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IBC: Kingdom’s economy is lagging

IBC: Kingdom’s economy is lagging

The International Business Chamber of Cambodia’s (IBC) two-day investment conference came to a close yesterday with the minister of commerce, Sun Chanthol, urging a roomful of industry representatives to buy into the Kingdom’s economy.

“Location, location, location,” Chanthol announced, like a real estate auctioneer, to the crowd at Phnom Penh’s Intercontinental Hotel.“Tell me what country allows you to have a 100 per cent banking licence, to allow foreigners to own 100 per cent in the telecom sector, to allow foreigners to own 100 per cent of the agricultural business? Only Cambodia,” he said.

The two-day conference held panel discussions ranging from tax and monetary policy to banking, the labour force, energy and agriculture. Across the vast field of discussion, one universal message was that infrastructure and skills shortages are holding the Kingdom back.

Yasuyuki Inoue, vice president of Minebea Cambodia, said staffing his 6,000-person electronic goods making factory was the biggest hurdle for his firm.

“Hiring the necessary number of people and the vast number of people who have no experience are the most difficult points for us and the manufacturing sector,” he said.

Mey Kalyan, senior adviser at the Supreme National Economic Council, said despite the barriers to growth, the manufacturing sector was slowly diversifying as countries like Thailand increasingly look to Cambodia to produce offshoot products for high-value items.

“For instance, Thailand might produce a car, and Cambodia can make the spare parts for the car like brakes, tires or air-conditioners,” he said. “That production network, which connects numerous factories across Asia, makes for a very dynamic zone.”

Yesterday’s panel on Cambodia’s agricultural industry saw energy costs and a lack of infrastructure at the centre ofdebate.

“Cambodia could double paddy rice production to 20 million tonnes per year if farmers adapt to produce crops twice a year,” said Ty Sokun, secretary of state for the Ministry of Agriculture, Forestry and Fisheries.

But Sok Hach, president of Golden Rice Cambodia, said while the electricity prices remain “two to three times higher” than Cambodia’s rice-producing neighbours, the country will remain dependent on other nations to buy and process the crops.“Fortunately, our fragrance rice is very good quality and we can sell at competitive prices, but rice millers choose not to process white rice because energy costs are high. As a result millers send our paddy rice out to Vietnam and Thailand,” Hach said. “One million tonnes of rice exports could have been easier to achieve if electricity tariffs were lowered to 10 US cents per kilowatt per hour.”

Jitendra Manghnani, country manager of India-based automaker Tata International said rice productivity overall in Cambodia sits well below Thailand and Vietnam. “While farmers in Vietnam produce around 5.6 tonnes of rice per hectare, Cambodia can produce only about 3.1 tonnes per hectare… We are simply missing out on milling capacity because the price of energy and infrastructure,” Manghnani said.

In a change of pace, during one of the final panel sessions for the IBC conference on Cambodia’s extractive industries, the discussion turned towards the Kingdom’s potential to become an oil and gas producing nation.

“If development in this area is fruitful, I think we have a very good facility to export in the future,” Diep Sareiviseth, deputy director general of the Department of Petroleum, said. “Now we’re promoting onshore acreages.”

Two of Cambodia’s 19 onshore oil and gas exploration sites have already been acquired. One was acquired by Petrovietnam Exploration Production Corporation and the other by Japanese firm MOECO. Sareiviseth said the remaining onshore sites were open for expressions of interest.

MOECO is also one of the joint venture partners in Cambodia’s most promissing offshore exploration areas, known as Block A, along with South Korean GS Energy Corporation and Singapore-based KrisEnergy.

Sareiviseth said that while exploration licences for all remaining five offshore sites had been acquired, the government would still accept viable applications for exploration.

“But we’re not Kuwait here, you know,” he said, laughing. “We have some onshore, we have a little offshore. But a lot of companies come in, lose a lot of money and find nothing. So we are looking for the big companies that are willing to invest their money and stay long term.”

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