External Trade Developments
The Royal Government of Cambodia
considers the integration of the
country's economy into the regional
and world economies as not only a necessity
for its sustained growth but as part of the
irresistible worldwide process of
globalization. The Government took already a
series of reform measures with a view to
ensure the full-scale economic and social
development of the country in the interest of
its people.
Trade liberalization has resulted in expanded
transactions with the convertible zone. Until
1987, all foreign trade was under state
monopoly and most transactions governed by
annual protocols with Council for Mutual
Economic Assistance (CMEA) countries.
Starting in 1988, private companies were
gradually allowed to operate in foreign trade.
The expansion of trade with the Western
world was further supported when, the port
of Kompong Som was opened up to
international shipping and the coastal
provinces of Koh Kong and Kampot were
authorized to trade independently with
Thailand and Singapore. In addition, owing
to its low customs duties and weak
enforcement, Phnom Penh has become a hub
of sorts for transit trade in the region,
especially with Viet Nam. In the first six
months of 1995, 18 companies investing in
Cambodia have exported locally-
manufactured goods worth US$ 7,097,354 to
15 countries, according to the report of the
General System of Preference under the
Ministry of Commerce. Of that figure, the
report said, $1,410,515 worth of goods have
been exported over the period of June with an
increase of $87,569 compared to May. The
countries involved included France, England,
Germany, Belgium, the Netherlands,
Switzerland, Australia, Denmark, Norway
and the US.
The principal recorded exports are rubber
latex and timber; other registered agricultural
exports include maize, soybean and
mungbean, sesame, and pepper. A small
amount of kapok was shipped each year to
the Soviet Union before the recent collapse of
the earlier trade agreements. Again,
unquantifiable amounts of rice, fruit, and
vegetables are also known to cross the border,
particularly into Viet Nam and food-deficit
areas in northeast Thailand. Sales of vehicle
tires are the only significant recorded
industrial export, but there are reports of a
contraband trade in cigarettes and alcohol.
Exports of stamps also bring in a small but
regular amount of foreign exchange.
Extensive unrecorded logging activities and
gem sales are widely considered to have
occurred. A recent study by the Thailand
Development Research Institute provides
clear evidence of the "illegal" sale of sawn
logs from Cambodia to Thailand. Similar
sales of lumber are being made to Viet Nam,
where a construction boom is under way and
outlet routes to external markets are probably
closer, as well as -easier and safer. Cut and
uncut precious stones are also finding their
way onto the Bangkok gem market. These
two activities are important foreign exchange
earners, but it is not clear that the benefits
have accrued to the civilian economy.
Cambodia's main imports up to the time of
the end of the spedal arrangements with that
Soviet Union predominantly comprised
capital goods and raw materials, in particular
machinery ant equipment, heavy vehicles, oil,
fuel, and yarn and cotton fabrics,, the last
generally intended for further domestic
processing. Consumer goods hardly figured
at ALL in this trade, and cheap household ware
(made of metal and porcelain) and simple
consumer products were imported from
China, But the last two years have seen a
huge influx of personal transport equipment,.
especially Japanese motorcycle, as well as
other Japanese consumer durables, such as
cameras, stereophonic goods, television sets,
fans, and air-conditioners.
Substantial progress toward a liberal import
regime had already been made before the
beginning of 1994. Most non-tariff barriers
and import licenses had been eliminated.
With regard to tariffs and import duties
(which ranged from 3 to 100 percent and were
applied within 10 rate categories) , the
structure had already been simplified in 1993
to a four-band system, with rates narrowed to
a range of 7 to 50 percent. However, more
steps were still needed to liberalize trade. As
a result of measures taken in the course of
1994, the following situation applies:
(i) the import license system has been abolished,
with the exception of fire arms and
pharmaceutical products;
(ii) quantitative import restrictions have now all been
eliminated;
(iii) export licenses are no longer
required, except for logs, sawn timber,
precious metals and stones, and antiquities;
and
(iv) the following items are exempt from
import
The Government has announced that it will
end the ban on rice exports in November 1995.
and drop the duties for school materials and
equipment, pharmaceutical products,
sporting goods, and agricultural equipment
and inputs. In addition, in its recently
adopted investment law, the Government
eliminated foreign exchange restrictions
applying to investors in Cambodia.
