Sophal Chan: L2C Scoping Study – Cambodia

1. Cambodia's Industrial Development
Presented by Chan Sophal
Cambodian Economic Association
Helsinki, Finland
24-25 June 2013 1

2. 2

3. Evolution of Industry in Cambodia
• 1960s and early 1970s
Strong growth driven by manufacturing
New factories built mostly by foreign aid
and run by state, thus inefficient
• 1975-1979
Manufacturing was destroyed
People were evacuated to work in rice field
3

4. • 1980s
Socialism backed by Vietnam and Soviet Union
A little manufacturing was resumed with
assistance from Vietnam and Soviet Union
All factories were owned by the state
Industrial products were produced for local
consumption or traded with the communist bloc
Evolution of Industry in Cambodia
4

5. Late 1980s
Cambodia freed its economy, initially with
Thailand and other neighbouring countries
Joined ASEAN in 1999
Joined WTO in 2003
Evolution of Industry in Cambodia
5

6. Cambodia’s economic growth since 1993
4.1%
9.1%
6.4%
5.9%
4.0%
4.7%
12.7%
10.7%
7.4%
6.6%
8.5%
10.3%
13.3%
10.8%
10.2%
6.7%
0.1%
5.5%
6.0%
0%
2%
4%
6%
8%
10%
12%
14%
1993 1995 1997 1999 2001 2003 2005 2007 2009e 2011p
Economic Growth Rate: 1993 - 2011
Source: Hang (2011)
6

7. Per capita GDP since 1993
7

8. Percentage Share of GDP
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008
49.3
46.4
47.6
49.6
46.5
46.3
46.3
43.5
37.9
36.7
32.9
33.6
31.2
32.4
31.7
31.9
32.5
13.6
13.0
14.4
14.8
15.7
17.1
17.4
19.1
23.0
23.6
25.6
26.3
27.2
26.4
27.6
26.8
22.4
37.1
40.6
38.0
35.5
37.7
36.6
36.3
37.5
39.1
39.7
41.5
40.1
41.7
41.2
40.8
41.3
45.1
Services Industry Agriculture
Source: ADB
8

9. Share of employment by sector
9
72%
77%
68% 72% 67% 65%
5%
4%
9%
9%
11%
11%
23% 18% 23% 19% 22% 24%
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
1993 1998 2004 2008 2009 2010
Agriculture Industry Services

10. Share of main industries
Manufacturing : 72.8%
Construction : 23.7%
Electricity, gas, and water : 2%
Mining : 1.5%
10

11. Structure of manufacturing sector 1993-2009 by output
0%
20%
40%
60%
80%
100%
1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009
Manufacturing1993-2009
Food, Beverages & Tobacco Textile,Wearing Apparel & Footwear Wood, Paper & Publishing
Rubber Manufacturing Other Manufacturing
Source: MEF (2010)
11

12. Export by commodities, predominantly garments
0
500
1000
1500
2000
2500
3000
3500
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009
Textile and Textile Articles Agricultural product Others
Source: Ministry of Commerce
12

13. Garment Export and its share
Food price soaring lead to
more agriculture export.
13

14. Ownership of Garment Factories in Cambodia
Hong Kong
19%
Taiwan
24%
Malaysia
5%
China, PRC
16%
Korea
11%
Singapore
4%
Cambodia
9%
Other
12%
Country of Ownership
Source: MEF
14

15. 77,048 Industrial Establishments
only 1.5% are medium or large, sharing 36% of
industrial employment (Economic Census 2011)
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
Number of industrial establishments
Other
Textile, Wearing apparel
and Footware (TWF)
Food, Beverages and
Tobacco (FBT)
15

16. 77,048 Industrial Establishments
only 1.5% are medium or large, sharing 36% of
industrial employment (Economic Census 2011)
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
Number of industrial establishments
Other
Textile, Wearing apparel
and Footware (TWF)
Food, Beverages and
Tobacco (FBT)
16

17. Distribution of employment by
77,048 industrial establishments
15
68
Distribution (%)
Food, Beverages and
Tobacco
Textile, Wearing Apparel
and Footware
Other
17

18. Distribution of 77,048 Industrial
Establishments by their Age
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
% firms
20+ years
11-20 years
6-10 years
0-5 years
18

19. Spatial distribution of 32,257 FBT establishments
19
Banteay
Meanchaey
2%
Battambang
10%
Kamong Cham
14%
Kampong
Chnang
2%
Kampong Speu
3%
Kampot
2%
Kandal
9%
Koh Kong
1%
Phnom Penh
40%
Prey Veng
2%
Siem Reap
7%
Sihanuk Vill
6%
Svay Rieng
1%
Takeo
1%

20. Spatial distribution of 25,156 TWA establishments
20
Banteay
Meanchaey
2%
Battambang
1%
Kamong
Cham
2%
Kampong
Chnang
2%Kampong
Speu
2%
Kampong Thom
1%
Kampot
1%
Kandal
20%
Phnom Penh
61%
Prey Veng
1%
Pursat
0%
Siem Reap
2%
Sihanuk Vill
1%
Svay Rieng
1%Takeo
3%

21. Sunrise and Sunset Industries
(Average growth of value added)
21
1993-1997 1998-2004 2005-2007 2008-Present
Sunrise
(Average share
growth rate
>0.05%)
Textile, Wearing
Apparel &
Footwear
Wood, Paper &
Publishing
Rubber
Manufacturing
Electricity, Gas
& Water
Textile, Wearing
Apparel &
Footwear
Mining
Construction
Mining
Textile, Wearing
Apparel &
Footwear
Non-Metallic
Manufacturing
Construction
Mining
Textile, Wearing
Apparel &
Footwear
Food, Beverages
& Tobacco
Non-Metallic
Manufacturing
Electricity, Gas &
Water
Sunset
(Average share
growth rate <-
0.05%)
Mining
Food, Beverages
& Tobacco
Non-Metallic
Manufacturing
Basic Metal and
Metal Products
Construction
Food, Beverages
& Tobacco
Wood, Paper &
Publishing
Rubber
Manufacturing
Food, Beverages
& Tobacco
Rubber
Manufacturing
Wood, Paper &
Publishing
Wood, Paper &
Publishing
Construction

22. Major Issues:
• FDI projects received very generous tax exemptions.
It yields little revenue for government.
• SMEs face high tax regimes, thus most stay informal
and as a result face constraints to growth capital.
• Little backward and forward linkages within the
country. Most garment factories are just sites of
Chinese or ethnic Chinese overseas.
• Need to diversify industrial base.
• => Industrial development policy is being prepared
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23. Conclusion
1. Political stability, location of the country and openness to
FDI allowed cheap labor and global market access to be
well exploited, contributing to high economic growth in the
past 20 years (about 8% per annum).
2. The next stage of high growth will soon depend more on
efficiency from both domestically free and fair competition
and international competitiveness.
3. Regional integration and globalization provide Cambodia
with opportunities for constructive engagement and
learning to compete.
4. Given the turbulent history in the past century, it is difficult
to expect more. Cautious optimism for the future!
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24. THANK FOR YOUR ATTENTION!
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