Sihanoukville Economic Zone Transforms Southern Cambodia

 

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A picture of Chinese President Xi Jinping meeting with Cambodian Prime Minister Hun Sen in Jakarta on April 23, 2015.  The photo has now been posted at the Sihanoukville Economic Zone.

By Liam Zanyk McLean

 

The Sihanoukville Special Economic Zone (SSEZ) in southern Cambodia has proven a key part of China’s Belt and Road Initiative in Southeast Asia, providing work opportunities to 14,000 Cambodian nationals and improving the area’s standard of living.

First established in 2007, the zone has offered significant work opportunities for men and women in predominantly textiles manufacturing businesses. According to the World Bank, nearly 80 percent of Cambodia’s population live in rural areas, but the establishment of several manufacturing facilities in the country in recent years have provided Cambodians with new work opportunities. Of these new facilities, the SSEZ is among the most significant.

A total of 74 companies are currently operating at the SSEZ, and a further 28 have announced plans to begin production there. Of those, 87 are from China, two from Cambodia and 13 from other countries, including Japan and the United States. Those working at the site have benefited from higher average wages than those that are available in the rest of Cambodia, including its capital, Phnom Penh. With a total land area of 11.1 square kilometers, the SSEZ is located 12 kilometers north of the city of Sihanoukville, giving it close access to the city’s port. There is also an airport 3 kilometers away from the site.

Sihanoukville’s deep water port gives it a geographic advantage in the region, allowing firms operating in Cambodia, and especially those in Sihanoukville, easy access to export infrastructure. Cambodia’s overall growth rate in 2015 was 7 percent, according to the World Bank. According to official provincial statistics, Sihanoukville’s was 8.3 percent. Officials said much of this rapid growth in the province was due to the success of the SSEZ.

Manufacturing in the SSEZ is mostly focused on textiles, with HOdo Group, a Chinese clothing manufacturer based in Wuxi, Jiangsu Province, as the zone’s largest operator. After a training period for workers, which typically lasts three months, companies pay a base rate of around US$160 per month, plus add-ons, higher than Cambodia’s average monthly wage. Salaries at the zone rise each year, and averaged around US$45 per month when the zone was first established in 2007.

Attractive Foreign Investment

Dai Yue’e, general manager of the SSEZ, said that Cambodia is an ideal place for foreign investors to do business.

“Cambodia has been developing very quickly,” Dai said. “Many foreign businesses are finding opportunities here.”

Sihanoukville, which is located 200 kilometers south of Phnom Penh, is home to a tourism industry that has been growing steadily in the past few years. For those working outside the tourism industry, however, jobs were scarce before the establishment of the SSEZ.

Sea Kunthea, a 22-year-old from a rural part of Preah Sihanouk Province, said her life changed drastically when she began working in a HOdo Group factory in the SSEZ. She studied Mandarin and was promoted multiple times. She now holds an administrative position at the SSEZ and earns US$400 per month, significantly higher than area averages.

“If it wasn’t for my job with HOdo, I wouldn’t have anything to do all day,” Sea said. “I would just sit at home.”

Sea said she began studying Chinese out of personal interest, and that she found spoken Chinese to be easier than spoken English.

“Chinese language skills are very beneficial to my career,” Sea said.

Welcoming, friendly people are an example of how the local population’s demeanor contributes to attracting foreign investment, according to Dai.

“Cambodia is a very civilized country,” Dai said. “The people are very honest.”

Dai added that Cambodia’s rapid economic growth in the past few years is in large part thanks to an increase in foreign investment. Foreign firms are attracted by reduced labor costs as well as tax incentives offered by the Cambodian government.

“Lately, Cambodia has been attracting investment from all over the world,” Dai said. “It’s a stable society, which makes it easy to work with foreign investors. Cambodia’s economic and cultural situation makes it ideal for Chinese investors.”

Cooperation between local government and the economic zone has been crucial, Dai said. At the zone’s main headquarters, government offices have been set up to provide employees with access to a wide variety of services.

However, the establishment of the zone hasn’t been without problems. As is common in southern Cambodia, electricity shortages have hampered productivity at factories. Electricity supply has improved as the local government has given more priority to the economic zone, Dai said. Labor shortages were a problem in the first few years after the zone’s establishment, but as wages have risen, so have the number of job applicants.

 

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Chinese contributions have benefited primary schools near the Sihanoukville Economic Zone.

 

Cooperation between local government and the economic zone has been crucial, Dai said. At the zone’s main headquarters, government offices have been set up to provide employees with access to a wide variety of services. Canadia Bank, one of Cambodia’s largest financial institutions, offers comprehensive banking services on site.

The site has also offered educational opportunities for workers and their children, providing funding for local schools and free Chinese classes.

Sok Bunturn, a 25-year-old from Svay Rieng Province east of Sihanoukville, traveled to the SSEZ to find work as opportunities in her hometown were rare. She now works in a factory floor position at the Clear Water Leather Supply Company, a multinational leather goods manufacturer.

“Working here gives me freedom to have a job and earn some money,” Sok said.

Sok, who has been working at the Clear Water Leather Supply for four months, spent her time at home before starting work at the factory.

“Because I didn’t earn any money before, I didn’t have any way to help my family financially,” she added.

Strong Relations

A good relationship between the Cambodian and Chinese governments, including between Chinese President Xi Jinping and Cambodian Prime Minister Hun Sen, has done much to ensure the success of the SSEZ. The pair met in Jakarta in April 2015 and discussed the importance of maintaining the zone and improving infrastructure links in Cambodia as part of China’s Belt and Road Initiative.

Yang Xiuping, Secretary General of the ASEAN-China Center, said that the Sihanoukville Zone is a model of international production cooperation as part of the Belt and Road Initiative. By deepening economic and trade cooperation between China and Cambodia, the project has brought about tangible benefits, including reducing poverty in southern Cambodia, Yang said. In addition, the project has been praised by the Cambodian people, she added.

There are estimated to be around 350,000 Cambodian citizens who are of Chinese ethnicity, and ethnic Chinese members of Cambodian society have taken on key roles in the country’s business community. As the success of the Sihanoukville Special Economic Zone continues and economic output in the region grows, Chinese and Cambodian ties will only grow closer.

 

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