In recent years, Special Economic Zones (SEZs) have emerged as key components of Cambodia’s economic strategy. These zones are designed to encourage investment and boost export-oriented manufacturing by offering various benefits such as tax exemptions and improved logistical support.
In this article, we will provide an overview of Special economic Zones in Cambodia, their benefits, and process for establishing a business within Cambodia’s Special Economic Zones (SEZs).
What are Special Economic Zones in Cambodia?
Special Economic Zones (SEZs) in Cambodia are designated areas that operate under distinct regulatory frameworks. The primary objective of these zones is to attract foreign investment and stimulate economic growth.
Cambodia has 57 approved SEZs, with 24 currently operational. These zones have successfully attracted over $1.65 billion in investments and have created approximately 161,000 jobs, mainly in manufacturing sectors such as automotive, electronics, and machinery. Some notable SEZ’s include:
- Sihanoukville Special Economic Zone: Supports a variety of manufacturing and service industries with tax incentives and simplified administrative procedures.
- Neang Kok Koh Kong: Encourages investment in agriculture and manufacturing through incentives and infrastructure development.
- Dragon King Bavet SEZ: Specializes in manufacturing, particularly textiles and garments, offering incentives to attract foreign investors.
- Kiri Sakor Koh Kong: Focuses on tourism and light manufacturing, backed by government-supported infrastructure initiatives.
- Pacific SEZ: Concentrates on textiles and garments, providing fiscal incentives designed to attract foreign investment.
Types of SEZs in Cambodia
There are three main types of economic zones in Cambodia, each designed to fulfill specific economic objectives and attract foreign investment. These include:
- Special Economic Zones (SEZs): Established to promote a variety of industries and attract foreign investment by offering financial incentives, simplified administrative procedures, and improved infrastructure.
- Export Processing Zones (EPZs): Focused specifically on export-oriented manufacturing, EPZs aim to facilitate the production and export of goods by offering benefits such as tax exemptions and simplified customs procedures.
- Industrial Parks: Designed to support manufacturing activities by providing the necessary infrastructure and resources for efficient operations.
These zones are located in key areas across Cambodia to enhance their economic effectiveness, support investment initiatives, and develop the country’s industrial sector.
Governance of Cambodia’s SEZs
Special Economic Zones (SEZs) in Cambodia are governed by the Law on Special Economic Zones and Sub-decree No. 148, both issued on December 29, 2005. This legal framework establishes the operational guidelines and incentives for businesses operating within these zones.
The Cambodian Special Economic Zone Board (CSEZB), under the Council for the Development of Cambodia (CDC), is responsible for overseeing the development and regulation of SEZs.
While SEZs are primarily managed by private developers, government representatives are stationed on-site to assist with administrative functions and ensure compliance with regulations.
Why Setup Your Business in Cambodia’s SEZs
Cambodia has established Special Economic Zones (SEZs) to encourage foreign investment and promote economic growth. Therefore, businesses in these zones receive certain additional benefits that are not available to mainland businesses. These include:
1. Beneficial Tax Incentives
Special Economic Zones (SEZs) offer several tax incentives including a 0% corporate income tax rate for the first eight years, followed by a reduced tax rate. Additionally, companies benefit from exemptions on import duties for equipment and materials used within the zones.
Businesses operating in SEZs also receive Value-Added Tax (VAT) exemptions on the import of raw materials and machinery intended for production aimed at export markets.
2. Infrastructure and Logistics
Cambodia’s Special Economic Zones (SEZs) are typically equipped with enhanced infrastructure, including well-maintained roads, ports, and utilities, which support efficient logistics operations. Investors also benefit from streamlined customs procedures, simplifying the import and export process and reducing both time and costs.
3. Government Support
The Cambodian government actively supports the development of SEZs through financial incentives, land allocation, and the creation of a favorable regulatory environment. This support is critical for attracting both domestic and international investors.
How to Establish a Business in an SEZ in Cambodia
Establishing a business in a Special Economic Zone (SEZ) in Cambodia requires adherence to specific procedures and regulations, beginning with obtaining certification as a Qualified Investment Project (QIP) from the Council for the Development of Cambodia (CDC). Emerhub can assist you in preparing the necessary documentation, which includes:
- Investment Proposal: A detailed plan outlining your investment intentions.
- Articles of Incorporation: Legal documents that establish your company.
- Business Plan: A comprehensive strategy for your business operations.
Once your business registration is complete, you need to submit construction plans to local authorities for approval. Even if you do not plan any immediate construction, the Cambodian government requires you to submit these plans to ensure compliance with local zoning and land-use regulations.
Additionally, you must submit an Environmental Impact Assessment (EIA) to the Ministry of Environment to confirm adherence to environmental standards.
The final step in the process is acquiring a Final Registration Certificate (FRC) from the CDC. Emerhub’s local experts will streamline these steps to facilitate a smooth and compliant business setup in Cambodia’s SEZs.
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