Rise in Air Cargo Shows a Diversifying Economy

The amount of air cargo entering and leaving Phnom Penh increased by almost 40 percent last year, and nearly 100,000 more business travelers to the capital were recorded during the first 11 months of last year compared to the same period in 2011, data from the government and the country’s airport operator show.

Economists said the jump in air cargo was an indicator of how Cambodia’s economy is beginning to diversify its industrial base, and that more business visitors demonstrated an increasing amount of interest from foreign investors in the country.

Between January and November, the number of passengers passing through the Phnom Penh International Airport to visit the country for business reasons increased 11 percent to 881,756 compared to the same period in 2011, figures obtained yesterday from immigration police show.

Moreover, the amount of air cargo entering and leaving the country through Phnom Penh rose 38 percent to 29,000 tons in 2012, according to Cambodia Airports, which operates the country’s international airports.

“It shows you are moving into higher-value products,” said Peter Brimble, senior country economist at the Asian Development Bank (ADB), referring to the increased levels of air cargo going in and out of the country.

Both indicators “reflect quite strongly the deepening of the industrial base,” he added.

Khek Norinda, communications manager at Cambodia Airports, agreed that the rise in air cargo and business travelers indicated that Cambodia’s economy is broadening after years of economists urging the government to diversify beyond cheap garments.

“More business visitors mean more business opportunities in Cambodia and cargo traffic is a good indicator of the volume of exchanged goods,” he said.

Indeed, the past two years have seen a host of Japanese firms specializing in high-tech manufacturing processes enter the country. In 2011, Minebea Co. Ltd.—which produces tiny motors for electronic devices—opened a factory inside the Phnom Penh Special Economic Zone (SEZ). And last year, Japanese wire-harness makers Yazaki Corporation and Sumitomo Corporation both entered Cambodia.

“That was exactly what kicked off Thailand’s deepening industrial progress. The kicker was the Japanese,” Mr. Brimble said.

With “manufacturing companies in search of lower costs transferring to Cambodia, air exports grew rapidly this year,” Nicolas Masse, country manager at Cathay Pacific Airways, whose subsidiary Dragonair is Cambodia’s largest air-cargo courier, said in an email. He added that merchandise transported by air is less than 1 percent of international trade in terms of volume but almost 40 percent in value.

The amount of cargo Dragonair exported in Cambodia last year was double that of 2011, reaching 1,700 tons in the first 11 months of 2012, Mr. Masse said, adding that cargo also accounted for 40 percent of the revenue collected by Dragonair from the 10 flights per week it operates between Hong Kong and Phnom Penh.

He said that the majority of Dragonair’s imports to the country were made up of raw materials for garment manufacturers and that the ratio of imports to exports was “well balanced.”

Logistics firm DHL Express, which uses twice-daily Bangkok Airways flights to Phnom Penh to transport goods in and out of Cambodia, saw a 13 percent increase in air cargo last year compared to 2011, said a supervisor at the company, who declined to give his name because he is not authorized to speak to the media.

Hiroshi Suzuki, CEO and chief economist of the Business Re-search Institution of Cambodia, said that garment products exported by air would most likely consist of high-end clothing and accessories.

“There are two reasons [for this],” Mr. Suzuki said, “The weight of their products is light and the price of their products is very expensive.”

Mr. Suzuki said that companies such as O&M Co. Ltd.—which makes wallets and other leather goods costing customers between $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, also located inside the Phnom Penh SEZ, said the additional cost of shipping products by air is justified by the speed with which they reach their destination.

“It’s more expensive, but air export to Japan [takes] only one day,” Mr. Sina said.

“Their products are more valuable, so they can make a profit by exporting their products by air, which is much more expensive, but with much shorter delivery time,” Hiroshi Uematsu, managing director of the Phnom Penh SEZ, said in an email, referring to FST and a second kimono-maker, Proceeding Co. Ltd., also located inside the SEZ.

“Many of these export-oriented factories use air in case of [a] tight delivery schedule,” Mr. Uematsu added.

Investors say that exporting goods out through the Sihanoukville Autonomous Port can take weeks. They also say transportation fees are more expensive than elsewhere in the region.

“If it is a product that’s in rapid demand…they need to get it to the market. That’s when it becomes more conducive to air travel,” said the ADB’s Mr. Brimble.

“Even in the [high-end] garment sector, shipping by air if there is an emergency, or if there is good demand, they’ll do it.”

(Additional reporting by Saing Soenthrith)

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