Logistics System Development Strategies for Cambodia 2015 Knowledge Sharing Program Construction and Infrastructure Policy Consultation Project
Logistics System Development Strategies for Cambodia 2015 Knowledge Sharing Program Construction and Infrastructure Policy Consultation Project
Project Participants
Execution of the Project (1) : Korea Research Institute for Human Resources
Kim Jonghak(National Infrastructure Research Division, PM) Kim Jungi (National Infrastructure Research Division) Oh Sungho (National Infrastructure Research Division) Ko Yongseok (National Infrastructure Research Division) Park Jongil (National Infrastructure Research Division) Hong Kyoungsun (National Infrastructure Research Division) Park Bora(National Infrastructure Research Division)
Execution of the Project (2) : External Expertise
Lee Hangsook (Incheon University) Jeon Chanseok (PTOW consulting)
Local Research Team in Cambodia
Ministry of Public Work and Transportation ∣ Preface ∣
The Knowledge Sharing Program (KSP), launched to share the experiences and knowledge that Korea has acquired in the process of economic growth with developing countries around the world, has become a major part of Korea’s ODA projects. KSP was launched in 2004, and has opened the way for Korean companies looking for opportunities in overseas businesses. It has also discovered new growth potential in foreign markets, so there has been increasing demand for KSP projects. By providing policy consultation in construction and infrastructure areas where Korean companies show strength, KSP projects can be implemented more strategically and the follow-up projects can be planned and integrated more effectively. This year’s KSP project was launched based on the expertise of the Korea Research Institute for Human Settlements (KRIHS), and the policy consultation agenda will be developed to support the recipient country’s socioeconomic development; Relevant overseas projects will be planned to open up new doors to overseas markets for Korean companies. Since April 2015, KRIHS has devoted all of its resources and efforts to this “Logistics System Development Strategies for Cambodia KSP”, arranging discussions, an interim report, a policy authorities training program and a final report between the two countries. At the final report held in Cambodia, the final project plan, which was prepared through a number of discussions with the policy authorities in Cambodia, was announced. This report includes KRIHS’ policy consultation for Cambodia. KRIHS has examined the current state of logistics in Cambodia, shared Korea’s experience in logistics development policies, studied implications for Cambodia’s future logistics policies and provided policy suggestions for Cambodia. We would like to express our sincere gratitude to all the KRIHS researchers and external advisors who worked very hard to study and share Korea’s economic development model and all the affiliated organizations and local experts in Cambodia for their support and cooperation. We also thank the reviewers and advisors who gave valuable opinions and ideas as the report was developed. We would like to send out a very special thank you to the International Economic Affairs Bureau of the Ministry of Strategy and Finance and its officials for their efforts and valuable administrative support. Thank you once again to everyone for their hard work and dedication, and we promise all of you that we will do out best to advance our KSP project and to contribute to the national development and prosperity of Laos. Lastly, we would like to point out that the opinions included in this report are the opinions of the experts and advisors who have participated in the project and that they do not reflect the official opinion of the Korea Research Institute for Human Settlements (KRIHS).
August 2016 Kim Dong-joo President of KRIHS Contents
Implications and Expected Effects of Logistics System Development Strategies for Cambodia 1
Chapter 1. Introduction 3
Section 1. Background and Necessity of Study 3 Section 2. Study Objective and Content 6 Section 3. Study Scope and Method 8 1Chapter 2. Current Status of Social Economy & Logistics Infrastructure in Cambodia 11
Section 1. Review of Upper Plan 12 Section 2. Social Economic Status 16 Section 3. Current Status and Problems Related to Logistics Infrastructure 23 Section 4. Implications on Policies 75
Chapter 3. Institution and Operation of Logistics in Korea 77
Reference 181 5Appendix. Logistic Function and System 183
Map and Overall Conditions of Cambodia ······················································· 4
Economic Index of Cambodia ········································································ 16
Comparison of Cambodia and Adjacent Countries ········································ 21
Cambodian Government Bodies and Names ·················································· 28
Road Density Compared to Adjacent Southeast Asian Countries ················· 29
International Road Network in Cambodia (based on 2011) ··························· 35
1-Digit, 2-Digit Road Enhancement Project in Cambodia ····························· 37
China’s Road Network Plan Details ······························································· 40
Japan’s Cambodian Road Network Plan Details ············································ 41
Railroad Stations of Northen Route ······························································· 43
Railroad History of South Route ·································································· 45
Overview of Routes in the Railroad Development Plan ······························ 48
Maximum Ship Capacity of Mekong River ················································· 50
Size of Phnom Penh Port ·············································································· 52
Sihanoukville Port Facilities ········································································ 56
Overview of Storage Facilities ····································································· 56
Number of Ships at Sihanoukville Port ························································ 57
Amount of Cargo Imported and Exported at Sihanoukville Port ················· 57
Amount of Cargo Processed at Sihanoukville Port ······································ 58
Number of Passenger Traffic at Sihanoukville Port ····································· 58
Development Plans of Sihanoukville Port ···················································· 58
Special Economic Zone of Sihanoukville Port (SEZ) ·································· 59
Summary of Other Small Sea Ports ······························································ 60
Other Sea Ports in Cambodia ······································································· 60
Overview of Main International Dry Ports ··················································· 61
Facility Sizes of Cambodia Airports ···························································· 63
Overview of Operated Routes at Phnom Penh International Airport ············ 64
Annual Overview of Passengers at Phnom Penh International Airport ············· 64
Annual Overview of Handled Cargo at Phnom Penh International ············· 65
Overview of the Operated Routes at Siem Reap International Airport ················ 66
Annual Overview of Passengers at Siem Reap International Airport ··········· 66
Annual Overview of Handled Cargo at Siem Reap International Airport ············· 66 Overview of the Operated Routes at Sihanoukville International Airport ············· 67 Annual Overview of Passengers at Sihanoukville International Airport ········ 67 Annual Overview of Handled Cargo at Sihanoukville International Airport ············· 67
Comparison among the National Basic Plans on Logistics ···························· 84
Logistics-related Laws in Korea ···································································· 87
Logistics Surveys in Korea ············································································· 89
Current Condition of Logistics Facilities Per Region ·································· 102
6 2015 Knowledge Sharing Program III
Current Conditions of Logistics Facilities in Korea ····································· 103
Staged Plans to Establish Comprehensive Logistic Network ······················ 108
Major Services and Staged Establishment Plans ·········································· 110
Specification of Pallet ·················································································· 112
Existing Road Network Conditions in Cambodia ········································ 126
Population and Traffic Volume for Each Province ······································ 128
Trade Volume of Major Trade Passage in Cambodia ·································· 134
Traffic Zone for Each Hub ··········································································· 136
Traffic Passage and Traffic Axis between Each Hub ·································· 140
Scoring Standard for Domestic Axes ··························································· 145
Scoring Standard for International Axes ······················································ 146
Domestic Axes Assessment Result ······························································ 147
Domestic Axes Assessment Result ······························································ 147
International Axes Assessment Result ······················································· 151
Improvement Items of Cambodian Logistics Policies and Systems ·········· 157
Responsibilities of Government and Local Governments and Responsibilities of Logistics Companies and Shippers ··············································································· 161
Sharing Roles between Logistics Related Governmental Bodies in Cambodia ·············································································································································· 165
Supporting Project for Establishing a Basic Plan on Infrastructure ············· 176
Supporting Project for Global Infrastructure Funding ································· 177
Supporting Project for Establishing an International Construction Market · 178
Utilization of ODA and EDCF ····································································· 180
Study Strategies ······························································································ 8 Procedures for Understanding Cambodian Logistics Related Conditions and Establishing Improvement Strategies ···················································································· 9 Flow of National Development Plans and the Rectangular Strategy ············ 12 GMS Range and Site Inspection for GMS Railroad ····································· 13 Target Rice Export Volume of Cambodia ···················································· 14 Logistics Plans of Adjacent Countries (Left – Thailand, Right – Indonesia) ··············································································································································· 15 Economic Growth Rate and Ratio of Each Industry to GDP ························ 17 Community Analysis, Population Size, and Distant Distribution ················· 18 Population Analysis in Cambodia ································································· 19 Geographical Condition of Cambodia ·························································· 20 Cambodian Land and Terrain Overview ······················································· 20 Comparison of Cambodia and Adjacent Countries ····································· 21 Water System Status in Cambodia ······························································ 22 International Trade Volume of Cambodia ·················································· 23 Cambodia’s major import/export cargo volume ········································· 24 Comparison of Logistics Costs (Left) / Competitiveness of Rice Production and Logistics (Right) ·········································································································· 25 Supply Chain of Rice ·················································································· 26 Rank in Infrastructure Domain (Left) / LPI Rank Comparison to Adjacent Countries and Korea (Right) ······························································································· 27 Major Interested Parties for Logistics ························································· 27 Road Network in Cambodia ········································································ 30 NR1, 2 Status (near Phnom Penh) ······························································ 31 NR3 Road Status ························································································· 32 NR5, 6 Road Status ····················································································· 33 Newly Constructed Beltway ······································································· 34 International Road Network in Cambodia ·················································· 36 Development Plan for Cambodian Road Network ····································· 36 Road Network Plan (China) ········································································ 40 Road Network Plan (Japan) ········································································ 41 Existing Railroad Network in Cambodia ···················································· 42 Northern Route Railroad in Cambodia ······················································· 44 Overview of South Route Railroad in Cambodia ······································· 45 Annual Overview of Train Operation ························································· 46 Transportation Progress of Freight Cars (ton) ··········································· 46 Railroad Network Plan ··············································································· 48 Overview of Inland Waterways in Cambodia ············································· 49 Maximum Ship Capacity of Each Section of the Inland Waterway in Cambodia ···························································································································· 51 View of Phnom Penh Port ··········································································· 52 Phnom Penh Port Pier and Cargo Handling Facilities ································ 52 Quantity of imported and exported goods through Phnom Penh Port ········ 52 Quantity of Imported and Exported Goods through Phnom Penh ·············· 53 Landscape of Phnom Penh New Port ·························································· 54 Sihanoukville Port ······················································································· 55 Cargo Warehouse at Sihanoukville Port ····················································· 57 View of Container Handling Facilities at Sihanoukville Port ····················· 57 Sihanoukville Port SEZ Development Plans ············································· 59 Location of Main Dry Ports ······································································· 61 Camodia Airport Location ·········································································· 62 View of Phnom Penh International Airport ················································ 63 Overview of SEZs in Cambodia ································································ 68 Picture of Distribution Facility in Phnom Penh ········································· 72 Picture of Poipet Customs ··········································································· 72 SWOT Analysis of Logistics Conditions in Cambodia ····························· 76
8 2015 Knowledge Sharing Program III Expansion of Area Logistics Complexes ······················································ 81 6th National Logistics Plan (Draft) ······························································· 86 Current Conditions of Logistic Infrastructure in Korea ································ 93 Concept of Logistic Complex and Axis Development in Koreas ················· 94 Procedures of Private Investment Projects Managed by Government ·········· 96 Estimation of the Demand of Area for Inland Container Processing Facilities ·················································································································································· 99 Estimation of the Demand of Area for General Cargo Processing Facilities ················································································································································ 100 Overall Layout of the Logistics Facilities in Korea ···································· 101 Current Status of the Logistics Industry in Korea ······································· 105 Cross-docking System ··············································································· 106 Overview of Comprehensive Logistics Information Network ·················· 107
Direction for Development Strategies ························································· 120 Conceptual Diagram for Cambodian Logistics Complexes ························ 122 Software Elements that Need to Be Improved ············································ 123 Flowchart for Selecting Logistics Complexes and Axes ···························· 124 National Growth Axes in Cambodia ··························································· 126 Population Size and Traffic Volume for Each Province ····························· 127 Demographic Distribution for Each Province ············································· 128 Traffic Pattern in 2012 (Left), Expected Traffic Pattern in 2020 (Phnom Penh – Other Regions; Right) ·································································································· 129 Expected Traffic Volume Between Each Province ····································· 130 Analysis for Traffic Volume Patterns in 24 Provinces ····························· 131 Major Border Region Facilities in Cambodia ··········································· 132 Current Logistics Passage in Cambodia ···················································· 133 Major Importing Countries (upper graph) and Exporting Country (lower graph) in Sihanoukville Port ····························································································· 134 Regions in Cambodia ················································································ 135 Major Logistics Complexes for Each Region of Cambodia ····················· 136 Traffic Volume for Each Region (2020) ··················································· 137 O/D Traffic Volume for Each Region ······················································ 137 Current Domestic Traffic Volume in Cambodia (2020) ··························· 138 Traffic Volume between Domestic Hubs (2012) (Unit: %) ······················ 139 Traffic Volume between Domestic Hubs (2020) (Unit: %) ······················ 139 Traffic Volume of Private Cars (2020) ···················································· 141 Traffic Volume of Trucks (2020) ······························································ 142 Domestic Logistics Axes in Cambodia ····················································· 143 International Logistics Axes in Cambodia ················································ 143 Conceptual Diagram of IPA ······································································ 148 IPA Result ································································································· 149 Major Logistics Complexes in Cambodia ················································· 152 Major Logistics Facilities in Cambodia ··················································· 153 Urban Logistics Center ············································································· 154 Example of Urban Logistics Center ·························································· 155 Major Logistics Axes in Cambodia ·························································· 156 Comprehensive Conceptual Diagram ························································ 156 Visions and Objectives of a National Basic Plan on Logistics ················ 158 Detailed Action Plans for the Objectives of a National Basic Plan on Logistics ··························································································································· 159 Specific Action Plans for Each Stage ······················································· 159 Conceptual Diagram for Integrated Logistics Information System in Cambodia ·························································································································· 162 Targets of Logistics Standardization in Cambodia ··································· 164 Comprehensive Action Plans for Logistics Development in Cambodia ··· 167
Proposal of Cambodia Logistics Improvement Measures ·························· 175 Diagram of Project Structure ······································································ 179
2015 Knowledge Sharing Program Ⅲ Implications and Expected Effects of Logistics
System Development Strategies for Cambodia
Kim Jonghak (KRIHS) Cambodia depends on foreign countries pertaining to imported good such as industrial product, construction material, and petroleum, due to weak manufacturing foundation. For this reason, Cambodia has the market structure that the logistics cost raises consumer price directly. Cambodia’s logistics cost is three times more expensive than Vietnam’s which is one of neighboring country of Cambodia. High logistics cost is caused in accordance with various factors such as lack of transportation infrastructure, absence of logistics policy and etc. Therefore, the strategies to reduce logistics cost should be followed with logistics infrastructure and logistics system. This research suggested Cambodia’s logistics strategy with two aspect; logistics infrastructure and logistics system.
6 Major Domestic Logistics Complexes 5 Major International Logistics Complexes According to Korea’s logistics experience, logistics infrastructure development is building national logistics complexes and establishing axes that connect each
Implication and Expected Effect of Logistics System Development Strategies for Cambodia 1 logistics complexes. This research divided Cambodia into six area, and designated major cities as logistics complexes that have high traffic volume. The order of major cities that have the high traffic volume is Phnom Penh, Sihanoukville, and Kampong Cham. By this order, it shows that Phnom Penh which is the capital of Cambodia has the most urgency to build logistics facilities. For the effective linkage between logistics complexes, 8 logistics axes suggested based on analysis of freight volume between areas. The result shows Sihanoukville-Phnom Penh axis and Phnom Penh-Kampong Cham axis have the highest priority which reveals it is necessary to build transportation infrastructure firstly.
This research suggested the modification of law and institution, the fostering logistics industry, and the reform of logistics related organizations as the strategy of logistics system development of Cambodia. At the moment, the comprehensive reformation of logistics is urgent because there is no logistics related organization or law system. This research suggested the logistics control tower organization that can control logistics related organization due to the characteristic of logistics that there are a lot of stockholders among government department. It is possible to promote effective law system and fostering logistics industry after establishing the control tower organization. It would cause more problems if each division establishes similar laws and systems separatedly
2 2015 Knowledge Sharing Program Ⅲ 2015 Knowledge Sharing Program Ⅲ Chapter 1. Introduction
Kim Jonghak, Oh Sungho (KRIHS)
Summary
Chapter 1 describes the background and objective of the task and makes study method recommendations to draw up strategies relating to the development of transportation and logistics in Cambodia. The strategy for the development of transportation and logistics in Cambodia is classified in two groups, improving hardware in terms of infrastructure and improving systems in terms of software. The method to draw up a strategy for the development of logistics is proposed through an analysis of transportation and geographical information along with a review of the related data.
Section 1. Background and Necessity of Study
Cambodia is a country with a population of 15.4 million (2015) and an area of 1.81 million ㎢, located in South East Asia. It shares a border with Thailand, Vietnam, and Laos and thus, it has a geographical advantage for commerce. However, Cambodia only has one international airport in Sihanoukville, and the Phnom Penh port is only operated as a feeder port.
Chapter 1. Introduction 3 Therefore, Cambodia is faced with a problem of having to depend heavily on foreign trade. The capital, Phnom Penh, has a highly concentrated population and is currently experiencing critical issues encompassing local housing and transportation. Due to a great portion of the population being comprised of a younger generation, Cambodia has high labor productivity. Therefore, labor-intensive industries such as apparel and sewing have grown substantially.
Map and Overall Conditions of Cambodia Kingdom of Cambodia Area 181.035㎢ Capital Phnom Penh Total population: 15,708,756 (2015) Population - Urban population ratio : 20.7%(2015) Population 82/sq.km Density Khmer 90%, minorities Ethnic (Vietnamese, Chinese Group Chams Tribe and Gaoshan) Khmer language, French (above 50’s), Language Chinese, English (Youth middle age group) Tropical Monsoon Climate Climate Source: https://www.cia.gov/library/publications/the-world-factbook/geos/cb.html
Cambodia has relatively flat topography with mainly low slopes and wide plains with a tropical monsoon climate. Therefore, it possesses a advantageous natural environment for farming and some of the preserved resources are various mineral resources such as iron ore and limestone. Although Cambodia has been promoting economic development through the development of sewing and apparel industries since the 2000s, inadequate
4 2015 Knowledge Sharing Program Ⅲ transportation and logistics infrastructure has been an obstacles for development. Therefore, there is a necessity to promote national development and invigorate the regional economy by effectively establishing logistics infrastructure including a transportation network. The Cambodian government established the 3rd phase (2013-18) of the NSDP and recognized the expansion of transportation and logistics facilities as the first priority of infrastructure development to carry out the national development strategies. There are plans established for cargo transportation infrastructure including railroad networks (2014, KOICA), ports (2011), and road networks (2014, China). Furthermore, the necessity for short-term investment measures along with long-term development plans for development of a transportation and logistics network that connects the Greater Mekong Subregion1) is being pushed ahead.
1) Since 1992, Asia Development Bank (ADB) has been implementing a large project for infrastructure development including roads, railroads, communication network, tourism, and human resource development by establishing the “Greater Mekong Subregion” which is a joint development project that includes regions such as Thailand near Mekong river valley, Myanmar, Laos, Cambodia, Vietnam, and Yunnan region of China.
Chapter 1. Introduction 5 Section 2. Study Objective and Content
1. Objective of Task
The objective of this task is to develop a policy proposal suitable for Cambodia’s conditions based on Korea’s knowledge and experience on logistics development. The details for proposing strategies for Cambodia’s logistics development are as follows: first, Cambodia’s current status related to logistics should be analyzed, however, at present, Cambodia’s legal system related to logistics is non-existing, making it difficult to render judgement on this particular issue. However, plans for roads, railroads, ports, and airports have been established. Therefore, these plans will be analyzed in this study. Secondly, Korea’s experience and knowledge on logistics should be transferred to Cambodia and therefore, this study finds elements that can contribute to Cambodia’s logistics development by looking back at the initial stage of logistics development in Korea. Furthermore, this study suggests a direction of development of Cambodia’s legal systems by reviewing the current conditions of development in Korea including laws, organizations, and logistics industries. Third, development plans for logistics in Cambodia will be proposed by being categorized into “hardware” including transportation facilities and “software” which includes laws and regulations in order to show the two items above, along with the analysis results of the current conditions of logistics in Cambodia.
6 2015 Knowledge Sharing Program Ⅲ 2. Main Content
The main content of this task are as follows. First, the current conditions of social economy and logistics in Cambodia have been observed. The economic standards and population size were observed for assessing the social economy and current conditions of infrastructure facilities in Cambodia. These includes the national master plan, roads, railroads, airports, and ports, all of which are analyzed to further look into Cambodia’s logistics conditions. Second, Korea’s experience and knowledge of logistics development has been suggested. By taking Cambodia’s current logistics conditions into consideration, aspects from Korea’s experience and knowledge of logistics development which can be applied to Cambodia have been drawn. The third content involves strategies for Cambodia’s logistics development with logistics development strategy being categorized into hardware and software. In terms of the hardware aspect, a development strategy suitable for Cambodia’s current conditions has been suggested through analysis of GIS and transportation demands.
Chapter 1. Introduction 7 Study Strategies
Section 3. Study Scope and Method
1. Study Scope
Pertaining to the spatial range, all 24 provinces of Cambodia have been included. Although the time range was not present in the perspective of policy suggestions, a priority for each axis has been proposed under the perspective of plans for improving logistics infrastructure.
8 2015 Knowledge Sharing Program Ⅲ 2. Study Method
As for plans for implementation of this program, the Cambodian MPWT data and existing literature have been reviewed and overall conditions of logistics were objectively examined through GIS data and traffic demand data. When the data proved to be insufficient, it was supplemented through field surveys and interviews with professionals.
Procedures for Understanding Cambodian Logistics Related Conditions and Establishing Improvement Strategies
In order to share the experience and knowledge of the Korean logistics industry, Korean logistics plans established during the initial phase of developing its own logistics industry have been reviewed. This was done in order to draw up applicable implications for Cambodia. In addition, an overview of the logistics related system in Korea including relevant laws and organizations have been examined through reviewing existing literature. Furthermore, knowledge on the logistics industry which can be applied to Cambodia including informatization and standardization of logistics was scrutinized through cooperative research with professional organizations.
Chapter 1. Introduction 9 10 2015 Knowledge Sharing Program Ⅲ 2015 Knowledge Sharing Program Ⅲ Chapter 2. Current Status of Social Economy &
Logistics Infrastructure in Cambodia
Kim Jonghak, Hong Kyoungsun, Kim Jungi(KRIHS) Jeon Chanseok (PTOW consulting)
Summary
To investigate the current transportation and logistics situation in Cambodia, the rectangular strategy, the GMS plan, and the logistics plan of neighboring states were reviewed. In addition, recent social and economic trends were examined through Cambodian socio-economic indicator analysis. Situational analysis of transportation infrastructure for passenger and cargo freight including roads, railways, airports, and ports were reviewed to tackle problematic issues. Regarding logistics, international trade flow volume, free economic zones, and rice-related logistics channel flow were reviewed. With the analyzed data, a SWOT analysis was performed to find the strengths, weaknesses, competitiveness, and threats pertaining to Cambodia to improve transport and logistics.
