Cambodia Needs to Be Competitive

The Khmer Times, 28 November 2016

Logistics is regarded as an engine of growth, an enabler in facilitating international trade and investment. It drives economic development through the provision of quality and low cost of production and distribution of goods and services.
Logistics is generally referred to as the means and services to transfer goods to the end consumers at a competitive price. It includes transportation networks (land, rail, sea and air transport), distribution services (trucking, warehousing, materials handling, inventory, packaging, courier and postal services), linking Special Economic Zones, custom clearances and border reforms and other supporting services such as telecommunications and electricity.
After economic liberalization and the opening up of Cambodia in the early 1990s, the logistics sector has been gradually developing. However, the sector remains much less competitive compared with neighboring countries.
Transport analyst Banomyong Ruth from Bangkok’s Thammasat University wrote in 2010 that Cambodia was lacking a reliable network of transportation, telecommunications, warehousing, trucking services and other related infrastructure.
High logistics “service-link” costs slowed the industrial and economic integration process in the country.
The logistics costs in Cambodia are higher than that of other Asean member countries, creating difficulties for Cambodian farmers and manufacturers in moving products to markets.
Cambodia’s export costs are about 33 percent higher than Thailand and 30 percent higher than Vietnam.
A study by the World Bank on rice monitoring in 2014 showed that transport costs of rice in Cambodia was higher than that in neighboring Thailand and Vietnam.
The transport cost of one ton of rice from a farmer to a rice miller was $247 in Cambodia compared with $126 in Thailand and $122 in Vietnam.
The transport cost of one ton of rice from the miller to the port was $43 in Cambodia compared with $25 in Thailand and $23 in Vietnam.
Cambodian exporters face challenges in supplying overseas customers and integrating themselves into regional production networks, the study by the World Bank illustrated.
The online data from the Cambodia Development Council shows that the transportation cost for a 20-foot container from Phnom Penh to Sihanoukville port costs about $400 (including trucking, documentation fees, export clearance fees, loading charges, certificate of origin, toll fees, agency fees, VAT and miscellaneous charges).
The charge at the port is about $350 and it takes about eight hours by road from Phnom Penh.
The export cost from Phnom Penh to Ho Chi Minh City in Vietnam is about $880 for a 40-foot container and $820 for a 20-foot container. These charges include the customs clearance fee in Cambodia, but exclude the charges at Vietnam’s port.
It takes about 15 hours by road. Using the waterway, the export costs are slightly lower. It costs about $800 for a 20-foot container from Phnom Penh Port to Cai Mep, including customs fees in Cambodia and Vietnam, although it takes about 36 hours by boat on the Mekong River.
To reduce transport costs, a study by the Asian Development in 2014 suggests Cambodia needs to develop efficient connectivity, which requires regionally coordinated investment in infrastructure such as cross-border roads and railroads, world-class ports and airports, telecommunications and a reliable and low-cost energy supply.
Located between Thailand and Vietnam, two main production hubs in the Mekong region, Cambodia has great potential to become an important part of regional production networks and logistics connectivity.
Road and rail connections would facilitate trade in goods and services.
Institutional and legal reforms have been underway to develop the logistics sector. Various laws have been adopted to facilitate investment in the logistics sector such as a law on concessions adopted in 2007, which aims to promote and facilitate the implementation of private financing for infrastructure development.
Liberalization in the development of the logistics sector is not sufficient. Good governance, political leadership, institutional reforms and coordination, capacity building and regional connectivity are needed to develop a competitive and seamless logistics sector.
Cambodia should consider establishing a national taskforce to work on logistics with the aim of coordinating ministries and agencies and promoting dialogue and partnerships among key stakeholders working in the logistics sector.
Human resources development and capacity building in logistics are critical for the effective implementation of a logistics policy.
International development partners and regional institutions should further assist Cambodia in capacity building in the logistics sector.
For instance, the more developed Asean members should assist the less-developed members in narrowing the logistics performance gap through human resources development and institutional reforms.

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