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Market to Shape New Industrial Base

Market to Shape New Industrial Base

In the nearly two decades since the Khmer Rouge attempted to turn Cambodia into a

pre-industrial age paradise, the manufacturing sector has produced little more than

plows, rubber tires and some building supplies.

Infrastructure has deteriorated to an almost unusable state, regular power is non-existent

and the labor force has lost most of its skilled workers.

Nevertheless, Industry Minister Pou Sothirak, a U.S.-educated computer engineer who

has been handed the job of laying the groundwork to rebuild Cambodia's war and revolution-decimated

industrial base, remains undaunted.

"I think we have the right atmosphere. The government has already called for

a free market system. We are in the liberal democracy framework very much aligned

with the rest of the world and so this should open up Cambodia and I think Cambodia

has a good chance to prosper and develop," he said.

The minister said he believed foreign investment held the key to industrial development

and that if the government could guarantee peace and stability, the country was well

placed among Asean's booming economic tigers to attract businessmen.

"I have been receiving quite a few investors from Singapore and Japan and Taiwan

recently and I am encouraged by the trends," he said.

Sothirak said that in the initial stage, Cambodia would use its low labor costs to

bid for subcontracting work from regionally-based multinationals. The government

would concentrate on developing small to medium sized manufacturing industries in

sectors such as energy, construction, textiles, food processing, and cottage industries

which he forecast "would be fairly important in the Cambodian context."

The minister, who is a member of the constitution drafting committee and also the

Board of Investment said the newly elected government would lay the legal framework

to guarantee investments and allow for the repatriation of assets. He said the charter

would reflect the government's commitment to multi-party democracy and a market economy.

"For the immediate recovery I think only the private sector, and this includes

domestic and foreign investors, can help a poor country like Cambodia move to the

development take off stage," he said.

The minister said the government would continue to sell off state-owned enterprises

but warned that "transparency would be an important criteria." The Ministery

of Industry, however, has little left to privatize. The former State of Cambodia

administration sold off or leased 58 of the ministry's 68 state enterprises. The

firms were not public utilities and were badly in need of rehabilitation but their

urban real estate was often particularly attractive.

Sothirak, while not being specific, said the new government would "have to concentrate

on cleaning up the house, and make the department as efficient as it can be".

Vietnam, with its large local market, industrious workforce and cheap labor looms

as the biggest rival for foreign funds. Sothirak said he was confident, however,

that Cambodia's democratically-elected government would give it the edge.

"This is something an investor will pay quite a bit of attention to. If Cambodia

can move into a free market system and I hope that if we can provide a good law on

investment, foreign investors will think of Cambodia as a first stop before Vietnam,

We are in the middle so we can export to Vietnam and we don't have the cumbersome

bureaucracy to deal with."

He said the government was also making plans to turn Kompong Som into free trade

zone, to take advantage of the southern province's deep sea port so Cambodia could

serve as an entrepot to Laos and Vietnam.

The minister noted that while the existing administration was only an interim body

he believed 90 per cent of the ministers would retain their portfolios when a constitutionally

elected government takes office in mid-September.

Sothirak, who previously worked for aircraft manufacturing giant Boeing, said he

had a long term vision that would see Cambodia move into self sufficiency and then

aggressive development as part of the global economy.

"Cambodia must go through the steps, we have to start at the beginning, even

before the beginning...In my lifetime Boeing is not going to be coming to Cambodia

but maybe light manufacturing like Intel, Motorola," he said.

"The first thing though, is to see Cambodia move off the less developed country

list."

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