Initial scan of the Food Processing and Light ...

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


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


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%






Processing of meat


Processing and preserving of fruit and…


Manufacture of cocoa, chocolate and…

Registered Enterprise

Registered Not registered

FP Total Persons Engaged

0 10,000 20,000 30,000 40,000


Processing of meat


Manufacture of malt liquors and malt




Distilling, rectifying and blending of…



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 malt liquors and malt

Manufacture of vegetable oils and fats…

Processing of fish and molluscks

Processing of food and vegetables





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%




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…


Registered Enterprise

Registered Not registered

Number of persons engaged

0 2,000 4,000 6,000 8,000 10,00012,000


Manufacture of bicycles and invalid…

Manufacture of cutlery, hand tools…






Structural metal


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 pulp, paper and…

Mnaufacture of electric motors

Manufacture of other electrical…

Manufacture of metal forming…



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!!!

Initial scan of the Food Processing and Light ...

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