The Cambodian Logistics Association says that Cambodia’s transport sector will continue to be affected in 2022, as shipping costs remain high while global issues continue to adversely impact.
Sin Chanthy, President of the Cambodian Logistics Association, told Cambodia Investment Review that rising fuel prices were adding to Cambodia’s transport sector woes after the COVID-19 crisis shipping costs were still continuing to rise.
He added that the transport sector seems to continue to suffer as before, until the global market situation, trade trends and global crises are resolved, the Cambodian transport market can not return to normal.
“We have been affected since mid-2021,” he said. The problems we face are rising shipping costs and a shortage of containers due to congestion in major markets such as the United States.
Now, although the situation of COVID-19 has greatly improved in Cambodia, especially in many countries in the world, but the cost of transport continues to rise. “Rising prices are due to rising global gas prices,” he continued.
“In 2022, the Cambodian transport sector has not been able to find a good balance yet, because a global crisis always occurs. “During the first four months of 2022, the situation in the transport sector continues to be affected by the cost of transport,” he added.
To read more about the predicted boom of Cambodia’s transport and logistics sectors click here.
According to the Cambodian Logistics Association, the cost of shipping Cambodia to international markets is between 10% and 20% of the set price. Shipping volumes were further reduced due to congestion at some international ports.
Shipping costs to the United States and Europe per container increased from around $2,000 to 5,000 before the outbreak and from $8,000 to 10,000 during the COVID-19 crisis and rising fuel prices. Prices for special shipping can be as high as $15,000 for a single container.
Cambodia may face a lack of competitiveness on the international markets
In an interview with Cambodia Investment Review, the Cambodian Logistics Association claimed that Cambodia could face a lack of competition in the international export market if shipping costs remained high compared to other countries in the region. And that if Cambodia still lacks resources and infrastructure.
Mr. Sin Chanthy said that the problem that makes transportation still high, which is different from other countries in the region is due to the lack of infrastructure to serve the transport sector both domestically and to international markets, especially some resource issues.
“We all know that Cambodia does not yet have deep-sea ports that can provide large-scale capacity and scope for large-scale cargo docks, while our neighbors, such as Vietnam and Thailand, have deep-sea ports. Many, which is their special point in getting the giant ship docked at their port,” he said. On the other hand, their infrastructure is still very good, so their shipping cost is lower than ours.”
He continued: “Speaking of Cambodia, all goods shipped from Cambodia, we have to transfer to some countries in the region before continuing to ship to the destination country. This is because we do not yet have a deep-sea port and the giant ships do not have the capacity to dock. Lack of containers and the use of old cars, lack of human resources, technology and poor management of domestic freight transport are also elements that make shipping from Cambodia expensive.”
For Sin Chanthy, these issues have led many local producers to divert their exports from major markets to cheaper regional markets. And in addition to shifting the supply of goods, Cambodia will also be able to lose some of the influx of foreign investors who wish to invest in Cambodia.
He said producers were the hardest hit by the crisis in rising shipping prices. This means that manufacturers have to reduce their production lines due to lack of demand from orders and rising commodity prices.
However, the President of Cambodian Logistics Association said that in order to increase the cost of transporting Cambodian goods to international markets in competition with neighboring countries, Cambodia must develop infrastructure such as deep-sea ports, strengthen shipping costs, etc.
“Our port is still very small capacity and we cannot transport a lot of goods to international markets, especially ships that dock at the port of Cambodia cannot travel directly across the continent, ” he said. “When the volume of shipments is less, the cost of transport will increase. This is a commercial market” he added.
Therefore, in order for Cambodia to be able to compete with other countries in the region, the president of the association explained that Cambodia should implement the ecosystem in the field of transportation and set up receiving and distribution centers in some potential areas.
However, according to Lim Heng, Vice President of the Cambodian Chamber of Commerce, confirmed to Cambodia Investment Review, the volume of Cambodia’s exports to international markets in recent years, especially in the COVID-19 crisis, are still better signs.
According to Lim Heng, the only goods that Cambodia still has an increase in exports are textiles, garments and agricultural products.
Regarding the deep-sea port, the Ministry of Public Works and Transport of Cambodia is currently expanding the capacity of Sihanoukville Autonomous Port by constructing a new container port with a water depth of 14.5 meters and a length of 350 meters, which will ensure the docking of container vessels.
Large-scale vessels with a capacity of up to 60,000 tons, or 93% of the total number of vessels in the Asia-Pacific region by early 2023, will respond to the current and future increase in the number of containers passing through the port.
In addition, the Ministry of Public Works is continuing to expand the port and establish an EDI (Electronic Data Exchange) port system, which will facilitate the official procedures of ships entering and leaving the port of Cambodia.
To read more about the Sihanoukville Autonomous Port click here.
The establishment of this system is also to speed up shipping procedures, reduce the cost of shipping goods by sea, as well as to respond to the growth of foreign investment, especially to make Cambodia a strategic location competition in Asia related to logistics and transportation.
Cambodia’s transport sector can continue to control rising prices
Although the global situation has shaken Cambodia’s transport sector, the Cambodian Logistics Association still expressed hope that the Cambodian transport sector could continue to manage the situation of rising freight rates in collaboration with a number of local transport companies.
Sin Chanthy said that many transport companies have tried not to raise prices according to the situation, while some companies have increased their prices by only 3% to avoid costs.
Sin Chanthy continued that in order to support the orders and consumption of end customers, all companies have decided not to increase the price of goods in line with the high price of gasoline. This means that the companies are willing to lose a little, but not to the detriment of the interests of their customers.
“Since the COVID-19 outbreak and the rise in gasoline prices, carriers have met to discuss not raising prices, and some companies have made significant reductions to sustain customer demand,” he said.
“We can also control the price increase because there is support from many stakeholders, including manufacturers, transporters. “Although this is still a challenge for our transportation sector, we still have the resilience to overcome it,” he added.
It should be noted that by land transport, the Cambodian Logistics Association claimed that there was no problem, while the cost of transport did not increase as much as water and air transport.
Please be informed that at present, the physical infrastructure system in Cambodia, especially the road connecting to Sihanoukville International Port has been built to facilitate land transportation, while this is another positive effect for the Cambodian economy.
Sam Oudom is a Prince Foundation Young Business Journalist.