Economic Zones Subdecree Under Review Bond Market

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)


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