Invest in Cambodia | SEZ, Investment Advantages, Preferential Policies, Current Situation...

Recently, a lot of good news come out about Cambodia’s trade development, especially the proposed new special economic zone.

On January 31, Cambodian Prime Minister Hun Manet said that Cambodia is considering creating a special economic zone by countries.

On February 12, The Cambodian government is preparing a policy on establishing Cambodia-Japan special economic zones. 

An inter-ministerial meeting was chaired by Sun Chanthol, Deputy Prime Minister and First President of the Council for the Development of Cambodia, to discuss and prepare concept documents for the Cambodia-Japan Special Economic Zones to encourage more Japanese businesses to invest in Cambodia.

Subsequently, a large Japanese company “Minebea Cambodia” also revealed that it is planning to expand its investment in the Kingdom by establishing a new special economic zone.

On February 21, India also expressed interest in establishing the Cambodia-India Special Economic Zone, which focuses on core technology investment projects.

Special economic zones are an important tool for Cambodia to attract investment and promote economic growth. Today, Compass Real Estate will provide a comprehensive explanation of relevant information about Cambodia’s SEZs.

Definition of SEZs 

Special Economic Zones (SEZs) are geographically defined areas within a country that are subject to unique regulations and incentives to encourage economic development and growth.

They are designed to offer businesses an environment that differs from the rest of the country in terms of trade, investment, and administrative policies, providing businesses within these zones with fiscal and non-fiscal incentives, such as tax benefits, streamlined regulatory processes, and access to infrastructure and resources. SEZs are typically established by governments to promote foreign investment, job creation, and overall economic growth in a particular region or industry.

Current Status of Cambodia’s SEZs

In Cambodia, SEZs were first approved in 2005 and implemented in 2006.

According to a report released by the Council for the Development of Cambodia (CDC), from 2011 to the first half of 2023, there were a total of 24 SEZs in operation across the country, with a total of 655 registered companies and an investment of over US$8 billion, providing 174,000 job opportunities and cumulative exports reaching US$25.7 billion.

The proportion of special economic zones in Cambodia's exports has increased from only 4% in 2011 to 23% in June 2023, it shows that special economic zones are playing an important role in attracting foreign investment and promoting economic development. Among the investment projects attracted by the special economic zones, 90% of them are garment, shoe and travel goods manufacturing factories.

The government is drafting the Law on Special Economic Zone, which aims to increase the attractiveness of foreign direct investment, especially in non-garment manufacturing, to further diversify the Cambodian economy and export, as well as reduce the high dependence on exports of clothing, shoes and travel goods. This is also another new law that Cambodia will enact to attract foreign direct investment following the “New Investment Law” that took effect in October 2021.

Terms and Conditions for the Establishment of SEZs in Cambodia

1. The Special Economic Zone shall be permitted to be established in the Kingdom of Cambodia at the appropriate and strategic areas according to the decision of the Royal Government of Cambodia and the “One-Stop Service” mechanism of the Council.

2. The Special Economic Zone may be established by the State, private enterprise or joint venture between State and private enterprise.

3. The Establishment of the Special Economic Zone shall be pursuant to the following conditions:

● It must have a land of more than 50 hectares with precise location and geographic boundaries.

● It must have a surrounding fence (for Export Processing Zone, the Free Trade Area and for the premises of each investor in each zone).

● It must have management office buildings, zone administration offices, large road network, clean water, electricity, and telecommunications networks, fire protection and security system. Based on each situation, the zone may have land reserved for the Residential Area for workers, employees and employers, public parks, infirmary, vocational training school, petroleum station, restaurant, car parking, shopping center or market, etc.

● It must have water sewage network, waste water treatment network, location for storage and management of solid wastes, environment protection measures and other related infrastructures as deemed necessary.

● It must comply with technical requirements, regulations and basic rules on construction, environment and other obligations in the development of Special Economic Zone as defined in the instructions issued by relevant ministries or institutions taking into account the geography and specific size of each zone and pursuant to the existing laws, national and international standards.

Advantages of Cambodia’s SEZs

1. Clear leading industries

Compared with other countries in Southeast Asia, the biggest feature of Cambodia's special economic zones is that each zone generally has a clear characteristic leading industry, rather than a “one-size-fits-all” positioning

2. Comprehensive supporting facilities

As shown in the establishment conditions mentioned above, Cambodia's special economic zones generally have comprehensive supporting facilities, including residences, banks, parks, medical care, shops, restaurants and other supporting living facilities.

