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Initial scan of the Food Processing and
Light Manufacturing Sectors
and Possible Sub-Sectors
Outline
• Introduction
• Food Processing
• Light manufacturing
• Selection of priority products
GDP by sector
34.80%
24.50%
40.70%
0.00% 5.00% 10.00% 15.00% 20.00% 25.00% 30.00% 35.00% 40.00% 45.00%
agriculture
industry
services (2013 est.)
GD
P -
co
mp
osi
tio
n b
y se
cto
r:
2013 GDP estimate $39.64 billion
% by sector
(source: index mundi 2014)
Employment by Sector %
Within the industry sector, employment spread: 50% garments; 25% construction; 10% food processing; and other 13% other manufacturing
27.3
16.9
55.8
13.4
18.6
51
Agriculture
Industry
Services
2011 2012
(ADB Country Diagnostic Study 2014)
Export and Import
Exports$6.781 billion (2013 est.; 82% of goods textiles & footwear)
Imports $8.895 billion (2013 est.)
Exports -commodities
clothing, timber, rubber, rice, fish, tobacco, footwear
Exports - partnersUS 32.6%, UK 8.3%, Germany 7.7%, Canada 7.7%, Singapore 6.6%, Vietnam 5.7%, Japan 4.7% (2012)
Opportunities in Manufacturing Sector
– Cambodia remains attractive to source labour due to relatively low salaries and ASEAN geographical location
– Cambodia enjoys low tariff due to global policies on General System of Preferences (GSP)/ Duty free Quota Free (DFQF)/ Everything But Arms (EBA)
– Enabling Environment: impressive industry regulatory framework in place (CTIS 2014 – 2018 and IDP 2015 –2025)
– Regional Developments: ASEAN Economic Community
Perceived constraints in manufacturing sector
(WB_ICA 2014)
Priority Sectors (IDP 2015-2025)
• New industries markets with high value-added products: machinery/mechanic/electronic/electric equipment/ transport assembly and natural resource processing
• Drugs and medical equipment production, construction materials, packaging equipment for export, furniture manufacturing and industrial equipment, etc.
• Agro-industrial products
• supporting industries serving regional production chains linked with either global markets
Food ProcessingInitial Scan
Sector Definition
Manufacture of food products and beverages (food processing) is the transformation of raw ingredients, by physical or chemical means into food, or of food into other forms. Food processing combines raw food ingredients to produce marketable food products that can be easily prepared and served by the consumer
(International Food Information Council Foundation).
Over half the world’s urban population will be in emerging economies.
Demand for food in emerging markets expected to rise because of population and income growth and are likely to adopt a rich country diet—more calories, protein, and processed foods (Goedde et al., 2015)
Consumers are increasingly health conscious: governments are tightening standards for food production/more stringent quality and safety requirements.
Exports of processed food are expected to make up 12 per cent of total exports by 2025.
Asian food demand expected to outpace local food production, leading to higher imports of meat and processed foods rather than traditional staple grains. (A review of market data concerning Asian Food and beverage markets)
Sector Outlook
Overview of processed foods (exports)
$ million % share $ million % share
Total Recorded Exports (goods + services) 4,509 7,335
Total Recorded and Informal Exports (goods + services) 4,945 100 8,155 100
Composition of TotalRecorded and Estimated Informal Exports
Garments 2653 54 3978 48
Other sectors (including informal exports) 894 18 2418 29
Composition of Other Sectors
Vehicles, mostly bicycles (recorded) 49 1 298 4
Rubber (recorded) 43 1 192 2
Milled Rice (recorded) 2 106 1
Corn + Soybean (recorded) 6 4
Cassava (recorded) 2
Paddy rice (informal - estimated) 356 7 851 7
Cassava (informal - estimated) 37 1 161 2
Corn + Soybean (informal - estimated) 42 1 78 1
