3. Logistics and industrial infrastructure

This section covers the following topics: ports and waterways, railways, roads, airports, telecommunications and connectivity, industrial and logistics parks.

Summary

• 3.1. Ports and waterways
• 3.2. Railways
• 3.3. Roads
• 3.4. Airports
• 3.5. Telecommunications and connectivity
• 3.6. Industrial and logistics parks

To support its growth, the Global Infrastructure Hub believes that Cambodia needs significant infrastructure investments amounting to US$28 billion between 2016 and 2040. For this reason, the Government of Cambodia is implementing substantial policy reforms, seeking to attract private sector investment through the Investment Law 2021 and the Public-Private Partnership Law 2021, along with free trade agreements, bilateral agreements and multilateral collaboration.

As a member of the ASEAN Economic Community and a signatory to the ASEAN Free Trade Agreement with partner countries and regions, Cambodia has prioritized the development of physical and non-physical infrastructure connectivity to enhance integration into the regional and global economy. The Rectangular Strategy – Phase IV prioritizes improving transportation connectivity and internal integration, and expanding energy coverage and digital connectivity. This aims to build an active logistics system that will connect economic hubs and contribute to economic competitiveness and diversification. Examples of these activities include

• the rehabilitation, construction and development of roads, bridges, railways, waterways, airways and expressways,

• lowering electricity prices, expanding supply coverage and building additional substations

• strengthening and expanding fibre optic cable distribution networks, fibre optic infrastructure and modernising the mobile telephone network.

On April 22, 2023, at the “ Transport and Logistics Forum 2023”, organized in Phnom Penh by EuroCham (European Chamber of Commerce), Sun Chanthol , Minister of Public Works and Transport, announced the contents of the “ Transport and Logistics Master Plan 2022–2030” to be published soon. A total of 330 infrastructure projects are planned, including 150 high priority projects for a total of US$ 30 1billion .

The main financing method, in addition to official development aid, is Public Private Partnership. The PPP Law applies to all qualified projects involving the development of infrastructure in transport, digital and telecommunications, and energy. Under the PPP Law, the government can provide support in the form of subsidized packages, favorable tax regime, property security rights, and certain government guarantees. The PPP Law allows for the choice of a private entity for the execution of the work itself or the assignment to a Third Party Contractor. Dispute resolution mechanisms are also open to international arbitration centers.

3.1. Ports and waterways

Cambodia has an extensive coastline and waterways of 443 and 3,700 km respectively, connected by 78 river ports and 27 sea ports. The busiest international ports in Cambodia are the ports of Phnom Penh and Sihanoukville , which are autonomous ports that act as national gateways and operate at near-full capacity.

Sihanoukville Autonomous Port (PAS) recorded strong growth in container throughput with a compound annual growth rate (CAGR) of 9.8% from 459,819 TEU in 2017 to 732,387 TEU in 2021. Phnom Penh Autonomous Port (PPAP) grew at 10.8% CAGR from 205,000 TEU in 2017 to 341,876 TEU in 2021. PAS captured about half of the total container market in Cambodia. Together with PPAP, the two ports captured 70% of the total market share. Cambodia’s international trade volume is expected to grow exponentially with greater diversity of imports and exports and higher value-added products, on the back of a more diversified economy, improving national income levels and population growth. As a result, logistics needs will become more diversified as the economy develops, fostering the need for multimodal transportation and logistics systems in the country.

In terms of financial results, in 2021, PAS recorded a 252.2% year-on-year increase in net profit (to USD 243.9 million), driven by the post-COVID container traffic surge, while revenue increased by 9.8% year-on-year (to USD 84.0 billion). In the same period, PPAP's total revenue increased by 13.5% year-on-year (to USD 30.8 billion), while net profit rose by 28.6% (to USD 12.7 million).

The new national master plan is expected to help improve the investment climate; this sector is poised to attract more international terminal operators and investors. Some of the projects planned in the coming years are very promising for investors, such as the expansion of PPAP and PAS, the development of Kampot Multipurpose Port project, the proposed Bassac River- Kep Sea waterway link and the KepCity marina .

PAS is currently expanding with the construction of a new 350-meter long and 14.5-meter deep container terminal to accommodate container vessels with a capacity of 4,000 TEU or 60,000 deadweight tonnage (DWT), expected to be completed by 2025.

PAS will build two more quays with a length of 400 meters and a depth of 16.5 meters, the other 430 meters long and 17.5 meters deep, for vessels of 10,000 and 15,000 TEUs respectively, to be built between 2028 and 2030. With these expansions, the port's capacity is expected to triple to handle 3.7 million TEUs by 2050. Superstructures will also be added to the seaport by 2025, including post- Panamax crane units , rubber-tired gantry cranes, container trolleys, tractors and trailers, a CCTV system, emergency power generation and digitalization of systems.

