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In Special Economic Zones, a Long Way To Go

Cambodia has slowly developed a number of special economic zones, but poor infrastructure, insufficient telecommunications, and complicated customs are hampering their full potential, according to a senior government official.

The zones, first created in 2005, are designed to cluster investment in factories for garments, electronics and foods, all for export. Investors are offered tax incentives and one-stop service by zone administration in exchange for setting up production in the zones.

Cambodia has laid out at least 19 of these zones, mostly along the borders with Thailand and Vietnam and along the coast. But only five of them are in operation, and the zones lack road, water, electricity and skilled labor, Sok Chenda, secretary-general of the Council for the Development of Cambodia, told an economic outlook conference last week.

“One can’t imagine the success of the SEZs if you don’t have better processing, including infrastructure, transportation, labor skill, administrative procedures at the border,” he told the conference.

The zones need attention in “all costs—electricity costs, shipping costs and telecommunications costs,” he said.

A special economic zone can be established by the state, private enterprises and through joint ventures, on at least 50 hectares of land.

Cambodia has seven such zones in Preah Sihanouk province, five in Svay Rieng, three in Koh Kong and one each in Banteay Meanchey, Kampong Cham, Kampot, Kandal, Phnom Penh and Takeo. Seven more are under construction, and plans for nine others have no activity at all.

Developers are local businessmen and foreign investors from China, Taiwan, Malaysia and Japan.

Sok Chenda said the zones have been unable to attract investors because developers have not paid attention to their critical infrastructure needs.

The CDC was implementing a special economic zone law that would designate the zones as separate customs territories, outside national territory.

Sales from outside Cambodia to investors in these zones would be conditionally relieved from import duties and taxes, based on the principle that goods manufactured or produced in them are meant for export only.

Hong Choun Narun, secretary-general of the Economic Ministry, said all 21 zones will be active over the next five years, boosting exports, creating jobs and strengthening national economic growth.

Some developers, like Norng Soyeth, director of a state-owned zone in Preah Sihanouk, anticipate robust operations. His zone has put $100 million into infrastructure, he said.

“As soon as we begin operation [in 2011], our place will be full of 30 factories, invested in by Japanese and Korean investors, because we are the best location inside the sea area,” he said. “That will reduce transportation costs.”

Other zone representatives are less confident, and many were unclear on when operations would begin.

“We planned to open our zone in 2011 or 2012, but everything was stuck and investors asked for a delay due to the financial crisis,” said Mong Reththy, president of the Oknha Mong zone in Preah Sihanouk. “Now we are waiting for a good economy to come so that we can start our business.”