The Phnom Penh Special Economic Zone is one of 19 such foreign investment enclaves planned for Cambodia, though only three currently have factories operating in them.
The developers of Cambodia’s special economic zones have achieved little success in attracting foreign investors, says a report prepared for Prime Minister Hun Sun.
Only three of the 19 SEZs designated throughout the country since 2000 have factories in operation, said the report, prepared by Sok Chenda, the secretary general of both the Council for the Development of Cambodia and its Cambodia Special Economic Zone Board.
Hiroshi Uematsu, finance and accounting director of the Phnom Penh Special Economic Zone, tells reporters at the SEZ on the outskirts of the capital that cheaper power, greater transparency and improvements in Cambodia’s legal system are needed to generate more interest in the Kingdom’s SEZs.
The report, dated February 20 but yet to be made public, said there had been no infrastructure development at four SEZs, of which two are in Sihanoukville: SNC (Cambodia) Holdings and SEZ Stung Hoa. The other two are Souy Chheng Investment SEZ in Koh Kong and NLC Import Export SEZ in Svay Rieng.
In his report, Chenda said attracting investment in special economic zones, especially those on the borders with Vietnam and Thailand, would require simplified import and export procedures.
He suggested that this could be achieved by negotiating with neighboring countries to establish single-stop inspections within common control areas at border crossings.
In the meantime, the board is studying management procedures and regulations at SEZs in other countries, including some ASEAN members.
During a visit to the port of Sihanoukville on May 1 to inaugurate a $9-million one-stop administrative service funded by the Japanese government, the Prime Minister said SEZs would help to boost economic development and create jobs.
But for many developers of the investment enclaves, the first challenge is to provide the infrastructure they need to attract factories.
Mong Reththy, president of the Mong Reththy Group, which is developing the Kea Posh SEZ at Sihanoukville, said he is concentrating on building roads and providing water and electricity supplies before trying to attract investors.
Reththy said the zone expected to begin attracting investors next year. About 20 companies from China, Taiwan and Vietnam had shown interest in establishing operations there.
“Investors won’t come if we do not develop infrastructure in the zones first using our own resources,” Reththy said.
“For my SEZ, I am developing it step by step with my own capital,” he said.
Reththy said the developers of some SEZs had encountered difficulties because they had problems raising capital.
However, Wing Huor, the managing director of the City Power Group Corporation which is developing the Kampot SEZ, denied that a shortage of capital was a problem for the developers.
“Most of the land for SEZs was bought cheaply, only a few dollars a square meter, so it did not cost them a lot of money,” he said.
Huor said site preparation had been completed on about 50 percent of his company’s 130-hectare Kampot SEZ, which has attracted interest from four Chinese garment companies.
He said the reason for the slow development of SEZs in Cambodia was because they took years to establish.
“We have to do it step by step,” he said.
Meanwhile, the Attwood Group says it has spent $15 million of the $100 million it plans to invest in the Phnom Penh SEZ to provide the infrastructure essential to attract investors.
“We have our own power plant and will provide electricity to our factories at a cheaper rate than the state can,” said Lim Chhiv Ho, chairwoman of both the Attwood Group and the Phnom Penh SEZ, which is a Cambodian-Japanese joint venture.
Chhiv Ho said companies from Japan and South Korea have built garment and shoe factories at the zone, which has signed contracts with another 10 investors to establish factories.
Hiroshi Uematsu, the finance and accounting director for the Phnom Penh SEZ, said cheaper power, greater transparency and improvements in the legal system would help to generate more interest in the SEZs.
Economist Sok Sina says the government’s decision to grant SEZs a five-year tax holiday meant that they had great potential to boost economic development.
But he acknowledged that it might take up to two years before investors in Taiwan, China and South Korea paid greater attention to special economic zones in Cambodia.
Sina said that while Cambodia had a competitive advantage in terms of the cost of labor, it lacked skilled manpower.
“Vietnam has a BMW assembly plant, and we could do the same,” he said.
Lou Kim Chhun, the director general the state-run Sihanoukville Port SEZ, said its main advantage was having “the best location for a special economic zone.”
The 70-hectare zone, which was established in 2003 and expects to have factories in operation by 2010, has the advantage of being next to the port, which will minimize transport costs for investors, Kim Chhun said.
The SEZ was established with Japanese government assistance and Kim Chhun said some companies in Japan had shown interest in the site.
Kim Chhun, who is also director general of Sihanoukville International Port, was optimistic that 30,000 jobs would be provided in the SEZ by the end of 2010.