Chapter 2. Current Status of Social Economy & Logistics Infrastructure in Cambodia 11 Section 1. Review of Upper Plan
1. Rectangular Strategy
The rectangular strategy was adopted in 2004 as the primary plan to achieve growth, employment, equity, and efficiency. As an implementation plan for the strategy, the National Strategic Development Plan (NSDP) was adopted in 2006 and currently, Cambodia is in the midst of promoting the “NSDP 2014-2018 (STEP 3).” The rectangular strategy sets agricultural development, infrastructure development, private sector growth, employment expansion, and human resource development as its four goals for national development. Infrastructure development has been specially recognized as the key stimulator for economic growth. With the recent launch of the ASEAN Economic Community (AEC) to integrate into the ASEAN economic sphere, the importance of logistics in Cambodia is being emphasized evermore. Flow of National Development Plans and the Rectangular Strategy
Source: KOICA, Master Plan for Railway Network Development in Cambodia, 2013
12 2015 Knowledge Sharing Program Ⅲ 2. Greater Mekong Sub-Region (GMS) Plan
GMS is a plan that was established in 1992 by the Asian Development Bank (ADB) to expand social infrastructure and to develop natural resources in the Mekong Sub-region to support economic development and economic transition of the neighboring states. It is a large-scale infrastructure development project covering Mekong river transportation network maintenance, energy development, communications network maintenance, and tourism development targeted towards the neighboring states including Cambodia, China, Laos, Myanmar, Thailand, and Vietnam. After completing development, more active interaction between human resources and material trade are expected among neighboring states.
GMS Range and Site Inspection for GMS Railroad
Source: KOICA, Master Plan for Railway Network Development in Cambodia, 2013
Chapter 2. Current Status of Social Economy & Logistics Infrastructure in Cambodia 13 3. The Rice Exportation Plan
In 2010, Prime Minister Hun Sen set a target of one million tons of rice export and selected the rice industry along with the garment industry as the main drivers for economic growth in Cambodia. However, in 2016 rice exports have merely reached half of the targeted amount. Cambodia's rice production capacity is about five million tons. The export numbers are poor compared to its production capacity. This is due to the lack of rice processing and handling, infrastructure and high logistics costs. Because of this, neighboring countries with cheaper logistics costs such as Thailand and Vietnam have been importing Cambodian rice to sell them to the international market after processing. This inhibits the growth of the Cambodian rice industry.
4. Logistics Development Plan of Neighboring States
The neighboring states of Cambodia have already recognized the importance of logistics. They have established and have been promoting a national level logistics development plan. For its logistics
14 2015 Knowledge Sharing Program Ⅲ policy, Thailand has set the GMS trade service hub and Asia gateway development as its goals and is focused on connecting trade networks and transportation channels with other countries. Indonesia is focused on logistics node development by developing national level logistics nodes and an international port hub through urban-rural linkages. Malaysia is aiming to develop a low-cost, value-added global supply chain logistics service and is working on logistics service improvements. Cambodia currently lacks a national logistics development plan such as these.
Logistics Plans of Adjacent Countries (Left – Thailand, Right – Indonesia)
Source: Ruth Banomyong, 「Developing National Logistics Policy: Lesson Learned from ASEAN」, World Bank National Trade Logistic Blueprint Workshop, 2014.9
Chapter 2. Current Status of Social Economy & Logistics Infrastructure in Cambodia 15 Section 2. Social Economic Status
1. Economic and Industry Status
In 2013, the GDP per capita in Cambodia exceeded 1000 USD and the GDP growth remained at a high level of 7% since 2010. However, the fiscal balance scale is at -5% to the GDP and has been generating a yearly deficit of around 7~8 billion USD.
16 2015 Knowledge Sharing Program Ⅲ In 2010, the primary industry accounted for 36%, the secondary industry accounted for 23.3%, and the tertiary industry accounted for 40.7% of the GDP. The main business of the secondary industry is apparel, and the tertiary industry is tourism. A high portion of the primary industry is agriculture and it is a major source of revenue for rural areas. Cambodia's main source of income is agriculture and is significantly affected by logistics. Therefore, Cambodia is trying to lower logistics costs through logistics development and increase agricultural competitiveness.
Economic Growth Rate and Ratio of Each Industry to GDP
Source: KOICA, Master Plan for Railway Network Development in Cambodia, 2013
2. Population Distribution
In 2015, the population of Cambodia was 154 million and the capital, Phnom Penh, comprised 10% of the total, at around 18.3 million. As the population of the 194 districts' population distribution was analyzed by population size and its distance from Phnom Penh, the population living within 50km from Phnom Penh accounted for around 40% of the total population.
Chapter 2. Current Status of Social Economy & Logistics Infrastructure in Cambodia 17 The population of the rest of the country excluding Phnom Penh is low. Phnom Penh, Sihanoukville, Siem Reap excluded, the population distribution in Vietnam and Thailand border towns (Thailand: Poipet, Battambang; Vietnam: Svay Rieng and more) were high.
Community Analysis, Population Size, and Distant Distribution
The average population of each of Cambodia's provinces is about 640,000 For the population rank analyzed after grouping 24 provinces into four by the average population, the most populated areas were Phnom Penh (1,835,100), Kampong Cham (1,741,400), Kandal (1,443,100), Battambang (1,215,600), and Siem Reap (1,096,500). The most populated tier was centered mainly to the northwest of Phnom Penh; Phnom Penh surrounding areas (Kandal, Kampong Cham), Thailand border area (Battambang), and a tourist attraction site (Siem Reap). The second tier is comprised of Prey Veng (983,200), Takeo (886,100), Banteay Meanchey (806,800), Kampong speu (797,800), Kampong Cham (684,800), and Kampot (625,500). These areas are located northwest and southwest from Phnom Penh.
18 2015 Knowledge Sharing Program Ⅲ Population Analysis in Cambodia
Third tier shows below average population and is mainly located between Battambang and Svay Rieng. From the analysis, it shown that overall, the population is concentrated to the northwest of Phnom Penh. This is thought to be, due to the fact that the population is highly concentrated in the metropolitan area around Phnom Penh along with the fact that the population is increasing in areas like Battambang and Siem Reap with the invigorated agriculture and tourism in the areas.
3. Geographical Status
1) National Spatial Features
Cambodia is located in the center of Southeast Asia and borders Thailand, Vietnam, and Laos. Cambodia is geographically well-suited to be a logistics hub not just for Southeast Asia but also Indochina.
Chapter 2. Current Status of Social Economy & Logistics Infrastructure in Cambodia 19 Geographical Condition of Cambodia
Compared to Vietnam and Thailand, Cambodia is geographically closer to a circle and the capital is located at the center; where there are favorable conditions for transportation and logistics infrastructure. An advantage is that the main development axis terrain is situated mostly plain regions without obstacles for the establishment of logistic complex facilities.
Cambodian Land and Terrain Overview
Mountainous Terrain Plain Terrain Plain Terrain
Mountainous Terrain Phnom Penh
When comparing Cambodia to Vietnam, the population is 16.5%, area is
20 2015 Knowledge Sharing Program Ⅲ 54.7%, and exports are 7% of Vietnam. Compared to Thailand, the population is 21.2%, area is 35.2%, and exports are merely 2.6% of Thailand. Cambodia is falling behind in terms of population size and exports compared to its neighboring states. Also, Cambodia's population is significantly low for its land area compared to its neighboring states.
Comparison of Cambodia and Adjacent Countries
Export Volume
Population Size
Comparison of Cambodia and Adjacent Countries
Population (in millions of Exports (in millions of Country Area (in 1000 km2) USD) USD) Cambodia 14.3 181 5,068 Laos 6.2 237 1,746 Thailand 67.3 513 193,176 Vietnam 86.5 331 72,192
2) Water System Status
Cambodia has abundant water resources, the 150km long Tonle Sap Lake sits in the center of the country, the 4,180km Mekong River runs from Tibet to Cambodia through Myanmar, Thailand and Laos, and goes through to Vietnam. The developed transportation system links Vietnam and Thailand with high trade
Chapter 2. Current Status of Social Economy & Logistics Infrastructure in Cambodia 21 activity provides great conditions for inland waterway development. However, the great difference in water level between the dry and rainy seasons makes transportation through the waterways difficult.
Water System Status in Cambodia
22 2015 Knowledge Sharing Program Ⅲ Section 3. Current Status and Problems Related to Logistics Infrastructure
1. Imports, Exports and Related Organizations
1) Current Status of Import and Export Volumes
In 2012, Cambodia's export volume increased 16.9%($7.8 billion) from the previous year and import volume also increased 15% ($7.1 billion) for the same period. shows that Cambodia's economy improved consistently while its export and import volume increased proportionally. Cambodia's major export and import countries are very different. The major import countries usually consist of Southeast Asia and other Asian countries including Thailand, Singapore, China, Indonesia, South Korea, Japan, etc. Cambodia rarely imports from Europe or the U.S.
International Trade Volume of Cambodia
Chapter 2. Current Status of Social Economy & Logistics Infrastructure in Cambodia 23 Cambodia imports most of its industrial products since it has a weak industrial base, and many of the imports come from neighboring countries due to the fact that Southeast Asia's industrial products are priced more competitively compared to European or American products. On the other hand, Cambodia's major export countries are China, Europe and the U.S. This is due to the fact that rice - which is Cambodia's major export product - generally exports to Europe and the U.S. rather than to other Asian countries that also produce rice themselves.
Cambodia’s major import/export cargo volume
24 2015 Knowledge Sharing Program Ⅲ 2) Competitiveness of the Logistics Industry
The overall cost of Cambodia's logistics is relatively higher than the surrounding countries. Compared to neighboring countries, for the marine transportation it costs $6(ton.100km), 3 times higher than Vietnam's $2(ton.100km), while for land transportation it costs Cambodia $13(ton.100km), 2.6 times higher than Vietnam's $5(ton.100km). Although Cambodia has a favorable environment for rice production, it is not very competitive compared to its neighboring countries, due to its higher logistics costs. When considering the cost of logistics for neighboring countries, Cambodia has the lowest price competitiveness since Thailand costs $151 and Vietnam costs $145 while Cambodia costs $250.
Comparison of Logistics Costs (Left) / Competitiveness of Rice Production and Logistics (Right)
Land
Sea
Cambodia Vietnam
Source: Enrique Aldaz-Carroll, 「Improving rice trade logistics to help reach 1 million tons export target」 World Bank National Trade Logistic Blueprint Workshop, 2014.9
In order to improve the competitiveness for Cambodia's logistics industry, the production chain - which connects producer to consumer - needs to organically connect the highways, railroads, island waterways, etc. Currently Cambodia lacks a organic production chain like this. If Cambodia's logistics industry improves through strategic planning in logistics policies and the construction of logistics infrastructure, it could potentially improve
Chapter 2. Current Status of Social Economy & Logistics Infrastructure in Cambodia 25 Cambodia's export competitiveness.
Supply Chain of Rice
Railroad
Waterway
Road
Source: Enrique Aldaz-Carroll, 「Improving rice trade logistics to help reach 1 million tons export target」 World Bank National Trade Logistic Blueprint Workshop, 2014.9
3) Infrastructure Standard Comparison and Competitiveness of the Logistics Industry
Cambodia's infrastructure facility standard ranked lower than 120th place in 2012, but it is currently making a lot of improvements, being placed 80th recently. Under the LPI (Logistics Performance Index: LPI), which indicates the competitiveness of the logistics industry, Cambodia ranked 129th place in 2010 to 83th place in 2014, improving 46 ranks within 4 years. This illustrates the consistent investment in Cambodia's infrastructure as the nation's economy improves.
26 2015 Knowledge Sharing Program Ⅲ Rank in Infrastructure Domain (Left) / LPI Rank Comparison to Adjacent Countries and Korea (Right)
Logistics industry requires cooperation not only from transportation related entities but also from various entities such as industrial and urban developmental organizatons, customs and tax, etc. Major Interested Parties for Logistics
Source: Enrique Aldaz-Carroll, 「Improving rice trade logistics to help reach 1 million tons export target」 World Bank National Trade Logistic Blueprint Workshop, 2014.9
Currently in Cambodia, there are a total of 22 governmental departments that are related to the logistics industry, they include: Ministry of Trade and Commerce, Ministry of Finance, Ministry of Industry and Energy, Ministry of Urban and Land Construction, Ministry of Posts and Telecommunications,
Chapter 2. Current Status of Social Economy & Logistics Infrastructure in Cambodia 27 Ministry of Public Works and Transport, Ministry of Rural Development, Ministry of Water Resources and Meteorology, Cambodia Development Resource Institute, General Department of Customs and Excise of Cambodia, etc. In the private sector there are the Truck Transportation Committee, Freight Transportation Committee, Port and Harbor Company, etc.)
Cambodian Government Bodies and Names
Category Cambodian Government Bodies and Names Minister of Commerce Minister of Economy and Finance Minister of Industry, Mining and Energy Minister of Land Management, Urban Planning and Construction Government Minister of Posts and Telecommunications Domain Minister of Public Works and Transport Minister of Rural Development Cambodia Council of Development General department of customs and excise Truck Association Private Freight Forwarder Association Domain Drt Port Companies
28 2015 Knowledge Sharing Program Ⅲ 3. Current Status of Roads and Railroads
1) Roads
(1) Current Status
Since the early 2000s when the country became politically stabilized, there have been various road reconstructions and facility improvement projects that have fixed, improved and built new roads. Some of the projects are also currently underway throughout the nation via international contracts and ODAs. As of September 2014, Cambodia has a total of over 55,000km road networks, of which 1-Digit and 2-Digit consists of over 11,000km. They consist of 20.1% of the total road networks, and 1-Digit and 2-Digit also consist of 43.7% of total bridge expansion length.
Road Density Compared to Adjacent Southeast Asian Countries Bridge Proportion Road Proportio Proportion Number Number of Extensio of Bridge Type of Road Extension n of Bridges Authority of Roads Bridges n Extension (km) (%) (%) (km) (%) NR(1-Digit) 2,243 4.06 9 589 14.5 17,643 23.1 MPWT 2) NR(2-Digit) 8,864 16.05 146 698 17.2 15,710 20.6 MPWT 3) To Be 3,4-Digit 4,407 7.98 236 904 22.3 16,309 21.4 Selected Local Road 39,728 71.92 13,355 1,869 46.0 26,559 34.8 MRD Total 55,242 100 13,746 4,060 100 76,221 100
Source: IRITWG, Overview on Transport Infrastructure Sectors in the Kingdom of Cambodia, 2015
2) NR is the acronym of National Road. NR (1-Digit) corresponds to national roads in Korea. 3) NR (2-Digit) corresponds to local roads in Korea.
Chapter 2. Current Status of Social Economy & Logistics Infrastructure in Cambodia 29 Road Network in Cambodia
Source: Ministry of Public Works and Transport
According to a field investigation of Cambodia's major road 1-Digit, overall conditions of 1-Digit are very favorable. NR1 is currently under construction to expand the road, which is most likely due to the economic growth, resulting in the inflow of population and resources to Phnom Penh. NR1 is an important road in terms of logistics since it is connected to Vietnam. NR2 road conditions are also favorable and public transportation of bus stops can be found everywhere. This is because NR2 is a primary road for people who live in Kandal and Takeo, which are the major provinces near Phnom Penh.
30 2015 Knowledge Sharing Program Ⅲ NR1, 2 Status (near Phnom Penh)
▲ NR1 Road in Phnom Penh
▲ NR2 Road in Phnom Penh
Cambodia's NR3 road has very favorable conditions overall and vehicles such as trucks were easily found, as there are many cars driving to nearby private transport terminals. A lot of people also use this road for passing the Takeo and Kandal provinces near the Phnom Penh area and there are many road expansion constructions currently underway for the roads passing through Phnom Penh.
Chapter 2. Current Status of Social Economy & Logistics Infrastructure in Cambodia 31 NR3 Road Status
▲ NR3 Road in Phnom Penh
▲ Adjacent Area from NR3 Road in Phnom ▲ NR3 Road Sign in Phnom Penh Penh
Cambodia's NR5 road connects Phnom Penh to Thailand's boundary region of Battambang and Banteay Meanchey province, and handles most of the logistics between Thailand and Cambodia. Consequently, the road condition is favorable and there are many trucks and freights using this road. NR6 road also has favorable conditions. It was built with private investment, it collects tolls based on the vehicle type ($3 for a utility vehicle). Also, it has a heavy traffic load and on-spot investigations shows an estimated average of approximately 10,000 vehicles using the road everyday.
32 2015 Knowledge Sharing Program Ⅲ NR5, 6 Road Status
▲ NR5 Road in Phnom Penh
▲ NR6 Road in Phnom Penh
The newly built beltway around Cambodia's Phnom Penh has good overall maintenance conditions and has favorable road conditions. It is expected to play a major role in Cambodia logistics as freight trucks are permitted to use the road during the daytime. Other types of vehicles no longer need to pass Phnom Penh to move to other regions, having a positive influence on the overall traffic congestion.
Chapter 2. Current Status of Social Economy & Logistics Infrastructure in Cambodia 33 Newly Constructed Beltway
▲ Newly Constructed Beltway
▲ Adjacent Areas from Newly Constructed Beltway
There are 3 international highways passing through Cambodia and 5 types of roads based on the width and pavement type of the road.
- Primary: Separated from motorcycle roads / Asphalt or concrete pavement - Class I: Highway of over 4 lanes / Asphalt or concrete pavement - Class II: Roads consisting of more than 2 lanes / Asphalt or concrete pavement - Class III: Narrow road of 2 lanes / DBST pavement
34 2015 Knowledge Sharing Program Ⅲ Since Cambodia highways consist of Class II, Class III and lower than Class III, in order to increase the regional traffic volume, Primary or Class I type road constructions or improvements are required.
International Road Network in Cambodia (based on 2011)
Name Classification and Extension (km) Extensio Below GMS Asian ASEAN Stopover n Prima Class Class Class Ⅲ Class Road Highway Highway (km) ry Ⅰ Ⅱ Ⅲ
Source: IRITWG, Overview on Transport Infrastructure Sectors in the Kingdom of Cambodia, 2015
Chapter 2. Current Status of Social Economy & Logistics Infrastructure in Cambodia 35 International Road Network in Cambodia
Source: IRITWG, Overview on Transport Infrastructure Sectors in the Kingdom of Cambodia, 2015
(2) Highway Network Construction Plans
The Cambodian government is pursuing projects to improve, expand and build new highways and to reenact relevant legislation under the leadership of the Ministry of Public Works and Transport (MPWT). Although national highway one was damaged from the civil war, it has been completely repaired, 2-Digit and other major roads - which consist of approximately 90% of Cambodia's roads - are making a slow progress, utilizing public and private capital to repair and construct. Development Plan for Cambodian Road Network
Source: Ministry of Public Works and Transport
36 2015 Knowledge Sharing Program Ⅲ Major Road Construction Plans and Status are as follows:
1-Digit, 2-Digit Road Enhancement Project in Cambodia
Road Year Pavement Org. Section No. Start End status Japan PK:13+000-Neak Loeung(andphase) 2006 2009 AC Japan PK:4+000-PK: 13+000(phase) 2010 2011 AC 1 Japan Monivong Bridge-PK:1+000( Phase) 2014 2016 AC(Detailed Design) ADB Neak Loeung-Bavet 1999 2004 DBST Road Maintenance WB Neak Loeung-Bavet 2009 2013 (Upgrading) ADB Kbal Thnal-Takeo 2001 DBST Korea Kbal Thnal-Takeo - - - 2 Korea Takeo-Ang Tasaom(NR3) - - DBST Japan Takeo-Phnum Den 2003 2007 AC Korea Phnom Penh-Kampot(phase 2) 2008 2011 DBST Korea Kampot-Trapeang Lopaou(phase 1) 2004 2007 DBST 3 WB Trpeang Lopaou-Veal Renh 1999 2006 DBST Southern Coastal Corridor Project(NR3:Kampong DBST ADB& Trach to Prek Chak, NR3:Kampot to Veal Renh, 2011 2014 (upgrading&Peridodic AusAid Cross-Border Facilities at Lok(Vietnam Border) Maintenance) USA Chaom Chao-Sihanoukville 1996 AC 4 OT AZ Chaom Chao-Sihanoukville 2001 2035 (periodic maintenance) Cambodia Phnom Penh-Kampong 2003 DBST Chhnag ADB PK:6+00-Kampong Chhnang 2010 2011 Maintenance ADB Kampong Chhnang-Sisophon 2000 2004 DBST 5 AC(4 lanes) China Phnom Penh-Prek Kdam 2013 - 18.89%(As of 31 May 2014) Japan Battambang-Sisophon 2013 2017 AD(Detailed Design) ADB& 5+6 OPEC PoiPet-Sisophon-Siem Reap 2006 2008 Ac Japen Phnom Penh-Chealea 1993 1995 AC
Japen Chealea-Skun 1996 1999 AC (deteriorated condition) ADB Cheung Prey- 2000 2004 DBST WB Kampong Thom-Ro Lous 1999 2006 DBST Japan Siem Reap-Bakong Temole 2000 2001 AC 6 ADB Sisophon-Siem Reap 2006 2008 AC AC Thnal Kaeng-Skum(4 lanes), China Skun-Angkrong(2 lanes) 2013 2016 (24.36% as of 31 May 2014) AC(4 China PK:4+000to Thnal Keng 2012 2015 lanes)-79.87%(as of 31 May 2014)
Chapter 2. Current Status of Social Economy & Logistics Infrastructure in Cambodia 37 <- continued>
Road Year Pavement Org. Section No. Start End status Japan Skun-Kampong Cham 1996 1999 AC Japan Kampong Cham-Chub 2001 2003 AC 7 ADB Chub-Kratie 2000 2004 DBST China Kratie-trapeang Kriel(Lao boredr) 2004 2007 DBST 8 China Prek Tameak-Anlong Chrey 2007 2012 AC 8-1 China Krabao-Moeun Chey 2010 2012 AC 8-2 China Anlong Chrey-Krek 2010 2012 DBST 9 China Tbaeng Meanchey-Talaborivath 2012 2016 DBST 11 China NR1:Neak Loeung-NR7:Thnal Tortoeung 2015 DBST 13 ADB Svay R ieng-Anlong Chrey 2014 2016 DBST 23 China Pea Reang Leu-Chombork(bored) 2013 - DBST WB Takeo-Kampong Trach-Kampot 2002 2005 DBST 33 ADB Kampong Trach-Lork(Vietnam border) 2007 2010 DBST WB National Road 4 - Pr다 Thnout River - - DBST 41 DBST China Thal Tortoeng-Chum kiri-Kampot 2010 2013 (Under negotiation) 43 China NR4:Treng Troyeng-NR3:Thvear Thmey 2015 - DBST 48 Thai Koh Kong-SreAmbel 2004 2007 DBST WB Udong-Thnal Torteng 2003 2006 AC 51 DBST(next 5-year China Udong-Thnal Torteng 204 - plan) Road 55 China Pursat-Thmar Da, Thai-Cambodia border 2013 - improvement ADB+ 56 29km from Sisophon to Samrong 2009 2015 DBST Korea 57 China Batambang-Pailin-Thai Border 2008 2012 DBST 1)Tmor Kol-Bovel-Sampov Luun DBST 57B China 2)Bovel-Samseb-Phnom Prek 2010 2014 (Under negotiation) 3) Samseb-Kamrieng Banteaymeanchey-Banteay Meanrit-Thmar 58 China 2014 - DBST Daum-Phaong 59 China Nr 59(Koun Damrey-Malay-Sampov Luun- 2010 2013 National Road 5-Thai border(through Chay DBST(not yet 5x Private 2004 - investment) atarted) 60B China Kg. Thmor-Kratic+Bridge 2015 - DBST(+bridge cost) WB Prek Kdam-Thnal Keng(NR6) 2002 2005 Maintenance 61 China Prek Kdam-Thnal Keng(NR6) 2010 2012 AC Koh Ke-Thnal Bek, Tbe ng Meanchey-Preah China 2008 2012 DBST 62 Vihear temple China Kampong Thom-Tbaeng Meanchey 2009 2013 DBST
38 2015 Knowledge Sharing Program Ⅲ <- continued>
Road Year Pavement Org. Section No. Start End status 64C China Tbaeng Meanchey-Talaborivat 2011 2014 DBST WB Phnom Dek-Rovieng 2004 2006 DBST 66 DBST(not yet WB Rovieng-River Stung Sen atarted) Thai Choam Sa Ngam-Anlong Veng 2006 2007 DBST 67 Thai Anlong Veng-Siem Reap 2007 2009 DBST Thai O Smach-Kralanh 2007 2009 DBST 68 DBST Cambodia O Smach-Kralanh+Bypass Samraong town 2009 2011 Re-pavement Tonlebet-Srey Santhor-Prek Tameak-Lvear China 2015 - DBST 70B Em-Peam Ro WB Traueng(NR7)-Kampong Thmar(NR6) 2004 2006 DBST DBST(+Kroch 71C China Tbong Khmum-Kroch chmar-Chamkarleu 2015 - Chmar Bridge) 72 ADB Memot-Tropeang Plong 2007 2009 71+72 China Tropeang Plong-Krek-Troeung-Kg. Thmar 2015 - AC China Snoul-Sen Monorom 2008 2011 DBST DBST 76 China Sen Monorom-Koh Nhek-Lumphat-Taang 2012 2016 (52.25%as of 31 May 2014) VN Bang Lung-O Yadav 2007 2009 AC 78 China O Pong Moan-Ban Lung 2009 2013 DBST DBST(not yet 78x Private Ban Lung-Bou sra(waterfall) 2008 - started) Sam An(NR9)-Kg.Sralaor 2-Kg.Sralaor 92 China 2015 - DBST 1-Mom 3 134B +135 China Chumkiri-Chhuk-Dorng Tung-Kg. Trach 2015 - DBST 181 WB Samraong-ChongKal 2004 2006 DBST 207 WB Sautr Nikum-Beong Tonle Sap 2004 2006 DBST 210 Private Siem Reap-Koh Ke 2003 - DBST 258D China Kob(NR5, PK:383)-O Beychoann 2011 2013 DBST 314D ADB NR1-VN border:Prey Mlu 2014 2016 DBST 378 China NR7:Dong Krolor-NR78:Banlung 2015 - DBST 1551 China NR4:Samch Meanchey-NR55:Promomy 2016 - DBST 1554 China Veal Veng(NR55)-Samlot 2015 - DBST 1577 China Sek Sork-Samlot-Border Pass 400 2015 - DBST 3762 China Sen Monorom-Dakdam 2010 2012 DBST 3787 China Banlung-Kantuyneak 2015 - DBST Source: IRITWG, Overview on Transport Infrastructure Sectors in the Kingdom of Cambodia, 2015
Chapter 2. Current Status of Social Economy & Logistics Infrastructure in Cambodia 39 For road networks, China and Japan have suggested the following construction plans.
