Trade barriers hinder growth of Cambodia's export industry

Xinhua | 11 October, 2012

By Agencies 

Cambodia could reap even greater benefits from trade facilitation measures in the Greater Mekong Subregion (GMS) by removing high logistics costs, delays and other barriers that hamper the country's connectivity and competitiveness, according to a new Asian Development Bank (ADB) book released here on Thursday.

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

Inefficiencies in export and import processes and export constraints in Cambodia cause significant delays and additional costs, which make the country less competitive in regional and global markets, according to the book entitled "Trade and Trade Facilitation in the Greater Mekong Subregion," which used the Southern Economic Corridor as a case study.

Transport costs in Cambodia are $9 per ton per 100 km from Bangkok to Phnom Penh and $13 per ton per 100 km from Phnom Penh to Ho Chi Minh City, compared with $6 in Thailand and $7 in Vietnam, the book said, adding that logistics costs for the Cambodian section, at $19 to $20 per ton per 100 km, are almost double those for the Thai and Vietnamese sections.

It said that Cambodia's exports grew by 13.5 percent yearly and its imports by 12.3 percent. But the share of Cambodia and Laos in the total trade of the GMS countries, excluding China, remains small. Thailand accounted for 68.8 percent of the total exports of GMS 5 countries in 2009, Vietnam 25.6 percent, Cambodia 2.2 percent, Laos 0.6 percent, and the rest came from Myanmar.

The book prioritizes three policy measures to address logistics challenges, including increasing the availability of information about agreements, laws, rules, and regulations; minimizing checkpoints along the corridor; and expediting the issuance of certificates of origin, which presently take 5-7 days for the Cambodian sector but are issued almost immediately in Thailand.

At the sector level, the book looked at garments, rice and wood exporters, conducting interviews with 120 small and medium enterprises and 39 export companies.

Cambodian firms reported a lack of reliable energy supply, shortages of labor with sector-specific skills, financing constraints, and government regulations that slow down their ability to import inputs and also hamper their ability to export more.

Cambodian garment exports accounted for about 82 percent of all Cambodian exports. However, without a stable electricity and water supply, manufacturers say they aren't able to produce high quality fabrics that would allow them to move up the value chain, whilst 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 book noted.

To ease the constraints and improve the process of exporting and importing, the book recommended implementing e-clearance; reducing processing time for certificates of origin; improving access to capital; improving water supply by tapping onto additional supply sources; simplifying documentation processes; increasing access to information about export requirements, processes, times and costs; and building the pool of skilled labor.

The Greater Mekong Subregion (GMS) comprises Cambodia, Laos, Myanmar, Thailand, Vietnam, and Yunnan Province and Guangxi Zhuang Autonomous Region in China.