Trucking Companies Plagued by High Costs, Informal Payments

Despite growing exports, freight companies say profits are being hit because most firms still use old, inefficient trucks and are often forced to pay custom officials informal fees at border checkpoints and ports.

Transportation costs in Cambodia are already some of the highest in the region, but the lack of investment going into freight companies means that many firms do not have enough trucks to supply current levels of demand in the market.

“We are having a bit of a capacity issue here and there are not enough trucks to contain traffic,” said Benjamin Wilson, country manager for the international shipping firm Maersk, adding that his firm hires a third party to deliver containers via road to the Sihanoukville Autonomous Port. “It’s certainly a problem and it’s an industry that needs an input of more investment.”

Some of the trucking fleets are so run down that firms often have to spend large amounts on repairing broken down vehicles.

“They are not up to the demand at the moment and sometimes we have difficulty in finding trucks. When we do, they are mostly old and can break down,” said Kouch Pheng, president of local freight forwarding firm Advanced Glory Logistics (Cambodia) Co. Ltd.

On top of that, “Cambodia doesn’t have rules on transit, so if a container is shipped here by accident, you have to apply for the import, pay all the taxes and then reapply for the export,” he said.

There are currently about 100 trucking companies operating in Cambodia, many of which are small, family-owned businesses whose fleets consume large amounts of gasoline when compared to more modern fleets, said Sok Chheang, executive director of the Cambodia Trucking Association. As a result, Cambodia’s land transportation firms charge between $10 to $15 per ton for a 100-km journey, compared to just $4 per ton in Vietnam and $7.50 in Thailand, according to the Asian Development Bank (ADB).

“Informal payments included in the transport charges could also partly explain why transport cost is an impediment…. [F]irms [have] little idea of, or control over, the informal payment part of overall transport charges,” the ADB said in a report released last week.

Such high costs mean foreign trucking companies are reluctant to enter the market.

“Foreign companies that may consider this market have to look at whether they can compete with the domestic companies and they think they cannot,” Mr. Chheang, of the Cambodian Trucking Association, said.

“One thing is that they have higher standards and spend a lot more on their employees, while also having to deal with their own compliance issues,” he added.

What is more, some of the major transport routes, such as between Phnom Penh and Bangkok are monopolized by only a few of the larger companies lucky enough to have obtained cross-border licenses.

“The larger companies have an easier time than the small companies, because of what they can offer in assurances, so it is difficult for us to compete with them,” said Pe Sokhoin, assistant to the managing director, at local trucking firm RSL Global Logistics Co. Ltd., adding that his firm is able to make about $30 per load carried to Sihanoukville from Phnom Penh.

According to trucking companies, any spelling or mechanical mistake on shipping receipts can result in a $30 to $100 cash payment to the customs department, while an error in container contents can result in a $200 to $300 cash charge.

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