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More Chinese FDI on the horizon

A vehicle passes through the gate of Manhattan Special Economic Zone in Bavet last year. Nearly a quarter of the factories in the industrial park are operated by Chinese companies.
A vehicle passes through the gate of Manhattan Special Economic Zone in Bavet last year. Nearly a quarter of the factories in the industrial park are operated by Chinese companies. Pha Lina

More Chinese FDI on the horizon

China has pledged to increase its investment in Cambodia in return for the Kingdom’s commitment to its regional policies and economic initiatives in Southeast Asia.

Wang Lei, secretary-general of the Chinese-ASEAN Expo (CAEXPO) Secretariat, said on Wednesday that Cambodia had thrown its full support behind China’s policies for ASEAN, including the Maritime Silk Road, a strategic initiative to develop maritime trade and economic growth on a route extending from the South China Sea through Southeast Asia and onward to the Eastern Mediterranean.

“The Prime Minister of Cambodia, Hun Sen, has promised that he will continue to support our initiatives for ASEAN, including the Maritime Silk Road,” he said at the closing ceremony of this year’s CAEXPO in Nanning, China.

In return, he said China would look to deepen investment in Cambodia’s industrial sector, primarily by encouraging Chinese companies to set up in the Kingdom’s special economic zones (SEZs). He said these industrial parks provide a more efficient industrial environment and politically stable investment for Chinese firms.

China is the biggest investor in Cambodia, accounting for up to 44 percent of the $19.2 billion in foreign direct investment (FDI) pumped into the Kingdom between 1994 and 2014, according to the findings of a comprehensive survey on FDI carried out by the National Bank of Cambodia (NBC) and the National Institute of Statistics (NIS).

The survey, however, lumped FDI by China, Hong Kong, Macau and the independent nation of Taiwan into one basket, a subtle political statement by its authors that made the total FDI contribution of Asia’s biggest economy giant’s unclear.

But the muddied statistic also demonstrates the sort of political favouritism that analysts claim China expects in return for its high level of investment and economic support.

Chea Vuthy, head of the Cambodian Special Economic Zone Board at the Council for the Development of Cambodia (CDC), stayed clear of politics during an investor presentation at CAEXPO. He welcomed Chinese interest in SEZs and encouraged more companies to invest in Cambodia.

“I recommend that companies come to Cambodia to benefit from the money your country has already invested,” he said.

Vuthy highlighted the investor incentives of Cambodia’s SEZs, including tax holidays for six to nine years. He also outlined the preferential trade agreements that allow Cambodia to export many products duty-free to the United States and the European Union.

“If you come to Cambodia and produce for the local market you will get tax exemptions on importing raw materials,” he said. “If you produce internationally, Cambodia has good trade agreements as a least developing country (LDC).”

Chinese officials said have said they intend to further liberalise the trade of goods and services under the ASEAN–China Free Trade Area (ACFTA), which came into effect in 2010.

Wu Tongdiao, deputy director-general of the Trade Development Bureau of the Ministry of Commerce of China, said he hoped the ACTFA agreement would soon be updated to be more inclusive for all 10 ASEAN member states. He also encouraged Cambodia, Laos, Vietnam and Myanmar (CLMV) to develop an e-commerce platform for trade with China.“A cross-border e-commerce platform would strengthen our ability to invest in the CLMV region,” he said.

Ding Yuanlong, deputy secretary-general of the China-ASEAN Business and Investment Summit Secretariat, said China was committed investing in CLMV countries but that Cambodia needed to do further work to draw more private investment.

“We have talked with the Cambodian Ministry of Commerce about increasing infrastructure, production capacity, financial cooperation and achieving better connectivity,” he said.

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