The government is interested in creating additional export processing zones in Kompong Chhnang and Svay Rieng provinces, in addition to long-planned zones in Koh Kong, Pailin, Poipet and near Sihanoukville, Prince Norodom Ranariddh, co-chairman of the Council for the Development of Cambodia, said Tuesday.
Governed by different laws and tax rates than the rest of Cambodia, the EPZs will offer tax-free conditions for investors. The government is considering sites near a planned airport in Kompong Chhnang and on Svay Rieng’s border with Vietnam.
“Hun Sen and I have agreed to create an EPZ at the Vietnamese border,” the prince said in his lengthy address to provincial governors and ministers.
Hun Sen has asked authorities in Svay Rieng province to make an assessment of a site near the border crossing in Bavet commune, the prince said.
“Vietnam is not a WTO member so…there is a trade opportunity there,” he said, referring to the fact that if a Vietnamese company manufactures a product inside Cambodia, that product will be subject to lower tariff rates when exported.
The prince said that while it is unconstitutional for foreign investors to own land in Cambodia, foreign ownership should be permitted inside the EPZs.
“The government should issue land titles for them…and there should be no tax on the import of raw materials and no 10 percent VAT in the zone,” he said.
Export processing zones are not without controversy.
Local NGOs have warned that in some nations, unions are outlawed in industrial zones and laws on labor inspection are suspended.
NGO Forum has urged for a new Law on Special Economic Zones to be unambiguous in the extension of the Labor Law to the industrial areas.
At a recent conference in Phnom Penh, Sandra Polaski, of the Carnegie Endowment for International Peace, said that unless such ambiguities are removed, workers in the zones could be without the Labor Law’s protections.
Commerce Ministry Secretary of State Sok Siphana said that the government commissioned the UN Development Program to conduct a social impact assessment of the proposed Koh Kong zone.
“We want the EPZ to become a modern tool, with labor-compliance links as in the garment sector,” he said.
The government estimates that the 330-hectare zone in Koh Kong will create 28,200 jobs and, under the best conditions, pay $17 million in wages.
“I think in late 2005 we will begin,” Sok Siphana said.
Economist Kang Chandararot of the Cambodian Institute for Development Study said: “The good thing we gain from EPZs is jobs.”
He warned, however, that the model to look at is the garment industry, which has created work but has not stimulated backward integration into Cambodia’s economy.
“For 10 years already there is no such thing as a yarn or button processing industry taking place here,” he said. “The EPZ impact on the overall economy will be small if all the materials are imported.”