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BRI-Backed Economic Zone Set to List on Cambodian Stock Exchange

Sihanoukville Special Economic Zone looks to Cambodia Securities Exchange for Phase II development funding.

Photo: The Sihanoukville Special Economic Zone: Only 50% complete, it already employs 22,000 local workers.
The Sihanoukville Special Economic Zone: Only 50% complete, it already employs 22,000 local workers.
Photo: The Sihanoukville Special Economic Zone: Only 50% complete, it already employs 22,000 local workers.
The Sihanoukville Special Economic Zone: Only 50% complete, it already employs 22,000 local workers.

One of Cambodia's most high-profile Belt and Road Initiative (BRI) projects has announced plans to list on the country's stock exchange. The senior management team behind the project – the Sihanoukville Special Economic Zone (SSEZ) – sees the forthcoming listing on the Cambodia Securities Exchange (CSX) as the key means of securing funding for the next phase of the Zone's development.

Established in 2008, the Zone extends across 1,113 hectares and is set some 13km from the port of Sihanoukville in southwestern Cambodia's Preah Sihanouk province. Jointly developed by the Hodo Group, the Wuxi-based textile and garment giant, and the Cambodia International Investment Development Group, the Zone has now been incorporated within the framework of the BRI, China's ambitious international infrastructure development and trade facilitation programme.

According to the Council for the Development of Cambodia, the Zone houses 160 companies and provides employment for more than 22,000 local people. Production within the zone focuses on textiles, shoes, travel goods, electronic products, electrical accessories, tyres, car parts, furniture, office equipment and sports equipment. About US$918 million has been invested in the Zone to date, while last year its export value was estimated at $372 million, a 68% year-on-year increase.

The project, however, is still very much seen as a work in progress, with only the initial 528-hectare phase completed, which accounts for less than half the available space. Once fully developed, it is anticipated that more than 300 businesses will operate from the site, collectively employing 80,000-100,000 local workers.

While the SSEZ will not be the first economic zone to list on the CSX, it will be the first backed by Chinese investment to do so. In May 2016, the much smaller Japan-backed Phnom Penh SEZ (PPSEZ) raised nearly $10 million from its initial listing. It then returned for a smaller listing in October 2018. On the back of its successful performance on the bourse, its share value rose 15% over the course of 2018.

Although the SSEZ will be hoping to perform at least as well as the PPSEZ with its own initial offering, it may have to convince investors that it has resolved a number of issues that have dogged its development of late. Most notably, the sheer scale of Chinese business activity in Sihanoukville is said to have alienated many of the locals, particularly as it has driven up property prices and negatively impacted the tourism industry.

More recently, it has had to contend with allegations that goods of China origin are being transshipped via the zone in order to avoid the punitive US tariffs now in place. Although both the management of the Zone and the Cambodian authorities maintain that a subsequent investigation found no evidence of such a practice, it has raised a question mark as to the transparency of its continuing operations.

Thankfully, China's other major BRI project in Cambodia – the Phnom Penh-Sihanoukville Expressway – has proved to be less controversial. Once completed, this $1.9 billion project will provide a rapid road link between the country's capital and the port that currently handles about 90% of its container traffic. The expressway is being developed by the state-owned China Communications Construction Company (CCCC), which plans to recoup its investment on a toll basis.

Geoff de Freitas, Special Correspondent, Phnom Penh

Content provided by Picture: HKTDC Research
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