ODA for Cambodian industrial park in works

Japan plans to conduct a feasibility study on the development of a major industrial park at a site close to Sihanoukville Port, Cambodia’s only seaport for international commerce, through official development assistance, government officials said April 29.

Tokyo plans to let the Japan International Cooperation Agency, a government-affiliated aid organization, launch the feasibility study during fiscal 1997, after it receives a formal request for such assistance from Phnom Penh, according to the officials. “Japan cannot provide ODA for the study without being formally requested by Cambodia to do so,” one official said. “We expect to receive the request in the near future.”

Sihanoukville Port, located about 200 km southwest of Phnom Penh, is widely believed to hold the key to Cambodia’s economic development. The study will take at least 18 months and cost several hundred million yen, which will come from the ODA budget allocated to the Ministry of International Trade and Industry, the officials said.

Japan will also dispatch an undetermined number of private-sector experts during fiscal 1997 to help the Cambodian government establish a necessary legal framework for the smooth implementation of the industrial park project, the officials said. The experts will be dispatched to Cambodia under the newly introduced ODA technical-cooperation program of the Foreign Ministry. This sends a total of 15 private-sector experts annually to developing countries to advise them on economic development, the officials said.

Japan, the world’s largest aid donor, has orchestrated international assistance efforts for Cambodia since the nation’s warring factions signed an international pact in October 1991 to end its civil war. The plan to build an industrial park for export-processing in Sihanoukville was first proposed to Cambodia last summer by a mission from the Japan Federation of Economic Organizations (Keidanren).

So far, Japanese investment in Cambodia is negligible and limited to garment and other projects by small and medium-size firms that take advantage of the cheap labor costs. It remains to be seen whether investment will rise sharply in the years ahead.

Potential investors are hesitant both because of the country’s shoddy infrastructure and due to growing concerns over its political and social stability. Feuding is reported to be escalating among the main partners in the ruling coalition formed following the U.N.-supervised general election nearly four years ago.

Whether or not the next general election, scheduled in 1998, will be held smoothly and peacefully without U.N. supervision, it is expected to have a great effect on Japanese and other foreign investors’ confidence in the country’s future. Cambodia also hopes to receive a boost in foreign investment following its entry into the Association of Southeast Asian Nations, expected as early as this summer along with Laos and Myanmar.

Marubeni and other major Japanese trading firms, including Itochu Corp. and Mitsui & Co., that are interested in the industrial park have commissioned a Japanese consulting firm to draw up a master plan for the park. The master plan was completed at the end of last year.