Cambodia's new Southern Economic Corridor (SEC), covering 21 provinces of Cambodia, will stimulate greater economic growth for the impoverished country, and drive growth in the Greater Mekong Subregion (GMS). But Cambodia is facing major constraints in transforming the corridor into an engine for national economic growth.

Provincial officials, private sector stakeholders, and development partners gathered in March to find ways to develop the corridor, during a regional symposium on the development of the corridor, jointly organized by the Asian Development Bank (ADB) and Australian Agency for International Development (AusAID) in Phnom Penh.

Improving infrastructure, trade and transport facilitation, logistics development and promoting value chains and industrial clusters are the major tasks needed to develop the economic corridor, said experts. "These are areas in which we urgently need to address bottlenecks in order to move SEC development forward," said Cham Prasidh, minister of the Ministry of Commerce and GMS Minister of Cambodia.

Southern Economic Corridor Lags Behind

The Southern Economic Corridor links Cambodia with six provinces in Thailand including Bangkok, four regions in Viet Nam including Ho Chi Minh City, and six provinces in Lao People's Democratic Republic (Lao PDR). It also reaches to Dawei in Myanmar. The other two major economic corridors in the GMS are the East-West Economic Corridor linking Lao PDR, Myanmar, Thailand, and Vietnam and the North-South Economic Corridor linking People's Republic of China's (PRC) Yunnan Province and Guangxi Zhuang Autonomous Region, Lao PDR, and Myanmar.

By the end of 2010, ADB had extended loans and grants totaling almost $4.7 billion to GMS countries for 55 investment projects with a total project cost of about $11.6 billion to help develop the corridors through roads, airports, and railway improvements; power supply; tourism infrastructure; urban infrastructure; and communicable disease control. Among the three corridors, experts said, the Southern Economic Corridor has lagged behind, and has not yet provided significant benefits to Cambodia.

"The development of the SEC is a long term and complex process, which requires careful planning and complementary software measures to support trade and business opportunities along the corridor," said Putu Kamayana, ADB country director for Cambodia.

"The private sector has a crucial role to play in accelerating SEC development while the public sector plays a key role in developing policies and conducive regulatory environments to facilitate private sector investment along the corridor," Kamayana said.

Identifying Solutions

Cambodia's growing economy has attracted significant foreign direct investments in recent years, especially from PRC, Japan, and Korea.. In 2010, the Council for the Development of Cambodia approved $2.69 billion in investment projects, according to the Cambodia Investment Board. However, most investment projects concentrate in major cities, especially Phnom Penh and Siem Reap. Other provinces along the economic corridor have seen only a small number of investments.

At the symposium, which brought together stakeholders from 43 provinces in Cambodia, Lao PDR, Thailand, and Viet Nam, private sector representatives highlighted the procedural barriers to cross-border trade, including infrastructure weaknesses and the general lack of information on doing business along the Southern Economic Corridor. They called for greater dialogue between the public and private sectors.

Shipping via Cambodia is slower and more expensive than via neighboring countries due to weak road transport, complicated paper work procedures, and numerous tea money payments, said Paul Apthorp, board member of the GMS Business Forum."Cambodia should recognize the electronic transmission of documents for transit, saving the original documents for final clearance. This would reduce freight costs and save time," he said.

At the end of the symposium, public and private sector stakeholders agreed on practical actions for infrastructure development along the corridor - including rural and feeder roads - to speed up transport and trade facilitation measures; to disseminate information to the private sector to facilitate business decisions in the Southern Economic Corridor; and to establish a systematic monitoring system for actions to promote the economic corridor's sustainable development.

Senior officials, provincial authorities, private sector stakeholders and development partners from the six GMS countries plan to meet again in June this year in Lao PDR to discuss an updated strategy and action plan for developing the Southern Economic Corridor.

"When these obstacles are addressed, the SEC will be fully transformed from a transport corridor to an economic corridor," said Kamayana of ADB, "bringing employment, increased incomes, and poverty reduction for Cambodians along the corridor."