Last time during my visit to Vietnam, I met a Malaysian investor who currently investing in Cambodia. She told me she is running a company supplying beavearge and softdrinks for Cambodia Market. Then, I asked her why did you come to Vietname? she replied she came here to order some inputs for the production in Cambodia. I continued why dont you order in Cambodia? She said there is no supply source that can consistantly ensure a smooth production for her firm and aslo the cost of input is quite expensive in Cambodia.
This a very obvious point for Cambodia, case most input is imported from neighbouring coutries or from other countries. If input is supply from Cambodian then such a linkage would added more value added to final products. Furthure, it will help in job creation for Cambodian people.
Then, what is VA? VA is the value added in the production chain so that the value will be included in the final goods produced.
Another simple example is the garment industry, the cloth production where the factories in Cambodia perfromed only Cut and Trim whereas input such as cotton is imported from China. This reflect a fogone value added in garment industry. Imagine what will be if the local supply is subsituted for the imported input from China. The transportation cost is reduced, local farmer find his business grow and job creation for local farmer.
Another case of Cashew nuts and Rubber plantation. Cashew nuts market in world market is predominant by Vietnam and India (FAO Statistics 2004). The problem is the demand for cashew nuts without shell is high. Cambodia is abundant with area of Cashew nut plantation 16,000 ha but the problem is we lack the company who process and package cashew nuts into final products. This lack offer Vietanamese dealer to buy from Cambodia through informal channel and make the price quite low. This reflect a lost of value added for cashew nuts industries.
The problem is the same for rubber industry. The world demand for plastic and material transformed from rubber is high but since we do not have any local process firm that process the natural rubber into semin-final or final product, the value added is lost. Although recently we have seven stated-owned company and there privated owned company as well as small holder of rubber plantation for natural rubber (EIC, 2007 June), we do not have company that process natural rubber this cause Cambodia to export natural rubber without any process.
Building supply linkage is necessary to avoid the lost of value added for most Cambodia industry. Also, it will offer job creation and ruaral development.
7 responses so far ↓
pinispinus // March 25, 2008 at 5:15 pm
As you know, we have an investment law whereby incentives for investment have been provided for foreign investors. Take an example of the cashew nuts, the government promotes the agro-business, gives tax incentives and others, there is a world market for this product, and Cambodian land is also favorable for this growing, but why there is still no company to do that? Electricity, water, transportation, and corruption are problems? Or others?
savuth // March 27, 2008 at 12:25 pm
First thanks for your comment and questions. You are right. What you have raised are all the main ingredients for business becasue they are included in the cost of production. Business means profit-oriented. There wont be investment if the cost exceed expected profit. Electrecity, water, infrustructure, telecommunication, transportation, security can be called the core industry. I noted that countries like China and Vietname put development of energy and this core sector ahead before other.
stforever // March 28, 2008 at 2:13 pm
Hi all, this is what most people said, but i wonder if there is any other explanation? Is there is anything we can do to solve the problems without depending on government’s interventions?
savuth // March 29, 2008 at 12:51 pm
Thanks Yaneth for good and challenging question. Reasons that we lose the value added are first firm, especially export oreinted firm do not use local supply. Second we do not have process and package firm that force us to sell raw material to neighboring via informal cross-border trade. How to solve this problem? I think first promote the usage of local content through incentive or regulation or investment law. Second, build the capacity of local supplier (local SMEs) to ensure that qualities of supplies are standardized. Third, to encourage investment in process and package it is quite important to think about the core cost facing these firms (electrecity, gazoline, water, infrastucture, security, set-up cost). Agains, I think the role of government is needed in this stage becuase these core industries (electricity, infrustructure…) require large capital, sunk cost and large scale investment. After this stage, the positive externality will invoke more private role in the second and following stages.
pinispinus // March 29, 2008 at 5:19 pm
Without the government intervention, it means that we let the market goes as what it likes. I do not think this is an appropriate position for the present Cambodia. The government has to do something to make it more better than the current situation. As I know, the government has already set an incentive system to promote the investment in Cambodia as you can see in this link: http://www.cambodiainvestment.gov.kh/?q=stup_inv_incentive. We must ask more why this incentive system cannot attract more investments in those industries. One possible argument is that the current incentive system does not work, and we have to ask whether this current incentive system corresponds to an industry policy. However, what I have learnt is that there is no clear industry policy in Cambodia. Promoting SMEs, Promoting hydrolic investment is part of them, but can we find a clear industry policy that identifies which sector should be promoted first, how long it will take to build up each sector, or how much we spend on these plan. And of course the incentive system should go along with this industry policy. I think the government should make a blue-print of industrial development like the one for the financial sector. And then we can coordinate the policy within this blue-print with the incentive system in form of land, tax, and duty exemption.
E.KAWAMALA // April 8, 2008 at 9:58 am
please provide the requested information instead of beating arround the bush
sanh ngo // August 14, 2008 at 11:33 am
1. Cambodia’s needing capable all parties united.
2. make people proud of Cambodian gov.
3. make for people and doing for Cambodian. Cambodia and Cambodian will grow like other development Countries for sue.
1 to3 works well, itself happen and all Investors worldwide willing to come,
What Cambodian’s needing friendly and kind not thing can stop it, Loom, boom, booming time ASAP for Cambodia,