SEZs vital for growth ahead of full free-trade agreement: experts
The important thing [for Cambodia] is to get foreign money to foster its domestic industry."
FOREIGN investment in Cambodia’s Special Economic Zones (SEZs) is vital if Cambodia is to benefit from free trade with China, say senior ASEAN officials.
On January 1, the ASEAN-China Free Trade Area was created, reducing the vast majority of trade tariffs between founding ASEAN members and China to zero percent.
Cambodia, Vietnam, Laos and Myanmar, as new members, must reduce their tariffs on certain goods to 5 percent and have until 2015 to eliminate the tariffs completely.
“The important thing [for Cambodia] is to get foreign money to foster its domestic industry. SEZ development in Cambodia is a potential way to produce exports for China,” Hidetoshi Nishimura, executive director of the Economic Research Institute for ASEAN and East Asia, said at his office in Jakarta on Thursday.
Cambodian exports to China are dwarfed by imports to the Kingdom, and foreign investment in the nation has plummeted due to the global economic crisis.
According to the Hong Kong Trade Development Council (HKTDC), trade volume between Cambodia and China was US$480 million in 2009. Of that, only $13 million consisted of Cambodian exports to China, mostly agricultural products.
According to Cambodia’s central bank, foreign direct investment flows into Cambodia declined 35.2 percent to $514.7 million in 2009, from $794.7 million in 2008.
S Pushpanathan, deputy secretary general for the ASEAN Economic Community, said that for Cambodia to attract more foreign direct investment the country must have clear and transparent investment laws and a mechanism for business-dispute resolution.
“These are factors that investors think about before they put their money in a country,” he said.
He added that as labour costs in Cambodia are cheap, Chinese investors will be attracted to investment in the garment and textile industries here.
The business community seems united in regarding sucessful SEZs as important factors in the Kingdom’s economic development.
Yuji Imamura, Japan International Cooperation Agency’s advisor in charge of investment environment improvement at the Council for the Development of Cambodia, wrote in an email Monday: “For investors, SEZs are where there is basic infrastructure is in place. It is hard work for them to set up their factories outside SEZ areas.”
He added that so far eight of Cambodia’s 21 SEZs are in operation. Around 40 companies are manufacturing garments, textiles, shoes and consumer goods within the zones.
Imamura added that in the future, international investors will see Cambodia as an alternative to investment in Vietnam, as labour costs in the Kingdom’s neighbour have risen.
Chan Nora, secretary of state for the commerce ministry, said Monday that it is clear that SEZs will be a positive attraction for foreign investors as trade facilitation, such as import and export paperwork, is easier inside the zones.
Hirosi Uematsu, managing director of Phnom Penh Special Economic Zone, wrote in an e-mail on Monday that since the start of this year, three foreign companies – an animal feed company from China, a Philippine snack food firm and an Indian food-processing company – have signed up to build factories, bringing the number of companies operating in the zone to 17. ADDITIONAL REPORTING BY SOEUN SAY