Global Cases

Cambodia, one of the countries gaining attention with “Thailand-Plus-One”

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Mass Media Relations Team, Corporate Communications DepartmentMasaaki Nakamura

I joined the company in 2014. As a member of the Mass Media Relations Team of the Corporate Communications Department, I am in charge of covering the Transportation & Construction Systems Business Unit, Mineral Resources, Energy, Chemical & Electronics Business Unit and finance, accounting and risk management as well as the Asia & Oceania region. I often spend a vacation gazing at the ocean in a tropical resort. I desire to live close to the ocean someday. I cannot wait to see volleyball at live at the Tokyo Olympics.

Sumitomo Corporation has developed businesses in 14 countries in the Southeast Asian and Oceania regions. Among them, one of the countries that is currently focused on as a region that will play an important role for “Thailand-Plus-One”*1 is Cambodia. Sumitronics Manufacturing Cambodia (SMC), the fourth manufacturing base of Sumitronics, a group company of Sumitomo Corporation, held an opening ceremony in conjunction with the Poipet Phnom Penh Special Economic Zone (Poipet PPSEZ) in December 2019. To coincide with the opening ceremony, I visited Poipet in Cambodia.

  1. Thailand-Plus-One :
    A business model consisting of a Japanese company with manufacturing bases in Thailand relocating its labor-intensive processes to a special economic zone of a neighboring country in view of the flood risks and rising labor costs in Thailand.

Potential of Cambodia

Cambodia is bordered by Thailand, Vietnam and Laos, has a population of approximately 16 million people and is a Buddhist country with a total area about half the size of Japan. It may be easier for readers to imagine if I say that it is the country where the world heritage site of Angkor Wat is located. Primary industries are the main driver of the Cambodian economy, so why then is Cambodia attracting attention as a “Thailand-Plus-One” country? There are two main reasons.

The first is that the Southern Economic Corridor*2 that connects Bangkok in Thailand, Ho Chi Minh City in Vietnam with Phnom Penh in Cambodia. Using the Southern Economic Corridor, Cambodia aims to establish supply chains near both Bangkok and Ho Chi Minh City, where Japanese companies are concentrated. In other words, Cambodia is expected to play a huge role in the development of the special economic zone of the Mekong region.

The second reason is the young labor force. There are many young people in Cambodia, with people aged 14 years or younger making up 31.6% of the population, and the working population is expected to continue to grow in the future. Furthermore, a great deal of attention is being paid to the inexpensive labor costs in Cambodia compared to its neighboring countries, and investment in labor-intensive industries is very active.

Office building of Poipet PPSEZ

In recent years, Cambodia’s GDP has grown at a yearly average of approximately 7%. The real GDP growth rate in 2018 accelerated to 7.5% compared to the previous year, and has been maintained at the high rate of 7% for eight consecutive years. Cambodia is one of the countries where stable growth is expected in the future.

Poipet in the past was famous as the site where companies funded with Thai capital built casinos, but in addition to being in an excellent location approximately four hours by car from Bangkok, it also has abundant human resources, with a neighboring population of around three million, and has attracted attention in recent years for its potential as a manufacturing base for Thailand.

  1. Southern Economic Corridor :
    Along with the Kunming-Bangkok Expressway and the East-West Economic Corridor, the Southern Economic Corridor is one of the international arterial roads traversing mainland Southeast Asia. It connects major cities with a population of over two million people, and is also a recipient of Japanese ODA.

Participated in the joint opening ceremony

A total of around 150 people, including Cambodian government officials, officials from the Embassy of Japan in Cambodia, representatives of tenant companies and municipal high school students, attended the joint opening ceremony held by SMC and Poipet PPSEZ. The ceremony began with a traditional Cambodian dance, followed by a series of greetings from authorized personnel and a ribbon cutting ceremony. Sok Chenda, the deputy secretary general of the Council for the Development of Cambodia, gave a passionate speech, saying, “With the end of the Cambodian Civil War, we are now living in an era of peace. The government will continue to actively put its efforts toward the growth and development of Cambodia. We expect SMC to create many new employment opportunities.”

Poipet PPSEZ is the third industrial park constructed in Poipet, where our company acts as a distributor. Located approximately 8 km from the Thai border, it can be easily accessed from National Highway 5, which is part of the Southern Economic Corridor that extends from the capital city of Phnom Penh to Thailand. Inside the approximately 70-hectare site, a complete infrastructure facility for providing a stable power supply, water supply and drainage is scheduled to be established, and there are also plans to build a rental factory along with land sales.

During the presentation given by Poipet PPSEZ, which was one of the most impressive parts of the opening ceremony, the journey to the completion of the zone was introduced with photographs, and visitors were able to get a real sense of the roughly four-year process of transforming the vacant lot into an industrial park. Other than the electrical wiring, all work was performed by Cambodian companies, making it an industrial park that was almost completely Cambodian built. When I envision Poipet’s role as a major industrial area in the near future, I find it difficult to contain my excitement.

A group photo taken at the joint opening ceremony. Pictured sixth from left is Deputy Secretary General Sok Chenda.

Tour of the new SMC factory

In order to provide low-cost and stable electronics manufacturing services (EMS) to Japanese automotive and consumer electronics manufacturers that manufacture products in Thailand, SMC entered Cambodia in 2016 ahead of other Japanese EMS business operators. SMC established a base in Poipet and started operation in 2017. Now, it has established a new base as the first tenant company of Poipet PPSEZ.

During my tour of the new factory, I was extremely surprised at its cleanliness. Also, SMC employees gave visitors a proper Japanese greeting, making us feel like we were still in Japan.

Why is the factory so clean? The reason is that cleaning takes place every morning, with all employees, led by President Kazuya Mifune, joining in to clean every corner of the facility. The factory currently employs around 90 employees, a number that has increased threefold compared to the previous year following the factory’s completion.

The manufacturing of wire harnesses*3 that was conducted during the rental factory days continues. I was surprised at the speed and accuracy of the tasks involved, such as attaching several different types of wires and twisting and bundling them together. I had heard that Cambodians are very diligent and good with their hands, and when I actually witnessed it, I was surprised by the very detailed work they were performing, work that I certainly could not do.

The board mounting for air conditioners also began as a new initiative of the EMS business. All of the parts are brought in from Thailand and managed with barcodes. The quality is extremely high. In addition to maintaining a stable production system, the company is also considering increasing production in the future.

In addition to developing the local economy, SMC is expected to contribute to creating jobs in Cambodia. I for one will be keeping my eye on SMC, which is working hard to embody the strategy of “Thailand-Plus-One” for Cambodia, where further growth is expected, particularly in the special economic zone of the Mekong region.

  1. Wire harness :
    An assembly of parts used in machinery that requires lots of electrical wiring, such as the wiring in a car.
The extremely polite employees at SMC.
The signboard located at the entrance of the new SMC factory.

(Bonus) The origin of the word “kabocha” (pumpkin)

Does everyone know the origin of the word kabocha (pumpkin in Japanese) ? I myself did not know until recently, but it is thought to have originated from the word “Cambodia,” back when the Portuguese introduced pumpkins to Japan as a product coming from Cambodia during the Edo period. I’m still curious about where you can find pumpkins in Cambodia, and I will try to find out during my next visit.

To tell the truth, I have never eaten pumpkin in Cambodia, but I always drink Angkor beer.

January 2020

Keyword

  • Infrastructure Business
  • Media & Digital Business
  • Asia and Oceania

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