SEZs a Boon to Country’s Workers: ADB Report

Cambodia’s nine special economic zones (SEZs) have created nearly 70,000 jobs that would not have existed otherwise, according to a report released by the Asian Development Bank last week.

The report, “Cambodia’s Special Economic Zones,” examines the success of the country’s SEZs based on interviews with companies operating in the zones and a survey that 58 of the 141 companies responded to.

“The study finds that the SEZs have attracted significant levels of foreign investment into Cambodia that would not have been present otherwise,” the report says.

“These investments have created around 68,000 jobs, with equal or better pay and better prospects than the alternatives that would otherwise have existed, raising the economic welfare of the workers concerned.”

The report adds that while traditionally the “success and sustainability” of an SEZ has been judged largely by its ability to provide a stable investment climate compared to the rest of the country’s economy, the focus should instead be on an SEZ’s competitiveness with similar zones in other developing countries.

“It is in attracting new investments into the country, thereby generating new employment, which would not exist in the absence of the SEZ, that a genuine contribution can be made,” it says.

In addition, the report commends the government’s hands-off approach to the SEZs’ development, which has allowed private developers to establish and manage the zones.

This approach had helped avoid “the large and sometimes wasteful public sector setup costs associated with SEZ establishment in many other countries,” the report says.

For the zones to remain internationally competitive, the report concludes, the government needs to work on addressing a number of concerns, including continuing to develop infrastructure, improving labor quality through basic education and improving electricity supplies—a major complaint of the firms operating in the country’s SEZs.

Stephen Higgins, managing partner of financial consultancy firm Mekong Strategic Partners, said in an email that while he doubted that 68,000 jobs could be attributed to SEZs, the zones had nevertheless provided a boost to the country’s economy.

“I think it is probably a stretch to say that the SEZs are responsible for all those 68,000 jobs, but there is no doubt that the SEZs have played a really positive role,” Mr. Higgins said.

“Quite a few of the companies currently in SEZs would have come to Cambodia regardless because of labor costs, a desire to diversify from Thailand or China, etc.”

Mr. Higgins noted, though, that the SEZs did provide valuable incentives to make foreign firms feel more comfortable investing in the country.

“They provide infrastructure that factories are looking for, and in a country like Cambodia that is often lacking when it comes to infrastructure, that is a big advantage.”

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