Ex-ante Evaluation
1. Name of the ProjectCountry: The Kingdom of Cambodia
Project: Sihanoukville Port Special Economic Zone Development Project(Loan Agreement: March 31, 2008; Loan Amount: 3,651 million yen; Borrower: The Royal
Government of Cambodia)
2. Necessity and Relevance of JBIC’s Assistance
Since establishing its constitution in 1993, Cambodia has been moving from a planned economy to amarket economy, and international integration and development have been proceeding at a swift
pace. In addition, since achieving accession to the World Trade Organization (WTO) in October
2004, Cambodia has taken steps to develop laws and regulations related to investment and economicactivities. On the other hand, Cambodia’s economic base is weak – as evidenced by the lack ofindustrial infrastructure and limited supply capacity due to low level of manufacturing technology,
coupled with the restrictive nature of the country’s domestic industry (total population: 14.2 million;
GDP per capita: US$512, as of 2006) – and the high percentage of the younger generation in its
population highlight the urgency of generating employment.
Expectations run high for foreign direct investment (FDI) to compensate for Cambodia’s lack of
domestic funds as well as to promote transfer of manufacturing technologies and job creation. In
recent years, as evidenced by the large increase in FDI from 2005 to 2006 (from US$1.1 billion in2005 to about US$4.4 billion in 2006 on approval basis), the scale of foreign investment has tended
to expand, with about half of it going to the construction industry. Although the textile and sewn
products industry accounts for about 71% of the country’s exports, there are concerns that theindustry may lose its competitive edge when, among other things, the safeguard against textile andsewn products from China is lifted (EU in January 2008, USA in January 2009) and the preferential
tariff rate on imports by the United States, the main destination for Cambodian textile and sewn
products, is lowered. Thus, FDI and other types of investments are expected to help diversify
Cambodian industry. Under such circumstances, it is essential that an attractive investment climate becreated if Cambodia is to be able to successfully generate employment through the development of
its private sector; albeit, there are many problems the country faces including poor governance andlack of infrastructure.
This project will take over from the Sihanoukville Port Special Economic Zone Development Project(E/S1), for which JBIC signed an ODA loan agreement in March 2006, and support the main
construction work. The establishment of the special economic zone (SEZ) focusing on attracting FDI
is expected to contribute greatly to the development of Cambodia’s export-related industries, at thesame time generating employment opportunities, particularly for the young. In addition, 18 SEZs
have been approved in Cambodia up to now, and the success of the SEZ is expected to have apipe-priming effect in expanding investments in other SEZs.
The government of Cambodia cites the development of the private sector and the creation ofemployment opportunities as important strategic targets in the Quadrilateral Strategy announced by
1 E/S (Engineering Services) Loans: These loans are provided to finance operations, including such preliminary work as project

formation and bidding (engineering services), undertaken by hiring consultants before a project is implemented.

-1-the new government, which was formed in July 2004, and in the National Strategic Development
Plan (NSDP) drawn up in January 2006.
In the Country Assistance Plan announced by the government of Japan in 2002, “sustainableeconomic growth and the realization of a stable society” headed the list of issues that need to besupported as priority matters. Moreover, in JBIC’s Medium-Term Strategy for Overseas EconomicCooperation Operations (2005), support for “infrastructure improvement and policy system reforms
to invigorate private economic activities” was cited as one of the priority areas to be considered inrelation to Cambodia. Therefore, JBIC’s assistance for this project, which promotes invigoration ofprivate-sector economic activities, is highly necessary and relevant.
3. Project Objectives
This project aims to increase direct investment flows into the region and to generate employment bydeveloping an SEZ in Sihanoukville City; thereby, contributing to the economic growth ofCambodia.
4. Project Description(1) Target Area
Sihanoukville City
(2) Project Outline
This is a project to develop an SEZ with an area of about 70 ha in Sihanoukville City. The scope ofthe project is as follows:(a) Development of an industrial site(b) Development of public services including roads, water supply facilities and sewage treatment
facilities(c) Consulting services for implementation of construction monitoring and supervision, support
for establishment of administrative decrees and statutes, support for creation of an
implementation structure, and support for investment inducement activities(3) Total Project Cost / Loan Amount
3,922 million yen (Yen Loan Amount: 3,651million yen)
(4) Schedule
April 2008–January 2011 (34 months). The project will be completed when the construction work iscompleted.
(5) Implementation Structure(a) Borrower: The Royal Government of Cambodia(b) Executing Agency: Port Authority of Sihanoukville (PAS) and Council for the Developmentof Cambodia (CDC)(c) Operation and Maintenance System: PAS(6) Environmental and Social Consideration(a) Environmental Effects / Land Acquisition and Resident Relocation-2-