① China's Road Construction Plan
According to China's proposal, Cambodia needs to build 850km of road construction until 2020, and 2,230km of road construction by 2040.
China’s Road Network Plan Details NO. Route Length, No. Investment Cost Schedule From To km Lane (Million USD) E99 PP Ring Road - 145 8 Short Term E1 PP Ring Road No.3 Svay Rieng 150 4 Short Term E4 PP Ring Road No.3 Sihanoukville 205 4 Short Term E3 PP Ring Road No.3 Sihanoukville 195 4 Long Term E5 PP Ring Road No.3 Thailand border 380 4 Short, Medium E6 PP Ring Road No.3 Banteay,Meanchey 390 4 25,500 Short, Medium E7 PP Ring Road No.3 Kampong Cham 130 4 Medium Term E27 Kg. Cham Stung Treng 225 4 Long Tern E67 Siem Reap Koh Kong 230 4 Medium, Long E042 Koh Kong Sihanoukville 145 4 Medium Term E033 Kampot Kep 35 4 Medium Term Total 2,230 25,500 Source: IRITWG, Overview on Transport Infrastructure Sectors in the Kingdom of Cambodia, 2015
Road Network Plan (China)
Source: reconstitution of existing data
40 2015 Knowledge Sharing Program Ⅲ ② Japan's (JICA) Road Construction Plan
Japan (JICA) conducted a pre-investigation for its road network plan, based on China's road construction proposal, and proposed a road construction of 2,200km.
Japan’s Cambodian Road Network Plan Details
Route Pavement Length, NO. Schedule From To Type km Phnom Penh (PP) Ring Road E1 Bavet(Along NR1) AC 135 Short Term No.3 E3 PP RIng Road No. 3 AC 150 4 Short Term UE Sihanoukvill(Along NR4) 210 205 4 Medium Term E5 PP RIng Road Short Term 195 4 Medium Term E6 - AC 380 4 Long Term E7 PP RIng Road No. 3 155 390 4 Long Term E9 Poi Pet Medium Term 130 4 Long Term E10 PP RIng Road No. 3 AC 225 4 Long Term Total 2,200 Source: IRITWG, Overview on Transport Infrastructure Sectors in the Kingdom of Cambodia, 2015 Road Network Plan (Japan)
Source: IRITWG, Overview on Transport Infrastructure Sectors in the Kingdom of Cambodia, 2015
Also, the capital city of Phnom Penh plans to build 4 beltways - Ring Road No.1(RR- I), Ring Road No.2(RR-Ⅱ), Ring Road No.3(RR-Ⅲ), Ring Road No.4(RR-Ⅳ) - in order to alleviate traffic congestion.
Chapter 2. Current Status of Social Economy & Logistics Infrastructure in Cambodia 41 2) Railroads
(1) Current Status
Cambodia railroads consist of 2 parts - a Northern lane and Southern lane - using a meter gauge (1,000mm) as the tracking gauge. The Northern lane is 386km and the Southern lane is 264km, but currently only the Southern lane in operation.
Existing Railroad Network in Cambodia
Source: Ministry of Public Works and Transport
42 2015 Knowledge Sharing Program Ⅲ ① The Northern Lane
The northern lane connects Cambodia's capital city of Phnom Penh and Thailand's boundary region of Poipet city, totaling 386km, consisting of the lost railroad which is 48km and the Phnom Penh~Sisophon part of 338km. Currently most of the facilities have stopped operating due to either damage or a lack of maintenance. The Northern lane's degree of damage is approximately 200km (52% of total length) of railroad lanes and 47 stops (96% of total railway stops), most of the remains are also difficult to operate. The railroads, except for the repaired 48km portion of Sisophon~Poipet, were initially planned to have completed repairs construction by 2013, but is being delayed due to insufficient budgets and other reasons. The government is currently allocating the budgets in order to restart the railroad operations.
Chapter 2. Current Status of Social Economy & Logistics Infrastructure in Cambodia 43 Northern Route Railroad in Cambodia
② South Route
South Route is a route that connects Phnom Penh and Cambodia’s International port, Sihanoukville. South Route is 264km long. However, 110km (41.5% of the entire length) out of 264km of the South Route has been destroyed due to civil war, mining, and flooding. Also, 16 bridges (17.2%) and drainage facilities were damaged due to flooding and sea water. Similar to the North Route, the communication system and signals of the South Route were nearly all destroyed and it has not been in operation since the end of 2010. In May 31, 2014 reconstruction of the route took place from Phnom Penh to Sihanoukville by a company in France called TSO. However, the average maximum speed has not surpassed 50km/h as of yet. Containers and the railroad terminal of Sihanoukville have been reconstructed by a company in Japan called Sinohydro in 2014 and currently, the bulk processing facilities of Sihanoukville are being renovated as well. On the other hand, the container train operated from Phnom Penh to Sihanoukville was reconstructed by a Australian company called TOLL in 2014 and is being operated 3 times a week.
44 2015 Knowledge Sharing Program Ⅲ
Railroad History of South Route
Distance Distance No. History Location between No. History Location between stations (km) stations (km) 1 Phnom Penh 0+000 16 Ang Keo 98+500 14.800
15 Thamda 83+700 9.200 30 Sihanouk Ville 262+600 15.600 Source: Ministry of Public Works and Transport
Overview of South Route Railroad in Cambodia
When observing the overview of the operation of the passenger train, the South Route has been inoperative since 2004 and the North Route has been inoperative since mid 2008. Freight cars are still operating on the South Route but have been inoperative on the North Route since 2009.
Chapter 2. Current Status of Social Economy & Logistics Infrastructure in Cambodia 45 Annual Overview of Train Operation
Source: Royal Railways of Cambodia
The quantity of reliable transportation for freight cars in 2002 reached 557,000 tons but subsequently, it has started to decrease. Currently, freight cars are only operating on the South Route.
Transportation Progress of Freight Cars (ton)
Source: Royal Railways of Cambodia
46 2015 Knowledge Sharing Program Ⅲ (2) Railroad Development Plans
The Cambodia Railroad Development Plan was established by KOICA of Korea in 2013. Based on 4 objectives and 7 strategies, 5 main routes, KOICA proposed 8 local routes, a high speed route, an industrial railroad, and a lead-in railroad. The main content of the Cambodia Railroad Development Plan is as follows:
① Objectives and Strategies
The objectives and indexes for the railroad development plan are as follows. 4 objectives and 7 indexes are specified below. ∙ Objective 1: Railroad development to contribute toward national policies and economic development - Strategy 1: Development through establishment of various growth poles - Strategy 2: National integration ∙ Objective 2: Railroad development for the eradication of poverty and also regional development - Strategy 3: Development of regional economy - Strategy 4: Regional development for resolving poverty issues ∙ Objective 3: Establishment of international traffic network for international cooperation and economic development - Strategy 5: Establishment of international traffic network ∙ Objective 4: Establishment of low-cost, high-efficiency traffic system through connecting transportation means - Strategy 6: Establishment of integrated traffic network - Strategy 7: Improvement of speed To establish the previously mentioned railroad development plan, the following railroad development plan has been established to include 5 main routes, KOICA has proposed 8 local routes, a high speed route, an industrial railroad, and a lead-in railroad based on 4 objectives and 7 strategies. Through the establishment and implementation of the Cambodia Railroad
Chapter 2. Current Status of Social Economy & Logistics Infrastructure in Cambodia 47 Development Plan, plans have been set to promote integrated national development and economic growth and to nurture balanced development among regions. Railroad improvement and route establishment plans within the railroad development plan are as follows:
Overview of Routes in the Railroad Development Plan Length Categ Length Category Section Section (km) ory (km) PHNOM PENH ~ SISOPHON High-speed PHNOM PENH ~ SISOPHON ~ 384 400 ~ POIPET ~ THAILAND POIPET ~ THAILAND
Main Main PHNOM PENH ~ SIHANOUK PHNOM PENH ~ SIHANOUK 260 243 VILLE VILLE
Routes SISOPHON ~ SIEM REAP ~
SISOPHON ~ SIEM REAP ~ Railroad 326 314 CHEUNG PREY CHEUNG PREY BAT DOENG ~ KAMPONG CHAM BAT DOENG ~ KAMPONG CHAM 249 236 ~ SNUOL ~ VIETNAM ~ SNUOL ~ VIETNAM
Local Local 139 MONDUL KIRI ~ RATANAK KIRI 151 VIHEAR STUNG TRENG ~ RATANAK KIRI 158 KAMPONG SEILA ~ VEAL RING 48 Routes KAMPONG CHAM ~ KRATIE 115 SVAY RIENG ~ SUONG 90 Lead-in Lead-in SNUOL ~ MONDUL KIRI 101 Railroad PHNOM PENH NEW PORT LINE 42 BATTAMBANG ~ PAILIN 75 KAMPONG CHHNANG AIRPORT LINE 21 PHNOM PENH ~ KOH KONG 248 KAMPOT PORT LINE 4 PRETEAS LANG ~ SVAY RIENG 170 SIEM REAP NEW AIRPORT LINE 3
Railroad Network Plan
Source: Existing Data Restructured
48 2015 Knowledge Sharing Program Ⅲ 4. Overview of the Inland Waterway, Port, and Airport
1) Inland Waterway
The inland waterway in Cambodia is 1,750km long. However, ships can only be operated in 580km of the inland waterways. Of the entire inland waterway in Cambodia, the Mekong River makes up 30%, Tonle Sap River makes up 15%, Bassac River makes up 5%, and all other rivers make up the remaining 50%. As the main inland waterway, the Mekong River can only be used during the daytime due to the absence of navigational lights. Instead, buoy lights have to be used for navigation. Furthermore, ships larger than 20 tons cannot be operated because the Kratie and Stung Treng sections are relatively shallow. The rest of the inland waterways are limited to ships that weigh equal to or less than 100 tons. There are 7 inland ports, Kampon Chnang, Kampon Cham, Stung Treng, Kratie, Battambang, Siem Reap, and Phnom Penh in the 6 regions of the inland waterway.
Overview of Inland Waterways in Cambodia
Source: KOICA, Master Plan for Railway Network Development in Cambodia, 2013
Chapter 2. Current Status of Social Economy & Logistics Infrastructure in Cambodia 49 In the 102km stretch of the inland waterway between the Phnom Penh and the border of Cambodia and Vietnam, ships longer than 110 m are not permitted to pass. Ships traveling in South China Sea and Phnom Penh use the Mekong Route in Cambodia and the Mekong Route of Vietnam. However, some sections of inland waterways in Cambodia have shallow water depths which limits maximum ship capacity.
Maximum Ship Capacity of Mekong River
Operation Capacity Limit (DWT) Length Category Section during the (km) year Low water Full water
Golden Triangle - Luang Prabang 362 O 60 Luang Prabang - Vientiane 425 O 15 60 Vientiane- Savannakhet 459 O 200 500 Savannakhet - Pakse 261 10이하 50 Pakse - Khinak 151 O 50
Mekong Khinak - Veune Kham 14 Classific Veune Kham - Stung Treng 30 O 15 50 ation Stung Treng - Kratie 128 O 20 50 Kratie - Kampong Cham 121 O 80 400 Kampong Cham – Phnom Penh 100 O 2,000
Phnom Penh- Junction of Vam Nao Pass 154 O 3,000 5,000 ~4,000 3,000 3,000 Vam Nao pass – South China sea 194 O ~4,000 ~4,000 Phnom Penh - Junction of Vam Nao Pass O 20 50 Bassac River Vam Nao Pass – South China Sea 188 O 5,000 5,000 ~6,000 Phnom Penh - 5km South of Kampong Chhnang 94 O 1,000 2,000 Tonle Sap Kampong Chhnang - Chhnok Trou 46 O 20 150 River Chhnok Trou - Chong Kneas 109 O 20 150
Branch Dense network of man-made canals, natural creeks and 4,785 O of tributaries, with a total navigable length of 4,785 km Mekong River Se-kong - Mekong tributary (Lao PDR and Cambodia )
Source: Belgian Technical Cooperation, Master Plan for Waterborne Transport on the Mekong River System in Cambodia, Final report(Volume 1 Main Report, Draft), September 2006
50 2015 Knowledge Sharing Program Ⅲ Maximum Ship Capacity of Each Section of the Inland Waterway in Cambodia
Source: Belgian Technical Cooperation, Master Plan for Waterborne Transport on the Mekong River System in Cambodia, Final report(Volume 1 Main Report, Draft), September 2006
2) Inland Ports
(1) Phnom Penh Port
Phnom Penh Port is a traditional inland waterway that provides access to ships coming from Vietnam which pass through the South China Sea. This port is being managed and supervised by the MPWT (Ministry of Public Work and Transportation) and the MEF (Ministry of Economy and Finance). Phnom Penh Port is located in the heart of the Phnom Penh and it is located 3 to 4km away from where the Mekong River and the Tonle Sap River meets. Port 1 was established before 1991 and is being used as a domestic port rather than an international port due to overcrowding. Due to the increasing quantity of goods being transported, the Cambodian government has established a new port located 25km downstream from Phnom Penh Port 2 and this new port is currently in operation.
Chapter 2. Current Status of Social Economy & Logistics Infrastructure in Cambodia 51
Size of Phnom Penh Port Description Specification Remark Container and General Cargo Quary : 20m × 300m Water depth is -5.0m Terminal Berthing Capacity : 3vessels at one time Passenger Terminal 2 Pontoons of 15m × 45m each Water depth is -3.5m 70m × 50m = 3,500㎡ Warehouse 50m × 30m = 1,500㎡ ICD Area : 92,000㎡
Source: Phnom Penh Autonomous Port
Phnom Penh Port Pier and View of Phnom Penh Port Cargo Handling Facilities
The quantity of imported goods transported through Phnom Penh Port in 2014 was 823,935 tons and exported goods were 467,850 tons which has been steadily increasing. However, local cargo have been inoperative since 2008.
Quantity of imported and exported goods through Phnom Penh Port
Source: Phnom Penh Autonomous Port
52 2015 Knowledge Sharing Program Ⅲ Cargo container processing at Phnom Penh Port has been steadily increasing. It has increased by approximately 180 times from 746 TEU in 2002 to 133,666 TEU in 2014.
Quantity of Imported and Exported Goods through Phnom Penh Port
Source: Phnom Penh Autonomous Port
(2) New Port of Phnom Penh
Construction of the new port at Phnom Penh started with borrowing 28.2 million dollars provided by China at the beginning of 2010 under the condition of setting limitations for low water, weight of traffic, and a processed capacity of Phnom Penh Port. The first stage of the port was completed in December of 2012. There is a total of 3 construction stages and the port is currently undergoing development. A multi-purpose pier and resource logistics complex project is to construct a pier to export rice, cassava, tapioca, wood chip, corn, and other goods. This project, in 2013, had an assigned budet of 31.35 billion KRW for the purchasing of the site and reinforcing the existing pier. In 2016, 20.68 billion KRW was budgeted for constructing 160 m of pier (52.03 billion KRW in total). 30 billion KRW has been assigned to the lease
Chapter 2. Current Status of Social Economy & Logistics Infrastructure in Cambodia 53 business with the new container terminal, which is being constructed to accommodate three 300 TEU ships (length: 300 m, water level: ≥ 6 m). This lease business will be administered by the Maritime and Port Administration of Phnom Penh through borrowing unloading equipment from private companies. Expected traffic volume of the new container terminal is 300,000 TEU in 2020. Maritime and Port Administration of Phnom Penh and PCF have established a joint company for the Mekong River dredging project to operate medium and small container ships with 250 TEC class.
Landscape of Phnom Penh New Port
Source: Phnom Penh Autonomous Port
(3) Siem Reap Port
Siem Reap Port is located near the Tonle Sap River 5km away from the city. This port can only be used when the water level is at its greatest. During the dry season, the depth of the Tonle Sap Lake is 10 m on average and is 11km long located along the Siem Reap Port. The accessible road of the port is also connected to the lake. Although a temporary wooden port is established every dry season, the accessible road becomes flooded and completely loses its function during the rainy season. Siem Reap Port is mainly used for cargo transportation coming from Phnom Penh after passing through the Tonle Sap River. Also, some ships are being operated along the route.
54 2015 Knowledge Sharing Program Ⅲ (4) Other Inland Waterway Ports
Other inland waterway ports consist of Sre Ambel Port, Kampot Port, and Sihanoukville Port - which has an oil cargo handling facility - and Oknha Mong Port. Of these ports, Oknha Mong Port is being widely used for importing small scale cargo. Kampot Port is currently undergoing development for expansion. The other port expansion plans will be planned and implemented in Koh Kong and Kiri Sakor for transporting sugar. Furthermore, there are plans to develop a new port in Kiri Sakor near Koh Kong, a new international port in Stung Hav near Preah Sihanouk, and a passenger port in Kep Province.
3) Marine Port
(1) Sihanoukville Port
Sihanoukville Port is located in the entrance of Kompong Som of Sihanoukville Province and is the only marine port in Cambodia. The nature of Kompong Som has an upside of having a natural condition of being able to protect itself from typhoons. Currently, the processing capacity of Sihanoukville Port is estimated to be at 3 million tons with a separate POL facility in place.
Sihanoukville Port
Source: Sihanoukville Autonomous Port
Chapter 2. Current Status of Social Economy & Logistics Infrastructure in Cambodia 55 This port can accommodate 10,000 DWT class cargo and 20,000 DWT class cargo. Sihanoukville Port has been established as a Special Economic Zone for economic growth with financial support from Japan. Sihanoukville Port is composed of one pier that extends out into the water, and two other piers. The main facilities are as follows.