Other recorded sectors (goods + services) 280 5 729 9
Source: CTIS 2014
Composition of Recorded and Estimated Informal Cambodia Exports,
2007 2011
Source: MIME
0
2
4
6
8
10
12
14
16
18
20
2006(18.6)
2007(17.3)
2008(15.3)
2009(14.4)
2010(14.7)
2011e(14.8)
Others 2.2 2.1 1.9 2 2 2
Rubber 0.6 0.4 0.4 0.4 0.5 0.5
Wood Products, Paper & Publishing 0.6 0.6 0.6 0.6 0.6 0.6
Textile, Wearing Apparel & Footwear 13 12.1 10.3 9.1 9.4 9.6
Food, Beverages & Tobacco 2.2 2.2 2.2 2.3 2.3 2.2
Shar
e (%
)
Share of Manufacturing Sector and Sub-Sectors in GDP (%)
Source: MIME 2011 Database
0
20,000
40,000
60,000
80,000
100,000
120,000
140,000
2004 2005 2006 2007 2008 2009 2010
Other Manufacturing Industries 3,089 3,205 3,239 2,897 3,285 3,371 3,909
Fabricated Metal products, Machinery& Equipment 6,727 9,741 8,243 9,407 9,821 6,170 6,722
Basic Metal Industries 0 0 0 0 0 0 0
& Coal
Non Metallic Mineral products except products of Petroleum 6,702 8,505 8,932 9,298 11,615 10,737 11,570
Chemicals 1,018 1,393 1,448 1,542 1,678 1,810 2,000
Paper product, Printing & Publishing 474 338 351 849 884 923 1,207
Wood & Wood product 97 4 0 0 0 0 0
Textile, Wearing Apparel and Leather industry 8,118 7,073 6,347 10,580 12,104 12,173 14,569
Food, Beverages, Tobacco 49,383 57,557 58,512 60,262 57,496 90,148 93,704
No
. of
Emp
loye
es
No. of Employees in Manufacturing SMEs
Source: MIME
0
500,000
1,000,000
1,500,000
2,000,000
2,500,000
3,000,000
3,500,000
4,000,000
2004 2005 2006 2007 2008 2009 2010
Other Manufacturing Industries 24,331 21,533 21,690 65,513 123,962 150,310 201,501
Fabricated Metal products, Machinery& Equipment 30,354 35,942 38,186 91,172 116,318 80,446 104,965
Basic Metal Industries 0 0 0 0 0 0 0
& Coal
Non Metallic Mineral products except products ofPetroleum
32,349 35,340 38,190 122,832 98,014 105,623 119,525
Chemicals 19,766 23,193 24,266 23,534 56,713 62,623 68,632
Paper product, Printing & Publishing 1,879 2,215 2285 3,513 4,031 4,173 5,211
Wood & Wood product 977 75 0 0 0 0 0
Textile, Wearing Apparel and Leather industry 9,608 14,212 12,933 14,072 75,426 21,136 26,040
Food, Beverages, Tobacco 2,000,000 2,352,833 2,461,530 2,294,293 2,219,803 2,527,085 3,119,559
Ou
tpu
t (M
illio
n R
iels
)
Outputs of Manufacturing SMEs (Million Riel)
Source: MIME
No. of FactoriesClassification 2008 2011 Change
Wearing Apparel 343 380 37
Shoes and Shoes part 32 54 22
Textile, Embroidery & Printing 49 62 13
Chemicals, Petroleum, Coal, Rubber & Plastic
Products33 44
11
Food 21 30 9
Fabricated Metal Products 21 30 9
Wood Products ( Including Furniture) 4 95
Paper, Paper product, Printing & Publishing 11 154
Beverage 12 15 3
Non-metallic Mineral Products (except
petroleum and coal)9 12
3
Tobacco 9 11 2
Hat, Cap, Bag and Glove 8 9 1
Leather 2 2 0
Other 3 2 -1
Jeans and Washing 16 14 -2
0
10
20
30
40
50
60
70
Garments, appareland footwear
Finance andinsurance
Accommodation Construction Rubber and plastics Food and beverages
% Change 67.5 8.2 8 6.7 6.1 3.5
% C
han
ge% Employment Growth (2010-2012)
Source: NEA Employer Skills Needs Survey, 2012
StrengthsAbundant relatively cheap labor
Enjoys some benefit from the market access to the US, EU, Canada and Japan through trade agreements
Food, beverage and tobacco industries slightly increased due to the government policy of promoting export particularly rice products.
Cambodia is centrally situated for easy access to major Asian economies
Quick and easy business & investment licensing registrations
Issues raised Only 4 Food Processing firms out of 14 Firms located in SEZ
(Ajinomoto, Liwayway, CamFood, AgriCom) Most industries are family-based with lack of entrepreneurship and
limited use of technology limiting its competitiveness in the international markets.
Lack of support from the government in human resources development, market information and market access, and technological innovation (CAMFEBA, 2013).
