The Royal Government of Cambodia (RFC) recognises that Special Economic Zones (SEZs) in Cambodia are an important part of the country's economic development because they bring infrastructure, jobs, skills, enhanced productivity and not least the prospect of poverty reduction in rural areas.

Location of the SEZs are vitally important so that the benefits in terms of increased employment and poverty reduction can be shared throughout Cambodia.

It is the policy of the Royal Government to lay production foundations in regions other than Phnom Penh in order to build economic linkages between urban and rural areas.

Cambodia is not an urbanised society and so the SEZs will provide employment for the country's labour force which is predominantly from the provinces and mainly women.

Fulfilling issues of corporate social responsibility, SEZs will also be able to provide accommodation, education and healthcare services for the workforce, something not generally provided by stand-alone factories.

A sub-decree on the Establishment and Management of Special Economic Zones (to include export processing zones and free trade zones) was adopted in December 2005.

The Royal Government has since approved a total of 21 Special Economic Zones (SEZs) located along the border with Thailand and Vietnam (Koh Kong, Poipet, Savet, Phnom Den), at Sihanoukville and Phnom Penh. Of the 21, 6 have commenced operations.

Aiming to attract more investors, the SEZs offer a 'One-Stop Service' for imports and exports, with government officials stationed on-site providing administrative services. Applications to establish factories within the SEZs are dealt with on-site as well as all administrative clearances, permits, authorisations, etc.

Businesses within the SEZs also benefit from a number of fiscal incentives, including income tax, customs, and VAT benefits.

Cambodia's SEZs are located adjacent to new road networks and provide state-of-the-art factory buildings, plentiful water supplies, water treatment plants, vocational training, banking services, postal services and telecommunications.

Because of Cambodia’s high cost of electricity, SEZs located inland have installed power plants to generate their own electricity, while those at the border buy cheaper electricity from Thailand or Vietnam.

SEZs located at the border not only benefit from the cheaper cost of electricity, but also attract investors from the other side of the border. Investors from Thailand and Vietnam operating within these SEZs are able to manufacture in Cambodia at a lower price and export directly to Thailand and Vietnam, or further afield within Asean and the rest of the world.

When considering Cambodia as a manufacturing base, it is worth remembering that by 2012 Cambodia will be linked to the region by first-class road networks, telecom networks and the power grid. As a member of the Greater Mekong Sub-region (GMS), Cambodia is poised to benefit from the development of economic corridors.

GMS Infrastructure projects worth around $10 billion have either been completed or are being implemented. Among these are the upgrading of the Phnom Penh-Ho Chi Minh City (Vietnam) highway and the East-West Economic Corridor that will eventually extend from the Andaman Sea (part of the Indian Ocean west of Thailand) to Danang (Vietnam).

So, in 2012, not only will investors have the market of Cambodia’s 14 million domestic consumers, but fast overland access to 310 million consumers in the Greater Mekong Sub-region too.

The Royal Government has been working hard to create the right environment for SEZs in Cambodia. The legal framework was put in place in about two months and the Cambodian Special Economic Zone Board (CSEZB) was established within three months.

CSEZB operates under the umbrella of the Council for the Development of Cambodia (CDC). CDC is basically what would be described in other countries as a Board of Investment (BOI) or Investment Promotion Agency (IPA).

A trouble shooting committee for SEZs has also been established in order to oversee any problems that may occur with land rights, exports, imports and the labour market. The prime minister himself is chairman of both CDC and the trouble shooting committee.

The establishment of the SEZs and the creation of an investor-friendly environment is an area where, in its context as an emerging market, Cambodia is recognised as having provided substantive leadership in South East Asia.