(i) Category: A(ii) Reason for Categorization
This project is likely to have significant adverse impact on the environment under the “Japan
Bank for International Cooperation Guidelines for Confirmation of Environmental and Social
Considerations” (established in April 2002). Thus, this project is classified as Category A.
(iii) Environmental Permit
The Environmental Impact Assessment (EIA) report related to the project was approved by
the Ministry of Environment in March 2006.
(iv) Anti-Pollution Measures
Wastewater from the SEZ will be treated and released into the sea in a state and manner thatmeets the wastewater standards established in Cambodia.
(v) Natural Environment
The project site is not located in or around sensitive areas, such as national parks, and soadverse impact on the natural environment is assumed to be minimal.
(vi) Social Environment
In this project, residents of about 700 households located in the target area were relocatedfrom 2001 to 2006. In addition, resident relocation of 10 households to make room for theconstruction of an access road is being carried out by PAS in accordance with the country’s
domestic procedures.
(vii) Other/Monitoring
In this project, PAS will monitor the progress of the resident relocation operation, the living
conditions of the residents after relocation, in addition to noise, vibration, water quality andsoil.
(b) Promotion of Poverty Reduction
None(c) Promotion of Social Development (e.g. Gender Perspective, Measures for Infectious Diseases
Including AIDS, Participatory Development, Consideration for the Handicapped, etc.)
In previous projects, including the Sihanoukville Port Urgent Rehabilitation Project SAPI
(2001), PAS implemented measures against AIDS targeting construction workers. Similarly, inthis project, PAS has agreed to implement measures against AIDS using existing schemes
including in-house clinics.
(7) Other Important Issues
The government of Japan is at present implementing the Poverty Reduction Growth Operation(PRGO) to promote Cambodia’s policy system reforms at the initiative of the World Bank.

-3-5. Outcome Targets(1) Evaluation Indicators (Operation and Effect Indicator)2
Indicators
Amount of direct investment (million dollars)
Number of relocating companies (companies)
Number of jobs created (people)
Amount of exports (amount of exports by relocatingcompanies) (million dollars/year)
Volume of containers handled (additional volume) (TEU/year)

Target (2013, 2 years
after completion)
150
26
15,00087
30,000(2) Number of Beneficiaries
15,000 (number of jobs created)(3) Internal Rate of Return (Financial and Economic Internal Rate of Return)
Based on the following conditions, the economic internal rate of return (EIRR) and financial internalrate of return (FIRR) of the project is 43.1% and 3.1%, respectively.
[EIRR](a) Cost: Project cost (building expenses, operation and maintenance expenses) (excluding tax)(b) Benefit: Investment-induced added value (increased exports and imports, increased job
creation, increased tax revenue, etc.)(c) Project Life: 30 years[FIRR](a) Cost: Project cost (building expenses, operation and maintenance expenses)(b) Benefit: Leases from real estate, revenue from public service payments(c) Project Life: 30 years
6. External Risk Factors
There is a risk that, due to delays in a number of projects linking transmission lines from theVietnamese border to Sihanoukville, and other problems, it may not be possible to supply the SEZ
with affordable and stable electric power charge.
7. Lessons Learned from Findings of Similar Projects Undertaken in the Past
From ex-post evaluations of similar projects in the past, the lesson has been learned that appropriate“location, infrastructure development, investment conditions, rent levels and attraction of companies”
etc. are important. In light of this lesson, the project will construct an SEZ linked directly toSihanoukville Port, and develop the necessary infrastructure in locations that are particularly
attractive to export-oriented industries. Moreover, with regard to investment conditions (preferentialtax treatment, etc.), thanks to the application of revised investment laws, an attractive investment
climate is being created in Cambodia. Furthermore, to make the SEZ an attractive area for investment
2Among the five indicators, the “volume of containers handled” covers the containers handled in Sihanoukville Port for export/importby the relocating companies to the SEZ. The other four are the indicators covering the SEZ.

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from the investors’ point of view, the project will propose appropriate rent levels through consulting
services etc., and will support PAS and CDC in attracting companies.
8. Plans for Future Evaluation(1) Indicators for Future Evaluation(a) Amount of direct investment (million dollars)(b) Number of relocating companies (companies)(c) Number of jobs created (people)(d) Amount of exports (amount of exports by relocating companies) (million dollars/year)(e) Volume of containers handled (additional volume) (TEU/year)(f) Internal Rate of Return: EIRR, FIRR (%)(2) Timing of Next Evaluation
Two years after project completion-5-