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Thai SEZs to rival local zones

An employee enters instructions into a machine on the semiconductor chip production line at the at the Hi-Tech Industrial Estate in Bang Pa-In, Ayutthaya province, Thailand
An employee enters instructions into a machine on the semiconductor chip production line at the at the Hi-Tech Industrial Estate in Bang Pa-In, Ayutthaya province, Thailand, last year. BLOOMBERG

Thai SEZs to rival local zones

Thailand is moving ahead with plans to increase cross-border trade with the Kingdom by setting up two joint special economic zones along the Cambodian border, to boost agricultural and industrial production, while using cheaper labour from Cambodia.

The SEZs will be set up along the Sa Kaeo-Bantey Meanchey and Trat-Koh Kong provinces, and includes the opening of a new checkpoint at Ban Nong Ian in Sa Kaeo by 2018, according to the Bangkok Post. Currently there are two economic zones operating in Poitpet and one in Koh Kong district

Kor Sumsaroeut, governor of Bantey Meanchey province, yesterday confirmed that talks are on between Cambodian and Thai officials to set up this SEZ, adding that while it is called a joint SEZ, it will be developed separately.

“Thailand will build their SEZs on their territory of Sa Kaeo province, very close to Cambodia’s border. According to the plan, they will employ labor force from Cambodia. Smart Cards will be used instead of passport for Cambodian workers to work in their SEZs,” he said.

Cambodia’s advantage lies in its cheap labour force, Sumsaroeut said, but limited infrastructure facilities along the border will affect the competitiveness of existing SEZs in the district.

“It is surely a competition for our SEZs in the province. What we can do is to improve the infrastructure supporting companies in the SEZs and the supply of electricity, which we are currently buying from Thailand,” he added.

Ly Kim Hong, manager of the Poipet O’neang Special Economic Zone, said that setting up of another SEZ in Thailand will increase competition, but the new development did not pose a threat too his SEZ.

“Despite the fact that Cambodia has a disadvantage in infrastructure, Cambodia has cheaper labour costs and trade preference over Thailand, especially for the garment industry,” he said.

Despite this increased competition, he said, there was enough space for investors to choose between the two countries, but that Cambodia needs to continue to improve its facilities.

“In terms of infrastructure, although we cannot compete with Thailand, we have good enough and usable infrastructure, which is acceptable for investors to transport their products out of the country. So we have to improve, but it is not a concern,” he added.

While a joint SEZ could be helpful in the short term – by providing Cambodian workers employment opportunities and better pay – it could affect Cambodia’s ambitions to kick start its own industrial and light manufacturing sectors, said Chan Sophal, director at the Centre for Policy Studies.

“So the pressure for job creation in Cambodia will be a bit relieved. However, it poses a huge challenge to Cambodia’s quest to develop its industry based on cheap labour at the early stage,” said Sophal.

According to Sophal, depending on the scale of industries set up at the proposed SEZ, Cambodian companies will have to match the higher wages offered by companies in the SEZ.

“I just hope that there won’t be too much investment in the SEZ that [will] absorb too much labour from Cambodia. I would call for a serious study of the potential impact of this Thai policy on Cambodia,” he added.

In June 2013, Cambodia and Thailand agreed to boost bilateral trade and investment by establishing two special economic zones along the border, as well as push for the construction of a 1,800 megawatt coal-fired power plant in Koh Kong province, which is yet to be developed.

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