SEZ growth slows as economic crisis hits

In Business, Economy, Financial Crisis on March 20, 2009 by viCheth



With the global downturn hitting Cambodia’s manufacturing, the Kingdom’s special economic zones are stalling plans for expansion, officials say.



The Phnom Penh Special Economic Zone, located 8 kilometres from the Phnom Penh international airport. Many of the country’s SEZ’s are feeling the effects of the slowdown, forcing delays.

DEVELOPERS and officials said Thursday that the global financial crisis has slowed the development of the country’s special economic zones (SEZs), dealing a new blow to an already struggling sector.
Cambodia’s 21 licensed SEZs had trouble attracting investment even before the economic crisis hit and officials say the recession could lead to delays or closures.
Larry Kao, managing director of the Manhattan Special Economic Zone in Svey Rieng province, said the facility is operating far below capacity.
"Before the crisis, there were six investors in the zone, but since the onset of the crisis, we have seen only one more large factory invest."
Located on the Vietnam border, it was expected to boost bilateral trade.
Development of the Manhattan SEZ began in 2005 and phase one has been completed, including a main road, sub-roads, public lighting, drainage and a water system.
The project is now going to phase two, which includes a commercial section.
He said that seven factories have been operating in the zone since 2006, employing 4,500 workers, producing bicycles, hardware, shoes, garments and wetsuits.
Kao said that development may have to be moved back by two years from the original target date of 2010.

Our main problem is that there are no new investors in our SEZ.

"Investment in the zone is moving slowly, but it is not at a standstill," he said.
"We planned to finish the development within five years, but due to the crisis, it could be up to two years behind schedule."
He said that the zone will be capable of housing 30 factories employing up to 15,000 workers.
Chieng An, governor of Svay Rieng province, said he expected Manhattan SEZ would be hit by the slowdown.
"Manhattan SEZ is a foreign investment, so it has branches internationally. It is inevitable that it will suffer from the crisis, and it’s impressive that it has held up as well as it has."
Delayed projects
Duong Tech, general manager of Duong Chhiv Group, which is developing a US$100 million special economic zone in Takeo province on the border with Vietnam, agreed that the crisis will slow development.
"The master plan says we will complete the project by 2015, but due to the current crisis, it will take longer than that," said Duong Tech.
"Our main problem is that there are no new investors in our SEZ. If there are investors interested in the zone, we will speed up our development, but if there are no investors, we will be more hesitant."
He said that since receiving government approval in 2006, only 10 percent of the infrastructure has been developed.
Kong Triv, the owner of the SNC SEZ in Preah Sihanouk province, also said that the crisis has hurt development plans.
The SEZ received its licence in 2002 with an initial investment of $14 million on a 150-hectare plot.
"We have no plans to develop the special economic zone," said Kong Triv, declining to give additional details.
A senior official at the Council of the Development of Cambodia said that SEZ development has slowed, but that he expects a swift recovery.
"It is normal that a downturn will affect SEZs – there is always an impact on investors’ budgets, but SEZs should focus on the long term to position themselves for a recovery," said a senior official in charge of Cambodia’s Special Economic Zones, who asked not to be named.
"Currently, there are 21 special economic zones in Cambodia, but only six are actively being developed," the official said.


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