Sihanoukville Port Facilities
Berth Channel Other Facilities Name Structure Length Depth Year Old External Jetty 290m -9.0m 1960 Warehouse: 5 Jetty Internal Jetty 290m -8.0m 1960 36,000㎡(84,000T) New wharfs Concrete Block 350m -8.5m 1970 , [South Channel] Container Yard: 3 Container Berth Concrete Block 400m -10.0m 2007 Length: 5.5km 174,000㎡ Depth: -8.5m Oil Pier Stone Jetty 53m -4.2m 1963 PAS Oil Terminal Width: 80~100m Wharf 53m (Private Facilities) [North Channel] Sokimex Jetty 200m -10.5m 2001 Oil Terminal Length: 1.0km Depth: -10.0m Tela Jetty 180m -7.5m 2003 Oil Terminal Width: 150~200m LHR Jetty 150m -6.0m 2009 Oil Terminal CEL Jetty 120m -6.0m 2013 Coal Terminal CIIDG Jetty 200m -7.0m 2014 Coal Terminal PTT Jetty 120m -6.0m 1996 Oil Terminal Source: JICA, Prepared based on the Study on the Master Plan for Maritime and Port Sectors in Cambodia, March 2007 (Updated by PAS)
Overview of Storage Facilities Classification Area (㎡) Capacity Quantity New Terminal 103,000 8,400 TEUs 1 Container Yard 46,000 3,000 TEUs 1 Container Refrigerator Van 54 boxes 9 sockets Container Container Cargo Depot 6,000 12,000 t 1 Warehouse 30,000 60,000 Tons 4 General Cargo Yard 90,000 Tons Route 500m 2 Railroad Railroad Container Cargo 35,000㎡ 232 TEUs/1slot 1 Terminal Source: Sihanoukville Autonomous Port
56 2015 Knowledge Sharing Program Ⅲ Cargo Warehouse at View of Container Handling Sihanoukville Port Facilities at Sihanoukville Port
98% of ships at the Sihanoukville Port consist of general cargo, oil tankers, and container cargo. Passenger ships amounts to less than 2%.
The amount of exports has increased by 5 times during an 11 year period from 2003 to 2011. Although the amount of imports only increased by a factor of 1.6 during the same period, the amount of imports have always been maintained to be higher than the amount of exports.
Amount of Cargo Imported and Exported at Sihanoukville Port Classificatio 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 n Imported 1,589 1,285 1,129 1,256 1,418 1,681 1,579 1,803 1,890 2,105 2,213 2,509 (1,000 Ton) Exported 183 218 252 331 401 377 296 406 549 555 799 915 (1,000 Ton) Source: Sihanoukville Autonomous Port
Container cargo, which comprises of up about 60% of the cargo at Sihanoukville Port, increased by a factor of 2.6 from 2003 to 2014. Fuel
Chapter 2. Current Status of Social Economy & Logistics Infrastructure in Cambodia 57 cargo also has increased by a factor of 3. General cargo decreased from 2003 to 2007 but is currently showing a gradual increase.
The number of passenger traffic at Sihanoukville Port was about 1,100 in 2003 and had reached up to 24,000 in 2010. In 2013, the number of passenger traffic was about 16,000.
Number of Passenger Traffic at Sihanoukville Port Classificatio 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 n Arrival 1,113 447 1,797 8,303 1,141 11,780 19,850 24,140 7,964 16,320 16,400 (Persons) Departure 1,169 354 1,909 8,162 1,318 11,920 20,210 24,260 7,958 16,440 16,520 (Persons) Source: Sihanoukville Autonomous Port
PAS is planning the first port in Cambodia able to accommodate a ship capacity of 30,000 to 40,000 DWT by considering operations in all regions and international services.
Development Plans of Sihanoukville Port
1-Dry Bulk Cargo Terminal 2 -Terminal for Oil Exploration
- Length: 330 m - Length: 200m - Alongside depth: -13.50m - Alongside depth: -7.50m - Designed to accommodate vessel with 40,000 DWT. - Logistic base yard: 26,900m2 - Dry bulk cargo storage yard: 27,900 m2
Source: Sihanoukville Autonomous Port
58 2015 Knowledge Sharing Program Ⅲ Furthermore, the Special Economic Zone (SEZ) of 70ha has been planned to be established near the port terminal to decrease transportation costs.
Special Economic Zone of Sihanoukville Port (SEZ)
Type Area Factory area 45ha Commercial and Multi-purpose area 6ha Inter-Modal logistic area 4.4ha Green area 5.2ha Admin maintenance office and parking 0.9ha Utilities and roads 8.5ha Total 70ha
Sihanoukville Port SEZ Development Plans
Source: Sihanoukville Autonomous Port
(2) Other Sea Ports
Other sea ports include Koh Kong Port (SP1), Sre Ambel Port (SP2), Oknha Mong Port (SP3), Stunghav Port and Oil Terminal (SP4 and SP5), Kampot Port (SP6), and Kaeb Port (SP7). Koh Kong Port (SP1) is located near the Thai border and has the most amount of ships and quantity of transported goods compared to all other sea ports.
Chapter 2. Current Status of Social Economy & Logistics Infrastructure in Cambodia 59
Summary of Other Small Sea Ports No. Port GC ship GRT GC ship% GRT % SP1 Koh Kong 213 1,196,371.96 34% 72% SP2 Sre Ambel 194 98,721.54 31% 6% SP3 Oknha Mong 206 202,335.51 33% 12% SP6 Kampot 1 5,264.00 0% 0% SP4,5,7 Others 11 167,867.00 2% 10% Total 625 1,670,560,01 Source: IRITWG, Overview on Transport Infrastructure Sectors in the Kingdom of Cambodia, 2015
Other Sea Ports in Cambodia
No. Port Company Investment Cost in Agency Project Million Strart SP1 Koh Kong - - - DPWT 1992 SP2 Sre Ambel New Port MDH trading company - - Private 2003 SP3 OKNHA MONG OKNHA MONG PORT BOO Private 2004 Co, LTD Port for Petroleum at SP4 Strunghav SOKIMEX PAS 2001 Port for Petroleum at TELA PETROLEUM SP4 GROUP INVESTMENT BOO $14.50 PAS 2004 Strunghav CO., LTD Port for Petroleum at SP4 Strunghav LHR PAS 2009 CEL(Cambodia Energy SP4 Port for Petroleum at Limited) Power Plant PAS 2013 Strunghav Company CIIDG(Cambodia International SP4 Port for Petroleum at Investment Group) PAS 2014 Strunghav Erdos Hongjun Electric Power Co., Ltd ATTWOOD IMPORT SP4 Int. Port at Stunghav EXPORT CO., LTD - $30 Private Port for Petroleum at SP5 REAM BASE PPT PAS 1996 SP6 Int. Port at Kampot Veng Hour Co., Ltd. - $9 DPWT Aussic-Cam Group Int. Tourist Port at Investment and SP7 Kaeb Development Co., BOT DPWT Ltd(Local) Int. Tourist Port at Rotong Development SP7 Kaeb Co., Ltd(Local) BOT DPWT Commercial Port at KAEB POWER SP7 Kaeb SUPPLY CO., LTD BOT $41 DPWT Source: IRITWG, Overview on Transport Infrastructure Sectors in the Kingdom of Cambodia, 2015
4) Dry Port
There are 7 main dry ports in Cambodia according to the Signed International Agreement in 2013. Most of the dry ports in Cambodia are located near Bavet (Cambodia-Vietnam border), Poi Pet (Cambodia-Thai
60 2015 Knowledge Sharing Program Ⅲ border), and Phnom Penh.
Overview of Main International Dry Ports
No. Name of dry Port Nearest town Remark
1 1 CWT Dry Port Phnom Penh Capital 2 Phnom Penh International Port Phnom Penh Capital 3 Phnom Penh Special Economic Zone Phnom Penh Capital 4 So Nguon Dry Port Bavet Border town with Vietnam 5 Teng Lay Dry Port Phnom Penh Capital 6 Olair World Dry Port Phnom Penh Capital 7 Tech Srun Dry Port Phnom Penh Capital Source: IRITWG, Overview on Transport Infrastructure Sectors in the Kingdom of Cambodia, 2015 Location of Main Dry Ports
Source: Ministry of Public Works and Transport
5) Flight
Cambodia has 10 airports which are divided into 4 categories: (3 international airports, 1 military airport, 6 local airports, and 1 airfield) according to the Cambodia Commercial Airline Executive Office. Only 3 airports are currently operating: the Phnom Penh International Airport, Siem Reap International Airport, and Sihanoukville Airport. The Siem Reap International Airport mainly attracts sightseeing passengers who come to see the ancient cultural assets including Angkor Wat, and is continuing to show an increase passenger numbers.
Chapter 2. Current Status of Social Economy & Logistics Infrastructure in Cambodia 61 Camodia Airport Location
A high tourist demand was expected for Sihanoukville Airport as the area surrounding the airport has been developed into vacation destinations. However, a domestic airplane crashed near the Sihanoukville Airport in 2007 resulting in the temporary closing of the airport. After this incident, Sihanoukville Airport was reopened as an international airport. For domestic flights, there are 6 flights a day from Phnom Penh to Siem Reap and 2 flights a week from Sihanoukville to Phnom Penh. Besides these domestic flights, there are no other domestic flights being operated.
Sihanoukville 2,500×34 (Asphalt/4C) 123.84 RGC/SCA Operating 19km Local Airport Kampong 2,400×45 Not 2011.00 RGC/Air Force Chhnang (Concrete/4C) Operating 1,600×34 Battambang 128.68 RGC/SCA Operating 3km (Bitumen/3C) 1,300×30 Stung Treng 112.50 RGC/SCA Operating 5km (Bitumen/3C) 1,300×30 Ratanakiri 48.09 RGC/SCA Operating (Laterite/3C) 1,300×30 Koh Kong 125.66 RGC/SCA Operating (Laterite/3C) 1,500×30 Mondulkiri 36.00 RGC/SCA Operating (Laterite/3C) 1,400×30 Not Preah Vihear 150.98 RGC (Laterite/3C) Operating 1,180×30 Kratié 112.50 RGC Operating 3.5km (Laterite/3C) Source: State Secretariat of Civil Aviation
(1) Phnom Penh International Airport
Phnom Penh International Airport is located in the intersection of NR3 and NR4 road about 8km west of the airport and it takes about 20 minutes by car from the central part of Phnom Penh.
View of Phnom Penh International Airport
Chapter 2. Current Status of Social Economy & Logistics Infrastructure in Cambodia 63 Phnom Penh International Airport has been operated by a French and Malaysian joint venture company through the BTO method for nearly 25 years since June of 1995. Recently, construction to expand the airport has been completed. Phnom Penh International Airport operates flights to 9 countries and 16 cities with about 80 flights scheduled daily. In 2015, about 3.08 million passenger traffic and 36,395 ton of cargo was processed at this airport. The number of passengers and amount of cargo is continuing to increase at this airport.
Overview of Operated Routes at Phnom Penh International Airport
Airlines Destination
Air Asia, Malaysia Airlines Kuala Lumpur Korean Air, Asiana Airlines Incheon Bangkok Airways, Thai Air Asia, Thai Airways Bangkok Cambodia Angkor Air, Cambodia Bayon Airlines Ho Chi Minh China Airlines, EVA Air Ho Chi Minh China Eastern Airlines Kunming, Shanghai China Southern Airlines Beijing, Guangzhou Dragon Air, Hongkong Airlines Hongkong Jetstar Airways, Silk Air Singapore Qatar Airways Doha Vietnam Airlines Hanoi, Ho Chi Minh Bassaka Air Macao Shandong Airlines Jinan
Siem Reap International Airport is the second largest airport in Cambodia and is located 4km west from the central part of Siem Reap. The airport is very convenient because of its accessibility. It only takes about 5 minutes to get to the airport by car from the heart of Siem Reap. Siem Reap Airport operates flights to 28 different cities and 9 countries with more than 100 flights a day. In 2015, about 3.3 million passenger traffic and 1,674 ton of cargo was processed at this airport. An increasing number of sightseeing passengers are continuing to visit this airport because of the international cultural asset, Angkor Wat.
Chapter 2. Current Status of Social Economy & Logistics Infrastructure in Cambodia 65
Overview of the Operated Routes at Siem Reap International Airport Airlines Destinations Spring Airlines, Cambodia Angkor Air, China Eastern Airlines Shanghai Eastar Jet , Sky Angkor Airlines, Cambodia Angkor Air, Korean Incheon Air, Asiana Airlines Cambodia Angkor Air Hangzhou Cambodia Angkor Air, Sky Angkor Airlines Chengdu Sky Angkor Airlines Wuhan Air Asia, Malaysia Airlines Kuala Lumpur Bangkok Airways, Air Asia, Cambodia Angkor Air Bangkok Hong Kong Express, Dragon Air Hongkong Lao Airlines Fakse Cambodia Angkor Air, Vietnam Airlines Hô Chi Minh Sky Angkor Airlines Nanning Vietnam Airlines Hanoi China Southern Airlines, Cambodia Angkor Air Guangzhou Silk Air, Jetstar Airways Singapore Korean Air Luang Prabang Air Busan, Sky Angkor Airlines Busan Source: CAMBODIA AIRPORTS(www.cambodia-airports.com)
Annual Overview of Passengers at Siem Reap International Airport (Unit: Persons)
66 2015 Knowledge Sharing Program Ⅲ (3) Sihanoukville International Airport
Sihanoukville International Airport is located about 23 east from Sihanoukville, a harbor city, which takes about 20 minutes by car from the central part of Sihanoukville. This international airport operates about 5 flights daily to destinations such as Tianjin and Hangzhou of China as well as Phnom Penh.
Overview of the Operated Routes at Sihanoukville International Airport Airlines Destinations Cambodia Bayon Airlines Phnom Penh Cambodia Angkor Air Tianjin Skywings Asia Airlines Hangzhou Source: CAMBODIA AIRPORTS(www.cambodia-airports.com)
Annual Overview of Passengers at Sihanoukville International Airport (Unit: Persons)
Cambodia anticipates 7 million international tourists per year by 2020. To prepare for this, Cambodia plans to establish 4 airports. In accordance to this plan Cambodia plans to establish a new airport in Siem Reap and Phnom Penh. In addition, plans to develop new local airports are undergoing review for areas such as Ratanakkiri, Mondulkiri, Stung Treng, Preah Vihear, and Koh Kong.
Chapter 2. Current Status of Social Economy & Logistics Infrastructure in Cambodia 67 5. Special Economic Zone (SEZ)
The SEZ obtained business approval from Council for the Development of Cambodia (CDC). The Cambodia government considers the SEZ as one of the best methods to attract foreign capital because foreign capital investment is 100% permitted for SEZ. Furthermore, foreigners can be employed for SEZ if a particular position cannot be fulfilled through local human resources.
Overview of SEZs in Cambodia
Source: Existing Data Restructured The SEZ stretches over the center of Phnom Penh, surrounding areas of Sihanoukville, and border of Vietnam. This geographical area suitably accommodates international exchanges. There are 34 SEZs in total which are dispersed throughout different areas including 5 around the capital of
68 2015 Knowledge Sharing Program Ⅲ Phnom Penh, 12 near the border of Vietnam, 9 around Svay Rieng, 2 near Banteay Meanchey located near the border of Thailand, 1 near Pursat located close to Thailand, and 14 near Sihanoukville where most SEZs are located. A total of 7 SEZs have their own SEZ Administration Organization which are Phnom Penh SEZ, Koh Kong SEZ, Sihanoukville Port SEZ, Sihanouk SEZ, Dragon King SEZ, Manhattan SEZ, and Thai Bavet SEZ. However, there are only 4 SEZs currently operating which are located in Svay Rieng (2), Phnom Penh (1), and Sihanoukville (1). This may be due to the inadequate logistics infrastructure of Cambodia which makes it difficult to invigorate the SEZs.
6. Issues
1) Lack of Transportation Infrastructure
The pavement rate of 1-digit road which is the national main road is high due to Cambodia’s continuous investment geared toward transportation infrastructure. Although the average speed in main roads is 56.2km/h, it is only 39km/h in the inner part of the city where poor road traffic conditions presents itself. Local roads are not being managed well and the rate of unpaved roads is high. This significantly decreases the functionality of roads. Since the road network is not adequate, cargo is only transported through main roads where the road network is in good standing. However, most of the main roads only have 2 lanes and thus, cars frequently pass each other which leads to high rate of accidents and safety issues. The 2 lane roads are overcrowded, needing an expansion to 4 lanes. Furthermore, highways need to be established in order to process traffic flow and resolve the back up of traffic when passing through different regions. The Cambodian railroad has a very low share of transportation of about 1%. This is because only one route, the south route, processes cargo in the
Chapter 2. Current Status of Social Economy & Logistics Infrastructure in Cambodia 69 sections between Sihanoukville and Phnom Penh. Although the ports and dry ports are actively operated, operation cannot be performed safely because of the variable water depths between the dry and rainy season. In addition, the connection between different transportation means are not being achieved because there are not enough cargo handling facilities and hinterland facilities. With regards to airports, only airports in Phnom Penh, Siem Reap, and Sihanoukville are being managed out of the 10 airports in Cambodia, due to passengers mostly consisting of tourists. The other remaining airports are not being managed adequately. An effective logistics system involves decreasing the amount of cargo handling and storage period to reduce distribution costs. If cargo handling work is increased when connecting to different transportation means, then single transportation means may be more efficient than having to cope with complex transportation means. A complex transportation system may be needed if the quantity of transported goods increase such as bulk or coal.
2) Absence of National Distribution Complex
Cambodia relies on imported goods for products including industrial products, cars, and construction materials. Therefore, Cambodia has a high quantity of transported goods. However, Cambodia does not have a reliable distribution complex in place to efficiently gather and distribute the cargo compared to its surrounding countries. As a result, the logistics cost is high in Cambodia. For example, Cambodia aims to become the largest rice exporting country in East Asia with the objective of exporting 1 million tons, however, its rice exporting competitiveness is decreasing due to high distribution costs. In addition, the empty container transportation rate is high because small distribution companies and independent truck owners are irregularly transporting cargo. Cambodia needs to establish a large scale distribution complex that can transport large size cargo instead of high volume of small-sized cargo. In order to efficiently transport cargo on a national scale, this type of large distribution complex needs to be established in a
70 2015 Knowledge Sharing Program Ⅲ developed area that has an advanced transportation network located close to consumers in large cities.
3) Inadequate Logistics System and Control Tower
It may be difficult for Cambodia to achieve the goal of reducing logistics costs without a blueprint of logistics development. When compared to surrounding countries, Cambodia does not have a comprehensive logistics development plan in place on a national level. Other nearby countries such as Thailand, Indonesia, and Malaysia are all in the process of striving toward achieving their strategic policies encompassing a GMS Trading Service Hub, establishment of an Asia Gateway, an international port hub, and a global supply chain logistics service. The geographical location of Cambodia is included in the AEC (ASEAN Economic Community. 2015) and SEWC (Second East-West Economic Corridor) but in order to join the integrating economic environment of Southeast Asia, the establishment of a logistics policy in Cambodia is pressing. Since various interested parties and authorities are involved in the logistics system, uncooperative action from one of the authorities will negatively affect the whole logistics system. Approximately 22 governmental authorities are related to logistics in Cambodia (including the Ministry of Commerce, Ministry of Economy and Finance, Ministry of Industry, Mining and Energy, Ministry of Land Management, Urban Planning and Construction, Ministry of Posts and Telecommunications, Ministry of Public Works and Transport, Ministry of Rural Development, Cambodia Council of Development, and Customs) and in the private domain, the Truck Association, Freight Forwarder Association, and Port Companies are related to logistics. However, since sharing of logistics related roles between these parties has not been properly regulated, it has become a negative factor for logistics competitiveness. Therefore, an authority which establishes logistics policies and systems and allocates roles between each party is required.
Chapter 2. Current Status of Social Economy & Logistics Infrastructure in Cambodia 71 4) Logistics Industry Falling Behind
Cambodia needs to place more emphasis for standardizing logistics on a national level. Analysis of the logistics cost is difficult to carry out because transportation is achieved through small-sized transportation truck businesses. In addition, roads are becoming damaged and risks of accidents are high because there are no set standards for load capacity limitations. Furthermore, tax standards are not adequately enforced which causes deviating prices in identical goods depending on the import period and general consumers end up taking the burden for this outcome.
Picture of Distribution Facility in Phnom Penh
Picture of Poipet Customs
72 2015 Knowledge Sharing Program Ⅲ Cambodia has 6 stages for custom clearance. This process may take a long time and unexpected costs may occur which is the cause of increased logistics costs. In addition, customs data and information is recorded by hand which causes inaccuracy and difficulties in transferring the information to other departments that need the custom statement and report of quantity of transported goods. Computerizing the data from the custom process can contribute to improving transparency of information and decreasing administrative costs to reduce the overall logistics cost.
5) Transportation Saturation in the Capital, Phnom Penh
Phnom Penh, the capital of Cambodia, is a dense city with a high number of people, cars, and capital. However, transportation infrastructure is inadequate. Although modern buildings are being constructed, expansion of transportation facilities is not being implemented adequately and therefore, traffic congestion are becoming worse. In addition, main roads (NR) are designed so that Phnom Penh must be passed through as the center in order to get to other regions which adds to the issue of traffic congestion. Therefore, a complex city traffic environment in Phnom Penh caused by an overwhelming amount of car and motorcycle traffic induces an increase in logistics costs and additional costs. Cambodia relies on importing most products from Thailand and Vietnam. Although the Cambodian government strives to achieve stabilization of price, the uncontrolled traffic environment provokes unexpected supply interruption and price variation. The government is seeking to encourage concentrated traffic to detour to other routes by constructing a beltway. However, the Cambodian government is facing a budget deficit and thus, constructing circulation roads may be difficult if there is no financial aid from other countries. Therefore, tremendous efforts are needed to overcome traffic congestion near the central part of Phnom Penh by expanding the road network. Resolving
Chapter 2. Current Status of Social Economy & Logistics Infrastructure in Cambodia 73 traffic congestion near the central part of Phnom Penh is expected to significantly contribute to reduce nationwide logistics costs.
74 2015 Knowledge Sharing Program Ⅲ Section 4. Implications on Policies
The analysis of strength, weakness, opportunity, and threat of logistics in Cambodia based on examination of the current conditions and issues are as follows. The strength is that Cambodia is striving to improve its logistics development. Cambodia understands the importance behind the development of infrastructure which is one of the goals of the rectangular strategy of the National Development Strategy. From this perspective, Cambodia is continuously taking an initiative to engage in infrastructure projects including connecting the north and south railroads and managing roads to actively prepare for development of logistics going forward. The opportunity for Cambodia is having a circular-shaped geographical location in the center of the Southeast Asian countries which may be advantageous when developing infrastructure. Moreover, Cambodia is in a good position to continuously attract foreign capital because its economy has an stable annual growth rate which in turn will have a positive effect on developing a stabilized infrastructure in the future. In particular, Cambodia’s economic growth may take a favorable turn starting from 2015 through the initiation of the Asian Economy Integration Plan. On the contrary, there are many weaknesses that Cambodia must overcome for the advancement in logistics. Above all, Cambodia currently lacks established laws pertaining to logistics and there are no organizations in charge of logistic policies. Currently, Cambodia lacks consolidated plans compared to other countries. Infrastructures including roads, railroads, ports, and airports have not integrated and therefore, duplicated investment on infrastructure and a decrease in efficiency may be caused. Moreover, since there is no directive governmental body to mediate logistics related authorities, it causes barriers in achieving logistics development. Some of the weaknesses that Cambodia has are high logistics costs and a
Chapter 2. Current Status of Social Economy & Logistics Infrastructure in Cambodia 75 poor transportation system. Logistics is mainly performed through the roads which causes traffic congestion and in turn increases transportation time. As a result, logistics costs are raised. Furthermore, Cambodia does not have a national-scale logistics complex. Instead, small-sized transportation trucks independently account for the distribution which is adding to the traffic congestion issue in the main cities. Lastly, Cambodia does not have adequate standards for logistics industries. They do not have standards for a customs and clearance process which causes difficulties when analyzing the logistics time and cost, thus it can lead to a diminishing desire for investments. Moreover, there are high risks for road damage and car accidents because Cambodia does not have a limitation for load capacity.
