| Latest Articles | Category: Opinion & Editorial |
Back number Search (FY2011- IIST e-Magazine):| Category Search | Keyword Search | |
Back number Search (FY2001-FY2010 IIST WORLD FORUM Mail Magazine): | Keyword Search | Timeline-Search |



IIST e-Magazine (For the Japanese version of this article)

Japanese Companies Starting to Leave Cambodia Mixed success at Phnom Penh’s Aeon Mall Hirotaka Yamakawa JIJI Research Institute Guest Researcher News Department, JIJI Press [Date of Issue: 31/January/2017 No.0262-0263-1029]

Date of Issue: 31/January/2017

Japanese Companies Starting to Leave Cambodia
Mixed success at Phnom Penh’s Aeon Mall

Hirotaka Yamakawa
JIJI Research Institute Guest Researcher
News Department, JIJI Press

Cambodia is changing rapidly. The minimum wage has more than doubled on four years ago, and Aeon has opened a big shopping mall in Phnom Penh. The capital is also in the midst of an apartment and building construction boom, and luxury car numbers are rising.


During my visit to Cambodia, which has a population of around 15 million people, I did some fact-finding on trends among Japanese companies, the Phnom Penh Special Economic Zone (a large-scale industrial park on the outskirts of the Cambodian capital), and the new shopping mall which Aeon has opened in Phnom Penh. Here I provide a rundown on the current situation in Cambodia.

Minimum wage more than doubles on four years ago

Cambodia has been under the spotlight as a “Thailand+1” country for companies with operations in Thailand wanting to transfer part of the production process to a neighboring country to diffuse risk. Recently, however, a growing number of Japanese companies have been pulling out of Cambodia in response to steep wage growth, with the minimum wage in 2016 rising to more than double the level four years ago. While around 250 Japanese firms have operations in Cambodia, setting up there simply for low wages is not advisable.

In 2012, Cambodia’s minimum monthly wage was US$61, but it has since climbed steadily to $80 in 2013, $100 in 2014, $128 in 2015, and $140 in 2016. Vietnam has four different minimum wage levels according to the region, and Cambodia’s minimum wage in 2016 was almost the same as the level in Vietnam’s second most expensive region.

Cambodia has 38 Special Economic Zones (SEZs). Japanese companies have operations in nine of these, including the Phnom Penh SEZ and the Sihanoukville Port SEZ around 230 kilometers southwest of the capital. However, more than 20 Japanese companies who were leasing facilities in these SEZs have now pulled out of Cambodia, most of them labor-intensive companies such as garment and bag manufacturers.

Payrolls halved in some companies

According to one senior executive at a Japanese manufacturer’s local enterprise in the Phnom Penh SEZ, which has the greatest number of Japanese tenants, “the minimum monthly wage back in 2012 when we first launched operations in Cambodia was a low US$61, but now in 2016 it is more than double that. With wages rising much faster than we expected, we have had to halve our payroll, which was once up at 260 employees, to 130 to deal with the higher level.” In other words, the company has instituted a massive personnel cut to get by.

Cambodia’s minimum wage rose again in January 2017 to US$153. With a five-year election cycle, the country faces a general election in 2018, and the major inroads which the opposition party made at the last election in 2013 may prompt the ruling party to hike up the minimum wage still further in 2018 as a means of garnering public support. In that case, some Japanese firms with operations in Cambodia are likely to find payroll cuts no longer sufficient to cope with the situation, forcing even more to pull out.

The popular Phnom Penh SEZ

Among the various Cambodian SEZs, the most popular with Japanese firms is the Phnom Penh SEZ, to the extent that more than half (45) of its 81 tenants as at October 2016 were Japanese. Conveniently situated around 18 kilometers from the heart of Phnom Penh—a 45-minute car journey—the Phnom Penh SEZ was established in 2006 by developer Phnom Penh SEZ Plc. Local investors put up 78 percent of the capital, with Zephyr Co., Ltd., accounting for the remaining 22 percent. The distribution agent is Sumitomo Corporation.

