ADB finds Cambodian exports hindered by trade constraints

PHNOM PENH, 11 October 2012 (Cambodia Herald) - Cambodia's exports are constrained by high logistics costs, delays and other barriers that hamper its connectivity and competitiveness, the Asian Development Bank said Thursday.

A statement said the findings were included in a new ADB book called Trade and Trade Facilitation in the Greater Mekong Subregion (GMS), which groups Cambodia with Laos, Myanmar, Thailand and Vietnam as well as China.

"Cambodia’s exporters are well-positioned within the GMS to grow and expand," said Peter Brimble, senior country economist who authored one of the book chapters. "Policy adjustments can help reduce cost and transport times, making Cambodian exporters more competitive and enhancing their credibility."

The statement said inefficiencies in trade processes as well export constraints caused "significant delays and additional costs." These made Cambodia "less competitive in regional and global markets," it added.

At $19 to $20 per tonne per 100-km, logistics costs in Cambodia are "almost double" those in Thailand and Vietnam, the ADB found. In Cambodia, it costs $9 per ton per 100-kilometer from Bangkok to Phnom Penh and $13 per ton per 100-km from Phnom Penh to Ho Chi Minh City. That compares with only $6 in Thailand and $7 in Vietnam.

The statement noted that Thailand accounted for 68.8 percent of the exports of the five countries excluding China in 2009 while Vietnam accounted for 25.6 percent.  Cambodia accounted for only 2.2 percent and Laos 0.6 percent. The rest came from Myanmar.

The book called for three policy measures to address logistics challenges, including increasing information about agreements, laws, rules, and regulations. It also recommended minimizing checkpoints and expediting issuance of certificates of origin. These take 5-7 days in  Cambodia but are issued almost immediately in Thailand.

In the garment, rice and timber sectors, "Cambodian firms reported a lack of reliable energy supply, shortages of labor with sector-specific skills, financing constraints, and government regulations," the statement said. The regulations "slow down their ability to import inputs and also hamper their ability to export more."

Without a stable electricity and water supply in the garment sector, "manufacturers say they aren’t able to produce high quality fabrics that would allow them to move up the value chain."

In addition, "food exporters face shortages of investment capital, industry-specific infrastructure, and international familiarity with Cambodian products.

"These constraints not only hold back exports, but also affect foreign direct investment," the ADB said. "Improvements in the two areas are critical for not only for diversifying Cambodia’s economic base, but also to develop Cambodia into a production base and become part of cross-border production networks."

To ease constraints and improve trade, the book called for electronic clearance, reducing processing time for certificates of origin and improving access to capital. It also recommended improving water supply by tapping onto additional supply sources, simplifying documentation, increasing access to information about export requirements, processes, times and costs as well as building the pool of skilled labor.