Cambodia and Thailand are considering creating special “export processing” zones along the border in which the countries would cooperate to manufacture goods for international markets.
Two zones are under discussion, said Sok Siphana, secretary of state for the Ministry of Commerce: one in Koh Kong and one in Poipet.
If the zones are created, he said, “it will help our farmers to get [better access to] foreign markets and more employment.”
Sok Siphana said Cambodian markets are flooded with imported goods from Thailand, China, Vietnam and other countries, but Cambodia sells few products internationally.
Bad roads and illegal checkpoints make it difficult for Cambodia to compete, he said. Cambodian rice, for example, sells for about $160 per ton in-country, but by the time it reaches border markets, the price has risen $40 per ton, which effectively kills its chances in a competitive international setting, he said.
The idea behind the export zones is that Cambodia, as one of the world’s poorest countries, qualifies for preferential treatment in world markets for certain products under World Trade Organization rules.
Thailand shared similar status until last year, when its per capita income rose so high it outgrew its WTO generalized system of preferences designation.
The designation means countries pay zero tariffs on certain products, as compared to countries with most-favored-nation status, which pay tariffs of 7 percent to 10 percent.
Now Thailand has a number of industries, including furniture, silverware and canning, that face higher tariffs under its new most-favored nation status.
If those operations shift to Cambodia, Sok Siphana said, they will pay zero tariffs under Cambodia’s GSP status.
Thai manufacturers are unwilling to relocate deep inside Cambodia, given its poor roads and the high fuel costs. But they are willing to look closely at sites just over the border, near Thailand’s superior road system.
Goods manufactured in the processing zones would only be sold internationally, not in Cambodia, and the zones themselves would be enclosed sites, he said.
The factories would be staffed by Cambodians and would manufacture export-oriented items such as toys, electronics and canned fish or fruit.
Eventually, the zones could expand to include micro-businesses and various services, such as financial, communications and computer or office services.
Cambodia and Thailand began discussing the export zone idea after noting the success of a similar arrangement between China and Hong Kong.
