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Lower fuel prices no remedy for troubled transport sector

A sign displays petrol prices at a service station on Phnom Penh’s Norodom Boulevard yesterday afternoon.
A sign displays petrol prices at a service station on Phnom Penh’s Norodom Boulevard yesterday afternoon. Heng Chivoan

Lower fuel prices no remedy for troubled transport sector

While local petroleum prices have dropped by nearly a quarter of their value since the start of the year, companies operating in the Kingdom’s highly competitive transportation sector insist they have not been able to convert lower fuel costs into higher profits – even when maintaining their fees.

Prices for regular gasoline and diesel decreased by 20.41 per cent and 23.41 per cent, respectively, since the beginning of the year, according to a fuel price index released on Friday by the Ministry of Commerce.

Earth Ang, manager for minibus fleet Neak Angkor Express, said the company has stuck to its regular fares despite falling fuel prices because the industry is facing a number of issues that negatively affect profitability.

“Even though prices for petrol decreased, we were unable to generate any profits because there have been fewer international tourists and we are facing increased competition from other transportation agencies,” he said.

“If it weren’t for the decrease in the number of passengers, we would see profits grow.”

Chan Dara, director-general of the transportation department at the Ministry of Public Works and Transport, said there is a general trend in the sector of making excuses to avoid passing along fuel savings to customers.

“The industry used to always complain about the high costs of petroleum, but then the government took action to control the price of fuel and yet we have not seen them decrease their prices,” he said, referring to retail fuel-price caps introduced in March.

“If petroleum prices go down, as they have been thanks to our policies, transportation prices should reflect that.”

Yet many transportation companies claim that they have already lowered their fees, and are feeling a pinch on profits.

Heng Kimsan, transport manager for Olongpich Express, said while the domestic bus company recently slashed its ticket prices, this was not a reaction to falling fuel prices, but rather to increasingly cut-throat competition that she said was undermining the commercial transportation sector.

“Our ticket prices fell by almost 50 per cent because of the greater number of competitors in the market, and so we are currently not making any profit,” she said.

Kimsan urged the government to intervene and “help control the prices in the sector and also regulate new market entrants more strictly by checking their backgrounds and their adherence to the law when they operate their services”.

She accused new market entrants of setting fares artificially low in order to gain a market share from established transportation companies, causing price volatility and pushing companies into bankruptcy.

Lower fuel prices could marginally benefit the struggling transportation sector and alleviate the impact of increasing operating costs, according to Sok Chheang, head of the Cambodian Trucking Association (CAMTA).

“This could help boost profits, but there are still other growing expenses, such as labour costs and the price of renewing outdated machinery, which still hold profits back,” he said.

“On top of that, we also face increased competition in the market and we are forced to lower our prices to attract customers.”

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