Cambodia's ambition to play a bigger role in the regional and global supply chain has driven its government to streamline multiple infrastructure projects to improve logistics and land transport.
Geographically sandwiched between two major economies of the Greater Mekong Subregion (GMS), Thailand and Vietnam, Cambodia wants to become a hub for goods transport in the GMS and strengthen the backbone of a new labour-intensive production base.
"You invest in Cambodia not to serve the consumer market of 15 million, but you need to invest to serve the 200-plus million in the GMS, the 600 million of Asean and eventually the whole world," said Sun Chanthol, Cambodia's minister of commerce.
As a cornerstone of its policy, the country has approved 34 special economic zones (SEZs), with 11 currently in operation and 23 being built. Some are located along the borders with Thailand and Vietnam, while the rest are mostly located in Cambodia's coastal provinces.
The government is committed to investing heavily in infrastructure to better support business activity in the SEZs, the minister said at a recent seminar titled "Logistics: Cambodia's New Growth Engine", co-hosted by Post Publishing Plc in Phnom Penh.
The priorities, he said, would be road networks linking essential strategic spots such as major border crossings, provinces with high economic potential, and seaports.
The cost of logistics in Cambodia is around 18% of gross domestic product (GDP), according to Oranooch Pakarat, vice-president of the Thai Business Council in Cambodia and a former logistics adviser to the Asian Development Bank (ADB).
The average logistics cost for developing countries in the region is in the range of 10-15%. Thailand spends around 15% of its GDP, Malaysia 13%, Indonesia 24% and Vietnam 25%.
Asean Highway 1, connecting Thailand to Cambodia and Vietnam, has been completed and the section from Battambang to Serei Soaphoan in Cambodia will soon be enlarged to four lanes. A bridge over the Mekong River to Vietnam has also been completed, eliminating the need for ferry services. Road No. 7, also designated Asean Highway 11, linking the deep-sea port in Sihanoukville to the border with Laos has also been completed, said the minister.
The Cambodian government is also improving its main airports in Phnom Penh, Siem Reap and Sihanoukville, as well as upgrading the main rail line from Phnom Penh to Sihanoukville, and also another line from Phnom Penh via Serei Soaphoan to Poi Pet to connect with the State Railway of Thailand network.
"Thailand and Cambodia share 798 kilometres of borders, with six border-crossing points currently in operation and another four will be open soon," said Nuttavudh Photisaro, the Thai ambassador to Cambodia. As well, he said, about 100 kilometres of roads running parallel to the border on the Cambodian side are now on par in terms of quality with roads on the Thai side.
"Cambodia is getting ready for Asean connectivity. Some parts of the road are well-paved, and even better and newer than those in Thailand," he said.
Under the GMS development programme, supported by ADB and other donors, physical connectivity in the region is improving. Nearly 7,000 kilometres of roads have been constructed, upgraded or improved.
The GMS consists of Cambodia, Vietnam, Laos, Thailand and Myanmar, as well as Yunnan province and the Guangxi Zhuang Autonomous Region in southern China.
Logistics routes linking the GMS countries have been mapped out with support from development institutions such as the ADB. One of the most widely promoted is the East-West Economic Corridor, a road stretching 1,450 kilometres from the port city of Mawlamyine in Myanmar. It travels east through the Thai provinces of Tak, Sukhothai, Phitsanulok, Phetchabun, Khon Kaen, Kalasin and Mukdahan, enters Laos at Savannakhet and continues into the Vietnamese provinces of Quang Tri, Hue and Da Nang at its eastern terminus.
However, at the moment "it barely has any potential. There is no supply chain," cautioned Mr Nuttavudh. "There is nothing apart from beautiful scenery along the route. Da Nang doesn't have a deep-sea port, so it can't be promoted for anything except tourism."
Ms Oranooch said that infrastructure, especially deep-sea ports in Myanmar and Vietnams, as well as streamlined border-transit regulations in Thailand and Myanmar, would be the priorities for strengthening the East-West corridor.
However, she believes that even more potential exists in the Southern Economic Corridor, along Asean Highway 1 connecting Bangkok, Phnom Penh and Ho Chi Minh City.
"All the routes in the economic corridors have been agreed on among the six GMS countries," she said. "So whether one agrees with them or not, they will have to follow the designated routes in order [for member countries] to pursue their investment and logistics plans."
The Southern Economic Corridor could be extended farther westward through Myanmar to Dawei, where a major industrial and port complex backed by Myanmar, Thailand and Japan is being developed.
As well, the ADB has approved US$110 million over the next five years for Cambodia to upgrade roads from Poi Pet to Phnom Penh in the first phase, followed by improvements from Phnom Penh to Ho Chi Minh City.
Mr Nuttavudh agrees the Southern Corridor is an important strategic link with abundant economic and logistics potential. The route connects with Vietnam's largest deep-sea port in Ba Ria-Vung Tau province southeast of Ho Chi Minh City, giving access to the Far East. A link to Dawei would provide access to the Indian Ocean, South Asia, Africa, and onward to Europe.
"And Cambodia is geographically at the heart of all the activity," he added. "Take the automotive industry for example. Vehicle parts are manufactured in Vietnam and Cambodia, then assembled in Thailand. That's the value chain that the Southern Corridor can offer."
However, logistics efficiency in the economic corridors is still constrained, most notably by the inability of trucks to freely cross borders as the promoters of Asean connectivity would like to see. Smooth goods transfers cannot be ensured and too many toll fees are collected along the routes, according to Ms Oranooch.
Coastal shipping is more cost-effective while land routes are more suitable for transport of dangerous or perishable goods, she added.
The framework for Asean logistics connectivity gives each country a quota of 500 trucks to travel out of the country. Vietnam, Cambodia and Laos already authorise their trucks to run freely in and out of each other's jurisdiction. However, Thailand has yet to sign on because of regulatory inertia and local truck fleet operators' inability to agree on quota sharing. Agreement is also complicated by the fact that vehicles drive on the left side of the road in Thailand and on the right side in Indochina.
"Infrastructure conditions are not ready, while supply and demand (for the use of the routes) is not conspicuous. But if it can become a reality, it's a good infrastructure to have," Ms Oranooch said.
"Though [the economic corridors] have yet to actualise larger-scale GMS connectivity, at least they will help to promote economic growth domestically."
Compared with Thailand, she said, Cambodia was more aware of the utilisation of the planned GMS economic corridors and Asean connectivity, as evidenced by installation of "Asean Highway" signs.