Manufacturing operations are still significantly lagging behind its neighboring countries
High logistics cost (RAIUS) Myanmar emerging as low cost rice exporter and competitor with
duty-free status Manufacturing significantly lagging behind its neighboring countries High energy cost (CAMFEBA, 2013)
Patterns and Trends in Trade
Destination of Processed Food exports: 58 countries Malaysia, Thailand China, EU_France, Poland, Africa)
Very small % of total exports : rice export volume (2015): 0.46 M tons , $210 Million
Very few rice millers exporters (14 firms);4 food processing firms in SEZ
Informal Export of Rice: $512 Million (2.3 Million MT) to Thailand and Vietnam
Strict SPS requirements
0
100
200
300
400
500
600
700
Thailand Vietnam OECD Others China
Imports of CambodiaUS$Million
637 185 81 58 18
US$
Mill
ion
Source: Cambodia Trade Integration Strategy 2013-2018 and Trade SWAp Road Map 2013-201
Imports of Cambodia US$Million
0
100,000
200,000
300,000
400,000
500,000
600,000
700,000
800,000
900,000
1,000,000
2001 2009 2011
Non-Food Products 2,400 2,253 5,739
Food & Live Animals 132,201 601,069 973,339
US$
Th
ou
san
d
Agriculture, Food and Forestry Products Import
Source: Cambodia Trade Integration Strategy 2013-2018 and Trade SWAp Road Map 2013-201
Estimates of AFF Product Imports by Cambodia, US$ thousand, 2001-201
2001 2009 2011Fo
od
& L
ive
An
imal
s
Sugar/sugar prep/honey 49,352 194,810 292,634
Miscellaneous food products 19,924 100,838 183,984
Animal feed ex un-milled cereals 1,501 59,287 121,400
Cereals/cereal preparation 22,403 61,714 106,353
Dairy products & eggs 16,726 48,943 73,128
Vegetables and fruit* 12,620 51,560 55,154
Live animals except fish 214 46,526 52,109
Coffee/tea/cocoa/spices 1,358 11,488 32,757
Fish/shellfish/etc. 7,716 23,555 29,071
Meat & preparations 387 2,346 26,750
No
n-F
oo
d
Pro
du
cts
Natural rubber 1,898 968 3,572
Oil seeds 311 658 2,010
Wood and wood products 48 601 137
Nat. gum/ resin/ pharm. plants etc 143 26 20
Source: Cambodia Trade Integration Strategy 2013-2018 and Trade SWAp Road Map 2013-201
Methodology
• Cooperation with NIS and NEA, reviewed 2011 and 2014 data
• Elimination of other sub-sectors - garments including foot-ware products and other sub-sectors activities, e.g. repair and printing etc..
• Identification of variables as criteria to select products using Cambodia Standard Industrial Classification (CSIC) survey and Export value of the products
• Scoring of top ten products in each criteria (Top (1)=10; Last =1)
• Weighing of variables significant to STED (1=low; 2=medium; 3=high)
• Selection of top ten products using the sum of the final value of each criteria
Number of Establishments in Food Processing (FP)
0 5000 10000 15000 20000
Manufacturing of fish and molluscks
Manufacture of soft drinks
Manufacture of starches and starch…
Manufacture of wines
Processing of meat
Manufacture of bakery products
Manufacture of macaroni, noodles,…
Distilling, rectifying and blending of…
Manufacture of sugar
Manufacture of grain mill products
Establishment
Registration of FP establishments
0% 20% 40% 60% 80% 100%
Manufacture of macaroni, noodles,…
Manufacture of grain mill products
Manufacture of wines
Manufacture of starches and starch…
Manufacturing of fish and molluscks
Processing of meat
Manufacture of bakery products
Processing and preserving of fruit and…
Manufacture of soft drinks
Manufacture of cocoa, chocolate and…
Registered Enterprise
Registered Not registered
FP Total Persons Engaged
0 10,000 20,000 30,000 40,000
Manufacturing of fish and molluscks
Processing of meat
Manufacture of starches and starch…
Manufacture of malt liquors and malt
Manufacture of soft drinks
Manufacture of bakery products
Manufacture of macaroni, noodles,…
Distilling, rectifying and blending of…
Manufacture of sugar
Manufacture of grain mill products
Regular Employee
FP Annual Sale (million US$)
Group Sale
Manufacture of soft drinks 52,922
Manufacture of grain mill products 13,442
Manufacture of macaroni, noodles, couscous
and similar farinaceous products10,302