SWOT Analysis of Logistics Conditions in Cambodia
The threat lies in the fact that the economic structure of Cambodia depends on external economic environments. In addition, the geographical features of the land is vulnerable to weather changes such as flooding of rivers during the rainy seasons which may become an obstacle when striving to achieve logistic advancement in the future.
76 2015 Knowledge Sharing Program Ⅲ 2015 Economic Development Experience Sharing Project Ⅲ Chapter 3. Institution and Operation of Logistics in Korea
Park Jongil, Ko Yongseok (KRIHS) Lee Hyangsook (Incheon University)
Summary
Chapter 3 seeks to deduce critical points for Cambodia's logistics development strategy by reviewing the history of Korean logistics institution. Initially, Korea focused on reorganizing and readjusting legal institutions related to railway and marine transport, as well as legal institutions related to transport vehicles that serve as a critical component of logistics and transport. Also, Korea promoted efficiency in managing logistics by introducing various logistics management systems combined with information technology. In the initial phase of logistics development, particularly concerning the infrastructure for logistics, Korea, at the government level, set up a Basic Plan on Logistics to select logistic complexes for each regional units, and connected each complexes with logistic axes, establishing a basic framework for a logistics policy. This article thereby deduced critical points for Cambodia's traffic and logistics development strategy by reviewing the initial stages of Korean logistics infrastructure and legal institutions.
Chapter 3. Institution and Operation of Logistics in Korea 77 Section 1. Legal Institutions
1. History of Logistics Policies
1) Logistics Policies before 1990
Korea's logistics policies before 1990s were applied in a decentralized and separated manner. Due to the lack of infrastructures such as roads and railways, most logistics were done with cargo vehicles. The Ministry of Transportation, a government agency in charge of logistics, concentrated on executing cargo vehicle transportation industry policies to foster transportation.
□ Cargo Vehicle Transportation Industry Policies
The cargo vehicle transportation industry in the 1950s and 1960s was mostly managed by minor vehicle owners with petty capital, and was developed into a system where the business operator who acquired a transportation vehicle business license would buy the vehicles and entrust them to a third party as he managed the company. As over-extended, chronic problems concerning practices of registering a privately-owned vehicle to a transportation company, in order to earn and receive payment for each work (The 'Jiip' system), worsened, the Korean government sought for the corporatization of those companies based on commercial law. In 1970s and 1980s, the corporatization policy for the cargo vehicle transportation industry continued due to its success in the passenger vehicle transportation industry in the 1970s. Cargo vehicle companies sent a petition to the National Assembly calling against direct management policies due to the petty size of each of the companies, and certain limitations of
78 2015 Knowledge Sharing Program Ⅲ the direct management system, resulting in a de facto deferment of a direct management policy. Since then, the government has changed its policy direction from direct management to legalizing entrusted business. After enacting the 'Trucking Transport Business Act,' entrusting business management became possible as of January 1998 without any legal restrictions.
□ Railroad Transportation Policy
Korea's critical means of transportation before highways in the 1970s were railways. In 1963, the Korean government revised the National Government Organization Act to take the external agency of Ministry of Transportation and turn it into the Korea National Railroad Agency as a specialized institution. After the Gyeongbu Expressway was built and competition arose between cargo vehicles and cargo transportation, the financial burden increased due to a decrease in transportation demand and income. The Korea National Railroad took various initiatives including resetting transportation fares to increase income and to cut spending, which would lead to the lightening of financial burdens and better management. They visited shipping companies, held various conferences, and set flexible cargo fare standards by expanding contract cargo transportation services to invite and attract additional cargos.
□ Maritime Transportation Policy
The Maritime Transportation Industry in the 1950s was too small to be employed overseas. However, due to economic growth in the 1960s, an increase in foreign trade led to an increase in the quantity of goods transported. In the 1970s, economic recession, following an oil shock, led to a decrease in quantity of goods transported, a rise in labor and operation cost, all contributing to the accumulation of a deficit. The Korean government initiated the Maritime Transportation Rationalization Policy in
Chapter 3. Institution and Operation of Logistics in Korea 79 1983 to merge or systemize some 70 maritime transportation companies into 17 larger ones to minimize the side effects of over-competition and maximize its chance of the survival of companies through economies of scale. The government also provided financial assistance by exempting various registration tax, acquisition tax, and surtax to support the companies until the market stabilized.
□ Air Transportation Industry
Korea's air transportation industry was marked by 20 years of monopoly by Korea Airlines, a private airline, ever since it acquired the Korea National Airlines in the 1960s. By the late 1980s, Asiana Airlines, the second private airline, entered the market, transitioning into a duopoly system. Although the air transportation industry is run by private companies, the Korean government has been imposing numerous restrictions and sanctions on entering the air transportation market and selecting flight routes. Such trends continues to this day.
2) Logistics in the 1990s
Logistics policy in the 1990s was independently and comprehensively developed. A Basic Plan for Cargo Logistics (1994~2003) was designed in 1994 to expand the policy scope of logistics. The plan was in effect from 1994 to 2003 with a purpose of offering a quick, affordable, easy, and safe logistics service.
□ Critical Points of the Basic Plan for Cargo Logistics
The following lists 11 critical points of the Basic Plan for Cargo Logistics. - Expansion of Area Central Logistics Facility - Establishment of Cargo Transportation Network between Areas
80 2015 Knowledge Sharing Program Ⅲ - Rational Reform of Transportation Structure - Operational Efficiency of Logistics Facility - Expansion of Storage Facility - Promote Standardization of Logistics - Establishment of Comprehensive Logistics Information Network - Improvement of Institutions and Procedures related to Logistics - Strengthening of the Role of International Logistics Center - Innovation of Logistics Technology - Training Logistics Specialists and Strengthening Administrative Support The purpose of this plan is to design a system of strategic area-to-area transportation hubs for the betterment of cargo logistics and to allow long term easing of cargo logistics throughout all areas of the country.
Expansion of Area Logistics Complexes
Source:Ministry of Construction and Transportation(1994), Basic Plan for Improving Cargo Logistics System to Cut Logistics Costs (1994~2003)
Chapter 3. Institution and Operation of Logistics in Korea 81 □ Other Policies
A detailed plan on inland cargo station was designed in the 1990s which led to the establishment of inland cargo stations in the capital area and Busan area. Restrictions on 'Cargo Vehicle Transportation Businesses' were lifted to replace the license system with a registration system. A government-led comprehensive logistics information network was initiated to informationalize logistics and a logistics consultants certification system was introduced.
3) Recent Policies: Basic Plan on Logistics
Since 2001, Korea has been conducting a logistics policy as part of a national growth strategy by designing the 'National Basic Plan on Logistics' that deals with all areas of logistics. The purpose of this plan is to execute a more comprehensive and efficient logistics policy by unifying haphazard and dispersed logistics-related plans to ultimately achieve the government's logistics goals. First, the National Basic Plan on Logistics (2001-2020) was designed in 2001, and the Revised National Basic Plan on Logistics (2006-2020) was published on September, 2006 to reflect dynamic changes in the domestic/international environment in the early 2000s. The Framework Act on Logistics Policies serves as legal background for the National Basic Plan on Logistics. This Act sets 10 years as the duration of the National Basic Plan on Logistics, with replanning every five years.
82 2015 Knowledge Sharing Program Ⅲ Legal Grounds for the Establishment of the National Basic Plan on Logistics (Framework Act on Logistic Policies)
Clause 2 Establishment and Execution of the Logistics Plan
Article 11 (Establishing the National Basic Plan on Logistics) ①
Today, the Revised National Basic Plan on Logistics (2011~2020) is being executed. The government designs and executes detailed plans every year to achieve what is laid out in the National Basic Plan on Logistics. The Minister of Land, Infrastructure and Transport and Minister of Maritime Affairs and Fisheries designs yearly implementation plans in accordance with Article 13 of the Framework Act on Logistic Policies. Currently, three basic plans have been designed since 2001, all setting the year 2020 as their goal. The original National Basic Plan on Logistics (2001~2020), under the slogan of an advanced nation of logistics excellence, seeks to develop cutting-edge technology for logistics networks, hardwares and softwares, raising competitiveness by improving the working environment of the logistics industry, establishing an eco-friendly logistics groundwork, and setting up an international logistics network to tap into the world.
Chapter 3. Institution and Operation of Logistics in Korea 83
Comparison among the National Basic Plans on Logistics
Original Plan('01~'20) Revised Plan('06~'20) Revised Plan(2011-2020) Global Logistics Leader Advanced Nation of Logistics 2020 Global Logistics Leader Guiding Low-Carbon, Green Slogan Excellence in the 21st Century Growth for the 21st Century • Set up a Logistics Network to become a Logistics Leader • Development of Logistics Technology through Harmony between Logistics •Create National Wealth Hardwares and Softwares through Logistics • Create National Wealth • Raise International Improve Efficiency of through Logistics Competitiveness by National Logistics • Improve Efficiency of Objective Improving Working System National Logistics Environment of the Logistics •Secure the driving factor System Industry for long-term growth • Establishing Eco-Friendly of the logistics industry Logistics Environment • Establishing International Logistics Network that can tap on the world •Achieve Logistics Efficiency by establishing Army, Navy, Air Force Integrated Logistics System •Establish Global Logistics •Secure Soft System Infrastructure to offer •Foster High Added-Value High-Quality Logistics Logistics Industry Service •Expand Hardware •Establish Advanced ※ Overlaps with the Objectives Logistics Infrastructure Strategy Logistics System by •Enhance Software Logistics Enhancing Green System Logistics System and •Establish Integrated Logistics Security System for Logistics •Raise Competitiveness of Policies Logistics Industry to enter Global Logistics Market •Enhance Competitiveness of Logistics Industry by Restoring Market Performan 2 General Indicators 3 General Indicators 15 Indicators ce 13 Detailed Indicators 16 Detailed Indicators Indicator Role Lists Offices of N/A Primary/Collateral Allocation Responsibility Synchronize Basic Plan/Medium-Term Integration of Basic and Basic Plan and Detailed Plan/Yearly Plan System Medium-Term Plans Plan Separate Basic and Medium-Term Plans
Source: National Human Resources Development(http://www.nhrd.net/board/view.do?boardId=BBS_0000004&orderBy=&startPage=198&dataSid=16601)
84 2015 Knowledge Sharing Program Ⅲ Under the slogan of 2020 global logistics leader, the strategy called forth by the Revised Plan('06~'20) seeks to establish a global logistics system, foster a high added-value logistics industry, expand hardware logistics infrastructure, enhance the software logistics system, and establish integrated system for logistics policies. Under the slogan of global logistics leader guiding low-carbon, green growth for the 21st century, the Revised Plan (2011-2020) seeks to create national wealth through logistics, enhance efficiency of the national logistics system, and secure the driving factor for long-term growth in the logistics industry. Overall, the Basic Plans are focusing on integration (cooperation), informationalization, and standardization of logistics. To become a logistics leader that the government approves, integration of policies and a logistics system is necessary. To establish an efficient logistics system, informationalization and standardization are necessary. Currently, Korea is in the process of drafting the 6th National Logistics Plan(2016~2025). The vision for the 6th National Logistics Plan is to 'become a global logistics leader, guiding creative, innovation and sustainable growth,' from which it can be understood that the government regards logistics as a critical factor for economic growth. As for the objectives, the plan seeks to enter the top 10 LPI countries, and fostering growth of a logistics enterprise that is capable of entering the world's top five. As for its strategy, the plan seeks for expansion of the Korean logistics system in the international logistics market, raising competitiveness of the logistics industry by lifting restrictions, establishing future-oriented smart logistics R&D and safe, eco-friendly, and a sustainable logistics environment, and establishing complex logistics infrastructure.
Chapter 3. Institution and Operation of Logistics in Korea 85 6th National Logistics Plan (Draft)
Source: Logistics Policy Division, Ministry of Land, Infrastructure and Transport, Development History of Korea's Logistics Industry, 2016.3.30
2. Legal Institutions related to Logistics
1) Related Laws
Notable Korean laws related to logistics can be categorized into six types for each subfield of logistics (port transportation, logistics industry, cargo vehicle transportation, railroad, logistics facility) and the comprehensive Framework Act on Logistics Policies superseding all areas of logistics.
86 2015 Knowledge Sharing Program Ⅲ
Logistics-related Laws in Korea
Road ․ Railroad Harbor ․ Vessel Air · Aircraft Logistics Industry Logistics Complex Promotion of Logistics Harbor Logistics Industry Road Act Transport Aviation Act Complex Development Business Act Development Act Act Air Transport Framework Act Korea Highway Logistics Harbor Act Business on Logistic Corporation Act Facilities Act Promotion Act Policies Trucking Safety of Port Authority Sustainable Transport Aircraft Act Transport Act Business Act Operation Act Framework Act on the Aviation Safety Development of Ships Act and Security - Railroad Act Industry Korea Rail International Aviation Network Ship - - Security Act Authority Act Registration Act Ballast Water Korea Railroad Management - - - Corporation Act Act Ship - Management - - - Industry Act NOTE: Promotion of Cargo Logistics Act was changed to Framework Act on Logistics Policies in 2008. Safety of Aircraft Operation Act was changed to Aviation Safety and Security Act in 2002 which was once again changed to Aviation Security Act in 2014. Promotion of Logistics Complex Development Act was changed to Logistics Facilities Act in 2007.
Framework Act on Logistics Policies serves as legal foundation of logistics policies and provides rules and restrictions on planning, executing, and supporting logistics policies. Several features of the Framework Act include, first, that it regards not only domestic, but also an international logistics policy design to be within its policy purview. Second, it defines logistics companies and the logistics industry, and seeks to systematically address changes in the logistics environment by considering not only
Chapter 3. Institution and Operation of Logistics in Korea 87 logistics facilities, but also other facilities related to logistics cooperation, automation, and informatization. Third, it fosters and supports comprehensive logistics companies by introducing comprehensive logistics enterprise certification to identify companies specializing in logistics and by providing relevant support. Fourth, it lays out policies and relevant assistance channels to establish an international logistics system, attract foreign logistics companies, and to promote Korean logistics companies to enter foreign markets. Logistics laws are essential in increasing efficiency of the logistics system, raising competitiveness of the logistics industry, and advancement and internationalization of logistics. The government should enact not only laws related to roads, railroads, harbors, and air transport, but also enact laws related to the logistics industry and logistics complexes in order to promote easy access to various logistics needs. At the same time, the government should define, restrict, and obligate relevant actions.
2) National Logistics Survey
To come up with an efficient logistics policy, periodic logistics survey should be conducted to track logistics status, and provide basic data for various future policy and strategy designs.
88 2015 Knowledge Sharing Program Ⅲ
Logistics Surveys in Korea
Survey Category Survey Content Related Surveys ․ Overview of the Company ․ Company's Yearly/Three-day Transport ․ Nation-wide Cargo Origin and Performance Destination Traffic Survey Company Logistics Survey ․ Resident Companies in each Logistic ․ Cargo Unit Load Survey Complex ․ Logistics Route Survey ․ Cargo Logistics Route for each Product ․ Cargo Vehicle Features ․ One-day Patterns of Cargo Vehicle Movement ․ Nation-wide Cargo Origin and Cargo Vehicle Traffic Survey ․ Cargo Vehicle Driving Patterns in each Destination Traffic Survey Logistics Complex ․ Cargo Unit Load Survey ․ Entrance and Exit Traffic in each Logistics Complex
․ Facility Status in the Company ․ Release Status of Logistics Storages ․ Logistics Storage Survey Logistics Facilities Survey ․ Cargo Vehicle Operation Status ․ Cargo Unit Load Survey ․ Personnel Information
․ Nation-wide Cargo Origin and ․ Traffic near Logistics Complex and Logistics Complex Traffic Survey Destination Traffic Survey Entrance and Exit Traffic Survey ․ Cargo Unit Load Survey ․ Maritime Import and Export Cargo Movement ․ Martime Cargo Origin and Destination Maritime Cargo Survey ․ Harbor-to-Harbor Transport of Coastal Traffic Survey Cargo
In Korea, a nation-wide Cargo Origin and Destination Traffic Survey is held every five years based on Article 12 (National Transport Survey) of National Transport System Efficiency Act, and Article 7 (Logistics Status Survey) of the Framework Act on Logistics Policies. The scope of the logistics survey is being gradually expanded to include a cargo unit load survey, logistics route survey, and logistics storage survey. Through the survey, a survey method is designed and conducted, and the results shed light on the current status of companies, cargo transport performance, cargo logistics route, cargo vehicle movement patterns, and practices of operating logistics storages. Through this, a cargo database such as cargo origin and destination traffic, logistics route for each product, traffic for each logistics centers are finally created to understand logistics patterns. DBs such as these serve as foundational data for the establishment of transport plans including the national basic transport network plan, medium-term transport facility plan,
Chapter 3. Institution and Operation of Logistics in Korea 89 plans to set up indirect social capital facilities for transportation, location plans for logistics facilities, and designing an efficient national logistics network strategy.
3) Logistics-related Organizations
Korea's logistics policy is designed by various organizations. Specifically, The Ministry of Land, Infrastructure, and Transport (formerly known as Ministry of Construction and Transportation), the Ministry of Oceans and Fisheries, the Ministry of Commerce, Industry, and Energy, and the Ministry of Agriculture and Forestry participate in policy design. The roles and responsibilities of each agency are listed in the figure below. Logistics policy can generally be divided into logistics complex facilities, logistics operation, logistics industry, green logistics, and international logistics. The reason why various agencies participate in the logistics policy design is due to its influence over various fields within the industry, transport, and economy. The Ministry of Construction and Transportation (currently known as the Ministry of Land, Infrastructure and Transport) has been at the center of the logistics policy design to this day. The Ministry of Land, Infrastructure, and Transport mainly deals with inland transportation and logistics-related projects, notably managing logistics centers such as cargo terminals, ICDs, and logistic complexes, and researching and developing comprehensive logistics information networks and logistics equipment standard pallets. The Ministry of Commerce, Industry and Energy is in charge of establishing delivery centers and a common delivery complex that has a direct influence on industries. The Ministry of Oceans and Fisheries is responsible for managing logistics and its harbor facilities. The Ministry of Agriculture and Forestry deals with logistics related to the agricultural industry such as logistics of agricultural and livestock products, while KORAIL participates in logistics policy design for comprehensive railroad logistics stations and railroad information networks.
90 2015 Knowledge Sharing Program Ⅲ
Agency Responsibilities Logistic Complex Logistics Logistics Green International Category Facility Management Industry Logistics Logistics Provide Expand Low Build Logistics Comprehensiv Pollution Harbors and Ministry Centers incl. e Logistics Cargo Cars, Airports, of Cargo Information Transportati Hazardo Complex Land, Terminal, Network, on, Storage us Transportati Infrastr ICD, Logistics Logistics Management Material on ucture, Complex, Equipment/St , Cargo s Brokerage, and Air Cargo andard pallet, Transportati Transpor North-Sout Transpo Terminal, Logistics on t h Border rt Urban Technology Brokerage Manage Logistic Logistics Development ment Complex Facility through CVO Introduce Logistics Information System, Check Ministry Build Local financial SCM, POS Northeast of Delivery Support to Systems, Pipeline Commer Centers or Pipeline Purchase Logistics Constructio ce Common Construc Standard Bar Support, n Project, Industry Delivery tion Codes, Standard Free Trade and Complex Standard Package Area Energy pallet, Size Standard Logistics Equipment Develop Harbor Expanding Maritime harbor and Management Coastal Transpor Ministry nearby Information Express t of Sites, System, Routes, Industry Harbor Oceans Maritime Standardizati High-speed , Constructio and Logistics on of Container Loading n Fisherie Center, Maritime ships, Large and s Wholesale Products Cargo Unloadin Market for Logistics, Vessels, g Cargos Maritime Automation Manage entering
Chapter 3. Institution and Operation of Logistics in Korea 91 Loading and Unloading Products Harbors Services in Harbors Standardiza Agricultural tion of and Livestock Packaging Logistics Establish Agricultural Ministry Center, Comprehensiv Products, of Wholesale e Agricultural Automated Agricult Market/Joint Products Loading and - - ure and Market for Logistics Unloading, Forestry Agricultural Information Direct Products, Rice Network Transaction Processing s of Complex Agricultural Products Railroad Small-Tran CY, sportation, Comprehensiv Establish Expand e Railroad Railroad KORAIL Pallet Cargo - - Logistics Information Vehicle, Station, Network Container Cement Silo, Cargo Vehicle Manage Establish Import and Korea Manage Customs Export Customs Bonded Information Clearance Service Warehouse Network and Customs Free Zone Source:Shin, Dong Sun(2002), Research on Government Functions in the field of Logistics and Establishing Responsibilities, The Korea Transport Institute
When reviewing the conditions of logistic infrastructure in Korea today, the following can be observed: it encompasses 105,673 km of the entire road network and 2,112 km of the entire railroad network in Korea. Also, there are 5 ports which include Incheon and Pyeongtaek located near the capital area, Busan and Ulsan located in the Gyeongnam area, and Gwangyang located in the Jeolla area. There many international airports located throughout Korea. Incheon International Airport and Gimpo International Airport are located in the capital area and Cheongju International Airport is located in the inland of Korea. Furthermore, Daegu International Airport and Gimhae International Airport are located in the Gyeongsang District, Mokpo International Airport is stationed in the Jeolla District, and Jeju International Airport is located in Jeju Island. The Korean government developed these roads, railroads, ports, and international airports centered around hubs.
