Southeast Asia is one of the fastest growing regional economies in the world, and is becoming increasingly enticing for international investors. Amongst these countries, Cambodia is emerging as one on the top markets in the area, especially for those in the garments and textiles sector. Because of the spotlight placed on them, the country is booming and has been growing by leaps and bounds over the past few years.
For many of the manufacturers, importers and exporters throughout Cambodia, logistics is the glue that holds binds their businesses. From the importing of raw materials, manufacturing, to the exporting of the final product; logistics is nearly always involved. For Cambodia, logistics isn’t only limited to garment industry, but is important for nearly all sectors. For example, the construction industry, which is currently booming in Cambodia, needs to often import construction material and equipment into the country and the logistics that goes on behind the scenes is crucial to this business.
For a deeper look into this ever-expanding industry, we spoke with experienced transportation and logistics experts in Cambodia including Mr. Virak MEAS, General Manager at Mass Transport Express (Cambodia), Ms. Kagnarin CHHEA, Sales Manager at CMA CGM (Cambodia), Mr. Leng Senghong, Operation Manager at DSV Air and Sea (Cambodia) about how the logistics and transportation industry are supporting Cambodia’s growth.
In 2017, Cambodia’s GDP increased by 7.7%, making them one of the fastest growing economies in the world. This is the result of the country’s policy to open the door for international investors in different areas of the market. “International investors originally came to Cambodia to invest in the garment and textiles industry,” said Mr. MEAS. “Some of them began by moving their manufacturing bases from Thailand to Cambodia, since Thailand is becoming a producer of other types of products. For example, high-tech and automotive products, which requires more skillful labor. Another factor is that wages in Thailand are rising, and political issues in the country that are less than stable. Meanwhile, the Cambodian Government is enacting import/export tax policies that is helping push more people to favor investing within the country.”
With investment flexibility, political stability, and the use of US dollar as the default currency, Cambodia has been luring more to take a further look into the country. Interestingly for investors, the use of US dollars is preferable as it lessens the risk from exchange rates. In addition, 50% of the Cambodian population is between the age of 15-50 years old, which is preferable for the manufacturing industries labor needs.
Ms. CHHEA said, “Apart from producing and exporting garments and textiles, Cambodia is also well known for agricultural commodities like rice and sugar. Beyond these larger sectors, we’ve found a wealth of commodities that offer opportunities for exporters, such as furniture, flooring accessories and electronic parts. From the latest data we have, Cambodia is beginning to export raw rubber to China too. Even though it’s a smaller amount compared to garments, textiles and agricultural commodities, it’s a positive sign that there’s more types of goods produced in and exported from Cambodia worth exploring. Furthermore, it’s a reflection of how strongly Cambodia’s economy has been growing.”
To support these sectors, the Cambodian Government is speeding up the construction and improvement of the country’s infrastructure. For example, Sihanoukville Port is becoming increasingly important for the country, and yet getting to and from the port is still an issue. Goods manufactured in Phnom Penh need to be trucked to the port which is around 220 kilometers away. While that may not sound too far, it can take at least 4 to 5 hours to reach the port due to poor road conditions and traffic delays.
The Way Forward
In order to ease the traffic jams and congestion, the Cambodian Government has begun planning with the private sector about constructing highways linking Phnom Penh and Sihanoukville. If the project succeeds it will greatly improve the country’s transportation system. Additionally, the Cambodian Government has already initiated rail transportation projects that looks to encourage more people to use this type of transportation, which will in turn decrease traffic jams on the road dramatically. In addition, the road between Phnom Penh and Poipet, which borders Thailand and links to the ASEAN highway No.1 is another important gateway for Cambodia to connect with Thailand and the world.
“Developing the infrastructure, especially the road linking between Phnom Penh and Poipet, is really necessary. If the infrastructure can be implemented properly, the transportation and delivery of cargo will be more efficient, which will in turn boost Cambodia’s economy even more, making them more competitive worldwide. Intermodal and land transportation is very important for Cambodia, since most of the products produced in Phnom Penh need to be transferred to Sihanoukville Port, which is the main gateway for Cambodia. Another option is trucking the cargo to the border town of Poipet, then crossing the land border to the Sra Kaew province of Thailand, then trucking the cargo to Suvarnabhumi Airport in Bangkok to deliver to various destinations by air, as Phnom Penh’s airport currently has some limitations,” said Mr. Senghong.
Nowadays, there are more airlines operating freighter and passenger flights between Phnom Penh and worldwide destinations than ever before. However, the available capacity still does not match the growing demands in the Cambodian market. Moreover, the passenger flights that provide belly-hold space for cargo are mainly narrow-body aircrafts, which are only able to accommodate a small amount of cargo compared to wide-body aircraft. During Cambodia’s peak season, from May to the end of the year, congestion is even worse at the airport. However, the port authority is planning to develop and expand cargo facilities inside the airport to fully support the country’s potential.
Both the Cambodian Government and private sector are aiding each other to help develop and improve the efficiency of Cambodia’s transportation systems. By adopting wider ranging free trade policies, the government is helping the country to better open doors for further international investment to enter the country, paving the way for Cambodia to become more competitive on the world’s stage. By upgrading their infrastructure and further developing stronger labor skills, Cambodia could become one of the most important countries for trade in ASEAN and make their stamp as one of the top manufacturing bases in the world.