The Kampot Multipurpose Port project is the first privately owned port and third deep-water port in Cambodia, developed by Kampot Logistics and Port at an estimated cost of US$1.5 billion. The first phase of the project is expected to cost around US$200 million to build a container terminal with an initial annual capacity of 300,000 TEUs. The multipurpose port will have a water depth of nearly 15 meters and is planned to be linked by expressway to the nearby capital Phnom Penh. During the second phase of the project, the container terminal capacity is expected to double to 600,000 TEUs by 2030. The port complex is expected to include a special economic zone (SEZ), free trade zone, warehousing, production and oil refinery.

3.2. Railways

The development of the railway sector relies on the rehabilitation of its existing rail network. Cambodia's long-distance railways remain largely underdeveloped despite an estimated 40% increase in traffic in 2022.

Currently, Cambodia has two main railway lines totaling 650 km: the Northern Line from Phnom Penh to Poipet and the Southern Line from Phnom Penh to Sihanoukville , the nation's deep-sea port. Royal Railways Cambodia is the current owner and operator of these two lines.

There are also several smaller rail links to the main lines, such as a 6.5km branch line linking Phnom Penh railway station with the oil depots along the Tonle River. I know .

The Asian Development Bank provided over $140 million in financing for the railway rehabilitation project.

The 2019–2023 Socio-economic Development Plan highlighted the objective of:

• rehabilitate railway lines and stations from Phnom Penh to Poipet ,

• build new railways or extend existing railways to connect Phnom Penh's new autonomous port, factories, SEZs and other new developments, as per Veal Rinhstation at KeoPhos Port,

• Improve cross-border connectivity, such as from the Cambodia-Thailand network to the Singapore-Kunming network.

Many of these initiatives are currently in the planning or feasibility stages and require funding from the private sector.

The Ministry of Public Works and Transport is considering three possible urban rail projects in Phnom Penh city, to ease traffic congestion on the roads and reduce accidents. These three rail projects are:

• the automated rail system, estimated at $1.4 billion, caters to the city's rapidly developing and growing middle class;

• Monorail Way (monorail), estimated at $2 billion

• Phnom Penh Metro Project Estimated at $1.8 Billion

These projects aim to benefit both commuters who use public transportation and to increase the value of commercial and residential properties for buildings near the planned stations.

The Cambodian government has announced the possibility of building a railway linking Phnom Penh to Bavet , with China Railway International Group Co., Ltd. completing the feasibility study in 2020.

3.3. Roads

Road transport is the largest transport sub-sector in Cambodia, accounting for over 90% of passenger and freight movements. However, Cambodia’s road quality performs below the regional level according to the World Economic Forum’s (WEF) Road Competitiveness Ranking 2019. Cambodia has a road quality score of 3.6 out of 7.0, the second lowest in the region (Vietnam: 3.4, Laos: 3.7, Thailand: 4.4, Malaysia: 5.3 and Singapore: 6.5).

The main road network includes 2,254 km of national asphalt roads connecting the country with its borders, 5,007 km of internal national roads, of which 72% are asphalted, and 9,031 km of provincial roads, of which 30% are asphalted, 47,920 km of rural roads, of which 5% are asphalted.

The National Strategic Development Plan 2019-2023 (NSDP) outlined the government’s priorities for improving transport connectivity by increasing its investment budget and attracting private sector investment.

Road transport is an important part of the logistics ecosystem, both within Cambodia and regionally among the countries of the Mekong Sub-region (GMS). Therefore, a significant part of the Infrastructure Master Plan focuses on strengthening and expanding road infrastructure and connecting major road arteries (especially international border crossings) to increase Cambodia's competitiveness, attract foreign investment, and reduce logistics and transportation costs.

Inaugurated on 1 October 2022 2, the Phnom Penh – Sihanoukville The 190km expressway is the first expressway in Cambodia. The Ministry of Public Works and Transport awarded the project to China Road and Bridge Corporation (CRBC) with an investment of US$2 billion, to create an efficient link between Phnom Penh and the coastal city of Sihanoukville . The new expressway more than halves the travel time between Phnom Penh and Sihanoukville , from five hours to two hours, and diverts traffic from existing roads, particularly National Road 4, significantly improving logistics efficiency by reducing the time and cost of transporting goods.

On November 9, 2022 3, Cambodian Prime Minister Samdech Hun Sen and Chinese Premier Li Keqiang signed a memorandum of understanding to build the 138km Phnom Penh- Bavet highway.

On March 28, 2023 4, the Ministry of Public Works and Transport announced, in a letter addressed to the provincial authorities, the launch of the feasibility study of the Phnom Penh Siem Reap Expressway. Reap . The announcement was met with great reception from the public as Siem Reap is one of the most popular tourist destinations for Cambodians and National Road 6 is currently one of the busiest and most congested roads in Cambodia due to its crossing of many populated provinces such as Kampong Cham, Kampong Thom and Siem Reap .

The rehabilitation of National Road 4 began in 2022 with lane widening and extensions, scheduled for completion in 2026. Other improvement projects include National Roads 31, 33 and 41.

Phase IV of the Rectangular Strategy also calls for improving traffic safety and public order and reducing illegal checkpoints and trucks that do not meet technical standards.

