and Light Manufacturing Sectors and Possible Sub-Sectors Outline - PowerPoint PPT Presentation

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 2013 GDP estimate $39.64 billion services (2013 est.) 40.70% GDP - composition by sector: industry 24.50% % by sector agriculture 34.80% 0.00% 5.00% 10.00% 15.00% 20.00% 25.00% 30.00% 35.00% 40.00% 45.00% (source: index mundi 2014)

Employment by Sector % 2011 2012 51 Services 55.8 18.6 Industry 16.9 13.4 Agriculture 27.3 Within the industry sector, employment spread: 50% garments; 25% construction; 10% food processing; and other 13% other manufacturing (ADB Country Diagnostic Study 2014)

Export and Import $6.781 billion (2013 est.; 82% of goods Exports textiles & footwear) Imports $8.895 billion (2013 est.) Exports - clothing, timber, rubber, rice, fish, commodities tobacco, footwear US 32.6%, UK 8.3%, Germany 7.7%, Exports - partners 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 Processing Initial 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).

Sector Outlook  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)

Overview of processed foods (exports) Composition of Recorded and Estimated Informal Cambodia Exports, 2007 2011 $ 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

Share of Manufacturing Sector and Sub-Sectors in GDP (%) 20 18 16 14 12 10 Share (%) 8 6 4 2 0 2006 2007 2008 2009 2010 2011e (18.6) (17.3) (15.3) (14.4) (14.7) (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 Source: MIME

Source: MIME 2011 Database

No. of Employees in Manufacturing SMEs 140,000 120,000 No. of Employees 100,000 80,000 60,000 40,000 20,000 0 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 Source: MIME

Outputs of Manufacturing SMEs (Million Riel) 4,000,000 3,500,000 Output (Million Riels) 3,000,000 2,500,000 2,000,000 1,500,000 1,000,000 500,000 0 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 of 32,349 35,340 38,190 122,832 98,014 105,623 119,525 Petroleum 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 Source: MIME

No. of Factories Classification 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 33 44 Products 11 Food 21 30 9 Fabricated Metal Products 21 30 9 Wood Products ( Including Furniture) 4 9 5 Paper, Paper product, Printing & Publishing 11 15 4 Beverage 12 15 3 Non-metallic Mineral Products (except 9 12 petroleum and coal) 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

% Employment Growth (2010-2012) 70 60 50 40 % Change 30 20 10 0 Garments, apparel Finance and Accommodation Construction Rubber and plastics Food and beverages and footwear insurance % Change 67.5 8.2 8 6.7 6.1 3.5 Source: NEA Employer Skills Needs Survey, 2012

Strengths  Abundant 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

Imports of Cambodia US$Million 700 600 500 US$ Million 400 300 200 100 0 Thailand Vietnam OECD Others China Imports of Cambodia 637 185 81 58 18 US$Million Source: Cambodia Trade Integration Strategy 2013-2018 and Trade SWAp Road Map 2013-201