Convention Center

By Arnaud Darc Cambodia has seen robust economic growth and significant poverty reduction since the since the beginning of 2010. However, the COVID-19 pandemic temporarily slowed this progress. Despite the challenges, Cambodia managed to reduce its poverty rate significantly and saw a consumption growth among the poorest 40% of households. To sustain and enhance this growth, particularly in the tourism sector, the construction of a convention center in Phnom Penh presents a promising solution. This paper explores the potential benefits, key considerations, and a proposed Public-Private Partnership (PPP) structure for the project. Introduction Cambodia’s economic growth has been commendable, but it faces challenges such as a lack of diversification, modest human capital development, and environmental sustainability issues. The tourism sector, a critical component of Cambodia’s economy, can significantly benefit from strategic infrastructure projects. Building a convention center in Phnom Penh could serve as a catalyst for economic diversification, job creation, and enhanced global competitiveness. Potential Benefits Boosting Business Tourism A convention center can attract international conferences, exhibitions, and business events, bringing in business travelers and increasing tourism revenues. Establishing Phnom Penh as a regional hub for business tourism diversifies the tourism market beyond leisure tourism. Economic Impact Increased visitor spending on accommodation, dining, transportation, and entertainment can stimulate the local economy. The construction and operation of the center can create jobs and boost local businesses. Infrastructure Development The project can drive the development of supporting infrastructure such as hotels, restaurants, and transport facilities, improving overall city infrastructure. Enhanced urban infrastructure benefits both residents and tourists, contributing to the city’s livability and attractiveness. Cultural and Knowledge Exchange Hosting international events promotes cultural exchange and knowledge sharing, benefiting local professionals and academics. It positions Phnom Penh as a city of global significance, fostering international collaborations and partnerships. Key Considerations Feasibility and Planning Conduct a thorough feasibility study to assess demand, potential economic impact, and site selection. Ensure that the convention center’s design and facilities meet international standards to attract global events. Sustainability Implement sustainable building practices and technologies to minimize environmental impact. Develop a plan to manage increased traffic, waste, and energy consumption associated with large events. Marketing and Promotion Develop a comprehensive marketing strategy to promote Phnom Penh as a prime destination for conventions and business events. Collaborate with international event organizers and tourism boards to attract high-profile events. Public-Private Partnerships Engage in public-private partnerships to share investment costs and risks, leveraging private sector expertise and resources. Ensure transparent and efficient management of the convention center to maximize its benefits. Integration with Local Economy Ensure that local businesses and communities benefit from the convention center’s operations. Develop programs to involve local suppliers and service providers in the convention center’s value chain. Proposed PPP Structure Given Cambodia’s low government debt-to-GDP ratio and the high debt ratio of the private sector, it is crucial to structure the PPP to leverage the government’s financial capacity while minimizing the private sector’s resource costs. Build-Operate-Transfer (BOT) Model Government Role Provide initial funding for land acquisition and basic infrastructure. Offer sovereign guarantees or low-interest loans to reduce financing costs. Ensure a streamlined regulatory process to facilitate swift project execution. Private Sector Role Design, construct, and operate the convention center for a defined concession period (e.g., 20-30 years). Invest in the construction and management of the facility, leveraging private expertise. Collect and manage revenue from operations, with a portion shared with the government. Government Incentives Provide tax breaks or subsidies during the initial years of operation to improve project feasibility. Offer lease agreements for the land at favorable terms to reduce upfront costs. Revenue-Sharing Agreement Establish a clear revenue-sharing mechanism that ensures both parties benefit proportionately from the project’s success. Define performance metrics and incentives to ensure high operational standards and financial performance. Blended Financing Approach Utilize a mix of public funds, concessional loans (from international development agencies or financial institutions), and private investment. Explore grants or soft loans from international organizations to reduce the overall cost of capital. Management and Oversight Set up a joint management committee with representatives from both the public and private sectors to oversee the project. Ensure regular audits and performance reviews to maintain transparency and accountability. Implementation Steps Feasibility Study Conduct a comprehensive feasibility study to assess the project’s financial, economic, and social viability. Engage with potential private sector partners early to gauge interest and gather input. PPP Agreement Draft a detailed PPP agreement outlining the roles, responsibilities, risk-sharing, and revenue-sharing arrangements. Ensure legal and regulatory frameworks are in place to support the PPP structure. Stakeholder Engagement Involve key stakeholders, including local communities, businesses, and potential users of the convention center, to build support and ensure the project meets market needs. Monitoring and Evaluation Establish robust monitoring and evaluation mechanisms to track project progress, financial performance, and social impact. Adjust strategies as necessary based on performance data and feedback. Conclusion The construction of a convention center in Phnom Penh holds significant potential to boost the city’s tourism sector, diversify its economy, and enhance its global profile. By leveraging the government’s financial strength and the private sector’s operational expertise, this PPP structure aims to create a successful and sustainable convention center project that benefits Phnom Penh’s economy and tourism sector. This comprehensive approach not only positions Phnom Penh as a prime destination for international business events but also ensures the sustainable development of the city’s infrastructure and economy. It is a strategic move that aligns with Cambodia’s long-term goals of economic diversification and inclusive growth.