INSTITUTIONAL DEVELOPMENT
Institution-building efforts, in the short-
term,, will concern the Ministry of
Commerce, in particular its Directorates
of Foreign Trade and of Domestic Trade.
Producers-exporters' associations per product
group will be created. These associations are
expected to facilitate the administrations' and
other official or professional entities' relations
and communications with those producers
producing for export in matters relating to
quality specifications and quality control, or
market information. These associations will
have to closely co-operate with the Chambers
of Commerce (one of them - the Phnom Penh
Chamber of Commerce - has been elected
since October 1995), divisions of which will
serve as exporters' and importers'
professional bodies, representing their
interests and functioning in the same manner
as the producers-exporters' associations.
Finally, the capacity-building for institutions
responsible for multilateral and bilateral
trade negotiations - the Ministry of
Commerce, the Directorate of International
Co-operation in the Ministry of Foreign
Affairs and International Co-operation, and
the Directorate of Economic Co-operation in
the Ministry of Planning - will be served by
specialized training courses in trade
negotiating techniques.
At medium-term, a Cambodian Center for the
Promotion of Foreign Trade (CAMBPROM)
will be created to carry out all actions and
operationalize all commercial strategies
decided upon by the Ministry of Commerce.
This organism should be autonomous, and
should become a self-financing institution
charging users of its services to cover its costs
without making any profits; nevertheless,
during its start-up activities and its first years
of existence, it should receive a fairly large-
scale technical assistance from international
institutions.
DEVELOPMENT OF FOREIGN TRADE
The actions to be undertaken in the short-
term, carried out by the Ministry of Commerce
will consist of export potential (per product
or product group) and market research studies (per
product or product group a s well and on
selected markets), the latter also serving import rationalization
efforts by comparing conditions of
procurement from various sources. These
studies will also include efforts to reduce
bureaucratic hurdles obstructing export
development. Another sphere of immediate
action should be in the field of acquisition
and channelling to the interested parties of
badly needed, because at present unavailable,
market- and trade information. The Ministry
of Commerce will start an essential
information collection and dissemination
activity, acquiring, for example, regular
information on the world prices of the
country's major export or import products
and on other market indicators through
subscription to specialized services (the
ITC/UNCTAD/GATT in Geneva can supply
some of this information free) or to catalogues
and other published sources. This
information should be disseminated to
producers and trading enterprises directly or
through their professional associations. The
Ministry has already, started to build up a
Documentation Center open to businessmen
and scholars.
Among the actions at medium-term, it is
necessary to mention as examples a product
adaptation programme as soon as the first
export potential and market research studies
were completed, followed by a further move,
conditioned by the progress of the
rehabilitation and reconstruction programme
and, especially, by the renascent industrial
structure of the country, the creation of new
export products.
ROUTES FOR INTERNATIONAL TRADE
Except for the traffic via the ports of
Phnom Penh and Sihanoukville, there
are no official statistics of the trade
volumes in tonnes. More informal exports
and imports, crossing the borders outside the
official customs posts, are not included but
could be substantial (the illegal timber export
during 1992 was estimated at the order of
770,000 tonnes).
Most of the traffic by far in both of the two
main ports is from or to Singapore, including
traffic from more remote ports and
transhipped in Singapore. Most of the official
trade with Thailand is divided between Road
5 and the port of Koh Kong. Official trade
with Vietnam has decreased substantially in
recent years. Much of the traffic along the
Bassac River and Roads 2, 21 and 78, for
example, is local between adjacent provinces
in the two countries. the volume of transit
traffic through Cambodia is insignificant at
present.
