Phnom Penh Special Economic Zone, the kingdom’s leading SEZ and the first private Cambodian company to list on the Cambodian Stock Exchange, announced last week plans to diversify its revenue after revealing less-than-satisfactory financial results for 2017.
Total revenue in 2017 equalled $9.1 million, a decrease from the previous year’s $9.4 million. The company was, however, able to achieve a higher gross margin than in previous years, with net profit rising by 16 percent to reach $1.68 million.
Khmer Times’ May Kunmakara meets with the company’s CEO, Hiroshi Uematsu, to discuss the SEZ’s financial performance, diversification plans and its future expansion in the kingdom.
KT: Tell me about PPSEZ’s business performance last year?
Mr Uematsu: 2017 was a very challenging year. The first half was particularly tough. Luckily, we managed to close important deals with international companies on the second half. Overall, we achieved a net profit of $1.6 million, an increase from $1.45 in 2016.
KT: How many factories have been established in the zone? What sectors do they belong to and where are they from?
Mr Uematsu: We have now 92 tenants from 14 nations, including Japan, China, Taiwan, US, Thailand, Vietnam, Malaysia, Singapore and India. They belong to a wide range of sectors, such as electrical parts, auto parts, food and beverage, animal feed, diamond polishing and product packaging.
KT: Tell us about the industrial zone in Poipet. How many factories are there and from what industries?
Mr Uematsu: We are now in the first stage of development of Poipet PPSEZ. We expect to have our first tenant by the end of the present month. In this SEZ, we are targeting Japanese and Thai electronic and auto part manufactures who plan to build a second factory or want to relocate.
KT: Why did you decide to build it?
Mr Uematsu: To capitalise on the heavy flow of business activity at the border with Thailand. The SEZ is at a very strategic location. Poipet itself is just 3.5 hours away from the deep-sea port in Bangkok. It is also in line with Thailand’s new economic model, known as Thailand 4.0, which aims to shift the focus to innovative production.
KT: In June 2015, the government released its Industrial Development Policy (IDP) for the years 2015-2020, which aims to diversify the industry by attracting more advanced manufacturers. What are your thoughts on this strategy?
Mr Uematsu: It is a step in the right direction. We should not put all our eggs in the same basket. With the recent increase in the minimum wage for garment workers, it makes sense to encourage investment in other industries to develop a more skilled workforce.
KT: The workforce in Cambodia is cheap but unskilled. Do you think this may be discouraging investors in more advanced economies, such as Japan, from investing in the country?
Mr Uematsu: Yes, I believe so. But, at least, we are on the right track. It will take a while for the IDP to bear fruit. Besides remaining competitive when it comes to the cost of labour, the government must also work to provide better utilities and improve infrastructure.
KT: You mentioned utilities. Is the price of electricity still an issue for industrial activity in the kingdom? How is your SEZ dealing with this?
Mr Uematsu: We are very aware of the importance of a cheap and reliable power supply. In Poipet, we have formed a joint-venture with B.Grimm Power Public Company Limited, a Thai utility company, to handle power distribution in the SEZ. We aim to use this as a drawing card to attract more investors from Thailand.