Processing of food and vegetables 3,955
Manufacture of malt liquors and malt 3,765
Distilling, rectifying and blending of spirits 764
Manufacture of wines 764
Manufacture of vegetable oils and fats (except
palm oil, coconut oil and corn oil)696
Processing of dairy products 370
Processing of meat 357
FP Export Value
$0 $50 $100 $150 $200 $250 $300
Manufacture of bakery products
Manufacture of macaroni, noodles,…
Manufacture of malt liquors and malt
Manufacture of vegetable oils and fats…
Processing of fish and molluscks
Processing of food and vegetables
Manufacture of wines
Manufacture of sugar
Manufacture of starches and starch…
Manufacture of grain mill products
Export Value (Million)
Top FP Products based on weighted criteria
Product
1 1 3 2 3 3
Estab# RegtrdPerson Engage
Annual Sale
Export Value
Emerging
Total
Manufacture of grain mill products 0.8 0.8 2.3 1.4 2.3 2.3 9.9
Manufacture of sugar 0.7 0.0 2.1 0.0 1.8 2.3 6.9
Manufacture of soft drinks 0.2 0.6 1.2 1.5 0.0 2.3 5.8
Manufacture of starches and starch products0.2 0.2 0.7 0.0 2.1 2.3 5.5
Distilling, rectifying and blending of spirits 0.6 0.0 1.8 0.8 0.0 2.3 5.5
Processing of food and vegetables 0.0 0.5 0.0 1.1 1.4 2.3 5.2
Manufacture of wines 0.3 0.2 0.0 0.6 1.6 2.3 5.0
Manufacture of malt liquors and malt0.0 0.0 0.9 0.9 0.7 2.3 4.8
Manufacture of macaroni, noodles, couscous and
similar farinaceous products 0.6 0.4 1.6 1.2 0.5 0.0 4.2
Processing of fish and molluscks 0.1 0.3 0.2 0.0 1.2 2.3 4.1
Light ManufacturingInitial Scan
Definition
• Enterprises whose production uses partially processed materials to produce items of relatively high value for end-users or intermediates for use by other industries; mainly small consumer goods(clothes, shoes, consumer electronics and home appliances)
Source: Sheffrin (2003) Economics, Principle and Action
Share of Manufacturing in Exports
• Total value of exports (FoB 2013): $9,248 million
• New exports :bicycles (0.39% of total FOB) and waste & scraps of precious metals (0.33% of total FOB).
• Value of bicycle exports : $413 million or 4.2% of global sales (2014); electrical and electrical equipment ( $2.3 million in 2012); pulp and paper: $ 67 million (2013)
Business Environment
• Growing sub-sectors in global trade: furniture, leather products, cereals, vehicles, plastics, electrical equipments
• Cambodia seen as location for new production bases: China+ 1 policy by Chinese, Japan, Korea, Taiwan companies; preferred choice by proximity to key industrial areas, e.g. Thailand, Singapore, and established industrial zones (EPZ) vs. Myanmar
• Sector growth : very fast sector growth 20-25% yearly• High FDI due to liberal rules for foreign investors ; proximity
to manufacturers in neighboring countries ; lower cost and difficulty of cross-border investment
• Developing and growing local consumer markets
(source : ITC trade statistics 2014)
Recent investments in key LM Sectors
Sub-sector of Industry Name of new company
Gems& Jewelry
Intertekset laboratory (Poipet) and
Tiffany & Co (PP)
Pulp and Paper
Oji Paper Co., Ltd. and Ojitex Harta
Packaging 2 factories
Electronics and Electrical
products
Minebea Co.with 5,000 workforce ;
Sumitomo Wiring and Yazaki (KK);
Autoparts maker Denso factory (PP)
Automobile industry Hyundai Motor and Ford
Light Manufacturing in SEZ
10
7
5 5
4 4 4
3 3
2
1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1
(excluding garments & footwear)
Global/Asian demand for manufactured goods
• New global middle class will grow mainly from the Asia Pacific region with stronger demand for cars, better healthcare and more complex equipment, such as automobiles, mobile devices and technologies, and computers (Singapore Economic Devt Board)
• ASEAN could be the 5th largest automobile market with volume forecast at 4,710,000 units by 2019. Sales of home appliance in ASEAN growing: 11.5 million units (1st 6 mos. 2013 where volume spiked by 20% vs. 2012 (Frost & Sullivan)
