A new special economic zone aiming to make Cambodia into a regional logistics hub held an official groundbreaking ceremony yesterday, at its future home on the muddy outskirts of Phnom Penh in Kandal’s Takhmao district.

The $100 million Kerry Worldbridge SEZ project is a partnership between two logistics companies, the Hong Kong-based Kerry Logistics and local firm Worldbridge International.

The SEZ will be completed in three phases, with the first phase, which includes building the Kingdom’s first customs-free warehouse, to be operational in 18 months and cost $60 million.

The bonded warehouse will enable companies to import goods duty-free, manufacture the final product and export them out of the country.

With bonded warehouses, duty exemptions apply only if the final product is exported and not sold in the local market.

“The trader or businessman can save a lot of import tax.

They can save on their balance sheet,” said Sear Rithy, who is on the board of directors at Kerry Worldbridge Logistics, the joint venture developing the SEZ.

According to Rithy, once fully operational the SEZ can provide jobs to nearly 25,000 employees and potentially attract foreign investment of more than $300 million.

The new warehouse and storage area will particularly benefit the automotive industry, said Rami Sharaf, CEO of Worldbridge International (Cambodia).

He added that the warehouse would provide the sector some financial leeway when importing vehicles.

“Plus, once inside the country, having paid full customs and tax, the car cannot be re-exported to another country because you cannot reclaim the customs and tax if you take the car back out of Cambodia to sell in another country,” Sharaf said.

Sharaf said that the proposed warehouse, coupled with manufacturing and logistics services, could move Cambodia towards being a regional import-export hub.

“Cambodia needs to diversify the industries that we have,” Sharaf said.

“With garments we are putting all our eggs in one basket.”

Ngorn Saing, CEO of RMA Cambodia, which imports Ford and Jaguar Land Rover vehicles, said the warehouse facility will help save time and have less of an impact on a company’s cash flow, as they will not have to pay duties upfront.

But for tractors and other agricultural equipment, which can already be imported duty-free, the scheme would not prove so advantageous, Saing said.

“This does not help tractors and the agricultural equipment industry as it is more beneficial to import and keep it at our own warehouses or showrooms, rather than paying storage fees at the bonded warehouse,” he added.