Cambodia making a play for more factories

MASASHI UEHARA, Principal economist, Japan Center for Economic Research.

Workers polish watch bezels by hand in Nihon Seimitsu's Bavet factory. The high ceiling ensures enough air flow to forgo air conditioning.

There are growing expectations that the Southern Economic Corridor, which cuts through the lower part of the Indochinese Peninsula, will soon buzz with activity. The corridor is a highway linking Bangkok with Phnom Penh and Ho Chi Minh City. It also stretches west from Bangkok, to Dawei, Myanmar, a city that opens to the Indian Ocean.

     Thanks in part to the ASEAN Economic Community, which officially kicked off in December, factories are beginning to sprout up in Cambodia, the corridor's biggest beneficiary.

Border towns

About a two-hour drive from Ho Chi Minh City, along a 70km stretch of highway with two lanes in each direction, is Moc Bai, a town along the border with Cambodia. After stepping out of our Vietnamese taxi, which would only go as far as Moc Bai, I walk to Bavet, on the other side of the border.

The Tsubasa Bridge, which opened to traffic in April, has 121-meter-tall towers and is 1,500 meters long. Except for the bridge, there are no streetlights along the highway between Bavet and Phnom Penh.

     Unlike the European Community just before its integration, the border's existence cannot be missed. Travelers have to go through immigration and customs on both sides.

     Bavet has about 10 casinos, including Le Macau and the Las Vegas Sun. With only foreigners eligible to access casinos in Vietnam, Vietnamese cross the border and gamble away their dong in Bavet.

     The town, however, has another face -- that of a special economic zone which hosts foreign export 

companies. Special economic zones are one-stop industrial parks that provide a variety of services -- investment project registration, help with export and import procedures as well as other assistance in cutting through red tape. They also promise necessary infrastructure, such as water supply and sewerage systems.

     An arrangement between Vietnam and Cambodia allows Vietnamese vehicles, including trucks, to go 20km into Cambodia. SEZs have been created along Cambodia's Route 1, part of the Southern Economic Corridor, for export convenience and to allow companies to dip into the cheap labor pool.

     Since Cambodia has been exempted from tariffs and import quotas by Japan, the U.S. and Europe, labor-intensive sewing industries have assembled in the area, hailing from China and Taiwan. Taiwanese and Chinese bicycle parts factories have also been set up; they use the tariff incentives and export their products to Europe.

     Watch-related companies are also getting in on the action. Nihon Seimitsu, a Japanese company based in Kawaguchi, Saitama Prefecture, started producing bezels in Bavet's Dragon King SEZ in March 2014. It is trying to create a "watch village" by inviting related companies to set up factories around its plant. Of Nihon Seimitsu's 130,000-sq.-meter site, its factory only takes up 40,000 sq. meters. A Hong Kong watch band maker took over another 50,000 sq. meters for a factory of its own, shifting its production from China.