KOMPONG CHAM - For the first time, a small Cambodian-owned industry has been

upgraded into a medium-scale factory. Five years after it started production in

Kompong Cham, the Flying Tiger bicycle tire factory has been modernized through

the International Labour Organization's Small Enterprise Development

Program.

The bicycle tire market in Cambodia is dominated by Thai and

Vietnamese products. Almost all home-produced tires come from a few small-scale

factories in and around Phnom Penh and they are steadily being squeezed out by

the mass-produced imports.

In fact, a survey by The Association of

Cambodian Local Economic Development Agencies (Acleda), a Khmer NGO which

implemented the ILO program, has found that most medium-scale industry around

Phnom Penh is owned by non-Cambodians.

Flying Tiger is now the market

leader in Kompong Cham province, and has also captured markets in Battambang and

Kompong Thom towns.

"Our products are known for their quality, and are now

preferred over Vietnamese, Thai and Phnom Penh tires," says manager Peng

Khean.

The upgrading was achieved by improving existing equipment and

retraining the factory's 37 workers, explained Wojciech Sobina, of the United

Nation's Industrial Development Organization, which helped with funding.

"There is no use importing costly equipment, given the shortage of

finance and skills," says Sobina. "We decided against using shock therapy." The

factory now produces about 250 pairs of tires every day at about 350 riels for a

pair. They are sold at the market for about 6,800 riel a pair. The business

makes a net profit of about $4,000 a month.

The workers had thought and

worked like craftsmen, rather than manufacturers, said Sobina, and there was

little emphasis on quality control or standardization.

An Acleda market

survey done before the training began showed that the main reason foreign

products were preferred was because they were standardized.

The basic

week-long training program and the following on-the-job training laid down

strict standards for width and thickness of tires and exact proportions of raw

materials.

"Workers were made to understand that changing the proportion

of a chemical even a little would affect the quality of the product in a major

way," Sobina says.

The tires are much less expensive than Thai brands

which cost 12,000 riel a pair. Meng Cheng, a wholesaler in Kompong Cham town,

says they are now of much better quality than the Vietnamese brands which sell

at 4,200 riel.

There are several factors which unnecessarily increase

costs, according to Peng.

Almost all raw materials have to be imported

from Vietnam, except natural rubber itself which is available from plantations

in Kompong Cham.

There is no financial assistance from the government,

and he has to borrow from banks and moneylenders at high interest for sufficient

working capital.

Peng himself found the going so hard earlier that he

temporarily switched to making rubber bands.

"It is not surprising that

Cambodian manufacturers find it difficult to be competitive," he says.

While the first phase has concentrated on improving existing facilities,

there are plans to expand to new markets in Phnom Penh, Kompong Chhnang and

Pursat.

The factory will also start producing motorcycle tires by the

year-end and breaking into a market almost completely dominated by Thai and

Vietnamese products.

Additional equipment will probably be second-hand,

bought from several tire making factories near Phnom Penh which have been closed

for years.