Current Conditions of Logistic Infrastructure in Korea
Chapter 3. Institution and Operation of Logistics in Korea 93 1. Logistic Complex and Axis
Korea has been establishing logistic policies by focusing on hubs. The National Logistic Plan suggests logistic policies encompassing 6 axes that connect 5 logistic complexes. Each logistic complex is connected through transportation infrastructure with combined freight. In other words, this refers to having not one but two or more transportation means for each logistic complex. The following figure is a concept of logistic development centered around hubs and axes. Concept of Logistic Complex and Axis Development in Koreas
Source: Dong-sun Shin (2002), Studies Related to Establishing Government Laws and Roles, Reconstitution of Korea Transport Institute
1) Inland Cargo Bases
The Korean government established the enactment of the Goods Distribution Promotion Act and inland cargo bases (Composed of Inland
94 2015 Knowledge Sharing Program Ⅲ Container Depot (ICD) and integrated freight terminal). Under the Goods Distribution Promotion Act, an integrated freight terminal and general terminal are determined based on the need of the public cargo terminal or specialized terminal according to the characteristics of the users. The existing cargo terminals mainly perform functions suggested by the cargo shipper and cargo transportation company (owner of cargo transportation) and thus, the roles of the cargo facilities require improvement. Due to this reason, the government decided to develop inland cargo bases that facilitate the roles of integrated freight terminals with the objective of strengthening the trans-shipment function which is a fundamental aspect of cargo terminals.
The inland cargo bases are categorized into integrated freight terminals and ICDs which have been established near 5 major areas. Main facilities of the integrated freight terminals are as follows.
① Cargo handling center, ② delivery center, ③ railroad Integrated transportation handling site, ④ maintenance utility Cargo facilities, ⑤ parking lot, ⑥ gas station, ⑦ washing Terminal facilities ① Container loading site, ② container work site, ③ sash ICD equipment site, ④ maintenance utility facilities, ⑤ Parking lot Inland cargo bases have been through the private sector project based on Private Investment Promotion Law and the project initiatives are as follows. It is composed of a plan confirmation stage, an execution stage, and a construction stage. Validity inspection and location selection has been conducted by the Ministry of Construction and Transportation which means the construction plans for an inland cargo complex has been facilitated by government bodies.
Chapter 3. Institution and Operation of Logistics in Korea 95 Procedures of Private Investment Projects Managed by Government
Source: Dong-sun Shin (2002), Studies Related to Establishing Government Laws and Roles, Reconstitution of Korea Transport Institute
The basic facilities of inland cargo bases including ramps, railroad entrances, and waterworks have been established and provided to the businesses by the government. The government provided a guarantee to finance the entire expenses of land purchases and also offered 30% of total private investments (excluding expenses for land purchases).
Terms and conditions for loans were set as with a 15 year payment period after a 5-year grace period in order to minimize the financial burden of companies. In addition, government reduces 50% of special surtax imposed on income generated by site creation and transfer of buildings and approved 15% of total investments as the reserve funds for investment. Also, tax benefits including corporate tax exemption have been provided.
2) Logistic Complex Facilities
96 2015 Knowledge Sharing Program Ⅲ Requests have been increasing from various changes based on the establishment of the Ministry of Land, Transport and Maritime Affairs in 2008 including added problems associated to logistics system efficiency in three aspects which are land, sea, and airway. Since 2008, the Korean government established a Law Related to the Development and Operation of Logistic Facilities in order to come up with measures to develop an efficient logistic network through the prevention of overlapping and inefficient expenses and the supply of reasonable logistic facilities. In addition, they are currently establishing the Comprehensive Plan for Development of Logistics Facilities based on Article 4 of the same law. The Comprehensive Plan for Development of Logistics Facilities is a 5 year plan related to development of logistics facilities for “Reasonable Development and Placement of Logistics Facilities and Efficiency of Logistics System.” This comprehensive plan for logistic complex facilities has the characteristics of having an interconnecting plan for logistic facilities to achieve the basic direction of the National Logistics Basic Plan. The first plan has been established with the time scope of 2008 to 2012. The second plan (2013-2017) has been established and is being implemented with comprehensive plans to control overall businesses and reestablishing the direction of initiatives of logistics facilities policies planned, implemented for 5 years by analyzing the outcome from the existing plans and applying the new national, economic, and social changes after the end of the first plan.
The Comprehensive Plan for the Development of Logistic Complex predicts the demands of logistic facilities to assess the amount of supply. In order to do so, the following items must be implemented: ① Defining type and subject of logistic facilities, ② classifying regional units, ③ measuring demands from domestic logistic facilities, ④ providing basic plans to systematically supply logistic facilities, ⑤ establishing plans to supply facilities for each regional unit. First, ① Definition of Type and Subject of Logistic Facilities are as
Chapter 3. Institution and Operation of Logistics in Korea 97 follows.
ㅇUnit Logistic Facilities: Smallest unit of logistics facilities which perform logistic activities independently includes Railroad CY4), General Cargo Terminal, Home Delivery Center, and Warehouse ㅇ Cluster Logistics Facilities: Logistics facilities that have been installed with more than two unit logistics facilities such as ICD, integrated logistics terminal, logistics complex, and railroad CY. ㅇ Connecting Logistics Facilities: Transportation facilities including roads and railroads that provide easy cargo transportation among logistics facilities.
5) ㅇ Supply and demand is estimated through analyzing the unit logistics facilities (railroad CY) which affect the demand similar to clustered logistics facilities, international logistics facilities (logistics complex near ports and airports) which is systematically supplied based on administrative functions, and clustered logistics (integrated logistics terminal, logistics complex, and market for agricultural & marine products) facilities among domestic logistics facilities. ㅇ Out of these, suggestions for future supply and demand of logistics complex near ports and airports and market for agricultural & marine products are in place according to various related plans. Therefore, this plan accepts the above original information. ㅇ Targeted facilities for estimate of demand: inland container processing facilities (ICD, Railroad CY) and general cargo processing facilities (integrated logistics terminal and logistics complex).
4)container yard 5) Ministry of Land, Transport and Maritime Affairs (2012), Quotation of Definition in the “Second Comprehensive Plan of Logistics Facilities”
98 2015 Knowledge Sharing Program Ⅲ Next, ② Zone classification system is composed of a total of 250 zones (cities, counties, and boroughs) similar to the classification system of national transportation DB. As for Korea, 16 cities and counties and 42 medium-sized districts have been classified. For the next step of ③ demand estimation of logistic facilities in Korea, the demand was estimated by dividing inland container processing facilities and general cargo processing facilities. As for inland container processing facilities, forwarded cargo related to complexes near ports were excluded from estimated values of import/export containers in the target year.
Estimation of the Demand of Area for Inland Container Processing Facilities
Source: Dong-sun Shin (2002), Studies Related to Establishing Government Laws and Roles, Reconstitution of Korea Transport Institute
By estimating the total supply from this, the demand of area and distribution area per region is estimated to be distributed for each region. The estimated method and direction for general cargo processing unit is as follows: the general cargo processing facilities are divided into two categories: a cargo handling center and a delivery center. This is because
Chapter 3. Institution and Operation of Logistics in Korea 99 accumulated trans-shipment and collective delivery are needed in order to process cargo. Therefore, the quantity of goods for trans-shipment and goods for collective delivery are divided into daily available goods. Then the area and number of buildings are calculated to come up with the total demand of area. Although the construction of the integrated logistics terminal has been completed during the existing plan, this plan has expired so it is presumed that there will be no additional supply for an integrated logistics terminal. Therefore, the processing amount of general cargo in the integrated logistics terminal has been eliminated for estimation of the processing amount for general cargo processing facilities.
Estimation of the Demand of Area for General Cargo Processing Facilities
Source: Dong-sun Shin (2002), Studies Related to Establishing Government Laws and Roles, Reconstitution of Korea Transport Institute
For the estimated data for the quantity of cargo OD goods in the target year, the total quantity of goods with general cargo that surpass 100 km from the entire cargo OD data of the National Transportation DB, of the target year to calculate the cargo handling centers, has been estimated. For collective delivery centers, the total quantity of goods was estimated by
100 2015 Knowledge Sharing Program Ⅲ using the inflow of general goods from under 50 km and inflow of general goods from over 50 km in the cargo OD data of the National Transportation DB of the target year. The plan for logistics facilities have been prepared through this process and the plan to allocate supply per region will be drawn up by establishing policy direction. The plan for national allocation of logistics facilities are as follows.
Overall Layout of the Logistics Facilities in Korea
Source: Ministry of Land, Transport and Maritime Affairs (2013), “Second Comprehensive Plan for Development of Logistics Facilities” (2013~2017)
Chapter 3. Institution and Operation of Logistics in Korea 101
Current Condition of Logistics Facilities Per Region Numb Cargo Cargo er of Processing Processing Region Type of Facilities Total Area Facilit Capacity Capacity ies (TEU) (TON) Gang Logistics Complex 1 173,883 0 662,000 won ICD (Inland Container 1 753,127 1,370,000 0 Depot) IFT (Integrated Freight Gyeo 1 381,736 0 5,810,000 Terminal) nggi Logistics Complex 3 1,028,320 0 3,921,000 Port Terminal 2 704,000 1,455,000 0 Cargo Car Terminal 4 104,406 0 1,397,000 ICD (Inland Container 1 951,940 1,400,000 0 Gyeo Depot)) IFT (Integrated Freight ngna 1 316,944 0 3,710,000 Terminal) m Port Terminal 3 2,081,000 4,580,000 0 Cargo Car Terminal 1 21,574 0 342,000 ICD (Inland Container 1 456,499 330,000 3,570,000 Depot)) Gyeo IFT (Integrated Freight 1 460,000 0 0 ngbuk Terminal) Logistics Complex 1 225,411 0 870,000 Cargo Car Terminal 2 118,050 0 1,920,000 Gwan Cargo Car Terminal 2 75,066 0 965,000 gju Daeg Airport Terminal 1 844 0 30,000 u Cargo Car Terminal 3 114,410 0 1,667,000 Airport Terminal 1 2,765 0 55,000 Daeje Logistics Complex 2 1,022,756 0 1,760,000 on Cargo Car Terminal 2 119,798 0 1,922,000 Airport Terminal 1 17,646 0 259,000 Logistics Complex 1 206,408 0 786,000 Busan Port Terminal 8 2,712,653 11,780,000 0 Cargo Car Terminal 1 85,667 0 0 Airport Terminal 1 126,470 0 1,440,000 Seoul Logistics Complex 1 560,694 0 1,946,000 Cargo Car Terminal 3 223,879 0 3,641,000 Logistics Complex 1 467,314 0 1,784,000 Ulsan Port Terminal 2 350,079 740,000 0
102 2015 Knowledge Sharing Program Ⅲ Cargo Car Terminal 1 41,593 0 756,000 Airport Terminal 8 292,269 0 3,870,000 Inche Logistics Complex 1 302,888 0 260,000 on Port Terminal 6 978,880 3,233,000 0 Cargo Car Terminal 3 119,981 0 1,904,000 ICD (Inland Container 1 520,782 340,000 0 Depot)) Jeolla IFT (Integrated Freight 1 520,782 0 4,700,000 nam-d Terminal) o Airport Terminal 2 3,915 0 66,000 Port Terminal 3 2,279,259 2,255,000 0 Cargo Car Terminal 3 77,087 0 424,000 Logistics Complex 1 189,151 0 735,000 Jellab Port Terminal 1 192,000 300,000 0 uk-do Cargo Car Terminal 1 23,924 0 380,000 Jeju Airport Terminal 1 17,574 0 327,000 Chun Logistics Complex 1 463,517 0 1,770,000 gnam Cargo Car Terminal 2 55,371 0 879,000 ICD (Inland Container 1 480,736 350,000 2,360,000 Depot)) IFT (Integrated Freight Chun 1 480,000 0 0 Terminal) gbuk Airport Terminal 1 2,257 0 38,000 Logistics Complex 2 445,512 0 1,725,000 Cargo Car Terminal 2 26,588 0 492,000 Source: Ministry of Land, Transport and Maritime Affairs (2013), “Second Comprehensive Plan for Development of Logistics Facilities” (2013~2017) In 2015, the total number of logistics facilities in Korea is 96 and the number and type of facilities are as follows.
Current Conditions of Logistics Facilities in Korea Type of Facilities No. ICD (Inland Container Depot)) 5 IFT (Integrated Freight Terminal) 5 Airport Terminal 16 Logistics Complex 15 Port Terminal 25 Cargo Car Terminal 30 Total 96
Source: Restructured statistical data from the National Logistics Integrated Information Center (http://www.nlic.go.kr)
Chapter 3. Institution and Operation of Logistics in Korea 103 Section 3. Logistic System
1. Logistics Industry
1) Development in Logistics Industry
The logistics industry in Korea is becoming more renown every year. The Korean government has selected the logistic industry as one of the 7 major promising service industries which will lead economic development in Korea. As of 2014, the Korean government set a goal for the logistics industry to achieve total sales of 76.4 billion USD and to provide jobs for 587,000 people in 184,000 companies. This goal amounts for 6% development based on total sales of the nationwide logistic market. As for inland logistic infrastructure, the road network accounts for 97.7% of total traffic volume and the railroad network amounts to 2.3%, and therefore, the road network is seen as the backbone of the Korean logistics system. The reason why the road network takes a high proportion in traffic volume is because there are significant demands for parcel delivery service. As for marine traffic volume, import volume is 3 times higher than export volume and therefore, most of import goods are delivered via the marine route. Container traffic volume in the Busan Port is in 6th position in the world and in particular, trans-shipment traffic volume accounts for more than half of total traffic volume. Regarding logistics through airways, export and import traffic volume are of a similar level and in particular, Incheon International Airport is ranked 2nd for processing international airway traffic volume.
104 2015 Knowledge Sharing Program Ⅲ Current Status of the Logistics Industry in Korea
Source: Logistics Policy Division, Ministry of Land, Infrastructure and Transport, Development History of Korea's Logistics Industry, 2016.3.30
2) Advanced Logistic Technologies
As logistics industries are being developed, advanced logistic technologies are consistently being introduced. Cross-docking is an example of advanced logistics technology. This technology is being used to deliver goods quickly and accurately. Cross-docking is a technology which enables inbound trucks to unload goods and have the goods sorted and classified by a conveyer belt system. The good are sorted and immediately loaded on to outbound trucks, obviating the need for warehousing. By using this technology, warehouses are rarely required and therefore, this technology enhances the efficiency of the time and the cost of logistics simultaneously.
Chapter 3. Institution and Operation of Logistics in Korea 105 Cross-docking System
In Korea, the logistics complex in Jangji-dong is located in the central part of Seoul and its land price is very expensive. However, if cross-docking technology is used, the use of a warehouse would be obviated and therefore, it may achieve maximum effect in the limited land space.
2. Logistic Information System
1) Logistic Information System
Logistics related informatization policies in Korea can be described as the comprehensive logistic information business conducted by the government. To define comprehensive logistic information system simply means this: a system which connects relevant systems including finance, trade, and customs with the individual cargo information system in land, sea, and airway. By establishing this comprehensive logistic system, it becomes possible to integrate and
106 2015 Knowledge Sharing Program Ⅲ automate cargo transportation tasks to provide an integrated logistic process service which reduces logistics costs. Once logistic tasks are separately processed, its efficiency is lowered. In order to obtain maximum effects with minimum costs, the integration of logistics is crucial. In order to integrate a logistics system, standardized logistics related information must be used.
Overview of Comprehensive Logistics Information Network
Source: Dong-sun Shin (2002), Study related to Laws and Roles of Government, Korea Transport Institute
Chapter 3. Institution and Operation of Logistics in Korea 107
Staged Plans to Establish Comprehensive Logistic Network Short-Term Mid-Term Long-Term Category 1996 ∼ 1997 1998 ∼ 2000 2001 ~ - Establishment of - Expansion of service - Make it super fast and comprehensive logistic - ultimedia/international Objective advanced information network service - CALS/EC service - Trial service - Commercial service - Development of handling civil affairs and implementation of its trial service - Commercialization and - Realization of e-commerce - Development of new expansion of - Establishment of service in meritorious E-document exchange integrated DB service section service (civil affair - Provision of multimedia - Establishment of public DB handling and logistic service Service preferentially exchange) - Provision of supporting - Basic design of cargo - Expansion of DB for service to establish transportation service and private sector optimized cargo implementation of its trial - Commercialization of transportation plans service cargo transportation - Integrated internet service - Establishment of additional service service system and implementation of its trial service - 44 types in government - 39 types in government - Supplementation of E-document/ sector sector e-documents and standardized form - 58 types in private sector - 25 types in private sector additional development - Establishment of CALS - Establishment of EDI relay - Rendering CALS/EC - Multimedia DB service System system - Establishment of (introducing advanced - Text-centered DB service integrated DB DBMS) - Connecting super fast network to arterial - Arterial network for digital - Broadband ATM network networks device only - Super speed carrier Telecommunicatio - High speed - General carrier network network n network communication carrier - Communication node - Addition of 5 network between Seoul and Busan communication nodes - Addition of 4 communication node - Expansion of Seoul - Additional establishment - Establishment of Seoul Central Center Computing center of 4 local centers in Central Center - Establishment of Busan central cities Local Center Cargo - Establishing environment transportation - System-based - Expanding and to provide advanced information establishment stabilizing the system service system - Expansion of relevant network connection - Connection between major - Connection of existing networks logistic network - Expansion of oversea Connection - Connection between - Connection of core logistic network between networks existing logistic networks national network connection - Connection between - Expansion of oversea oversea logistic networks logistic network connection
108 2015 Knowledge Sharing Program Ⅲ In 1994, the “Basic Plan for Cargo Distribution System Enhancement” was initially established, followed by the “National Computing Adjustment Committee” that was organized in 1995. Then, the Korean government designated the comprehensive logistic network as the national computer network, then this area of business was implmented in full scale. In order to establish an efficient logistic information network, the Korean government enacted laws and regulations such as the Goods Distribution Promotion Act. This Act authorizes relevant content including e-documents and selection of business operators to have full authority and in turn, the“Basic Plans for a Comprehensive Logistic Information Computer Network” was enacted in 1996 through consultation and agreement between government bodies including the Ministry of Information and Communication based on research conducted by the Korea Transport Institute and Korea Information & Communication Co., Ltd.
Chapter 3. Institution and Operation of Logistics in Korea 109
Major Services and Staged Establishment Plans
Short-Term Mid-Term Long-Term Category 1996 ∼ 1997 1998 ∼ 2000 ~ 2001 Establishment of To make the system Objective service provision Expansion of service advanced and extremely system rapid. ‧ Preferentially applying forms regarding import/export domain: ‧ Apply to all documents civil affairs documents related to civil affairs: related to entry and including civil affair departure based on documents related to ‧ Introduction and Electronic ports and airports, cargo transportation Data application of CALS/EC customs, and importing ‧ Apply to all logistic Interchange service system and exporting goods related tasks: all (EDI) service ‧ Multimedia service ‧ Expansion and document forms related supplementation for to import/export and existing services domestic cargo ‧ Development of new transportation service in meritorious service section ‧ Development and expansion of private DB ‧ Establishment of ‧ DB connection service public DB ‧ Provision integrated for oversea networks Database (DB) preferentially DB service: domestic ‧ Establishment of DB for service ‧ DB connection service and international tracking cargo between relevant ‧ Multimedia service ‧ Expansion of finding networks Information Provider (IP) ‧ Basic design and trial service ‧ Real-time cargo and ‧ Promote vehicle tracking service Cargo track ‧ Cargo tracking service informatization of by using ITS/CVO and between major logistic transportation major logistic complex technology complexes availability facilities ‧ Support service to ‧ Vehicle maintenance information ‧ Technology establish optimized service service development for cargo cargo transportation and vehicle tracking plan system
Source: Dong-sun Shin (2002), Study related to Laws and Roles of Government, Korea Transport Institute
According to the basic plans described above, an Electronic Data
110 2015 Knowledge Sharing Program Ⅲ Interchange (EDI) system has been established by Korea Information & Communication Co., Ltd. to start its trial service. Also, the comprehensive logistic information network establishment business has been implemented with 3 stages and the plans for each stage is described in the table above. As for the comprehensive logistic information system, even though there is a common consensus for its need for informatization of transportation data, there are huge difficulties for distributing to small sized domestic transportation companies which have a small amount of initial investment. However, plans to reduce the burden for users by leasing CVO terminals with/without costs have been set and implemented. Since then, the logistic informatization process has been further developed due to the establishment of the Framework Act on Logistics Policies in 2008. According to Article 30 (Establishment of National Logistic Integration Database), it aims to provide 16 services by establishing an integrated national logistic DB, a hub which connects logistics related information between private and government domains (such as transportation in land, sea, and airway and customs, national logistics portal, decision making support, multidimensional information analysis, and an inland logistic approval system. Specifically, this aims to integrate government bodies’ information based on real-time cargo and logistics information, hazardous substances, and geographical information and to incorporate ocean port logistic information and to establish international logistic information center (KLIC) and a common use system for import/export logistics information. Pertaining to each stage of this plan, connection and integration of the existing unit network as the first stage (2008 to 2009); in the stage 2, establishment of a portal system based on the achievements from stage 1 (2010 to 2011); and making each system advanced through the establishment of an approval system
Chapter 3. Institution and Operation of Logistics in Korea 111 and customized system as stage 3 (2012).
2) Standardization of Logistics
Standardization of logistics is the activity to enhance logistic efficiency through simplification, specialization, standardization, and unitization of logistic factors including logistic equipment and cargo, types of external package, specification, structure, and logistic information. This process is crucial to achieve efficient handling and transportation of cargo. Therefore, the government must provide standards and facilitate related institutes, companies, and individuals. As for the unitization of specification, a container is the representative example. A container is the representative type of a unit loading method which enables complex transportation and integrated transportation and also, a container is an effective system for reducing load time and preventing damage of cargo. In addition, it is relatively safe against theft and damage, and provides an advantage in reducing insurance premium and packing costs. Specifications of containers are provided by ISO (International Organization for Standardization) and this specification is commonly used worldwide. The most representative transportation unit of containers is TEU (Twenty-foot Equivalent Unit) and FEU (Forty-foot Equivalent Unit). Another example of a loading method is a pallet. Unlike containers, different standards are applied to each country and in some countries standards do not exist. Therefore, providing a standardized size on a national level is required. If different specifications are provided per company, this may cause chaotic situations in the future.
Specification of Pallet
Type Korea Japan Europe United States 800×1,200 Pallet size (mm) 1,100×1,100 1,100×1,100 1,016×1,219 1,000×1,200
112 2015 Knowledge Sharing Program Ⅲ Source: Korea Pallet Association
Unitization of pallet specification will facilitate mechanization by using a crane and palletizer and help to determine appropriate rack size and height of a warehouse, as well as to enable standardization of the size of the cargo bed. As for package processing, standardization of package size, package strength, material, technique, and management is required but such efforts have not been successful thus far. In terms of informatization, it is required to participate in projects for barcode modification and technology introduction which are being facilitated worldwide. In addition, unification of a cargo item code and achievement of compatibility in documents including quotes is required. In Korea, standardization of logistics started from the 1970s, however, achievements have not been sufficient compared to advanced countries. Most standardization has merely been company-wide or organization-wide.
