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Robust factory growth charted

A worker operates machinery at a precast plant in Phnom Penh’s Russeo Keo district in 2015.
A worker operates machinery at a precast plant in Phnom Penh’s Russeo Keo district in 2015. Hong Menea

Robust factory growth charted

Cambodia has seen a marked increase in industrialisation over the past five years, with the number of factories nearly doubling during that period and producing a broader range of goods for both export and domestic consumption, according to new unreleased government data.

In the yet-unpublished 2016 annual report of the Ministry of Industry and Handicraft, data show the total number of factories nationwide jumped 74 percent during the last five years. Cambodia had a total of 1,578 factories in 2016, compared to just 907 in 2012.

While the Kingdom’s $6 billion garment industry continues to dominate its industrial profile, accounting for over 10 percent of GDP and providing 600,000 jobs, recent years have seen strong growth in other industrial sectors.

The total number of garment factories grew by 60 percent to top 1,000 during the five years ending in 2016. Meanwhile, the number of factories producing food, beverages or cigarettes increased by 82 percent to 135 during the same period, while metal processing factories surged by 141 percent to 111.

Factories in other sectors including furniture, plastics, paper and electronics also grew at high rates, though from a low base.

Mey Kalyan, senior adviser to the Supreme National Economic Council, said the government has adopted an industrial development strategy and is actively pushing to diversify beyond labour-intensive garment manufacturing toward higher value-added products.

“The trend of industry started to change in response to the economy’s growth and the government’s change in attitude,” he said. “The industrial sector is now diversifying. It’s not just about adding food and beverage factories, but also electronics plants that keep growing larger and larger.”

He said the growth of non-garment manufacturing was a welcome development, as new factories producing electronics and automobile parts tend to generate higher revenue. They also bring in new technologies and expand the skill sets of the local labour pool while moving local industries up the value chain.

Kalyan said the government has recognised that a cheap and reliable electricity supply is crucial to industry, especially in special economic zones, as they shift to higher value-added products such as electronics and automotive spare parts.

“The government now understands and focuses on the quality of electricity, which is a basic necessity for industry and investors,” he said.

The growth of factories has been accompanied by a surge in revenue from industrial products, according to the ministry report. Exports of industrial products including garments grew by 77 percent over the past five years to reach $9.5 billion, while revenue from domestic production nearly tripled to reach $2.1 billion.

Oum Sotha, spokesman of the Ministry of Industry and Handicraft, said the government’s 10-year industrial development strategy, which charts a course from 2015 through 2025, projects industry to expand by another 30 to 40 percent in the coming five years.

“The new policy will speed up the development of Cambodian industry,” he said, adding that unlike previous policies, the current strategy ensures that all government ministries and agencies are following the same playbook.

“The government has set up a single direction for Cambodia’s industrial development in which all ministries must follow the same course,” he said.

Ngoun Meng Tech, director general of the Cambodian Chamber of Commerce, said the recent high growth of industrialisation was a positive outcome for the government, but much more remains to be done.

“There is still a lot of potential room for development,” he said. “If we can fill all this space, I believe that growth rate of revenue would increase further.”

However, he said that future growth would be contingent on the government providing attractive investor incentives and cutting down bureaucracy.

“Admin services are still critical for investors,” he said.

“If this part can be sped up it would be a major attraction to investors as they are already happy and comfortable to operate their business in Cambodia.”

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