A Change of Guard

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Monday, 17 October 2011

Rice development main tool for poverty reduction

Monday, 17 October 2011
Stuart Alan Becker
Sok Siphana at the IBC conference last week.
Phnom Penh Post

Government to set policy and make way for the power of the private sector

CAI Mep, a new port on the Mekong Delta in Vietnam, is likely to become the trans-shipment point for a good part of the container traffic from the factories of Phnom Penh in future, motoring down the Mekong from Phnom Penh's river port loaded with Cambodian-made goods, according to career shipping and logistics expert Paul Thomas.

The Cai Mep International Terminal – part of the Vung Tau Port complex, near Ho Chi Minh City – is operated by APM Terminals, whose headquarters are in The Hague, in the Netherlands.

“Cai Mep offers direct sailings to European ports without Singapore. And you don’t have to take goods by road 230 kilometres from Phnom Penh to Sihanoukville. The cost factor is not dramatically lower, but it's a little bit less,” Thomas says.

Thomas served in the German navy early in his career and, after many years of shipping and logistics work, mainly based in Singapore, arrived in Phnom Penh in 1996.

He is a former president of the German Business Association in Phnom Penh.

Today, he’s expanding his family logistics company, Thomas International Services, by planning a new tran-sshipment and packing warehouse to be located somewhere near the new Phnom Penh river port, about 35 kilometres from Phnom Penh. He’s looking for a professional engineering and design company to prepare the plans.

Thomas International Services has 50 employees and two facilities: the main office, in Parkway Square, and a 3,000-square-metre logistics facil-ity outside Phnom Penh.

“Sihanoukville will lose some of its importance, because Phnom Penh has a new port coming,” Paul Thomas says. “Sihanoukville’s importance in the coming years will have to change with “break bulk” vessels, which means taking conventional, non-container cargo.”

Thomas says containers will continue to pass through Sihanoukville, but he believes what’s going to be very important for Sihanoukville is rice shipments of up to 10,000 metric tons in large break bulk vessels.

“Rice exports have increased tremendously here, but it's not economic to load rice into containers. You need break bulk vessels, and then you can go straight to anywhere in the world. 2011 was a boom year for Cambodian exports.”

Thomas also believes more and more cruise ships will use the Sihaoukville port. He also believes that Cambodia’s economic future is excellent.

“I believe the future is not only rosy; the future will also be very structured, and you have a lot of business opportunities in Cam- bodia,” Thomas says.

“We have restructured our comp-any to be in a position to take advantage of those opportunities, not only in container traffic but in technical services and professional maintenance, including plumbing and electrician services.”

Thomas believes fairs and exhibit-ions will become more important in the years to come.

“We will have more coming up as a counterpart to handle goods going in and goods going out,” he says.

Thomas says the logistics scene in Asia changed during the 1990s, when European textile producers relocated their operations to offshore facilities, mainly in Asia, and old-established companies in Europe had to reduce staff in big numbers.

“When the logistics scene in Asia changed in the '90s in the regional aspect, you had to be present in all locations,” he says.

One of the interesting ways in which the Cambodian garment industry differs from others is that it has no supporting industries to make yarn and fabrics, he said.

“Labour is only a certain percentage of the complete product; it’s not solely about the cheap labour, but about how to source raw materials, and how to bring them here.

“Cambodia has no fabrics, no yarn. Korean and Taiwan, for ex-ample, have all kinds of supporting industries; Cambodia doesn’t have those industries.

“Cambodia has a Chinese textile industry in Cambodia.

“Vietnam and Indonesia have foreign investors who are running factories, and local conglomerates running textile and footwear business, but here in Cambodia, 99.5 per cent is overseas Chinese investment.”

Thomas says a huge British factory has just opened in Cambodia, making trousers and jackets.

Thomas’s right-hand man is his son, Chris, who says the ease of doing business is what makes Cambodia attractive.

“Transferring money in and out, it is totally open channels in Cambodia. Compared to Thailand and Vietnam, Cambodia makes it easy.

“If you buy something overseas, you pay, and you don’t have a problem. That is very attractive, also for Chinese investors. You can transfer money in and out without any hassle, but in Vietnam it's very difficult,” Chris Thomas says.

“The freight-forwarding business is the business of buying services from a direct service provider and reselling it to a customer,” Paul Thomas says.

Thomas senior first came to Cambodia in 1996 and has been a resident here since 1999, having foun-ded a business in Phnom Penh with four or five employees.

“When Cambodia started in 1996 with the first garment factories, the export market was clearly North America. It came into the picture because it wasn’t subject to quotas, and that made certain Chinese companies open factories here.”

In those days, trans-shipment to Singapore was required, and a 40-foot container from Sihanouk-ville to Singapore cost $4,000. Today, the cost is only about $500.

“When the small players came in, prices came down. More and more production came in, and Europe became a factor. The proportion then was 70 per cent North America, 30 per cent Europe; today, it is 60 per cent North America and 40 per cent Europe,” he says.

“The proportion has changed, but North America is still the major market.”

Europe is beginning to come back as a major market for Cambodian goods, Paul Thomas says.

“At first, there were relatively small orders from very good European companies, so the big textile retailers and importers – Scandinavia, France, Britain, Germany – began buying in small quantities, and this has been developed into bigger quantities.”

One of Thomas International’s main focuses today is dealing with “buyer’s consolidations”: receiving from as many as 18 factories, sorting the orders and finalising the checking
of merchandise before exporting.

The trick is to utilise the containers to their maximum capacity for the benefit of the importer in Europe, Paul Thomas says.

Ninety-eight per cent of Thomas’s work involves shipping goods to Europe, with Rotterdam the number-one destination by far Goods shipped from Cambodia include children’s clothes, knitted clothes, cardigans, T-shirts, blouses, trousers and other items.

“We are also shipping rice, and we are participating in the Rice Forum next week,’’ Thomas says.

“This year, we’ve done about 10,000 tonnes of rice, with most of it going to France and eastern Europe,” he says.

In 2009, when Thomas International was opened, it specialised in packing highly valuable art items, including many for the National Museum of Cambodia, The Smithsonian Institute in the US and the organisers of big gallery exhibitions in European countries such as Germany and Switzerland.

Paul Thomas folded his earlier company into the new one, which is now a Cambodian company with his wife and family as shareholders.

Thomas’s wife, Nitta Yin, is the chairwoman of the company, and along with the changes came the appointment of an accredited local auditor, as well as the appointment of a legal adviser.

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