These are uncertain times for the global shipping industry. According to The Economist, insipid economic growth and changes in manufacturing patterns – with multinational firms increasingly establishing subsidiaries in local markets – have resulted in some of the biggest shipping companies reporting marked losses. The real magnitude of the crisis came to light in August last year, when South Korean container line Hanjin Shipping collapsed.
In your opinion, what are the most urgent challenges facing the Cambodian shipping industry?
For shipping lines, a very pressing issue is the slower growth in cargo volume (both import and export) to and from Cambodia. We have seen a slow growth for trade to and from the Kingdom, which is worrying. Cambodia is impacted by the global trade and will need to increase its competitiveness to attract more investment.
The higher operating costs and lower efficiency in Cambodia, compared to neighbouring countries, is also an issue. The shipping industry faced a most challenging time when the ocean freight plummeted in 2016. In a tough market like this, we are expected to cut operating cost and enhance the customer experience to maintain our competitiveness. In order to achieve this goal, our suppliers in Cambodia (ports, shipping agents, depots, and others) can support the industry by reducing their prices and increasing their efficiency.
You mentioned the crisis in your industry last year, the most visible example of which was the collapse of Hanjin Shipping in August. How has this downturn in the global shipping industry affected Maersk Line’s operations in Cambodia?
It’s a challenging time for the shipping industry; it’s hard to remain profitable. Maersk Line’s operations in Cambodia remain unchanged. However, we will always need to review how we do business here to ensure we keep our leading position in this market while still maintaining our priorities of cost leadership, process efficiency and customer experience. We focus on providing ‘easy shipping’ where our customers can enjoy the shipping experience via our advanced e-commerce platform.
What are some other recent developments in the transport and logistics industry that we should be aware of?
The government has made some efforts to reduce costs. Specifically, the lift on lift off (LoLo) fee has been cut by 10 percent at Sihanoukville Port, and five percent at Phnom Penh Port. There has also been a 10 percent reduction in the fee with KAMSAB (Kampuchea Shipping Agency and Brokers).
There are also plans to set up a National Logistics Council who will put together a National Logistics Blueprint – basically a logistics master plan – in 2017. This will consolidate all the scattered logistics and transport issues and plans. The Council is expected to be accountable for the implementation of such a master plan.
Cambodia currently ranks very low in the World Bank’s Logistics Performance Index (LPI), occupying the 73rd place. What do you think could be done to improve the country’s logistics system and also help lower prices?
It’s a big question, and not one to be answered in a sentence or two. In my opinion, the World Bank’s LPI is just an indicator of where we are right now, and it shows that, overall, there has been some improvements. Personally, I think the LPI alone is not helpful in guiding what actions we need to take to improve our logistics system. We also need to look at certain studies carried out by specialised agencies. The Japan International Cooperation Agency’s study titled Logistics Situation and Challenges in Cambodia, for example, can help us understand what could be done to improve the system and reduce costs.
Basically, it’s high time we get a national logistics master plan to help us identify our logistics vision, what needs to be done to get there, and how we measure the improvement. Also, I would suggest investing in the development of e-commerce systems that will make the process more efficient and reduce the unofficial costs.
How would you rate Cambodia’s customs administration, and how can it be made more effective?
There have been many improvements in the last couple of years especially with the implementation of ASYCUDA (Automated System of Customs Data) and the reduction of turnaround times for customs clearing.
But, there’s plenty of room for improvement. We need a specific point of contact that can help us resolve problems, as well as clearer guidelines. We would welcome the introduction of better connectivity as well: an EDI (electronic data interchange) system with logistics and transportation stakeholders (such as exporters and importers, customs brokers, forwarders and shipping lines) will reduce the manual transactions involved, increase data quality, fasten processing times and reduce unofficial facilitation fees.
It’s been a year since the ASEAN Economic Community (AEC) was established. What do you think have been some of the tangible effects for Cambodia’s shipping industry of being part of this economic community? What changes and developments might we expect in the upcoming years due to ASEAN integration?
It’s hard to comment after just one year. There will be several changes in the upcoming years. For example, the National Single Window will be implemented as part of requirements imposed by the AEC. Likewise, there will be a reduction in duties and tariffs for cargo flowing within the AEC; this will test the competitiveness of Cambodia’s products and services. I also foresee an increase in imports from ASEAN countries, which will have a positive impact in the shipping industry.