PPSEZ CEO: Digitalizing custom procedures can reduce 30% of Cambodia’s logistic cost and if Donald Trump Wins

• 30 July 2024
• Property Focus
• 1645 Views

The Phnom Penh Special Economic Zone (PPSEZ), a key industrial park in Cambodia, is diversifying its tenant base to attract more companies from Thailand and Vietnam, amid shifts in global supply chains. Housing over 90 tenants from 15 countries across 3.57 square kilometres, PPSEZ aims to complement Thailand’s supply chain and encourage production transfer from Vietnam, reported Nikkei Asia on 23 July 2024.

Currently, Japanese and Chinese companies comprise two-thirds of PPSEZ’s tenants. However, the operator, Royal Group PPSEZ, is targeting more Thai and Vietnamese firms, leveraging the “Thailand plus one” strategy. “Geographically, it is easy to complement Thailand’s supply chain,” said Hiroshi Uematsu, CEO of Royal Group PPSEZ.

Situated 540 km from Bangkok, PPSEZ is strategically positioned for businesses looking to diversify from Thailand. Additionally, Phnom Penh’s proximity to Ho Chi Minh City and Dong Nai province enhances its appeal for Vietnamese production transfers.

The geopolitical climate also influences this strategy. “If Donald Trump wins the November U.S. presidential election, trade conflicts between the U.S. and China may escalate, and Cambodia will attract even more attention as a production relocation destination,” Uematsu added.

Cambodia’s political stability, despite Western criticism, adds to its attractiveness as an investment destination. The PPSEZ has evolved significantly since its inception, with China’s Marvel Garment, which began operations in 2020, now being the largest tenant. Marvel Garment occupies 50 hectares, employs 17,000 workers, and exports products for brands like Nike and Polo mainly to the U.S.

Cambodia also seeks to attract more Japanese investment to balance its economic dependence on China. However, the weak yen against the dollar poses challenges for Japanese companies entering the Cambodian market, Uematsu explained.

Addressing logistical costs is crucial for PPSEZ’s strategy to attract more businesses. Uematsu revealed that the park has assigned five specialized personnel certified as customs brokers since May 2023 to reduce logistics costs and combat corruption.

“In some cases, this can reduce logistics costs in Cambodia by less than half. If corruptions are eliminated by fully digitalizing customs procedures, I believe it is possible to lower down total logistics cost [from neighbouring countries] up to 30%,” he said.

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