Cambodia Investment Review

Cambodia’s Logistic Revolution: Transforming into a Sub-Regional Trade Powerhouse with $30B Investments

Cambodia’s Logistic Revolution: Transforming into a Sub-Regional Trade Powerhouse with $30B Investments

Vijian Paramasivam

Cambodia is making significant strides in modernizing its logistics sector in an effort to become a “sub-regional hub for logistics,” which will bolster its economic growth and integration into the global supply chain. This transformation is expected to improve the livelihoods of millions of people by making transportation of goods more cost-effective and efficient.

The Kingdom’s logistics costs, estimated at 26 percent of GDP in 2020, are much higher than those of its neighboring countries, according to the World Bank. However, the Cambodian government is determined to upgrade its logistics infrastructure and reduce these costs.

Strong optimism about the Kingdom’s potential

At the EuroCham Cambodia’s “Transport and Logistics Forum 2023,” Senior Minister of Public Works and Transport H.E. Sun Chanthol expressed optimism about the nation’s potential, stating that they “want to be a sub-regional hub for logistics and facilitate cross-border trade.”

Read more: Cambodia’s logistics and industrial experts explain key opportunities and challenges facing the sector

Government data projects impressive growth numbers for the logistics sector, with railway freight expected to reach eight million tonnes per year and 1.5 million passengers annually by 2030. Air travelers are projected to grow between 26.5 and 30.5 million per year, and air cargo is anticipated to hit about 350,000 to 400,000 tonnes per year.

Senior Minister of Public Works and Transport H.E. Sun Chanthol says the logistics sector is pivotal for Cambodia’s growth.

In response to this expected growth, the Cambodian government has introduced the Comprehensive Intermodal Transport Master Plan 2022-2030. This plan aims to create a powerful logistics ecosystem by upgrading key infrastructure such as airports, seaports, roads, river canals, and railways, thereby improving the movement of cargoes and people.

Chanthol emphasized the importance of investing in the logistics sector, which encompasses warehousing, distribution, customs, and border facilities. A more efficient and competitive logistics infrastructure will attract foreign direct investment (FDI) and create jobs for Cambodians.

Investing $30 billion to implement 150 projects

One notable project under the Master Plan is the Bassac River canal, which will connect the Bassac River to the seaport of Kampot province. Chanthol believes this will be a “game changer” for Cambodia, as it will significantly improve inland transport, lower logistics costs, save time, and contribute to global trade.

To support these ambitious plans, Cambodia will invest approximately $30 billion to implement 150 projects aimed at modernizing key logistics infrastructure. These investments are crucial to ensure the success of the supply chain for farmers and garment exporters.

Read more: YCH Group unveils multi-modal Phnom Penh Logistics Complex At 40th & 41st ASEAN Summit

The Sihanoukville Autonomous Port (PAS), Cambodia’s premier seaport, is also undergoing upgrades to attract mother vessels from Europe and North America. PAS chairman and CEO Lou Kim Chhun highlighted the importance of reducing congestion at the port and improving its capacity to handle international vessels.

Sihanoukville Autonomous Port chairman and CEO Lou Kim Chhun says the port will attract global shipping lines once upgraded.

Upon completion of the New Container Terminal Phase 1 in 2026, 93 percent of Intra-Asia container ships will be able to enter Sihanoukville Port, significantly reducing logistics costs and improving competitiveness.

The New Container Terminal-Phase 3, expected to be completed in 2029, will attract direct shipping lines from Europe and North America. Sihanoukville Port is forecast to handle around 2.5 million TEUs by 2035, three million TEUs by 2040, and 3.7 million TEUs by 2050.

Cambodia’s strategic location between economic powerhouses like China, India, and ASEAN presents a significant opportunity for the country to become a vital hub for goods moving between these regions. As Cambodia continues to invest in its logistics infrastructure, it will become an increasingly attractive destination for companies seeking to expand their supply chains or outsource logistics operations.

Progress of the Comprehensive Intermodal Transport Master Plan

At the EuroCham Trade Forum, various speakers provided updates on the progress of the Comprehensive Intermodal Transport Master Plan, customs updates, and progress on the Sihanoukville Autonomous Port (PAS). They discussed the goals of the Master Plan, which include the development and improvement of the transportation and logistics system, as well as the 2030 transportation forecast.

Mr. Chea Samnang presented the latest custom updates, including the Strategy for Customs Reform and Modernization (2019-2023), which aims to modernize the customs administration and enhance trade facilitation. He also provided updates on the Best Trader and AEO Strategies, along with the 2030 Customs Automated System.

Top logistics sector experts sharing their opinions during a panel discussion.

H.E. Lou Kim Chhun discussed the progress of the Sihanoukville Autonomous Port (PAS), one of the four most significant economic pillars to be developed as the Multipurpose-Special Economic Zone. He provided updates on the Sihanoukville Port SEZ (SPSEZ), new container development, freight data for PAS (2018-2022), and other related topics.

Read more: Dr. Deborah Elms on Cambodia’s long-term trade outlook

Mr. Prayag Chitrakar shared the latest industry trends of the freight market. Between 2023 and 2028, the cumulative annual growth rate (CAGR) for the Cambodian logistics industry is predicted to be 5%, with four critical growth areas: agriculture, tourism, manufacturing, and commercial and residential building.

These updates and discussions at the EuroCham Trade Forum emphasize Cambodia’s commitment to investing in its logistics infrastructure to create a more competitive and efficient system. This investment will not only improve the country’s economic growth and global integration but also create more opportunities for millions of people, including farmers and garment exporters.

EuroCham Cambodia’s “Transport and Logistics Forum 2023” was hosted at Raffles Hotel in Phnom Penh on April 20, 2023.

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