GENERAL CARGO AND BULK TRAFFIC
Some 90% of the international traffic
using Phnom Penh port is trade with
Singapore, Thailand or Indonesia. This
traffic has the alternative of using
Sihanoukville (or Koh Kong). The Mekong
route adds about 450 km to the shipping
distance compared with Sihanoukville.
Coupled with the need to drop anchor at
night, as there are no lights to help night
navigaion, the round trip takes about six days
longer than a round trip to Sihanoukville.
Nevertheless, Phnom Penh is often preferred
to Sihanoukville because it is close to the
customer. For example, less-than-container-
load traffic arriving in Sihanoukville has to be
stored until the consignee in Phnom Penh
can arrange customs clearance. After
clearance, it has to be staffed into containers
for security on. the road journey to Phnom
Penh. It is much easier for the consignee to
clear and collect his goods in Phnom Penh.
The total price paid for shipping from
Singapore to Phnom Penh, including
transhipment and the road joumey on the
Sihanoukville route, is broadly the same on
the two routes.
POL (PETROL, OIL AND LUBRICANTS)
Most oil is now imported via Phnom Penh
and stored at two main sites along the River
Tonle Sap or via Sihanoukville, while the storage
area belongs to the �Compagnie Kampuchea
des Carburants� (CKC) - a state-owned
company under the Ministry of Commerce.
These arrangements dates from 1980s when
CKC had a monopoly of the national oil
import (CKC�s current market share is only
about 25%). In practice, CKC is now
managing the facilities, some of which are
being let out to Shell. While Shell and CKC
may combine to improve the jetty, this would
only be designed for their own traffic. In the
very near future CKC is going to be
privatized and would form a joint venture
with a private local oil company - Sokimex -
while other foreign oil companies such as
Shell, Total, Petronas, Caltex, etc. would be
competing for a place in the market on a
same footing.
CONTAINERS
World-wide, containers are increasingly
carried in specialised ships designed for
quick turn-round. Such ships operate liner
services to Sihanoukville but not to Phnom
Penh. Even after the planned improvements,
the capacity of Phnom Penh port for
container handling will only be half that of
Sihanoukville today. Sihanoukville is thus
likely to retain its dominance for container
traffic.
KOH KONG PORT
The main other international port is Koh
Kong. This port could grow in importance as
trade with Thailand and Malaysia increases
despite the fact that it does not have the
status of an international port. On the other
hand, however, some of the Thai traffic may
divert to Roads 5 or 48 in the future. Road 48
is impassable at present., but if rebuilt with a
ferry at Koh Kong, the Bangkok-Phnom Penh
distance would be some 720 km (compared
with 682 km via Road 5). Trade with south-
Eastern Thailand would be generated. Some
of the sea trade might switch to road, but
Malaysia and Singapore traffic would not be
affected except that it might use Koh Kong
town port and Road 48 rather than
proceeding to Sre Ambel by sea. This might
require expansion of the town port.
PROPOSED DRY PORT
The bulk of Cambodia's general cargo
imports, including most of the -containers,, are
coming, through Sihanoukville, but with
Phnom Penh as the ultimate destination. This
presents a problem as the original documents
have to be produced at the port, and any
customs dues paid, before the goods can be
released. Transport has to be organised to
Phnom Penh. If through bills of lading could
be organised by the shipping companies, so
that goods could be sent CIF Phnom Penh,
this would reduce the need for Unnecessary
joumeys and allow for more speedy delivery.
There would also be advantages for
Sihanoukville port, as goods could be more
swifly despatched and through put increased.
Many of these problems would be facilitated
with the establishment of an inland clearance
depot (dry port') in the Phnom Penh area. On
receipt in Sihanoukville, the containers could
immediately be forwarded by road or rail for
clearance and delivery in Phnom Penh. The
dry port facilities would include road and rail
access' handling and storage facilities,
customs facilities, etc., and could also be
extended to cleal with other goods than
containers. As this is being writen,
Government has just signed an agreement
with a private, Singapore based company for
the construction and operation of such a dry
port.