Improving Trade and Logistics in Cambodia

Challenges

Cambodia sits in a dynamic region (sandwiched between the economies of Thailand and Vietnam) and its best hope for improving livelihoods is to integrate further into the dynamic ASEAN region. Weak logistics have long impeded Cambodia’s progress in realizing its trade potential, however, because its export costs are about 33% higher than Thailand and 30% higher than Vietnam. Cambodia’s farmers and manufacturers encounter difficulties in moving goods to markets; exporters face challenges in supplying overseas customers and integration into regional production networks remains challenging.

Solution

The TRAC program, which is managed by the World Bank and supported by a multi donor trust fund, has focused on customs and border reform to establish linkages with its ASEAN trading partners. The World Bank is helping establish a ‘National Single Window’, an automated solution combining different border agencies into one electronic platform for use by traders and businesses.

To streamline the export process, the World Bank has worked with the Royal Government of Cambodia to identify and categorize over 120 laws, royal decrees, sub-decrees, and regulations containing formal non-tariff measures, including import/export related permits, licenses and approvals.

TRAC is a program, consisting of 25 sub-components, many of which focus on specific interventions to facilitate trade, such as solutions for truck quotas at border crossings. With enhanced competition in the trucking industry, transport prices have begun falling, encouraging exports and leading to new investment.

Procedures are being streamlined to boost processed rice exports. The World Bank is also helping the fishery industry establish cooperatives that will help to increase the formal exports of these products.

Results

Cambodia’s progress in reforming and modernizing its import, export and transit operations has contributed to the following outcomes:

• Procedures for issuing and applying Certificates of Origin (COs) have been abolished where unnecessary and, when needed, simplified through an automated system.
• An automated customs solution has been rolled out in 21 border checkpoints
• The duration of customs clearance fell from 5.9 days (2010) to 1.4 days (2014).
• The duration of physical inspection fell from 29% (2010) to 17% (2014).
• Cambodia’s ranking rose 46 places in the Logistics Performance Index between 2010 and 2014.
• The Ministry of Commerce’s capacity to define and implement policy priorities has strongly improved. This is reflected in the Diagnostic Trade Integration Study, which is being reviewed as a template to be used by several developing countries.
• Cambodia reduced poverty from 53% (2004) to 20% (2011). Increasing rice exports and new jobs in export manufacturing contributed to poverty alleviation.

Bank Group Contribution

The World Bank is providing technical expertise and equipment to facilitate the establishment of Cambodia’s National Single Window (NSW) by 2015.

Partners

TRAC is a multi-donor trust fund currently valued at $22 million. Financing was provided by the European Union, Danish International Development Agency, and the United Nations Industrial Development Organization.

Most TRAC activities are owned and directly implemented by the government. A portion of the money is allocated to the World Bank to directly support project implementation, analytical work, and to provide strategic guidance.

Moving Forward

The National Single Window will have the capacity to link to the Ministry of Commerce, allowing traders to conduct all their import, export and transit regulatory requirements through a single gateway. TRAC developed a blueprint and business case for implementation system across all line ministries and agencies.