Cambodia (officially known as the Kingdom of Cambodia) is located in the southern portion of the Indochina Peninsula of South East Asia. Cambodia is the world’s 70th most populous country with a population of 14.8 million people.
Cambodia is located at the heart of what has been the most dynamic region of the world economy for the past several decades: South–East Asia. In 1999, Cambodia became a member of the Association of South-East Asian Nations (ASEAN).
Cambodia’s government has been described by Human Rights Watch’s Southeast Asian Director, David Roberts, as a “vaguely communist free-market state with a relatively authoritarian coalition ruling over a superficial democracy. (Source: Wikipedia)
How foreign logistics companies are positioned
Over the past 10 years the Cambodian government has made a sustained effort to create a market-friendly environment for foreign investors in the region. In March and April 2003, Cambodia passed a revised law on investment and taxation which reaffirm its openness to foreign direct investment.
For foreign companies wishing to take advantage of the many logistics opportunities in the ASEAN region, whilst Cambodia is one of the least developed of the countries in the ASEAN region it has preferential access to some of the world’s richest markets for a number of products and in terms of foreign investment into logistics it is still a very much unexplored opportunity.
Currently China is Cambodia’s biggest source of foreign direct investment, with plans in place to spend $8 billion in 360 projects which started in 2011.
“Cambodia is a rapidly changing society that presents many opportunities for the prudent investor, tourism being only one of them. Although more progress still needs to be achieved in legal and judicial reform, foreign investors are convinced of the Royal Government’s commitment to the reform process itself. The country’s commitment to the market economy more broadly is strong enough to be specifically enshrined in the Constitution. We at the IBC look forward to a productive ongoing dialogue with the officials of the Royal Government, aimed at improving the investment climate still further.” – Bretton G. Sciaroni
Cambodia‘s Growth is Long Term
Cambodia is set to develop their economy through its large markets, low wages and liberal economy. Since the fall of the Khmer Rouge it has come a long way in a very short period. During the period between 2001–2010 Cambodia’s economic growth was at 7.7% making it one of the world’s top ten countries with the highest annual average GDP growth
The Government has made important progress executing reform programmes aimed at accelerating the growth and stability in order to build a foundation for sustainable development. As a result of various reforms, the private sector is increasingly becoming the force for economic growth.
Cambodia’s small and poor population of 13 mil-lion gives it a much less attractive market than neighboring countries such as Viet Nam and Thailand.
Cambodia currently has a decentralized government infrastructure, with a lack of awareness of rules and regulations amongst many of the local authorities, coupled with an absence of e-documents at the border.
Cambodia currently has a limited access to finance a lack of skilled labor and overall limited access to many logistics services.
In order to attract further foreign investment the Cambodian government needs to increase investment into public sectors; specifically schools, vocational training and hospitals. As well as centralizing, where possible government services. There also needs to be a strong focus on the introduction of education programs for local authorities to improve awareness of laws, regulations and agreements.
Logistics Critical to Cambodia’s Growth
The transportation and Logistics industry in Cambodia as a critical enabler to Cambodia’s continuing economic growth.
Cambodia, along with several ASEAN member countries participates in trade facilitation programs that are sponsored chiefly by the Asian Development Bank. The agenda of the program is to focus on infrastructure improvements (e.g., road and rail infrastructure), as well as facilitation of the cross-border transport of goods, and the introduction of a singular permit system that will allow trucks to make a single stop to complete all border procedures (as opposed to stopping at multiple agencies’ posts on each side of the border). (Source: US International Trade Commission)
Cambodia’s Economic Areas
Aside from Cambodia’s large tourism industry, the economy of Cambodia is dependent on exports of; garments, footwear, wood products and rubber. Garment manufacturing is almost entirely export-oriented.
The main export markets for garments are the United States and the European Union. In 2000, Cambodia exported 76% of its garment products to the United States and 23% to the EU. Cambodia’s footwear is mainly exported to the EU (60%) and to Japan (35%) (Source: Ministry of Commerce).
Potential Economic Sectors
The Cambodian government has been working on encouraging investment into agri-processing, with a focus on rubber, rice, palm oil, cassava and corn.
This can be evidenced in the total export amount of 2010 of $197 million US, which grew to $422 million US in 2011.
Cambodia’s Logistics Infrastructure
In general Cambodia can be accessed by all forms of transport through; Air, land and sea ports. At present the overall logistics services in the region are limited, with many of the roads due to their geography, inaccessible to trucks, a high cost of electricity and a lack of supportive services such as hospitals and government centre’s.
Geographically, Cambodia is well placed to be a hub in land, water and air transport. The opening of the new passenger terminal at Phnom Penh International Airport and the expansion of Sihanoukville port can serve the increasing demand for global and regional transport of passengers and cargo.
As for international market access, Cambodia, one of the least developed countries in the ASEAN region, offers the prospective investor preferential access to the European Union, Canada and the United States for a number of products, including garments.
Cambodian Logistics Education
There is a distinct lack of skilled labor and education opportunity in Cambodia currently. Development of Logistics skills and knowledge is critical to Cambodia’s future. Companies like Latus are pro-actively positioning themselves to assist in Logistics education and skills development.
However specialist foreign logistics companies are also well placed to bring their knowledge and expertise to the Cambodian market.
Considering Entry to the Cambodian Logistics Market?
In order to support the continuing growth and improvement of the Cambodian logistics sector it is estimated that in excess of $1 billion USD in investment annually is required to realise Cambodia’s goals. Foreign companies wishing to enter into the logistics market should consider short distance inter island transport and logistics opportunities.
Australian, USA and Canadian companies in particular with large ex pat Cambodian populations should be looking to leverage that resource to investigate the market opportunities.
Alternatively undertaking courses like our ASEAN Logistics Intensive enable foreign companies to learn and network with Cambodian companies in desperate need of skilled labor to identify potential opportunities.
Cambodia is a remarkable country with a resourceful and enterprising population. A country that, considering its recent political and social upheaval has developed quickly. Foreign logistic companies should be seriously considering investigating in Cambodia’s burgeoning economy and logistics industry.