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Kolao revs up its investment

Motorbikes sit in KR Motors’ showroom yesterday at Koh Pich in Phnom Penh.
Motorbikes sit in KR Motors’ showroom yesterday at Koh Pich in Phnom Penh. Pha Lina

Kolao revs up its investment

Kolao Group, a South Korean-owned automaker and distributor, plans to build factories in a proposed industrial park in Cambodia to assemble its proprietary line of automobiles and motorcycles, a company executive said yesterday.

Lee Jae Hoo, country head of Kolao Group (Cambodia) Co Ltd, said the Korean-listed parent company intends to invest $100 million to establish a special economic zone (SEZ) in Bavet near the Vietnamese border. The 112-hectare industrial park will include two vehicle assembly plants and a dry port.

“We plan to start operation in September 2017 with $100 million as our initial investment,” he said, adding that the company would soon submit its investment plan to the Council for the Development of Cambodia (CDC) for approval.

Kolao Group manufactures Kolao motorcycles as well as trucks and pickups under its Daehan brand. The company has operated in Laos for nearly 20 years, where it has 20 showrooms and a sales network of nearly 350 dealers.

The group entered the Cambodian market in 2013, operating as KR Motors, and opened a showroom in the capital last year for its motorcycles. At least 500 units have been sold to date, its management claims.

Lee said the decision to invest further in Cambodia came after studying the market for two years. He said the company was impressed with the government’s Industrial Development Policy (IDP), as well as the Kingdom’s social stability and labour pool.

“We decided to invest here as we like the IDP and the government welcomes foreign direct investment,” he said. Lee said the Kolao’s $100 million investment would be used to establish its own SEZ and two assembly plants for imported complete knock-down (CKD) vehicles.

“We will start car and motorcycle assembly factories as the first step,” he said. “After that, we will start a full-production factory.”The assembly plants will produce 30,000 trucks and 50,000 motorcycles a year, according to Lee. “We know that Cambodia has no car factories yet, so there is still a lot of opportunity for us here compared to Thailand and Vietnam,” he said.

He added that the launch of the ASEAN Economic Community (AEC) last year would eventually remove all tariff barriers within the region, giving the Cambodian plant duty-free access to a combined population of over
600 million.

According to Mao Kunthea, general manager of Kolao Group Cambodia, the company’s two factories will assemble CKDs of Kolao motorcycles and Daehan trucks, and possibly other brands.

“Once we improve our technical skills we will have our own production line,” she said.

Sam Serei Rath, undersecretary of state at the Ministry of Commerce, who has toured Kolao Group’s assembly plant in Laos, said the South Korean company has vast experience in vehicle manufacture and sales, and its investment would benefit Cambodia’s economy.

It also makes good business sense for Kolao Group. “It will help them to achieve profits as Cambodia’s investment law provides tax benefits, such as exemptions on exports,” Serei Rath said. “In addition, we have a younger and more energetic workforce for their industry compared to neighbouring countries.”

South Korea was one of the 10 largest investors in Cambodia last year, and at least one Korean automaker, Hyundai, has invested in an assembly plant here.

Economist Kang Chandararoth said inflows of Korean investment have grown on both the potential of Cambodia’s domestic market, as well as its connections to neighbouring Southeast Asian markets.

“The flow of Korean investment . . . will attract other investors in the same sector,” he said. “Cambodian workers at the factory will see their incomes rise while acquiring better skills.”

Kolao Group has clarified that the $100-million investment is not its initial investment, but rather a long-term plan, and that it is currently in discussion with several automakers, including Ssangyong, for licensed production at its factories.

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