Prak Visal: Sihanoukville Growth Due to Economic Zone Success

By Liam Zanyk McLean

Rapid economic growth in Cambodia’s Southern Preah Sihanouk Province is due in large part to the success of the province’s Chinese-funded Special Economic Zone, according to Prak Visal, Deputy Director of the Administration Department at Preah Sihanouk Provincial Hall.

The Sihanoukville Special Economic Zone (SSEZ), located just outside the city of Sihanoukville, the province’s largest city, was set up in 2007. It is now a key part of China’s Belt and Road Initiative in Southeast Asia and employs around 14,000 Cambodian nationals working for 74 different companies currently operating at the site. The zone is mainly involved in textiles manufacturing, with HOdo Group, a Chinese clothing manufacturer, in charge of overall zone management.

While Cambodia’s overall GDP growth in 2015 reached a rapid 7 percent, Preah Sihanouk Province’s growth for the same period was even faster, at 8.3 percent. This is due to both a growth in tourist arrivals as well as the success of the Special Economic Zone, Prak said.

As a coastal city, Sihanoukville is home to tropical beaches as well as Cambodia’s only deepwater port, allowing the city to tap into both international tourism and export markets. Foreign investment as well as tourist arrivals have grown rapidly over the past few years, Prak said.

“Our success is due to geographic advantages,” Prak said. “Only through embracing our local geographic advantages can the area develop.”

The SSEZ, which covers a total land area of 11.1 square kilometers and is located 212 kilometers south of Cambodia’s capital, Phnom Penh, has given foreign textiles firms access to a country that has proven to be a very attractive investment opportunity.

“We anticipate that in the future, the SSEZ could have around 300-400 businesses operating,” Prak said.

HOdo’s role as the zone’s largest operator has been important, Prak said. HOdo’s Chinese employees get along well with their Cambodian coworkers, as well as local government officials. Wuxi, the city in China’s Jiangsu Province where HOdo is headquartered, became sister cities with Sihanoukville in 2009.

Economic Effects

Increased output at the zone has influenced Sihanoukville’s economy, Prak said. Average annual earnings in the province have surpassed US$1,800, higher than Cambodia’s national average. Rural people, who account for nearly 80 percent of Cambodia’s population, have found great work opportunities at the SSEZ. Good wages and stable work have attracted job seekers from across Preah Sihanouk Province as well as from other Cambodian provinces.

Prak said officials in the Cambodian government have been given an excellent opportunity to learn from the Chinese government, which has years of experience in establishing successful Special Economic Zones. Chinese investment in the area, in addition to the establishment of the zone, has helped area schools and provided some of the province’s poorest residents with free food and water.

Local business activity has grown quickly as local people’s incomes have increased.

“Before the SSEZ was established, it was rare to see anyone opening up private businesses,” Prak said. “Now, there are all kinds of goods and services being offered near the economic zone. Living standards have increased, and so have people’s disposable incomes. They now consume more.”

Land prices near the zone have seen a quick increase as well. Due to its largely rural population, land prices in Cambodia away from Phnom Penh remained stable for years, until an increase in jobseekers at the economic zone made properties near the zone itself more attractive. Prices averaged around US$3 per square meter in the area before 2007, Prak said. Now, they average around US$10.

Prak said that close cooperation and communication between the economic zone and the local government has been crucial in overcoming challenges that administrators have encountered since the zone was first established. An increase in wages has met the demands of local workers, who now earn at least US$160 per month at the zone, plus addons. Improved electricity supply has increased productivity.

“There is not a huge cultural difference between China and Cambodia,” Prak said. “We have an intimate relationship with the economic zone. If any problems arise, both the administrators of the zone and local government officials know about it.”

Cultural Ties

The SSEZ, which hosts several government offices that provide comprehensive services to Cambodian workers there, has benefited from a good working relationship that exists between Cambodians and Chinese, Prak said.

“There is not a huge cultural difference between China and Cambodia,” Prak said. “Because of this, we have an intimate relationship with the economic zone. If any problems arise, both the administrators of the zone and local government officials know about it. When it comes to identifying solutions, there is never a big difference between how locals and Chinese want to approach the problem.”

Chinese cultural influence is evident across Cambodia. Chinese food is extremely popular and Chinese language study is becoming increasingly common. The SSEZ has begun offering free Chinese language training to both zone employees and local children, including tutoring services. Bilingual language skills  in Khmer and Chinese have proven extremely advantageous for many workers at the zone, Prak said.

“Overall, Chinese is extremely beneficial to study in Cambodia,” he added.

The number of Chinese tourists traveling to Cambodia has increased rapidly in the past two years, with 694,712 arrivals in 2015, according to China’s tourism authority. This represents a 14.5 percent increase compared to 2014.

“It’s helpful for tour guides, hotel managers, restaurant owners and goods sellers to learn Chinese,” Prak said. “Chinese tourists are becoming more and more common in Cambodia.”

A program funded by the SSEZ has given talented Cambodian students scholarships to attend university in China, benefiting local young people who would not otherwise be able to afford an education abroad. The SSEZ sent seven students to China for study in 2010, and nine in 2015.

“I hope more and more people will choose to study and apply for this program,” Prak said. “It will help to increase their income.”

China’s Belt and Road Initiative has been welcomed with open arms in Cambodia, Prak said. Due to the country’s social stability, working with foreign investors rarely leads to difficulties. However, Prak said it is crucial that foreign companies understand Cambodia’s ethnicities and culture.

“We have our own distinct language, customs and culture,” he added.

Located just 12 kilometers from the coast, the Sihanoukville Special Economic Zone is playing a key role in boosting Cambodia’s economic growth. It also serves as an indicator of China’s proficiency in streamlining infrastructure, production and export as the country’s Belt and Road Initiative grows increasingly influential across Asia.