Ex-ante Evaluation
1. Name of the ProjectCountry: The Kingdom of Cambodia
Project: Sihanoukville Port Special Economic Zone Project (E/S)(Loan Agreement: March 20, 2006; Loan Amount: 318 million yen; Borrower: The
Royal Government of Cambodia)
2. Necessity and Relevance of JBIC’s Assistance
Since its constitution was established in 1993, Cambodia has been moving from aplanned economy to a market economy, and international integration and development
have been proceeding at a swift pace. In addition, since achieving accession to theWorld Trade Organization (WTO) in October 2004, Cambodia has taken steps todevelop laws and regulations related to investment and economic activities.
However, levels of poverty remain high with making up 35% of the population (as of2004). Furthermore, in view of the restricted nature of the country’s domestic market(total population 13,800,000 people; GDP per capita US$350, as of 2004) and thegrowing pressure of its working age population, the employment
generation throughthe development of Cambodia’s private sector focusing on labor-intensive andexport-oriented industries is a pressing issue from the perspective of poverty reduction.
There are great expectations of foreign direct investment (FDI) to resolve the problems.
However, while at one point in the mid-1990s the scale of FDI reached almost US$250
million, this was followed by a downward trend, and in 2004 it remained at
approximately US$150 million. There are also concerns that investment in the textiles
and sewn products industry which makes up over 70% of the country’s exports (2004)
could decrease in the wake of the expiration of the WTO Textiles Agreement at the endof 2004. In such circumstances, in order for the country to successfully generate
employment through the development of the private sector it is essential to create
attractive investment climate as a recipient of direct investment, but there are many
problems for the country including complicated administrative procedures and lack ofinfrastructure.
This project will establish a Special Economic Zone (SEZ) in Sihanoukville (selected asa model in the JICA Development Study, the 2003 “Study on Regional Development of
the Phnom Penh Sihanoukville Growth Corridor” as a result of its location) as. Inaddition, the project will make legal and institutional policy proposals which will be
conducive to the attract investment.
The establishment of the SEZ focusing on FDI, is expected to contribute greatly to thedevelopment of the country’s export-related industries, at the same time as generating
employment opportunities, particularly for the young.
The Government of Cambodia puts the development of the private sector and theemployment generation as the important strategies in the form of the Rectangular
Strategy, announced by the new government that was formed in July 2004, and theNational Strategic Development Plan (NSDP) drawn up in January 2006.

In the Country Assistance Program announced by the Government of Japan in 2002,“sustainable economic growth and the realization of a stable society” headed the list ofissues which need to be supported as serious matters. Moreover, in JBIC’s“Medium-Term Strategy for Overseas Economic Cooperation Operations” (2005),
support toward “the development of infrastructure and policy institutional reform forthe invigoration of private-sector economic activities in the Growth Corridor region”
was cited as one of the priority areas in relation to Cambodia. Therefore, the level ofnecessity and relevance of JBIC assistance is high.
3. Project Objectives
This project aims to expand the flow of direct investment into the region and to generate
employment by developing the SEZ directly connected to the Sihanoukville Port,
thereby contributing to the economic growth of Cambodia.
4. Project Description(1) Target Area
Sihanoukville City
(2) Project Outline
This is a project to develop a SEZ with an area of about 70 hectares in SihanoukvilleCity, focusing on an export processing zone, and to implement consulting services.
The target of the loan is the engineering services (E/S) that will precede the mainbuilding work.
(3) Total Project Cost/Loan Amount
4,394 million yen (Yen Loan Amount: 318 million yen)
(4) Schedule
January 2006 - May 2009 (40 months)(5) Implementation Structure(a) Borrower: The Royal Government of Cambodia(b) Executing Agency: Council for the Development of Cambodia (CDC) and thePort Authority of Sihanoukville (PAS)(c) Operation and Maintenance System(i) National government: Cambodia SEZ Board (CSEZB)(ii) Sihanoukville Port SEZ: The Sihanoukville Port Authority will bear
responsibility for maintenance. A one-stop service office for dealing withgovernment procedures in an integrated fashion will be established.
(6) Environmental and Social Consideration(a) Environmental Effects/ Land Acquisition and Resident Relocation(i) Category: B(ii) Reason for Categorization
This project is classified as Category B because it is a loan targeting engineering
services, and does not fall under Category C as stipulated in the “Japan Bank forInternational Cooperation Guidelines for Confirmation of Environmental and Social
Considerations” (established April 2002).

(b) Promotion of Poverty Reduction
The project will promote economic growth, of great importance for the poverty
reduction in Cambodia, and is expected to be conducive to the reduction of poverty
primarily through the generation of employment.
(c) Promotion of Social Development (e.g. Gender Perspective)
As the target area is an international port and a tourist area with a high rate of
HIV/AIDS infection it is planned to include conditions for the prevention ofHIV/AIDS in the contract made with the contractor for the main business of theproject and to have the contractor and PAS implement measures against AIDS among
the construction workers, and also to carry out such support in E/S.
(7) Other Important Issues(a) Partnership with the World Bank
The World Bank’s Poverty Reduction Supporting Operation plans to promote
improvements in the institutional side of this SEZ with the aim of developing theprivate sector, one of its main improvement areas.
(b) Partnership with JICA
Having adopted the “Study on Economic Policy Support in the Kingdom ofCambodia” (2005), JICA will propose measures aimed at attracting investment inCambodia, principally by Japanese companies.
5. Outcome Targets(1) Evaluation Indicators (Operation and Effect Indicator)
Indicators
Baseline
Target (2012 [2 years(2005)
after completion ofproject])
Amount of Direct Investment
170(for SEZ in total) (millions ofUS dollars)
NumberofRelocating
29
Companies (companies)
Number of Jobs Generated
29,200(people)
Amount of Exports (amount116
of exports by relocatingcompanies) (millions of USdollars/year)
VolumeofContainers
40,000Handled (additional volume)(TEU/year)(2) Internal Rate of Return
Financial Internal Rate of Return (FIRR): 5.3%(a) Cost: Project cost, operation and maintenance expense(b) Benefit: Leases from real estate, revenue from public service payments(c) Project Life: 30 years
Economic Internal Rate of Return (EIRR): 16.0%(a) Cost: Project cost (excluding tax), operation and maintenance expense

(b) Benefit: Added value from investment(c) Project Life: 30 years
6. External Risk Factors
Changes of the priorities accorded the project by the Government of Cambodia
following changes in the administration.
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 thatappropriate “location, infrastructure development, investment conditions, rent levels
and attraction of companies” etc. are important. Based on this, this project will
construct an SEZ adjacent to the Sihanoukville Port, and develop the necessary
infrastructure in locations which are particularly attractive to export-oriented industries.
Furthermore, with regard to investment conditions (preferential tax treatment etc.),
amended investment laws have been applied, with contents which are advantageous forinvestors in comparison with other ASEAN countries. Moreover, to make the area an
attractive area for investment from investors’ point of view, the project will propose
appropriate rent levels through consulting agencies etc., and will support implementing
agencies concerned with the attraction of companies.
8. Plans for Future Evaluation(1) Indicators for Future Evaluation(a) Amount of Direct Investment (for SEZ in total) (millions of US dollars)(b) Number of Relocating Companies (companies)(c) Number of Jobs Generated (people)(d) Amount of Exports (amount of exports by relocating companies) (millions of US
dollars/year)(e) Volume of Containers Handled (additional volume) (TEU/year)(f) Internal Rate of Return (FIRR, EIRR): %(2) Timing of Next Evaluation
After project completion