The final draft of a subdecree establishing special economic zones is under review by senior government officials, even though a proposed law on the zones has not been passed by the National Assembly, government officials said Monday.
“There have been many meetings on it, but I don’t know when the prime minister will sign it,” Council for the Development of Cambodia spokesman Chea Vuthy said.
Walled-in special economic zones, under discussion since 1994, are envisioned for Sihanoukville and Koh Kong.
Export processing areas within the zones will function as separate customs areas, where materials enter without tariffs but cannot be brought to domestic markets.
Under the final draft, private zone developers are given a minimum nine-year tax holiday, while investors will apparently be subject to the tax incentives outlined in the 2003 Law on Investment.
The provision could prove controversial with businessmen who have advocated a return, within the zone, to the 1994 investment law’s more generous tax breaks.
International Business Club President Bretton Sciaroni said that he and other business leaders will meet Thursday with Finance Minister Keat Chhon to discuss the subdecree.
Chinese Chamber of Commerce President Jimmy Gao said Chinese investors welcome progress on the establishment of the zones.
“A key advantage is in the transportation costs,” he said. “If the cost of moving a container away from the Sihanoukville to Phnom Penh can be eliminated that makes it very attractive…. The garment industry will try to set up there if they can save costs.”
Coalition of Cambodian Apparel Workers Democratic Union Deputy President Chhorn Sokha said Monday that she believes the zones will create jobs and if garment factories move to Sihanoukville, workers will relocate with them. But she said that the right to hold demonstrations could be constrained in the new zones.
“We are afraid that workers will be kept apart from the other people in the country and guards will be deployed,” she said.
The final draft of the subdecree stipulates that the labor code applies within zones. Developers are also required to set up vocational training schools and investors can only hire 10 percent of staffs from abroad. The subdecree also differs from the draft law prepared with the assistance of the Japanese International Cooperation Agency in May 2004.
In the JICA version, special economic zones would have been governed by an independent authority known as the Economic Zones Authority of Cambodia. This authority would have approved investors and granted incentives. Members of the EZAC were forbidden from holding other government offices or having any business interests in the zones. They were required to declare their assets. In the final draft of the subdecree, there is no prohibition stopping zone administrators from holding other office or having business interests in the zones.
The Attwood company was granted the right to develop a zone in Sihanoukville earlier this year, prior to the subdecree. Official documents indicated that the wife of Commerce minster Cham Prasidh owned a significant stake in the company at the time.
Chapter 4, article 7 of the subdecree also states that “zone development and local investors can receive special rights to possess land…through the possibility of amendments to concerned regulations.” In recent months, CDC co-president Prince Norodom Ranariddh has called for allowing foreigners to own land in economic zones, a move that would require an amendment to the Constitution.
Opposition lawmaker Son Chhay said Monday that economic zones should be debated by the National Assembly rather than approved by subdecree.
“This is the way the government has chosen to operate now,” he said. “It is like the law on casinos. Instead of debating the law, they decided to let casinos operate with only a subdecree.”
The lawmaker also criticized the lack of conflict of interest provisions in the subdecree. “This opens the door to corruption,” he said.
(Additional reporting by Kuch Naren)