Lack of competition keeping logistics prices artificially high

11 August 2021

 

Lack of competition in areas including ports is harming Cambodia’s economy by keeping prices artificially high, said an OECD report into the country’s logistics sector.
The report said the country’s two international ports located in Phnom Penh and Sihanoukville are both state-owned and able to win contracts without a bidding process.
This enables them to operate without competing on price and quality, and allows them to charge more for port services, such as warehousing, than regional neighbours Thailand and Vietnam.
OECD’s report called for the government to consider allowing private operators to manage the ports.
It said the country should ensure the provision of port services is tendered based on “fair, transparent and non-discriminatory terms” to guarantee competition.
Also, that the government should only impose maximum prices for services, the OECD argued.
In addition, the paper expressed concern that a lack of competition in Cambodia’s transportation and logistics sector could hurt economic growth within the kingdom, where the cost of logistics is double the global average and higher than in neighbouring countries.
The transportation and storage market in Cambodia was worth $2.1bn in 2019 and represented around 7% of GDP but has been severely disrupted by Covid restrictions.
The Cambodia Freight Forwarders Association (CAMFFA) estimated last June that between 10% and 15% of logistics providers were heading for bankruptcy.
And over the last five years to 2019, Cambodia has slipped 25 places to 98 of 160 in the World Bank’s Global Logistics Performance Index.
Road transport largely dominates logistics within the country and the number of registered trucks more than doubled between 2008 and 2016.
Yet Cambodia is one of the few countries which requires HGV trucks to have two drivers – a policy which shuts out smaller operators, the report argues.
Recommending that the government scrap the rule, the OECD said it would make more sense to give drivers sufficient rest stops.
It is also advising the Cambodian government to cut restrictions limiting the number of trucks which can make cross border trips to trade with Thailand and Vietnam.

Lack of competition in areas including ports is harming Cambodia’s economy by keeping prices artificially high, said an OECD report into the country’s logistics sector

The report said the country’s two international ports located in Phnom Penh and Sihanoukville are both state-owned and able to win contracts without a bidding process.

This enables them to operate without competing on price and quality, and allows them to charge more for port services, such as warehousing, than regional neighbours Thailand and Vietnam.

OECD’s report called for the government to consider allowing private operators to manage the ports.It said the country should ensure the provision of port services is tendered based on “fair, transparent and non-discriminatory terms” to guarantee competition.

Also, that the government should only impose maximum prices for services, the OECD argued.

In addition, the paper expressed concern that a lack of competition in Cambodia’s transportation and logistics sector could hurt economic growth within the kingdom, where the cost of logistics is double the global average and higher than in neighbouring countries.

The transportation and storage market in Cambodia was worth $2.1bn in 2019 and represented around 7% of GDP but has been severely disrupted by Covid restrictions.

The Cambodia Freight Forwarders Association (CAMFFA) estimated last June that between 10% and 15% of logistics providers were heading for bankruptcy.

And over the last five years to 2019, Cambodia has slipped 25 places to 98 of 160 in the World Bank’s Global logistics performance index.

Road transport largely dominates logistics within the country and the number of registered trucks more than doubled between 2008 and 2016.

Yet Cambodia is one of the few countries which requires HGV trucks to have two drivers – a policy which shuts out smaller operators, the report argues.

Recommending that the government scrap the rule, the OECD said it would make more sense to give drivers sufficient rest stops.

It is also advising the Cambodian government to cut restrictions limiting the number of trucks which can make cross border trips to trade with Thailand and Vietnam.

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