Investor Must Read: Learn about the differences, advantages and policies of Cambodia's SEZS and industrial parks

Among Southeast Asian nations, Cambodia is emerging as a preferred investment destination due to its strategic location, open foreign investment environment, and preferential policies. In this regard, Special Economic Zone (SEZ) and Industrial Park are critical for attracting key foreign investments. The Cambodian government has given significant support, providing investors with unique policy dividends and industrial focus incentives.

So, what are the differences between special economic zones and industrial parks? What are the investment advantages and preferential policies? This article will give you a detailed introduction and analysis.

1. Special Economic Zone VS Industrial Park

1.1 Special Economic Zone (SEZ) 

Special economic zones (SEZs) in Cambodia are special areas for the development of the economic sectors approved by The Council for the Development of Cambodia (CDC). They can be established by the state, private individuals, or a joint venture between the two. 

SEZ brings together all industrial and other related activities such as industry, trade, logistics, and services, and enjoys special legal and tax incentives. Each special economic zone shall have a production area, which may have a free trade area, service area, residential area, and a tourism area.

Typical representative: Sihanoukville Special Economic Zone

1.2 Industrial Park

An industrial park is a concentrated area dedicated to manufacturing production activities, usually dominated by a single or a few industries (such as textiles, electronics, auto parts), with relatively complete supporting infrastructure (such as roads, electricity, water supply, etc.). An industrial park can be part of a special economic zone or operate independently.

Typical representative: Cam M J Industrial Park 

So, in summary, special economic zones are usually national-level development zones that enjoy special policy support from the government, while industrial parks are more focused on industrial manufacturing. The two can overlap, for example, a special economic zone can contain multiple industrial parks.

2. The Advantages of Investing in Cambodia’s Special Economic Zones and Industrial Parks

2.1 Low-cost Labor

Cambodia's low labor costs combined with a young population provide sufficient labor resources for manufacturing companies. For example, setting up factories in special economic zones or industrial parks and hiring local workers not only saves labor costs, but also enjoys the government's support policies for employment.

2.2 Strategic Geographical Location

Cambodia is located at the heart of Southeast Asia, neighboring Vietnam, Thailand, and Laos

, and near important global trade routes. In particular, the Special Economic Zone in Sihanoukville, which is close to Cambodia's largest deep-water port, is an ideal investment destination for export-oriented companies.

2.3 Free Trade Policy

Cambodia is a member of ASEAN and is part of The Regional Comprehensive Economic Partnership (RCEP). Its products can enter ASEAN, China, Japan, South Korea and other markets duty-free, greatly reducing export costs.

2.4 Complete Infrastructure

The infrastructure in the special economic zones and industrial parks is relatively complete, including roads, ports, electricity, networks, sewage treatment systems, etc., providing companies with an efficient and convenient production and operation environment.

2.5 Foreign-friendly Investmen Policies

Cambodia allows 100% foreign investment, does not restrict profit repatriation, and the government provides legal protection for foreign-invested enterprises, giving investors more confidence.

3. Preferential Policies of Cambodia’s Special Economic Zones and Industrial Parks

3.1 Preferential tax policies

-Corporate income tax: Investors can enjoy a tax exemption period of up to 6 to 9 years, after which the tax rate is 20%.

-Import tariffs: Cambodia offers exemptions from import tariffs on production equipment, construction materials, and raw materials for production in certain circumstances.

-Export Tariffs: Most exporting companies do not need to pay export tariffs.

-Value Added Tax (VAT): 0% for production equipment, construction materials, etc.; 0% for raw materials for industries serving the export market; 10% for industries serving the domestic market.

3.2 Land lease and use rights

Foreign companies can lease land in special economic zones and industrial parks for up to 50 years, which can be renewed.

Companies can apply for more favorable lease prices based on the scale of their investment.

3.3 "One-stop" service

Special economic zones in Cambodia have a "one-stop service center" (OSSC), which can quickly handle corporate registration, business licenses, employment permits and other procedures, reducing cumbersome procedures and improve operational efficiency.

3.4 Labor and training support

The government cooperates with company managers to provide local employee recruitment support, and they can apply for government-subsidized vocational training programs.

4. Investment Advice and Risk Warning

4.1 Choose mature special economic zone

Sihanoukville Special Economy Zone (SSEZ):  jointly developed and constructed by private companies from both Cambodia and China, it has attracted 202 companies from all over the world (such as Hongdou Group), and enjoys bilateral policy support from China and Cambodia.

The Royal Group Phnom Penh Special Economic Zone (RGPPSEZ) : adjacent to the city center and Phnom Penh International Airport, with convenient logistics, focusing on the development of electronics and automotive parts industries.

4.2 Avoid potential risks

Labor disputes: It is necessary to comply with Cambodia's Labor Law to avoid the risk of employee strikes.

Electricity costs: Although the SEZ has built its own power grid, electricity prices are still relatively high.

4.3 Follow up with government policy 

In 2022, Cambodia approved a new Law on Investment to promote foreign and domestic investment. The law aims to make Cambodia more attractive to investors by providing incentives, guarantees, and protections (such as extending the tax exemption period to 9 years).

Pay attention to any update in the EU EBA policy (restore some tariff preferences in 2023) and make plan for diversified markets in advance.

The Cambodian government is drafting the Law on Special Economic Zones, which should be continuously paying attention.

Cambodia's Special Economic Zones (SEZs) are considered a cost-effective investment option in Southeast Asia for manufacturing and export processing industries due to their strategic location, policy, and cost advantages. 

It is recommended that enterprises give priority to special economic zones with mature policies and complete supporting facilities in combination with their own industry characteristics, and use professional institutions to complete legal compliance and localized operations to maximize the benefits of Cambodia's economic growth.

If you are considering investing in Cambodia, you may wish to learn more about the policies and advantages of different special economic zones and industrial parks, choose the region that best suits your business development, and seize for the opportunities in the Southeast Asian market!

(Note: The policies are subject to the latest documents of The Council for the Development of Cambodia and the General Department of Taxation.)