The road sector is expected to grow with further support from international partners and private sector participation under the Public Private Partnership Act of 2021.

3.4. Airports

The growing economy and growing influence in Southeast Asia are reflected in the annual number of air passengers, which exceeded 10 million in 2018. The three existing international airports of Phnom Penh International Airport (PNH), SiemReap International Airport (REP) and Sihanoukville International Airport (KOS) were operating at close to nominal capacity in the period before the COVID-19 pandemic.

Phnom Penh International Airport (PNH) is the largest and busiest airport. Its current annual passenger handling capacity is 7 million, thanks to expansion in 2017; in 2019, it handled over 6 million passengers in over 56,018 aircraft movements.

After completing its expansion in 2015, SiemReap International Airport (REP) doubled its capacity to 5 million passengers, while Sihanoukville International Airport (KOS) was upgraded in 2018 to accommodate up to 500,000 passengers annually.

The State Secretariat for Civil Aviation (SSCA) expects the airline industry to return to pre -pandemic levels at the end of 2023 or early 2024.

To meet the growing passenger demand, Cambodia has released several master plans for airport development, including the New Phnom Penh International Airport (NPPIA), Siem Reap International Airport Reap Angkor, Dara- Sakor International Airport and Poipet Airport (currently under feasibility study).

The Government is strengthening international cooperation and air links to develop the civil aviation sector regionally and globally. Some of the efforts include coordinating with the International Civil Aviation Organization (ICAO) to determine standards and recommendations for the implementation of the safety audit program, preparing draft regulations and provisions on the domestic and international civil aviation sector, and establishing memoranda of understanding, agreements and legal documents on air transport services. The Government has also completed the protocol for the implementation of the 12th Agreement on Air Transport Services under the ASEAN Framework Agreement and established the completion of negotiations of the ASEAN-EU Comprehensive Air Transport Agreement.

3.5. Telecommunications and connectivity

According to World Bank data, in 2021, mobile phone users were just under 19.9 million, almost 120% of the population, while fixed lines were almost 40,300. According to “Connectivity in the Least Developed Countries , Status report 2021” 5by the International Telecommunication Union, a UN agency, the percentage of the population using the Internet exceeds 79%, the highest value by far among the least developed countries (LDCs), where the average is 30%.

Cambodia's internet network is of good quality and affordable, its development has undergone rapid growth, especially thanks to the competition in the construction of fiber networks, but the connectivity sector has been poorly regulated, with the birth and death of a fair number of ISPs (in May 2023 there were 38), which also operated in a not entirely regular manner until May 2022, when the Cambodian government imposed a crackdown and the beginning of a process of reorganization of the sector, also physically demolishing tangles of fiber cables suspended above the streets of the main cities 6.

According to ministerial directives, in fact, only two operators are authorized to install and maintain the fiber optic network: the state-owned Telecom Cambodia (TC) and Cambodia Fiber Optic Cable Network (CFOCN), a private company that is the only one truly equipped with intervention capacity. Already on February 12, 2020 7, TC and CFOCN had signed a Memorandum for the construction and consolidation of the regional and urban fiber optic network and the ministerial plan for 2024 provides that CFOCN will build a super-fast fiber connection with Hong Kong, replacing a previous one, in order to improve the performance of the entire network.

3.6. Industrial and logistics parks

Logistics hubs in Cambodia are underdeveloped, with narrow entrances and inefficient operations. Cargo movements in Phnom Penh are slow and expensive due to truck regulations in urban areas, trucks are not allowed to enter the city during the day, increasing costs. Existing dry ports offer basic services and are often uncompetitive, but usually have specific routes and niche customers for their trucking operations. Available logistics services are limited or fragmented, less - than -container load (LCL ) services are only available to certain destinations (China and the United States), and last-mile transport is often unavailable due to the lack of truck terminals. Additionally, dry port services, including warehouse operations, container handling stations (CFS), and container storage, are expensive compared to neighboring countries.

The Master Plan for Transport and Logistics 2022-2030 includes the construction of two new logistics hubs, one in Phnom Penh and the other in Sihanoukville .

The document “Industrial Development Policy 2015 – 2025” focuses heavily on the development of Special Economic Zones; according to the Development Council of Cambodia, in 2023 there will be 24 Zones active involving a total of over 160,000 workers and over 560 investment projects 8.

In addition to SEZs in key cities and ports, such as the well-known Phnom Penh and Sihanoukville SEZs , there are SEZs clustered along the borders with Thailand and Vietnam. Given the higher production costs in Thailand, many Thai and foreign manufacturers are adopting the "Thailand+1" strategy and increasingly diversifying their assembly process to lower-cost neighboring countries, including Cambodia. To attract foreign manufacturers from Thailand, three SEZs have been established in Poipet , a northwestern city on the Cambodian-Thailand border. One of the SEZs is the Sanco SEZ Poipet , an 83-hectare industrial park. It is home to many Japanese companies in the automotive and electronics sectors, such as Sumitronics and Sanko Electronics , which has manufacturing bases in Thailand and factories in Poipet , to utilize Cambodia's lower-cost labor.