Chapter 3. Institution and Operation of Logistics in Korea 113 Section 4. Implication of Policies
1. Logistic Infrastructure (Hardware)
In Korea, the entire land was classified with regional units and major logistic complexes were selected for each regional unit in order to obtain nationwide logistic infrastructure. By selecting sub-logistic complex areas adjacent to each logistic complex, “Hub and Spoke” logistic complex facilities was established. This concept refers to necessary facilities to reduce the travel distance of logistics and to efficiently process import/export traffic volume between each region. Korea assesses the size of facilities with basic unit method along with selecting complex facilities for each region and considers the size of traffic volume. In order for Cambodia to advance its own logistic system to be like Korea’s, the selection of logistics complex facilities by dividing the whole nation into regional units is required. In addition, selection of axes which connect each logistic complex by considering current transportation facilities and traffic volume, along with expansion of transportation facilities is required. However, in order to assess specific size of facilities, logistics plans have to be established in the future.
2. Logistic System (Software)
Basically, the objective of logistics is to facilitate the flow of goods and the flow of goods can be facilitated under a standardized
114 2015 Knowledge Sharing Program Ⅲ and automated system. The Korean government has invested tremendously in standardization and the automation of logistics in consideration of such basic properties of logistics. In Korea, both the government and companies have strived to reduce logistics costs through Electronic Data Interchange, informatization of logistics, and standardization of logistics. Items to be prioritized in the Cambodian logistic system are e-documents and a logistics standardization system. However, systematic enhancement is also required since these systems can be realized through the establishment of IT infrastructure and agreement between each government body.
3. Cooperation between Public and Private Sectors
In the perspective of establishing logistic infrastructure and its system, along with policies related to logistics, establishment of relationships between government bodies (central government and local governments) and private companies is necessary. Government bodies must establish logistics related plans and policies, and facilitate direct participation of private sectors as well as to collect difference opinions. Through the harmonization and sharing of roles between public and private sectors, efficiency of the logistics system can be enhanced. The effects of various types of logistics policies collected by government institutions increase when collaboration with the private sector is achieved. For a successful outcome, the following must be established and operated: a logistics consultative group with government employees at the government institutions, employees who work at the businesses and facilities related to logistics, and academic professionals. Depending on the circumstances, such consultative groups needs to be established on a regional level, as well as on a central level.
Chapter 3. Institution and Operation of Logistics in Korea 115 There needs to be a system in place that discusses topics including changes related to logistics, issues between bodies, items for cooperation, and effects of current policies by holding meetings regularly under the leadership of government institutions. This system should apply to such topics for the establishment of policies and also provide subsequent feedback. Funds which are invested into the logistics project are generally covered by the following funding sources: government fund including local taxes and non-tax receipts, dependent fund including aid fund from central government and grant, various pensions and funds, regional development fund, leading from financial institutions, advances received and distribution price from urban development projects, local bond issuance, foreign loan, etc. However, is sensible to supplement financing through the rationalization of a system that can attract private funds to increase the effectiveness because government institutions cannot satisfy the demand for basic facilities related to logistics. To achieve this, systems for licenses and permits based on related laws, business sites, financing, right of management and the assurance of profits, and foreign exchange bonds should be used. In the long-term perspective, a private sector financing system and conditions should be established to invigorate foreign investments from foreign companies for logistics facilities. Korea has been striving to systemize a logistics system and invigorate its logistics industry on a national scale, and as a result, it has made amazing achievements. However, many issues were encountered along the way, encompassing: a lack of awareness, lack of professionals, and poor development of infrastructures. If such cases are analyzed and applied beforehand, this may promote prosperous improvement for the logistics industry in Cambodia.
116 2015 Knowledge Sharing Program Ⅲ 4. Korea’s experience and lesson
◦ Lacking awareness of the importance of logistics -> Awareness needs to be increased on a national level - Although there is significant level of contribution toward employment and economic growth, national awareness of the importance of logistics is insufficient. - Logistics facilities is recognized as unwanted facilities
◦ Lacking professionals in the field of logistics -> Government needs to provide support for an education system - Absence of professionals who have specialty and knowledge in the field of logistics - Lack of institutions, businesses, and programs to train and promote professional in the field of logistics - Lacking a combined network that consists of industries, academic institutions, and research institutions
◦ Poor development of infrastructure -> need continuous development of logistics complex and precise estimation of demand - Poor development of integrated logistics facilities and supply of logistics complex - Issues including overlapping development in same district and inaccurate estimation of demand when establishing development plans
◦ Excessive regulations -> vitalizing markets through deregulation is required - Road: approval system for cargo trucks, limiting drive for trucks with heavy cargo and long cargo, etc. - Port: compulsory pilotage standard, night pilotage standard, etc.
Chapter 3. Institution and Operation of Logistics in Korea 117 - Airport: approval system for flight cargo transportation fare, etc.
◦ Tax burden -> establishing plans to reduce taxes for logistic companies - Less favorable system compared to manufacturing industry (electric charges, comprehensive real estate holding tax, etc.) - Traffic generation charges are imposed for owned logistic warehouse - Not providing tax-free oil to cargo ships sailing along the shore
◦ Poor certification system -> establishing a certification system and providing incentives to outstanding companies - Supportive measures are insufficient for those who have acquired certification - Since similar logistics related systems are indiscriminately implemented, it requires to acquire unnecessary certification and generate maintenance costs
118 2015 Knowledge Sharing Program Ⅲ 2015 Knowledge Sharing Program Ⅲ Chapter 4. Logistics Development Strategy for Cambodia
)Kim Jonghak, Hong Kyoungsun, Park Bora(KRIHS) Jeon Chanseok (PTOW consulting) Lee Hangsook (Incheon University)
Summary
Logistics development strategies for this project will be presented with the categories of “hardware” including roads, railroads, and logistics complex and “software” including laws, systems, and the industrial system. As for the hardware strategy, national logistics centers in Cambodia and logistics axis which connects each logistics center have been suggested. Also, an outline of investment priority for these axes has been proposed. From the perspective of software, a basic plan on logistics and application plans for logistics related laws and organizations have been proposed in order to develop a logistics system in Cambodia.
Chapter 4. Logistics Development Strategy for Cambodia 119 Section 1. Basic Direction
1. Outline
Logistics development strategies for this project will be presented with the categories of hardware and software. Transportation structures including roads and railroads along with logistics centers that are the basic infrastructure for logistics and transportation, these fall under the category of hardware. On the other hand, software refers to elements other than hardware structures, such as systems, laws, and organizations which are required to transport domestic and international goods. The logistics system in Cambodia must be developed in accordance with the basic systematic connections between elements of hardware and software.
Direction for Development Strategies
120 2015 Knowledge Sharing Program Ⅲ 2. Hardware Improvement Plans for Logistics Development
As presented through the cases in Korea, logistics development strategies proposed at the initial development stage aim to select national logistics centers for each regional area and to design logistics axes which can connect each logistics center. For this project, the logistics axis which is centered around a logistics center and transportation infrastructure is to be defined as the hardware of the logistics system. Hardware improvement plans for Cambodia will be presented. below explains the concept of connecting Cambodian logistics centers and sub-complexes which can be considered as “Hub and Spoke.” The Cambodian government has established specific plans for transportation infrastructure including roads, railroads, airways, and ports. However, the Cambodian government lacks plans for a building logistics hub which can incorporate each of the elements described above. Therefore, we have strived to choose a desirable location of the logistics center and logistics axis by considering comprehensive factors including the direction of the master plan of the Cambodian government, population distribution, and traffic volume between each region.
Chapter 4. Logistics Development Strategy for Cambodia 121 Conceptual Diagram for Cambodian Logistics Complexes
2. Hardware Improvement Plans for Logistics Development
In order to achieve development of the logistics system in Cambodia, improvement on the elements of hardware including roads, railroads, and logistics centers as well as software factors including systems and the logistics industry should be implemented simultaneously. The software required to develop a logistics system has been categorized into 4 factors. First of all, a national basic plan on logistics should be established. As previously mentioned, establishment of a national basic plan on logistics” should be prioritized as Cambodia currently lacks a blueprint for logistics system development. A national basic plan on logistics includes
122 2015 Knowledge Sharing Program Ⅲ mid/long-term strategies, visions for logistics system development, and establishment of objectives to prepare changes in elements for the logistics environment going forward. Second of all, the establishment of laws relating to logistics is required to plan and implement logistics policies because legal grounds are mandatory elements. The Framework Act on Logistics Policies and Distribution Industry Development Act can be considered fundamental laws relating to logistics. Integration and modification of logistics related policies, items that make the logistics system more efficient, terms to improve competitiveness of the logistics industry, and other major factors must be included in the Framework Act on Logistics Policies. In addition, the Distribution Industry Development Act must include plans for developing the distribution industry, establishing infrastructure for the distribution industry, and terms to make distribution functions more efficient. Thirdly, policies for facilitating the logistics industry must be established. Above all, establishing a logistics information system and logistics standardization should be prioritized in order to foster the logistics industry. Lastly, relevant organizations which can implement logistics related tasks that have been previously mentioned such as the establishment of a national basic plan on logistics, enactment of major laws relating to logistics, and the establishment of policies for the logistics industry are required. An organizational system should be improved to implement logistics policies in the most efficient way by reviewing current logistics related organizations in Cambodia.
Software Elements that Need to Be Improved
Chapter 4. Logistics Development Strategy for Cambodia 123 Section 2. Improvement Strategies for Logistics Infrastructure
1. Outline
In order to select the location of logistics centers and logistics axes which are considered as the core logistics infrastructure, we have conducted the processes described in Figure 4-4. At the first stage, existing master logistics related plans in Cambodia has been reviewed and a GIS analysis for regional demographic distribution has been implemented in order to understand the framework of the existing logistics network conditions and current demographic distribution situation in Cambodia.
Flowchart for Selecting Logistics Complexes and Axes
124 2015 Knowledge Sharing Program Ⅲ In the second stage, domestic and international traffic volume was analyzed. Origin-destination traffic analysis has been conducted to understand the pattern of domestic traffic volume in Cambodia. For international traffic volume, international trade volume for Thailand and Vietnam has been analyzed. In the third stage, Cambodia has been categorized into 6 regional domains to select a logistics complex for each domain based on the analysis results from first and second stages. In the fourth stage, logistics axes which connect 6 regional domains have been selected. In order to select logistics axes, O/D traffic volume between six regional domains has been analyzed.
2. Analysis of Network and Demographic Distribution in
Cambodia
1) National Growth Center and Road Network Plans
MPWT (Ministry of Public Work and Transportation) of Cambodia has established plans to develop a road network in 2004 and terms of the plans were revised according to the NSDP (National Strategic Development Plan). Growth centers and national network frames established in Cambodia are described in . Cambodia has selected 6 regions (Phnom Penh, Sihanoukville, Battambang, Siem Reap, Stung Treng, and Kampong Cham) as the major hubs for economic growth. In the figure below, growth centers with Phnom Phnh at the center are connected with an arterial road axes (NR 1 to NR 7). Isolated provinces are connected to arterial axes with sub-axes to facilitate balanced development. With Phnom Penh as the center, Cambodia attempted to design national land development by connecting major growth centers nationwide with a radial road network system. Thus, these major growth centers should be reviewed when selecting logistics complexes.
Chapter 4. Logistics Development Strategy for Cambodia 125
Existing Road Network Conditions in Cambodia
Major Growth Centers Roads Connecting Hubs PHNOM PENH NR 1, 2, 3&4, 5, 6, 7 P-SIHANOUK NR 3&4 BATTAMBANG NR 5 SIEM REAP NR 6 STUNG TRENG NR 7 KAMPONG CHAM NR 7
National Growth Axes in Cambodia
Source: IRITWG, Overview on Transport Infrastructure Sectors in the Kingdom of Cambodia, 2015
2) Demographic Distribution Analysis
126 2015 Knowledge Sharing Program Ⅲ Population size and traffic volume data can be considered fundamental data which can describe the movements of people and products. For this project, traffic volume data in 2012 has been used to grasp traffic patterns between 24 provinces in Cambodia. The highest population size was found in Phnom Penh and Kampong Cham among 24 provinces, followed by Kandal, Battambang, and Siem Reap. As for the analysis results of traffic volume, Phnom Penh has the highest figure, followed by Kandal and Kampong Cham. This pattern is similar to the population size pattern.
Population Size and Traffic Volume for Each Province
describes the road network in Cambodia and demographic distribution for 24 provinces. As a result of assessing population size and distribution for each province, many people resided in southern areas adjacent to Phnom Penh, including Kampong Cham, and border areas between Cambodia and Thailand including Battambang and Siem Reap. In addition, many people were clustered in the area around NR5 (Phnom Penh – Battambang) and NR6 (Phnom Penh – Siem Reap) which are the main roads connecting these two major population concentrated regions.
Chapter 4. Logistics Development Strategy for Cambodia 127 Demographic Distribution for Each Province
Population and Traffic Volume for Each Province Province Population (2015) Daily Traffic Volume (2012, %)6) PHNOM PENH 1,835,100 15.6 KAMPONG CHAM 1,741,400 10.1 KANDAL 1,443,100 14.2 BATTAMBANG 1,215,600 5.9 SIEM REAP 1,096,500 5.6 PREY VENG 983,200 5.8 TAKEO 886,100 6.5 BANTEAY MEANCHEY 806,800 3.7 KAMPONG SPEU 797,800 4.4 KAMPONG THOM 684,800 4.1 KAMPOT 625,500 4.8 KAMPONG CHHNANG 542,700 4.5 SVAY RIENG 503,400 2.1 PURSAT 447,500 1.8 KRATIE 376,900 2.4 P-SIHANOUK 272,900 1.7 ODOR MEANCHEY 252,800 0.8 PREAH VIHEAR 196,700 1.0 RATTANAK KIRI 179,500 0.8 KOH KONG 149,500 1.9
Note: Generated traffic volume has been calculated as the ratio of the traffic volume of each province to total traffic volume
2. Domestic and International Traffic Volume Analysis
1) Traffic Volume Analysis for Each Region
As a result of analyzing traffic pattern from Phnom Penh to other regions, areas adjacent to Phnom Penh have shown a higher rate of traffic volume. When analyzing the traffic pattern based on geographical directions, south-west axis (Sihanoukville - Angkor Borei) and north-west axis (Battambang – Siem Reap) have shown higher traffic volume than other axes. It has been estimated that traffic volume will increase in the future but major traffic axes will not be changed significantly. It is also anticipated that traffic volume in the north-west axis may continuously be increased with Phnom Penh as the center rather than the south-west axis in the future.
Traffic Pattern in 2012 (Left), Expected Traffic Pattern in 2020 (Phnom Penh – Other Regions; Right)
6) This is the proportional traffic volume based on the total traffic volume.
Chapter 4. Logistics Development Strategy for Cambodia 129 When expected traffic volume in 2020 and 2025 is analyzed based on the origin and destination (O/D) traffic volume for 24 provinces in 2012, whereas traffic volume around the capital area was the most significant in 2012, traffic volume between the border area between Cambodia and Thailand including Battambang and Siem Reap is expected to significantly increase in 2020. In 2025, a significant increase in traffic volume may be shown in the axis between breadbasket of Phnom Penh (Kampong Cham and Kratié) and Svay Rieng adjacent to the Vietnam border. When the traffic volume between each province of Cambodia is demonstrated as the axes, it can be shown as below. According to the figure below, traffic volume has a radial axis structure which stretches to nationwide regions with Phnom Penh as the center. In particular, higher traffic volume is shown in the north-west axis which stretches from Phnom Penh to the Thailand border area, the south-west axis in which Sihanoukville port is located, and the south-east axis which reaches the Vietnam border area.
Expected Traffic Volume Between Each Province
Expected Traffic Volume in Expected Traffic Volume in Traffic Volume in 2012 2020 2025 In addition, abundant traffic volume is shown in the axes which connects the northwest and northeast provinces located close to the Vietnam border. It is recommended that Cambodia establish plans for logistics complexes based on the traffic volume analysis described so far. The result of
130 2015 Knowledge Sharing Program Ⅲ conducting a comprehensive analysis for traffic volume in 24 provinces is shown in below. Higher correlation pertaining to the traffic volume is shown between the northwest regions including three provinces (Bantei, Manchai, and Battambang) located near the Thailand border. Also, higher correlation of traffic is shown between the southeast regions including Phnom Penh as the center, Kampong Cham, and Svay Rieng etc.
Analysis for Traffic Volume Patterns in 24 Provinces
2) International Traffic Volume Analysis
(1) Major Facilities in Border Regions
Cambodia shares its border with Thailand, Laos, and Vietnam. Major facilities in border regions which function as the pathway for international activities are shown in the following figure. Entrance points to Cambodia other than the border areas of Siem Reap International Airport, Phnom Penh International Airport, and Sihanoukville International Airport.
Chapter 4. Logistics Development Strategy for Cambodia 131 Major Border Region Facilities in Cambodia
Source: KINGDOM OF CAMBODIA, Cambodia Trade Integration Strategy 2014-2018, 2014
There are multilateral border checkpoints in Preah Vihear around the Laos border and Ratanakiri, Mondulkiri, Svay Rieng, and Kampot which are located at the Vietnam border. Bilateral border checkpoints are located in Banteay Meanchey and Koh Kong which are placed around the Thailand border and in Stung Treng which is located near the Laos border as well as in Svay Rieng, Prey Veng, Kandal, and Takéo. It has been shown that border checkpoints are located around the Vietnam border which occupies the largest border line in Cambodia.
(2) Logistics Passage and Trade Volume
As for the international logistics axes in Cambodia, it can be categorized as follows:
1. Western Cambodia-Poipet-Bangkok 2. Central/Eastern Cambodia – Bavet-Ho Chi Minh
132 2015 Knowledge Sharing Program Ⅲ 3. Central Cambodia- Mekong- Saigon Port to Cai Mep 4. Phnom Penh- Sihanoukville Current Logistics Passage in Cambodia
Delivery time to reach Sihanouk Port is about 2 to 3 days and delivery time to reach Cai-Mep Port in Vietnam is about 4 to 5 days. In the above figure, number 2 and 3 mean the axes which connect to the ports in Vietnam. Through these axes, Cambodia can deliver freight to overseas countries including the United States, European countries, and China. Since Cai-Mep International Port has high logistics demands, this port can provide relatively reasonable carrying charge compared to other ports. Therefore, many SEZs around Phnom Penh export to other countries by using the axis 2 and 3. When considering trade volume for each axis, the axis of Sihanoukville takes up about 73% of trade volume in total. This may be because the SEZ located in Sihanoukville imports base materials and exports finished products at the same time within Sihanoukville. The main country to import and export from/to Sihanoukville is China. The biggest importing country is China, followed by Indonesia,
Chapter 4. Logistics Development Strategy for Cambodia 133 Taiwan, Korea, Thailand, Malaysia, Japan, the U.S., Singapore, and India. The largest exporting country is China, followed by France, India, the U.S., and Thailand.
Trade Volume of Major Trade Passage in Cambodia International Logistics Axis Trade Volume TEUs % of total Sihanoukville (International) 260,000 73 Vietnam) 62,000 17 Thailand 34,000 10 Source: World Bank, Cambodia Trade Corridor Performance Assessment, 2014 It is a noteworthy fact that the import volume is more than 5 times of the export volume to indicate that the export volume is significantly lower than the import volume.
Major Importing Countries (upper graph) and Exporting Country (lower graph) in Sihanoukville Port
Source: World Bank, Cambodia Trade Corridor Performance Assessment, 2014
134 2015 Knowledge Sharing Program Ⅲ 3. Selection of Logistics Axes and Six Major Logistics
Complexes in Cambodia
In order to select a logistics complex for Cambodia, we have classified Cambodian land into 6 regions by considering the location of water resources (Mekong River and Tonlé Sap Lake), topography (northern mountainous terrain and southern plain terrain), and human-social conditions. Mekong River divides Region 5 and Region 6 and Tonlé Sap Lake is the boundary line between Region 4 and Region 5. Southern Cambodia is mostly plain areas and most of the mountainous terrain is concentrated in Region 5, located in northern Cambodia. For southern Cambodia, regions are divided centering on the location of the capital, Phnom Penh. Region 1 is the capital area and Region 3 is located to the left side of Region 1, whilst Region 2 is located to the right side of Region 1. Centered to these geographical conditions, Cambodia classifies its regions with other fields also in compliance with this regional system.
Regions in Cambodia
Chapter 4. Logistics Development Strategy for Cambodia 135 Six logistics complexes for each region were selected based on the analysis previously mentioned. Phnom Penh (Region 1), Kampong Cham (Region 2), Sihanoukville (Region 3), Battambang (Region 4), Siem Reap (Region 5), and Stung Treng (Region 6) were selected as the major logistics complexes in Cambodia.
Major Logistics Complexes for Each Region of Cambodia
Traffic Zone for Each Hub
Hub Zone Province Hub Zone Province 1 BANTEAY MEANCHEY 8 KANDAL 2 BATTAMBANG 5 12 PHNOM PENH 1 15 PURSAT 4 KAMPONG CHHNANG 24 PAILIN 21 TAKEO 6 KAMPONG THOM 5 KAMPONG SPEU 17 SIEM REAP 7 KAMPOT 2 6 22 ODOR MEANCHEY 9 KOH KONG 13 PREAH VIHEAR 18 P-SIHANOUK 10 KRATIE 23 KEP 11 MONDUL KIRI 3 7 25 Laos 16 RATTANAK KIRI 19 STUNG TRENG 8 26 Thailand 3 KAMPONG CHAM 4 14 PREY VENG 9 33 Vietnam 20 SVAY RIENG Note: shaded cells refer to the major cities of traffic zones
136 2015 Knowledge Sharing Program Ⅲ When aggregating traffic volume of each region to the representative province, traffic volume in Region 1 (Phnom Penh) accounts for 30% of total traffic volume. Subsequently, Region 3 (Sihanoukville) accounts for 21% and Region 2 (Kampong Cham) 19% of total traffic volume.
Traffic Volume for Each Region (2020)
According to the analysis results of O/D traffic volume in 6 regions, most regions have a similar O/D traffic volume. However, the Phnom Penh region showed a higher destination traffic volume compared to the origin traffic volume. O/D Traffic Volume for Each Region
Chapter 4. Logistics Development Strategy for Cambodia 137 4. Selection of International Axis and 8 Major Axes in
Cambodia
Analysis for selecting axes which connects major logistics complexes has been conducted. As for transportation hubs, 6 domestic hubs and 3 overseas hubs have been set by considering demographical information, a life zone, and other relevant factors. There are 30 axes between the 6 major domestic hubs. In order to consider the traffic demands in the future, expected traffic in 2020 was estimated by using O/D traffic volume data in 2012. According to the analysis result of traffic volume between the domestic hubs, the highest traffic volume was presented between hub 5 (Phnom Penh) and hub 6 (P-Sihanouk) which accounts for 34% of total traffic volume. The second highest traffic volume was shown between hub 5 (Phnom Penh) and hub 4 (Kampong Cham) which amounts to 24% of total traffic volume.
