Finance ministry, World Bank take on high logistics costs in Kingdom

Content image - Phnom Penh Post

Finance ministry permanent secretary of state Vongsey Vissoth (left) and World Bank (WB) senior economist Cordula Rastogi at Monday’s meeting. FRESH NEWS

The Ministry of Economy and Finance and World Bank (WB) are looking at in-depth strategies to reduce logistics costs in Cambodia, given the impact of Covid-19 on the global supply chain.

The continuing study is also part of the government’s agenda to bring about sweeping reforms in a bid to attract foreign investment, said Vongsey Vissoth, permanent secretary of state of the ministry.

In a meeting with WB senior economist Cordula Rastogi on June 6, Vissoth reiterated that logistics is a priority and key sector to boost trade and investment. “Cambodia’s economy will not be able to grow and prosper in the long run if we do not have an efficient and vibrant logistics system,” he said.

Vissoth stressed that the global economy is currently experiencing significant shocks due to Covid-fuelled blockages in supply chains and logistics systems, and other changes in the trading environment.

These, he said, have led to changes in interconnectivity, which in turn has resulted in major shifts in supply chain and logistics operations.

Vissoth said that high logistics costs in Cambodia are a “chronic” structural problem and that the government had started to address this issue before Covid-19.

Efforts to lower the cost are ongoing via systematic and structural reform measures as per the “The Strategic Framework and Programmes for Economic Recovery in the Context of Living with Covid-19 in a New Normal 2021-2023”, a comprehensive roadmap to safely guide the economy as the novel coronavirus becomes endemic.

In the medium term, Cambodia needs to do more work, in both “software” and “hardware” aspects, to develop efficient transport and logistics systems for cost-effective interconnection.

These systems would also reduce time consumption and ensure stability, thereby making the economy more competitive and diversified.

All of these would appeal to foreign investors amid the changing geographical and economic landscape moulded by the relocation of investment from China, Vissoth said.

“Cambodia must seize the opportunity through structural reforms to reduce logistics costs and develop a more vibrant and efficient transport and logistics system to absorb investment that would relocate from China.

“[This] could expand our economic base in the short and medium term and enhance long-term competitiveness,” he added.

When contacted, Cambodia Logistics Association president Sin Chanthy said he had no details on the joint study by the ministry and the WB but acknowledged that the domestic logistics sector is “slightly impacted” by rising global oil prices.

Globally, the sector is affected by the high cost of shipping to the EU, US and other long-haul countries caused by the shortage of containers, fuel prices and Covid-19, he told The Post on June 7.

Chanthy shared that the government is currently addressing shipping costs to make it more competitive while enabling large ships to dock in Cambodia and alleviating congestion at ports.

According to a WB study on the global logistics sector, costs of logistics in Cambodia were comparatively high and volatile due to high operating and shipping costs.

It stated that unofficial fees, connectivity issues between one type of transport and another, and procedural issues continued to hinder the sector’s growth.

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