Cambodia is charting the path to improved connectivity

PHNOM PENH: Cambodia is laying the foundation to become a regional trade hub in Southeast Asia through strategic infrastructure investments and policy reforms.

Statistics from the General Directorate of Customs and Excise (GDCE) released on October 10 show that the total trade volume between Cambodia and its trading partners from January to September reached $40.94 billion.

Trade volumes are expected to double over the next six years to nearly $100 billion, according to a new World Bank report, “Cambodia’s Regional Connectivity: Unlocking the Full Potential of Transport Corridors.”

With trade volumes set to double by 2030, the Royal Government and the World Bank have outlined an ambitious plan to overcome current logistics and connectivity bottlenecks.

“Regional connectivity and logistics development are Cambodia’s top priorities; Strengthening our capacities will be very important,” said Minister of Public Works and Transport Peng Ponea.

“They can help position Cambodia as a key player in regional connectivity and increase trade along global supply chains,” the World Bank quoted Ponea as saying.

Accelerating growth amid challenges

According to the report, from 2010 to 2022, Cambodia’s containerized import and export movements increased by over 400%, driven by strong demand from North America, Europe and Asia.

However, logistics costs remain high, accounting for 26% of GDP, compared to only 14% in Thailand and 20% in Vietnam.

“Cambodia ranks 115th out of 138 countries in the World Bank’s 2023 Logistics Performance Index, reflecting inefficiencies in customs clearance, infrastructure and logistics quality,” the report warned.

The Comprehensive Intermodal Transportation and Logistics System (CITLS) Master Plan 2023-2033 outlines $30 billion in priority investments for roads, railways, inland waterways and logistics centers.

The projects aim to strengthen Cambodia’s competitiveness in export-oriented sectors such as textiles, agriculture and light manufacturing.

Unlocking the potential of trade corridors

The World Bank highlighted three critical trade corridors that are essential for Cambodia’s economic growth and regional integration.

These corridors are vital in solving logistics challenges and reducing transportation costs that currently hinder the country’s commercial competitiveness.

1. East-West Road Corridor

The East-West Road Corridor serves as a vital trade route for the Greater Mekong Subregion (GMS), connecting Cambodia to Thailand, Vietnam and Laos.

A key section of this corridor, the 400-kilometer Siem Reap-Oyadav Road, needs significant improvements to facilitate smoother trade flows between the three countries.

It was announced that this corridor is vital for strengthening connectivity with major regional markets and unlocking the economic potential in Cambodia’s northeastern provinces.

The report stated that the route is part of the Asian Road Network and is a priority under the ASEAN Connectivity (MPAC) 2025 Master Plan.

Improving this corridor will not only improve regional trade but also provide economic opportunities for underdeveloped regions of Cambodia.

“Road connectivity is the backbone of trade for Cambodia, especially along international corridors,” the report said.

“Improving the Siem Reap-Oyadav Road can significantly reduce transportation costs and promote regional economic integration,” he added.

2. Inland Waterway Corridor

Cambodia’s Inland Waterway Corridor leverages the Mekong River to connect Phnom Penh with the port of Cai Mep in Vietnam, a gateway to international markets such as North America and East Asia.

Inland waterways are known for their cost efficiency, especially for bulk and containerized goods.

The waterways currently account for 26% of Cambodia’s containerized trade, but the potential for expansion is huge, the report said.

Phnom Penh Autonomous Port (PPAP) plans to double its container handling capacity by 2029 through infrastructure investments such as the expansion of the LM17 container terminal.

“Additional improvements include modernizing feeder ports in provinces such as Kampong Cham and PrekKdam, dredging navigation channels to accommodate larger ships, and increasing security measures,” according to the report.

Administrative hurdles, such as customs clearance delays, remain a problem. Facilitating cross-border waterway transit procedures with Vietnam is crucial to reaping the full benefits of this corridor.

3. Railway Corridor

The report stated that Cambodia’s Railway Corridor, which includes Poipet, Phnom Penh and Sihanoukville Port, is underutilized and carries less than 1% of domestic cargo.

However, it has significant potential to enhance trade with Thailand and facilitate connections to international markets through Sihanoukville.

The government has outlined plans to renew existing metered railway infrastructure, purchase modern rolling stock and upgrade digital signaling systems.

These investments aim to make rail transportation more efficient and cost-effective. The World Bank also recommends studying the feasibility of expanding rail links to Phnom Penh’s river ports to support multimodal transport.

“Railways are an untapped resource in Cambodia’s logistics system,” the report warns. “Strategic investments in rail infrastructure can reduce costs and congestion by shifting freight from roads.”

The corridor is also seen as the key to decarbonisation. Rail transport produces significantly lower greenhouse gas emissions than road transport, in line with Cambodia’s sustainability goals.

Each corridor plays an integral role in Cambodia’s logistics ecosystem. Roads facilitate the rapid transit of perishable goods, inland waterways offer low-cost public transportation, and rail provides a sustainable alternative for heavy freight.

Together, these corridors form the backbone of Cambodia’s strategy to become a regional trade leader.

“The report brought together key stakeholders from government, the private sector and development partners to explore options for improving Cambodia’s transport sector and regional connectivity,” said Tania Meyer, World Bank country manager for Cambodia.

“A comprehensive approach to improving the transportation network will help increase Cambodia’s competitiveness, unlock export potential and promote trade in the region,” he added.

Addressing infrastructure inefficiencies

Cambodia’s logistics network faces significant challenges that hinder its growth and trade efficiency. Key problems include an aging fleet, lack of paved roads and underused railway lines.

With an average age of 20 years, most trucks are older, resulting in higher fuel consumption, increased maintenance costs and higher greenhouse gas emissions.

“This aging fleet also contributes to slower transit times, reducing the competitiveness of Cambodian exports,” the report said.

While 85% of national roads are paved, only 10% of rural roads are closed. This lack of infrastructure impacts last-mile connectivity, limits access to agricultural and industrial areas, and increases transportation costs for rural communities.

Despite their potential, railways currently carry less than 1% of domestic transportation. Waterways that are cost-effective for bulk goods face capacity constraints and inefficient cross-border procedures.

“These issues limit the full use of sustainable modes of transportation,” according to the report.

Efforts to streamline customs processes at major borders such as Poipet and Bavet have made progress, shortening customs clearance times.

But inefficiencies in coordination and technology adoption continue to delay trade flows, underscoring the need for further improvements. – Phnom Penh Post/ANN