Cambodia’s Special Economic Zones: A Prime Destination for Investment

Cambodia has steadily positioned itself as a prime investment destination in Southeast Asia, attracting foreign direct investment (FDI) across multiple sectors. In 2023, the country recorded FDI inflows of US$2.7 billion, with key contributors including China, Japan, Thailand, and South Korea. A significant portion of this investment is directed towards Cambodia’s Special Economic Zones (SEZs), which serve as hubs for manufacturing, trade, and logistics. These SEZs are instrumental in the country’s economic strategy, facilitating job creation, industrial diversification, and international trade.

Growth of Special Economic Zones

As of the first semester of 2024, Cambodia has 26 operational SEZs, with four new zones launched in the same year, bringing the total to 30. The total export value from Cambodia’s SEZs exceeded US$5 billion in 2024, further emphasizing their importance in the national economy.

Key SEZs and Their Strategic Importance

Phnom Penh SEZ

One of Cambodia’s most established economic zones, Phnom Penh SEZ spans approximately 357 hectares. It is home to 114 companies, including 85 manufacturing firms and 29 non-manufacturing enterprises. The zone employs over 43,000 workers, with major investments from Japan, China, and Thailand. Key industries in Phnom Penh SEZ include electronics, automotive components, and fashion jewelry. Notable investors here include Japanese firms specializing in precision engineering and Chinese automotive component manufacturers.

Sihanoukville SEZ

Situated near Cambodia’s largest port, Sihanoukville SEZ is a key hub for trade and export-driven industries. Covering 1,113 hectares, it hosts 188 enterprises and employs more than 30,000 workers. With a capacity for up to 300 enterprises, Sihanoukville SEZ attracts investment primarily from China and Japan. The zone benefits from direct port access, making it a strategic choice for logistics and manufacturing companies.

Bavet SEZs

Located near the Vietnamese border, the Bavet SEZs—Tai Seng Bavet SEZ and Manhattan SEZ—play a critical role in cross-border trade. Tai Seng Bavet SEZ covers 99 hectares and houses 11 companies, while Manhattan SEZ spans 157 hectares with 18 companies. Combined, these zones accommodate enterprises across manufacturing, logistics, and agriculture, attracting investment from Taiwan, China, and other Asian economies.

Investment Incentives in Cambodian SEZs

Cambodia’s SEZs offer attractive investment incentives designed to enhance profitability and business viability. Key benefits include tax holidays of up to nine years, import duty exemptions on raw materials and equipment, and VAT incentives. Companies operating within SEZs enjoy reduced profit tax rates compared to non-SEZ investments, making Cambodia a competitive alternative to other regional manufacturing hubs, including Vietnam and Thailand.

Application Process for SEZ Investment

Investing in a Cambodian SEZ involves a structured process that ensures compliance with local regulations and eligibility for incentives. Here’s a step-by-step guide:

1. Determine Eligibility: Ensure the business activity aligns with Cambodia’s SEZ investment criteria and sector-specific regulations.
2. Select a Suitable SEZ: Choose an SEZ based on industry focus, location advantages, and infrastructure availability.
3. Prepare Investment Proposal: Submit a comprehensive investment plan outlining business objectives, financial projections, and operational details.
4. Register with the SEZ Authority: File an official investment application with the Council for the Development of Cambodia (CDC) or the respective SEZ governing body.
5. Obtain Licenses and Permits: Secure necessary business registration, investment license, and operational permits from relevant government agencies.
6. Sign Land Lease Agreement: Negotiate and finalize lease terms with the SEZ operator if land or facilities within the SEZ are required.
7. Comply with Environmental and Labor Regulations: Ensure adherence to Cambodia’s environmental impact assessments and labor laws before commencing operations.
8. Begin Operations: Once approvals and infrastructure setup are completed, businesses can commence production or service activities within the SEZ.
9. Ongoing Compliance and Reporting: Maintain regulatory compliance, tax reporting, and annual filings as required by Cambodian authorities.

On average, SEZ applications take between three to six months to process. Investors may encounter challenges such as bureaucratic delays, which can be addressed with legal and consulting assistance.

Land and Infrastructure Considerations

SEZs in Cambodia offer long-term land lease arrangements, with costs varying depending on location and development level. Many SEZs provide ready-built industrial facilities, which reduce the initial capital expenditure for investors. Moreover, environmental compliance is an important consideration, with regulations requiring sustainable waste management and energy-efficient practices.

Workforce Availability and Labor Considerations

Cambodia’s SEZs benefit from a growing labor pool at competitive wage levels compared to neighboring countries. The manufacturing sector, especially textiles, electronics, and automotive parts, is the largest employer within SEZs. Training programs are available to enhance workforce skills, but foreign investors may face recruitment challenges due to competition for skilled labor. Compliance with Cambodia’s labor laws, including working conditions and employee benefits, is essential for smooth operations.

Role of One-Stop Service Centers in SEZs

To streamline business operations, Cambodia’s SEZs operate one-stop service centers that provide administrative support. These centers assist with permit processing, customs clearance, and business registration, facilitating interaction with government agencies and expediting approvals. However, processing times can vary, so engaging legal and consulting experts to navigate administrative requirements is advisable.

Sector-Specific Investment Opportunities

Cambodia’s SEZs present opportunities across various industries. The manufacturing sector leads investment inflows, accounting for 69 percent of total approved capital in 2024. Key industries include textiles and garments, electronics, automotive components, and agribusiness. The country is also expanding into emerging sectors like renewable energy and logistics, offering new avenues for foreign investors. The SEZ framework supports industrial diversification, moving beyond traditional garment manufacturing to high-value production sectors.

Challenges and Risks for Investors

While Cambodia’s SEZs provide numerous advantages, investors must navigate certain challenges. Infrastructure limitations, particularly in power reliability and road networks, can affect operational efficiency. Administrative hurdles and bureaucratic delays are commonplace, requiring proactive engagement with SEZ authorities. Corruption risks also exist, making due diligence and compliance monitoring essential. Additionally, Cambodia faces competition from regional SEZs in Vietnam and Thailand, where incentives and infrastructure are more developed.

Regional Integration and Market Access

Cambodia’s participation in regional trade agreements enhances the appeal of its SEZs. The ASEAN Economic Community (AEC) framework provides duty-free access to key markets across Southeast Asia. Moreover, the country’s integration into the Regional Comprehensive Economic Partnership (RCEP) strengthens its role in global supply chains. These agreements position Cambodia’s SEZs as attractive bases for export-driven industries targeting both regional and international markets.