Cambodia has enjoyed strong trade growth in recent years, investing in transport and logistics infrastructure a top priority for long-term development.
The economy expanded by 7.3% in 2018, pegging it as one of the fastest-growing in ASEAN (Association of Southeast Asian Nations). Exports rose by 16.3%, while imports increased by 22%, and this was reflected in the country’s airports and seaports, where annual double-digit volume growth has become the norm.
As a result, Cambodia must spend US$600 million per year on infrastructure to keep up with economic growth, according to government estimates.
And, in recent years, Prime Minister Hun Sen has increasingly turned to China and its mammoth Belt & Road Initiative (BRI) to secure the required funds.
In January, for example, he travelled to Beijing and secured an extra US$588 million in aid over the next three years. China’s President Xi Jinping said the two countries would increase bilateral trade to US$10 billion by 2023, up from the current $4.7 billion achieved from January to August 2018.
China’s BRI investments into Cambodia have so far centred on Sihanoukville, the coastal city popular with tourists and home to the country’s only deep-water port.
The Chinese invested Sihanoukville Special Economic Zone (SSEZ), for example, has been lauded as a pillar of Sino-Cambodian cooperation, attracting some 161 companies and registering US$918 million in capital. In 2018, container throughput at Sihanoukville port increased 16.9% to 537,107 TEU.
The SSEZ, now the largest economic hub in the country, will soon be connected to the capital via the 190km Phnom Penh-Sihanoukville expressway, China’s latest BRI project in Cambodia. Built by the China Road & Bridge Corporation, the US$2 billion expressway broke ground in March, and is expected to halve journey times between the two cities from 5 hours to 2.5 hours upon completion in 2023; and will be the country’s first ever expressway and a milestone for road transport.
According to Open Development Cambodia, 74% of the current network consists of rural roads, while 40% remains unpaved. Consequently, the cost of moving goods within Cambodia is high compared to neighbouring countries.
Another reason, according to local logistics players, is the lack of connectivity between roads, waterways and railways. To help remedy this, plans are underway to build a new multimodal logistics centre outside capital Phnom Penh.
Cambodia’s manufacturing output is dominated by the garments sector, which accounts for 84% of exports. While the air cargo percentage of exports is relatively low, capacity constraints and rapid volume growth are prompting investments to increase handling capacity.
For example, air cargo volumes leapt 20% in 2018 to reach 80,000 tonnes. The majority of air cargo is handled at Phnom Penh International Airport, where a new $100 million cargo terminal is slated for construction to soak up demand.
According to Sin Chanthy, president of the Cambodia Freight Forwarders Association (CAMFFA), the air cargo peak season in February and March leaves exporters scrambling for space.
“One of the main challenges for us is that during the peak season, it’s hard to find space in aircraft to carry our products since few airlines operating in Cambodia offer this service,” he told the Khmer Times.
“Sea transport continues to be the first choice for exporters, while trucking is number two. The air option, with its high costs, is often used when the shipment is urgent,” Chanthy said.