The total developed area will be 360 hectares, which is the size of 77 Tokyo Domes. All Phase 1 blocks (141 hectares) have sold, and only a few remain in the Phase 2 development (162 hectares), so a third phase is currently being developed. Tenants sign up for a 50-year lease, paying a rent of US$70 per square meter.

Main entrance to the Phnom Penh SEZ

Main entrance to the Phnom Penh SEZ

More than 16,000 employees

Japanese companies in the Phnom Penh SEZ include Ajinomoto, small motor manufacturer Minebea, and Sumitomo Wiring Systems, a manufacturer of wiring harnesses for automobiles. Aside from Japan, there are also companies from Taiwan, China, Singapore, and the United States, etc., with soft drink major Coca Cola among the US firms. More than 16,000 people are employed within the SEZ, with workers apparently receiving an average monthly wage of around US$180 (including allowances).

Japanese companies like the Phnom Penh SEZ because of its many merits compared to other SEZs, including (1) a power plant, a sewerage treatment system, communications facilities and other essential infrastructure, and almost no blackouts; (2) the presence of Japanese restaurants, convenience stores, and banks; (3) its proximity to Phnom Penh. Phnom Penh itself has the Aeon Mall and a JCG Corporation-backed hospital which opened in October 2016 and offers advanced medical services. According to one Japanese company employee stationed locally, Phnom Penh is more convenient and a much easier place to live than it was a few years ago.

Aeon Mall, Phnom Penh

Aeon Mall, Phnom Penh

Bustling food court, slow going for Japanese specialist stores

I also visited Aeon Mall, which opened in June 2014 in Phnom Penh. Aeon’s first store in Cambodia, it comprises four stories with a total floor area of around 100,000 square meters. It is open all year round, and sales for 2015 were four billion yen, expected to reach 4.3 billion for 2016.

When the mall first opened, it had 49 Japanese tenants, but restaurants in particular have since pulled out. According to one Japanese living in Cambodia, a lot of Japanese companies have left because sales haven’t grown as strongly as expected against rent.

It was a weekday evening when I went to the mall, but the stores of mass electronics retailer Nojima and women’s lingerie specialist Wacoal were both quiet. By contrast, customer numbers picked up in the food section as of around six, with long lines forming at cash registers. The food court was also almost full, mostly of young people and families, and young people packed out the game corner. The contrast was therefore sharp between those floors and sections of floors with a lot of customers or almost none. Other Japanese companies with stores at the Aeon Mall include the Japanese-style tavern Watami, the 100-yen shop Daiso, beef bowl chain Yoshinoya, and travel agent HIS.

Fun in the rink for young people

There was also a big ice-skating rink (approximately 1,000 square meters) on the fourth floor. Even at 5:30 on a weekday evening, young people were happily skating around. The entrance fee was US$10 an hour inclusive of skate rental, which is expensive for Cambodia. Most of the customers at the rink appeared to be children from wealthy families.

Phnom Penh has a population of around 1.8 million. With a growing number of nuclear families, more people are eating out or buying ready-made meals. The Aeon Mall plans to cater to those needs, as well as to boost its range of baby goods and beauty and health products. Aeon intends opening a second store in a new housing development in the outskirts of Phnom Penh in 2018.

Ice-skating rink at Aeon Mall

Ice-skating rink at Aeon Mall

Apartment and building construction boom

This was my first visit to Phnom Penh in four years, and I was surprised at the boom in high-rise apartment and building construction. Many of the construction companies were Chinese. There were more luxury cars, including the Toyota Lexus and Germany’s Mercedes Benz and BMW, and the number of auto dealers had also increased. The streets of Phnom Penh are changing at a phenomenal pace.

High-rise apartment buildings under construction in Phnom Penh

High-rise apartment buildings under construction in Phnom Penh

(original article : Japanese)
(For the Japanese version of this article)


| Latest Articles | Category: Opinion & Editorial |
Back number Search (FY2011- IIST e-Magazine):| Category Search | Keyword Search | |
Back number Search (FY2001-FY2010 IIST WORLD FORUM Mail Magazine): | Keyword Search | Timeline-Search |