[140113.EN.AIR] Cambodia's 38pc Hike In Air Cargo Shows Country's Rise Up Value Chain

PHNOM PENH airport's 38 per cent January-November increase in air cargo to 29,000 tons and its 11 per cent increase in passengers to 881,756 - of whom 100,000 came on business - indicates Cambodia's economy is diversifying, say economists.

Hong Kong carrier Dragonair's Cambodian exports last year were double that achieved in 2011, reaching 1,700 tons in the first 11 months of 2012. This represented a 40 per cent year-on-year increase in the revenue collected by Dragonair from the 10 flights a week between Hong Kong and Phnom Penh.

"It shows they are moving into higher-value products," said Peter Brimble, senior country economist at the Asian Development Bank (ADB), adding that it "reflects the deepening of the industrial base."

"If it is a product that's in great demand, they need to get it to market. That's when it becomes more conducive to air travel. Even in the garment sector, shipping by air, if there's an emergency, or high demand, they'll do it," said Mr Brimble.

Cambodia Airports manager Khek Norinda agreed that the rise in air cargo and business travellers indicate that Cambodia's economy is broadening after years of economists urging the government to diversify beyond cheap garments.

Japanese firms outsourcing high-tech manufacturing have arrived. In 2011, Minebea Co Ltd, which produces tiny motors for electronic devices, opened a factory inside the Phnom Penh Special Economic Zone (SEZ). Last year, Japanese wire harness makers Yazaki Corporation and Sumitomo Corporation entered Cambodia as well.

"That's what kicked off Thailand's deepening industrial progress. The kicker was the Japanese," said ADB's Mr Brimble.

With "manufacturing companies in search of lower costs transferring to Cambodia, air exports grew rapidly this year," said Cathay country manager Nicolas Masse, whose sister airline Dragonair is Cambodia's largest air cargo carrier. He added that merchandise transported by air is less than one per cent of international trade in terms of volume, but almost 40 per cent in value.

Mr Masse said that most of Dragonair's import volume was made up of raw materials for garment manufacturers and that the ratio of imports to exports was "well balanced".

DHL Express, which uses twice-daily Bangkok Airways flights to Phnom Penh to transport goods in and out of Cambodia, saw a 13 per cent rise in air cargo last year compared to 2011, said a company official.

Business Research Institution of Cambodia chief economist Hiroshi Suzuki said garments exported by air are likely to be high-end clothing and accessories. "There are two reasons for this - the weight of their products is light and the price of their products is high," Mr Suzuki said,

Mr Suzuki said that companies such as O&M Co Ltd - which makes wallets and other leather goods costing customers between US$200 and $300, inside the Phnom Penh SEZ-opt to ship their products by air because their light weight makes the process affordable.

Hai Sina, an administrator at FST PP Co Ltd, a Japanese silk kimono maker, in the Phnom Penh SEZ, said air cargo is justified by the speed with which products reach market. "It's expensive, but air export to Japan takes a day," Mr Sina said.

Said Phnom Penh SEZ chief Hiroshi Uematsu: "Their products are more valuable, so they can make a profit by exporting products by air, which is much more expensive, but with much shorter delivery time."

Exporting goods through the Sihanoukville Autonomous Port can take weeks and fees are more expensive than elsewhere in the region, said the report.

Source : HKSG.