3. Preferential incentive policies

Businesses operating within Cambodia’s Special Economic Zones (SEZs) receive a range of fiscal incentives designed to promote investment and growth in the zones. These incentives include:

● Tax holidays: Businesses within SEZs are exempt from paying taxes on profit for a certain period, ranging from six to nine years depending on the specific SEZ.

● Reduced customs duties: Businesses within SEZs can import raw materials and equipment for their operations without paying customs duties.

● VAT exemptions: Businesses within SEZs are exempt from paying VAT on goods and services sold within the zone.

● Accelerated depreciation: Businesses within SEZs can accelerate the depreciation of their fixed assets for tax purposes.

● Investment incentives: Businesses that invest a certain amount of capital in SEZs may receive additional incentives, such as land concessions or access to infrastructure and utilities.

In addition to these fiscal incentives, businesses within SEZs also benefit from streamlined regulatory processes, such as simplified customs clearance procedures and access to a one-stop service for imports and exports. 

★ One-stop service 

Within the SEZs, the Cambodian government provides a “one‑stop” service, in which representatives of relevant government ministries, such as the Cambodian Development Council, Ministry of Commerce, Customs, Camcontrol, Ministry of Labour and the provincial authority, offer on‑site services to process documentation required for company registration and investment licensing, export/import permits, work permits, etc. These services help investors save time in visiting multiple government agencies in Phnom Penh, thereby shortening the application process. 

In addition, although foreigners are not allowed to own land in Cambodia, the special economic zones provide foreign investors with renewable leases of up to 50 years, allowing them to develop, subdivide or sublease the land, allowing tenants greater flexibility in coordinating factory activities over the long term.

Cambodia’s main Special Economic Zones

Currently, there are 24 special economic zones in Cambodia, including 8 in Svay Rieng Province, 5 in Sihanoukville Province, 4 in Phnom Penh, 3 in Banteay Meanchey Province, 2 in Kandal Province, 1 in Koh Kong Province, and 1 in Kampot Province.

* Distribution map of some SEZs in Cambodia

Phnom Penh Special Economic Zone

The Royal Group Phnom Penh Special Economic Zone was established in 2006 and is located on the outskirts of Phnom Penh, about 8 kilometers away from Phnom Penh International Airport and connected to National Road No. 4, which is also the main road connecting the capital to the Sihanoukville Autonomous Port. The Phnom Penh Special Economic Zone has a total area of more than 350 hectares and is developed in three phases.

The special economic zone mainly attracts labor-intensive light industries such as clothing, footwear, food processing and agricultural products, mechanical and electrical products and other consumer goods (such as pharmaceuticals, packaging). A few companies are engaged in ancillary industries, including cartons, plastic packaging and string.

According to a report released by the Royal Group Phnom Penh Special Economic Zone, exports have doubled in five years, from $316 million in 2016 to $683 million in 2021, and has reached $1.346 billion in 2022, and $1.62 billion in 2023.

Sihanoukville Special Economic Zone

Sihanoukville SEZ is located in southern Cambodia, about 210 kilometers away from Phnom Penh. It has a total area of about 1,690 hectares. It is the largest special economic zone in the kingdom, which is almost five times bigger than the Phnom Penh Special Economic Zone.

Sihanoukville Special Economic Zone is one of the first batch of overseas economic and trade cooperation zones approved by China. It is a national-level economic cooperation zone between the governments of Cambodia and China. It is also one of the landmark projects of the joint construction of the "Belt and Road". Managed by Chinese Hongdou Group, It has attracted 180 enterprises and private companies from China, Europe, the United States, Southeast Asia and other countries, creating nearly 30,000 job opportunities.

Sihanoukville Special Economic Zone is regarded as a model for China-Cambodia production cooperation under the "Belt and Road" initiative, and its development has accelerated in recent years. According to a report released by the Sihanouk Special Economic Zone, the total import and export volume of the Sihanouk Special Economic Zone in 2023 has reached $3.362 billion, an increase of 34.8% from 2022.

Qilu special economic zone 

Qilu special economic zone is invested and constructed by Qilu(Cambodia)Economic Co.,Ltd. It is the first special economic zone in Svay Rieng City.

The total planned area of the special economic zone is 360 hectares, with the first phase cover an area of 213 hectares and the second phase cover a total area of 147 hectares.

The special zone is located in Svay Rieng City of Svay Rieng Province, on the Cambodia-Vietnam border. It is 4 km away from the city center, 95 km from Vietnam's Ho Chi Minh International Airport, 150 km from Saigon Port, and 130 km from Phnom Penh. The traffic is conventient, and land transportation and shipping time is short with low transportation cost. There is no open-package inspection through Vietnam.