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

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.) GDP - composition by sector:

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

• ther 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 - partners US 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 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

• ther 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

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

Share (%)

Share of Manufacturing Sector and Sub-Sectors in GDP (%)

Source: MIME 2011 Database

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 & 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 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 Employees
• No. of Employees in Manufacturing SMEs

Source: MIME

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 & Coal Non Metallic Mineral products except products of Petroleum 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 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

Output (Million Riels)

Outputs of Manufacturing SMEs (Million Riel)

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 Products 33 44 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 petroleum and coal) 9 12 3 Tobacco 9 11 2 Hat, Cap, Bag and Glove 8 9 1 Leather 2 2 Other 3 2

• 1

Jeans and Washing 16 14

• 2

10 20 30 40 50 60 70 Garments, apparel and footwear Finance and insurance Accommodation Construction Rubber and plastics Food and beverages % Change 67.5 8.2 8 6.7 6.1 3.5

% Change

% Employment Growth (2010-2012)

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

100 200 300 400 500 600 700

Thailand Vietnam OECD Others China Imports of Cambodia US$Million 637 185 81 58 18

US$ Million

Source: Cambodia Trade Integration Strategy 2013-2018 and Trade SWAp Road Map 2013-201

Imports of Cambodia US$Million

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$ Thousand

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 2011 Food & Live Animals 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 Non-Food Products 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)

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

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 products 10,302 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# Regtrd Person Engage Annual Sale Export Value Emergi ng 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 products 0.2 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 malt 0.0 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 Manufacturing Initial 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

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

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 mastics 3,213

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

Products 1 1 3 2 3 3 Estab# Regtrd Person Engage Annual Sale Export Value Emergi ng Total Structural metal

0.8 0.7 2.1 1.4 4.9

Manufacture of plastics and synthetic rubber in primary forms

0.2 1.8 1.8 0.2 4.1

Manufacture of bicycles and invalid carriages

0.5 1.2 2.1 0.2 4

Manufacture of clay building materials

0.4 0.8 2.3 0.3 3.8

Manufacture of furniture

0.6 0.6 1.4 1.1 3.6

Manufacture of other products of wood; manufacture of articles of cork, straw and plaiting materials

0.5 0.9 1.6 3

Manufacture of other electrical equipment

1.5 1.2 0.2 2.9

Manufacture of articles of lime, cement and plaster

0.6 0.6 1.6 2.8

Manufacture of jewellery and related articles made

• f precious and semi-precious materials

0.7 0.5 1.2 0.2 0.2 2.8

Manufacture of corrugated paper and paperboard and of containers of paper and paperboard

0.2 2.3 0.2 2.8

Thank you!!!