The total occupancy rates in Phnom Penh’s Special Economic Zones (SEZ) hit 50 per cent through 2011, according to a CBRE report released this week.

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The report stated that seven SEZs are now operational in Cambodia, while 15 remain in the development pipeline.

The government started to establish SEZs in order to attract foreign investors to Cambodia, especially near the Kingdom’s borders, according to Nguon Meng Tech, general director of the Cambodian Chamber of Commerce.

They wanted to invest in those [border] areas because it was easier to do business, and because of the tax exemption in those regions,” he said at a seminar earlier this month.

Improving political, economic and social stability, coupled with the government’s efforts to encourage further investments has led to an increase in occupancy rates, Nguon Meng Tech added.

Despite restrictions on foreign land ownership, there are no limitations on foreign-owned companies. Among the benefits of the lease is a corporate income tax of 9 per cent, full import duty exemption on raw materials, machinery and equipment and a nine year tax holiday, according the CBRE report.

The total values for investment projects in the SEZs increased 683 per cent year-on-year in 2011, hitting US$715.25 million, according to figures released by the Council for the Development of Cambodia.

Some insiders said, however, that while an additional 15 SEZs will enter the market in the coming years, supply is still lacking.  

“Demand is accelerating thus helping the growth of the sector although this could decelerate due to the low level of supply in the industrial rental market - where demand outweighs supply rents will grow,” said CBRE surveyor Owen Williams.

He added that SEZ’s are offering a good return for investors with yields reaching double digits.