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Cluster model to entice SEZ investors

Kerry World Bridge bonded warehouse situated on the outskirts of Phnom Penh.
Kerry World Bridge bonded warehouse situated on the outskirts of Phnom Penh. Heng Chivoan

Cluster model to entice SEZ investors

Kerry WorldBridge Logistics SEZ, which is developing a 63-hectare industrial park and free trade zone 17 kilometres south of the capital in Kandal province, has taken on a new partner to design and create an “industry and technology cluster” aimed at attracting non-garment manufacturing investment to its embryonic special economic zone (SEZ).

Under a memorandum of understanding (MoU) signed yesterday, the company will cooperate with German-based consultancy firm and management firm InSITE Bavaria to address the barriers that deter German manufacturers from establishing factories in the Kingdom – specifically the country’s high electricity prices and massive skills gap.

“We are keenly aware of the challenges currently faced by Cambodia’s industrial development, and we hope that by working together we can address them,” said Charles Esterhoy, chief operating officer of Kerry WorldBridge.

“We understand that this MoU will not solve Germany’s problem for investing overnight, but this is undoubtedly a step forward.”

Under the agreement, the two parties will create a working group that will promote efficient energy solutions, vocational skills training, regulatory recommendations and conduct bilateral trade missions to the German state of Bavaria.

“We are already working on a feasibility study for a rooftop solar micro-grid with the local consultancy firm Mekong Strategic Partners, and German expertise will have great input on this,” he said.

“And for vocational skills training, we will partner with the Technical University of Munich to create a management and training facility in the zone.”

Esterhoy said that while the MoU was by necessity broad and comprehensive in scope, an “industry and technology cluster” would help to centralise investor needs and scale up development with purpose-built facilities targeting particular sectors such as light manufacturing or automobile assembly.

The size and scope of an industry and technology cluster has yet to be determined, he said. Kerry WorldBridge Logistics SEZ, a joint venture between Hong Kong-listed Kerry Logistic Network Ltd and local firm Worldbridge International, launched in July 2015.

The $100 million project was designed to be built in three phases, starting with a customs bonded warehouse zone on 17 hectares that allows importers to bring in goods duty-free for local assembly or transhipment. Phase two and three will focus on developing the 43-hectare SEZ and bringing in manufacturing investment.

Teck Kee Tan, executive director of WorldBridge Land, said that, while the SEZ had yet to secure any anchor investors, the MoU signified that the project was gearing up for its second phase. “We have to be careful when we collaborate with particular manufacturers because we have a long-term perspective that aims to bring in new industries,” he said.

“With this agreement we hope to bring in investment within this year and have manufacturing facilities in place by 2018.”

Instead of focusing on short-term returns, he explained, that the SEZ was looking to create investment synergies that could sustain production that would last between 30 to 50 years.

“What we are trying to do in Cambodia is a real test,” he said. “And if it is successful it will show that Cambodia is ready to take on more difficult industrial challenges.”

Daniel Gottschald, managing director of InSITE Bavaria, said the firm has partnered with more than 40 industrial parks across the world that have pushed German investment into new fields, particularly in emerging markets. However, he said this was the first project in ASEAN.

“The goal of this agreement is to set up an industrial park pilot project that will be operational by 2018 that can bring in high-level investors that can produce real impact,” he said. “This is more complex work then just investment promotion.”

Gottschald said that the key to bringing over German investors was not to court individual companies in one particular industry, but to set up a “safe” harbour for investment that can attract four or five large firms to move at once.

“Groups of investors are easier to bring over to new markets,” he said. “But you need real projects not just ideas to attract them. Tax incentives and SEZs are not enough. You need to have full service infrastructure and that is why an industrial cluster with high technological capabilities can work.”

While he declined to provide details for which companies the partnership would hope to target, he said there was potential in the production of agricultural technology, machine parts, automotive supply chains and sustainable energy firms.

Hans-Joachim Heusler, managing director of Bayern International, a German state body that supports trade services abroad for nearly one million Bavaria-based businesses, said that companies needed a good reason to invest in Cambodia beyond just cheap land and cheap labour.

“What we need to come here is for Cambodia to have educated workers . . . and a good connection with the owners of the land and to the government,” he said. “So we believe we have found a partner that will help us bring in as many big investors as we can.”

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