• Asia's future growth powered by increased infrastructure spending, and rising domestic demand. (ADB). Estimated $8 trillion for telecom, transport, water and sanitation (McKinsey)
SWOT/KEY ISSUES
• Strengths: low labor costs and training development of workers; government fiscal incentives; easy access to intermediate imports (proximity to suppliers); good links to foreign firms
• Weaknesses: low labor productivity; poor infrastructure (roads, internet, electricity, water supply), lack of domestic manufacturing base & linkages; weak labor regulations; poor regulatory institutions; high reliance on imported immediate inputs
• Opportunities: training of workers; ASEAN integration and production value-chain; proactive government and business-friendly policies; strong outlook for foreign investors
• Threat: lack of strong regulations (labor); emerging production bases (e.g. Myanmar)
Light Manufacturing (LM) No. of Establishments
0 500 1000 1500 2000 2500 3000
Manufacture of other transport…
Manufacture of other fabricated metal…
Manufacture of glass and glass products
Manufacture of cutlery, hand tools and…
Manufacture of clay building materials
Manufacture of other products of…
Manufacture of furniture
Manufacture of articles of lime,…
Manufacture of jewellery and related…
Structural metal
Establishments
Light Manufacturing (LM) Registration
0% 20% 40% 60% 80% 100%
Manufacture of jewellery and related…
Manufacture of articles of lime,…
Manufacture of furniture
Structural metal
Manufacture of glass and glass products
Manufacture of plastics and synthetic…
Manufacture of pulp, paper and…
Manufacture of plastic products
Manufacture of corrugated paper and…
Manufacture of clay building materials
Registered Enterprise
Registered Not registered
Number of persons engaged
0 2,000 4,000 6,000 8,000 10,00012,000
Manufacture of plastic products
Manufacture of bicycles and invalid…
Manufacture of cutlery, hand tools…
Manufacture of other products of…
Manufacture of jewellery and related…
Manufacture of furniture
Manufacture of articles of lime,…
Manufacture of plastics and synthetic…
Structural metal
Manufacture of clay building materials
Total persons engage
LM Annual Sale (million US$)
Group Sale
Manufacture of other electrical equipment 669,969
Structural metal 427,322
Manufacture of bicycles and invalid carriages 333,023
Manufacture of furniture 123,918
Manufacture of pulp, paper and paperboard 30,744
Manufacture of other fabricated metal products n.e.c. 9,342
Manufacture of plastic products 8,321
Manufacture of cutlery, hand tools and general
hardware 4,526
Manufacture of clay building materials 4,211
Manufacture of paints, varnishes and similar
coatings, printing ink and mastics3,213
LM Export Value (million US$)
$0 $200 $400 $600 $800 $1,000$1,200
Manufacture of jewellery and related…
Manufacture of plastic products
Manufacture of pulp, paper and…
Mnaufacture of electric motors
Manufacture of other electrical…
Manufacture of metal forming…
Manufacture of other products of…
Manufacture of plastics and synthetic…
Manufacture of bicycles and invalid…
Manufacture of corrugated paper and…
Annual Sale (million)
Top Ten LM Products
Products1 1 3 2 3 3
Estab# RegtrdPerson Engage
Annual Sale
Export Value
Emerging
Total
Structural metal 0.8 0.7 2.1 1.4 0 0 4.9Manufacture of plastics and synthetic rubber in
primary forms 0 0.2 1.8 0 1.8 0.2 4.1
Manufacture of bicycles and invalid carriages 0 0 0.5 1.2 2.1 0.2 4
Manufacture of clay building materials 0.4 0.8 2.3 0.3 0 0 3.8
Manufacture of furniture 0.6 0.6 1.4 1.1 0 0 3.6Manufacture of other products of wood;
manufacture of articles of cork, straw and plaiting
materials 0.5 0 0.9 0 1.6 0 3
Manufacture of other electrical equipment 0 0 0 1.5 1.2 0.2 2.9
Manufacture of articles of lime, cement and plaster 0.6 0.6 1.6 0 0 0 2.8Manufacture of jewellery and related articles made
of precious and semi-precious materials 0.7 0.5 1.2 0 0.2 0.2 2.8Manufacture of corrugated paper and paperboard
and of containers of paper and paperboard 0 0.2 0 0 2.3 0.2 2.8
Thank you!!!
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