Current Domestic Traffic Volume in Cambodia (2020)
138 2015 Knowledge Sharing Program Ⅲ Traffic Volume between Domestic Hubs (2012) (Unit: %)
Traffic Volume between Domestic Hubs (2020) (Unit: %)
We have tried to integrate traffic passages centered between the top 8 axes which account for the highest traffic volume from 30 axes in total. If there is no axis that directly connects the hub, it has been considered that the corresponding traffic detours to another hub. For example, in the case of “Hub 2 – Hub 4” which takes a small amount of traffic volume, it shall be considered that the traffic generated from hub 2 detours to hub 5 to reach hub 4. The following table shows the summary of traffic passage and traffic axis between each logistics center.
Chapter 4. Logistics Development Strategy for Cambodia 139
Based on the above traffic passage analysis, traffic volume generated from major 8 axes which connect 6 hubs has been analyzed. 8 axes were analyzed by categorizing traffic volume into private cars and trucks. As for the traffic volume of private cars, traffic volume between the center hub 5 (Phnom Penh) and hub 4 (Kampong Cham) accounts for the highest volume of 33%. Subsequently, the traffic volume between hub 5 (Phnom Penh) and hub 6 (P-Sihanouk) amounts to the second highest traffic volume of 28%. Traffic volume between hub 5 (Phnom Penh) and hub 2 (Siem Reap) was 14% and traffic volume between hub 5 (Phonm Penh) and hub 1 (Battambang) was 7%.
140 2015 Knowledge Sharing Program Ⅲ Traffic Volume of Private Cars (2020)
As for the traffic of trucks, traffic volume between the center hub 5 (Phnom Penh) and hub 4 (Kampong Cham) accounts for the highest proportion of 27% and the same proportion was found between hub 5 (Phnom Penh) and hub 6 (P-Sihanouk). Subsequently, the proportion of traffic volume between hub 5 (Phnom Penh) and hub 2 (Siem Reap) was 15%, followed by 11% of the proportion found between hub 5 (Phnom Penh) and hub 1 (Battambang). Traffic volume of trucks has a different tendency compared to traffic volume of private cars. Whereas the highest traffic volume of private cars was found between hub 5 (Phnom Penh) and hub 4 (Kampong Cham), the highest traffic volume for trucks was shown between the center hub 5 (Phnom Penh) and hub 4 (Kampong Cham) and between the center hub 5 (Phnom Penh) and hub 6 (P-Sihanouk). Hub 6 which includes Sihanouk Port has a higher traffic volume than other regions and therefore, it has been confirmed that the traffic axis between Sihanoukville and Phnom Penh is the main axis for traffic volume of trucks. For private cars, traffic for work including commute vehicles seemed to be highly generated due to many people being concentrated in Kampong Cham and many business offices clustered in the area of Phnom Penh.
Chapter 4. Logistics Development Strategy for Cambodia 141 Traffic Volume of Trucks (2020)
Contents that have been previously analyzed are summarized in . 8 axes were selected as they connect 6 domestic logistics centers. Axis 1 which connects Phnom Penh with Sihanoukville and Axis 8 which connects Phnom Penh with Kampong Cham seems to have a relatively higher traffic volume and more advanced infrastructure compared to other axes. Even though traffic volume was shown along Axis 2 which connects Sihanoukville with Battambang, there are currently no roads in the axis. China has established plans to construct roads along this axis. As for Axis 6 and Axis 7, roads are currently existing but the condition of roads is poor and traffic volume is relatively low compared to other axes. There are relatively low demands for Axis 2, Axis 6, and Axis 7 compared to other axes and therefore, these axes need to be developed on a long-term basis. As for international axes, 4 major axes (Thailand Axis, Laos Axis, Vietnam Axis, and Internal Axis) which connect Cambodia with adjacent countries and other countries were selected.
142 2015 Knowledge Sharing Program Ⅲ Domestic Logistics Axes in Cambodia
International Logistics Axes in Cambodia
Chapter 4. Logistics Development Strategy for Cambodia 143 5. Evaluation of Logistics Axes in Cambodia
Development priority for each axis was examined by analyzing the current situations of axes which connect 6 logistics complexes in Cambodia. Similarly, current circumstances of axes which connects each hub(logistics complex) to adjacent countries and overseas countries were analyzed in order to determine priority when establishing an efficient international logistics system. In order to achieve this objective, current conditions and plans for a transportation system in 8 axes which connect 6 domestic hubs(logistics complexes) in Cambodia were analyzed and 4 international axes (Thailand Axis, Laos Axis, Vietnam Axis, Internal Axis) which connect adjacent countries and overseas countries were analyzed to decide upon a development priority.
1) Assessment Method
After selecting major assessment indices for each axis and conducting comprehensive evaluation, a development priority has been determined by assessing scores for each alternative passage through scoring of each item and applying weighted values as shown in the following table. Assessment of domestic axes was based on the planned logistics infrastructure level (40%) and the current infrastructure level (60%). As for the planned infrastructure level, scores were given based upon development plans to be implemented for roads, railroads, ports, and airports. With respect to the current logistics infrastructure level, scores were given based on the current condition of roads (paving ratio), railroads (whether they're being operated), ports, and airports (number of ports/airports being operated). Regarding the international axes, it has been evaluated based on a planned logistics infrastructure level (40%), trade volume (35%), and
144 2015 Knowledge Sharing Program Ⅲ current logistics infrastructure level (25%). Planned logistics infrastructure level has been scored according to the plans for roads, railroads, ports, and airports. In terms of trade volume, the proportion of trade volume for each axis was considered as the standard in scoring. For the current logistics infrastructure level, it has been scored based on road conditions (whether the road is connected), railroad conditions (whether the railroad is connected), and port/airport conditions (whether they are operated).
Scoring Standard for Domestic Axes
Elements Score 1. Planned Logistics Infrastructure Level (40%) 40 1.1 Road Grade 10 1. Arterial Roads 10 2. Service Roads 6 3. Others 2 1.2 Railroad Grade 10 1. Arterial Railroads 10 2. Service Railroads 6 3. Others 2 1.3 Port Grade 10 1. International Port 10 2. Domestic Port 6
1.1 Road Grade 5 1. Arterial Road (1-Digit) 5 2. Service Road (2-Digit) 3 3. None 1 1.2 Railroad Grade 3 1. Arterial Railroad 3 2. Service Railroad 2 3. None 1 1.3 Port Grade 30 1. International Port 30 2. None 0 1.4 Airport Grade 2 1. International Airport 2 2. None 0
2. Trade Volume (35%) 35
2.1 Trade Volume 35
1. Trade Volume > 60% 35 2. Trade Volume < 60% 10
3. Current Logistics Infrastructure Level (25%) 25
3.1 Road Condition 8
1. Connected to International Axes 8
2. Not Connected to International Axes 0
3.2 Railroad Condition 7
1. Connected to International Axes (Operative) 7 2. not Connected to International Axes (Not-operative) 0 3.3 Port and Airport 10
1. Operative 10 2. Not Operative 0 Total 100
146 2015 Knowledge Sharing Program Ⅲ 2) Evaluation Results for Domestic Axes
According to the evaluation results for 8 domestic axes, Axis 1 received the highest score, followed by Axis 3, 5, and 8. Axis 6 scored the lowest grade.
Chapter 4. Logistics Development Strategy for Cambodia 147 (1) Idea of IPA (Importance-Performance Analysis)
IPA is the method to evaluate the adequacy of each assessment item by quantifying the assessment items as 2 factors (importance and performance) to display them in quadrant. In this project, the adequacy of each traffic axis was analyzed based on the demands of the transportation and infrastructure level (roads and railroads). As for the domestic axes analysis in Cambodia, the y axis was set as the demand (traffic volume) and x axis was set as the logistics infrastructure level for each axis that has been analyzed previously. In order to interpret the result, the contact point between the mean value of the x axis and y axis was set as the center to divide the area as a quadrant. The 1st quadrant refers to the area with a high demand and low performance that needs to be improved. The 2nd quadrant is a desirable area because it refers to high demand and high
Conceptual Diagram of IPA
performance. For the 3rd quadrant, both demand and performance are so low that need to be improved in the future. The 4th quadrant reflects low demand and high performance and therefore, maintaining the current status is recommended. In summary, it is recommended to select prior domains to be selected from the 2nd and 1st quadrant.
148 2015 Knowledge Sharing Program Ⅲ (2) Result of IPA (Importance-Performance Analysis)
According to the assessment results for domestic axes drawn from IPA, Axis 1 (Phnom Penh-Sihanoukville), Axis 8 (Phnom Penh-Kampong Cham), Axis 5 (Phnom Penh-Siem Reap), and Axis 3 (Phnom Penh-Kampong Cham) were located in the 1st quadrant. These axes have a high demand and high infrastructure level. Of these 4 axes, Axis 1 has the highest demand and infrastructure level and therefore, it has been considered that the current condition is highly advanced. Axis 3 and Axis 5 have a relatively low demand but high performance. There are no axes located in the 2nd quadrant. Axis 2 (Sihanoukville-Battambang) and Axis 6 (Siem Reap-Stung Treng) were located in the 3rd quadrant. Since Axis 6 has a low demand and very low performance, this axis needs to be improved on a long-term basis. Axis 4 (Battambang-Siem Reap) and Axis 7 (Kampong Cham-Stung Treng) were located in the 4th quadrant and thus, these axes have a low demand and high performance. Since Axis 3 has higher a infrastructure level compared to its demand, it has been shown that there are already sufficient logistics infrastructure plans for this axis.
IPA Result
Chapter 4. Logistics Development Strategy for Cambodia 149 3) Assessment Result for International Axes
According to the prioritization analysis on the 4 international axes, the International Axis (Sihanoukville) achieved the highest score whereas the Thailand Axis and Laos Axis scored the lowest grade. It is recommended to develop such Axes by centering on the International Axis (Sihanoukville) which shows a high trade volume and the Vietnam Axis which has advanced infrastructure plans when considering the current situation in Cambodia.
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International Axes Assessment Result Others Elements Thailand Laos Vietnam (Sihanoukville ) 1. Planned Logistics Infrastructure Level 10 10 40 34 (40%) 1.1 Road Grade 1. Arterial Road (1-Digit) 5 5 5 2. Service Road (2-Digit) 3. None 1 1.2 Railroad Grade 1. Arterial Railroad 3 3 3 2. Service Railroad 3. None 1 1.3 Port Grade 1. International Port 30 30 2. None 0 0 1.4 Airport Grade 1. International Airport 2 2 2 2 2. None 2. Trade Volume (35%) 10 10 10 35 2.1 Trade Volume 1. Trade Volume > 60% 35 2. Trade Volume < 60% 10 10 10 3. Current Logistics Infrastructure Level (25%) 18 18 18 10 3.1 Road Condition 1. Connected to International Axes 2. Not Connected to International 8 8 8 0 Axes 3.2 Railroad Condition 1. Connected to International Axes (Operative) 2. not Connected to International Axes 0 0 0 0 (Not-operative) 3.3 Port and Airport 1. Operative 10 10 10 10 2. Not Operative Total 38 38 68 79
Chapter 4. Logistics Development Strategy for Cambodia 151 6. Summary of Logistics Infrastructure Enhancement
Strategies
Based on analyses that have been conducted previously, the infrastructure enhancement strategies can be outlined as follows. Firstly, development of 6 logistics complexes and 5 international logistics complexes and establishment of logistics sub-centers which can assist major logistics complexes are required to improve the logistics system in Cambodia. Logistics sub-complexes should be established in locations which can easily access major logistics complexes and other regions. Also, areas with higher traffic volume compared to other regions are preferred. It is recommended to develop logistics sub-complexes after activating major logistics complexes.
Major Logistics Complexes in Cambodia
6 Domestic Logistics Complexes 5 International Logistics Complexes
Secondly, plans to establish facilities to be located in the selected logistics complexes are required. Logistics complexes need diverse transportation and logistics facilities. Major facilities to be located in the
152 2015 Knowledge Sharing Program Ⅲ diverse transportation and logistics facility include a cargo terminal, warehouse, housing, and supplementary support facilities. Regarding major regions which have logistics complexes, storing and delivery facilities, including a cargo terminals, warehouses, logistics complexes for agricultural and marine products, collection and delivery centers, wholesale and retail centers, and wholesale and retail distribution centers should be accompanied. This is because major logistics complexes should promptly process various and vast logistics activities including delivery, packaging, and storage with 2 or more complex transportation systems such as railroads and roads. Furthermore, major logistics complexes should enhance their efficiency by integrating production and distribution functions altogether. As for logistics sub-complexes, volume and types of products are relatively limited compared to major logistics complexes. Since these sub-complexes focus on delivery functions rather than distribution functions, supplementary functions such as production and commercial functions are also required to facilitate economic growth in the local community. Roles of logistics sub-complexes are to collect products manufactured from adjacent regions to deliver them to the major logistics complexes or to deliver base materials to major logistics complexes in adjacent regions. By doing so, adjacent regions can produce goods with provided base materials. If a factory is built in the logistics facility, it can provide the advantage of producing goods within the logistics facility to deliver goods to major logistics complexes without a shipping charge.
Major Logistics Facilities in Cambodia
Major Logistics Complex Facilities Logistics Sub-Complex Facilities
Chapter 4. Logistics Development Strategy for Cambodia 153 It is advisable to establish urban logistics center in logistics sub-complexes which will be located in city areas. Since land prices in urban areas are relatively expensive and the location tends to be limited, vertical development is recommended over horizontal development. Moreover, it can draw a synergy effect by developing a logistics system, a business area, and housing altogether.
Urban Logistics Center
An advisable example for urban logistics center development is as follows: locate the warehouse in the first basement level and establish a parking lot for trucks on the second basement level and a parking lot for private cars on the third basement level. On the first floor, locate urban-type factories to produce goods and place a shopping mall on the second floor. On the third and fourth floor, establish financial and R&D centers to facilitate business and locate housing facilities on the fifth floor in order to provide advantages of an urban-type logistics center within the living place.
154 2015 Knowledge Sharing Program Ⅲ Example of Urban Logistics Center
Third of all, 8 axes to connect 6 major domestic logistics complexes and 4 international logistics axes should be developed. As previously mentioned, 8 axes are required to establish logistics network between 6 major logistics complexes. In the short term, Axis 1, 3, 5, and 8 which have a high demand for development should be prioritized for improvement. Although the establishment of a road network is planned for Axis 2, this axis currently lacks logistics infrastructure which connects Battambang with Sihanoukville. Axis 6 and 7 connect the Stung Treng hub located in the northern mountainous region, however due to mountainous terrain, linking infrastructure is difficult and traffic volume is low. Therefore, 4 axes with a high demand, which are centered around Phnom Penh, should be initially developed. There are 4 international axes composed of Thailand Axis, Vietnam Axis, Laos Axis, and International Axis (Sihanoukville). Development should be centered on the International Axis (Sihanoukville) and the Vietnam Axis as these axes have the largest demand.
Chapter 4. Logistics Development Strategy for Cambodia 155 Major Logistics Axes in Cambodia
8 Domestic Logistics Axes 4 International Logistics Axes
In order to improve the logistics system in Cambodia, enhancement in the software domain including the establishment of a basic plan, improvement of systems, fostering industry, and organizational restructuring as shown in
is required.
Improvement Items of Cambodian Logistics Policies and Systems
Category Details Based on the laws relating to logistics policies, Establishment of National Basic establish mid/long-term strategies, visions, Plan on Logistics and objectives to prepare changes in logistics environment in the future Framework Integration/modification of logistics policies, Act on enhancing efficiency in logistics system, and Logistics reinforcing competitiveness in logistics Enactment of Policies industries Logistics Related Distribution Establishment of distribution industry Major Laws Industry development plans, establishing infrastructure Development for distribution industry development, and Act enhancing efficiency of logistics functions Establishment of Logistics Informatization of logistics and standardization Industry Fostering Policies of logistics Allocating roles for each governmental body including Ministry of Public Transportation, Restructuring of Governmental Ministry of Commerce, Industry and Energy, Bodies Ministry of Land, City, and Construction, Ministry of Trade, and Office of Customs Administration
Chapter 4. Logistics Development Strategy for Cambodia 157 2. Establishment of a National Basic Plan on Logistics
Cambodia must establish the mid/long-term master plan in order to become the logistics power in the Southeast Asia region by establishing a national basic plan on logistics to promote efficiency and rationalization of a nationwide logistics system and to settle a sustainable logistics system. Therefore, the National basic plan on logistics should be able to analyze changes and forecasts for the domestic/international logistics environment and to set objectives and visions to provide strategies of various logistics policies and systematic approaches. The national basic plan on logistics should focus on establishing mid/long-term nationwide logistics strategies based on laws Framework Act on Logistics Policies to prepare for changes in the logistics environment for the future. The applicable scope is the entire land of Cambodia and it should be expanded to adjacent countries and Southeast Asia regions if and when required. A long-term plan on a 20-year basis should be established to propose a vision of logistics and directions of policies, and at the same time, a mid-term plan on a 5 to 10 year basis should be set to provide specific action plans. If needed, these plans can be modified or renewed during the process. Visions and Objectives of a National Basic Plan on Logistics
158 2015 Knowledge Sharing Program Ⅲ Detailed Action Plans for the Objectives of a National Basic Plan on Logistics
Specific Action Plans for Each Stage
Chapter 4. Logistics Development Strategy for Cambodia 159 3. Enactment of Logistics Related Major Laws
Logistics related laws deal with logistics facility and freight transportation means including roads, railroads, ports, and airports and logistics industry or logistics complex. The objective of these laws is to promote logistics development and conveniency, and at the same time, to regulate logistics related activities. In Cambodia, only the Road Act and Road Traffic Act are currently enforced but there are no bills pertaining to logistics. Therefore, the Framework Act on Logistics Policies and Distribution Industry Development Act should be enacted in a timely fashion. The objective of the Framework Act on Logistics Policies is to set basic terms pertaining to establishment, implementation, and supportive measures of domestic/international logistics policies, which aim at promoting efficiency, advancement, and internationalization of a logistics system and competitiveness of logistics industries, to contribute to nationwide economic growth. In addition, this Act has set its basic ideology as perceiving the important role of logistics, promoting quick, accurate, convenient, and safe logistics activities, and harmonizing governmental logistics policies to facilitate systematic development of logistics industries. The Framework Act on Logistics Policies defines responsibilities in which governmental bodies, local governments, logistics companies, and shippers shall bear such conditions and its details are described below.
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Responsibilities of Government and Local Governments and Responsibilities of Logistics Companies and Shippers
· Government should establish and implement nationwide logistics policies in order to facilitate logistics activities and to increase Responsibilitie efficiency of logistics system. s of · Government should train human resources for sound and balanced Government development of logistics industry. and Local · Local government should establish polices and plans pertaining to Governments local logistics while harmonizing government’s logistics polices and plans and considering local characteristics.
Responsibilitie · Logistics companies and shippers should be committed to facilitate s of Logistics logistics industry and enhance efficiency of logistics system and Companies must strive to cooperate with logistics policies and plans of the and Shippers government or local governments.
The objective of the Distribution Industry Development Act is to promote efficient growth of distribution industry and to set sound business order to protect customers and contribute to nationwide economic growth. This Act is required to establish policies pertaining to advancement of the distribution system, promotion of efficiency in distribution functions, improvement of customer’s convenience in distribution industry, establishment of balanced development in distribution industry for each region, restructure and enhancing competitiveness of medium and small sized distribution companies, improvement of international competitiveness in distribution industry, establishment of sound business order in the distribution industry, and creation of fair competition.
4. Establishment of Logistics Industry Fostering Policies
The important elements among nationwide policies which aim at promoting logistics industry in Cambodia are informatization and standardization of logistics. If these elements are settled in a systematical way, it will reduce the trial and error process and confusion that may be
Chapter 4. Logistics Development Strategy for Cambodia 161 arise to enable a quicker and more efficient nationwide logistics system. In addition, it may be helpful to attract foreign companies to increase international competitiveness through reducing regulations, for example, establishing a free economic zone and free trade zone.
1) Informatization of Logistics
Government should establish an integrated logistics information system in connection with an individual freight information network including land, sea, and air and related information networks combining customs, trade, and finance, in order to automate transportation of freight and to provide an all-in-one logistics service to reduce logistics costs.
Conceptual Diagram for Integrated Logistics Information System in Cambodia
162 2015 Knowledge Sharing Program Ⅲ This system can support all functional areas including transportation, delivery, warehouse management, and placing/receiving orders. Also, it enables the connection of systemization of various functional systems in connection with various managerial activities including purchase, production, and sales to enhance efficiency in modification and control.
2) Standardization of Logistics
Standardization of logistics refers to efforts in making devices, containers, and equipment that are used in each stage of logistics including transportation, storage, loading and unloading, package, and information as the standard to establish unit load system which can secure connectivity and compatibility between such elements. Standardization is one of the most necessary policies to achieve systemization, efficiency, and economic feasibility of logistics under circumstances where movement and traffic flow are good and increasing. Nationwide standardization should be prioritized before standardizing company-wide specifications to provide easier supply and reduce wastage. The targets of nationwide logistics can be categorized as transportation, storage, package, and loading/unloading, informatization. The common domain and details are describe in the table below.
5. Restructure of Governmental Bodies
Logistics related government bodies in Cambodia include the Ministry of Public Transportation, Ministry of Commerce, Industry and Energy, Ministry of Land, City, and Construction, Ministry of Trade, Office of Customs Administration. The Ministry of Public Transportation plays a pivotal role in supervising, controlling, and facilitating logistics industries. Other governmental bodies should support each logistics domain and role share. A nationwide logistics system should be improved through facilitating cooperations and communications between these bodies.
Chapter 4. Logistics Development Strategy for Cambodia 163 Targets of Logistics Standardization in Cambodia
The Ministry of Public Transportation, Ministry of Commerce, Industry and Energy, Ministry of Land, City, and Construction, Ministry of Trade, and Office of Customs Administration can share the roles described in the table below.
164 2015 Knowledge Sharing Program Ⅲ
Sharing Roles between Logistics Related Governmental Bodies in Cambodia
Logistics Logistics Logistics Environment International Ministry Complex Operation Industries al Logistics Logistics Facilities Expanding hub facilities Establishment Cargo Transportation Construction of (including cargo of integrated transportation and international ports terminal, ICD, logistics industry, marine management and airports and Ministry of distribution information transport industry, of dangerous supporting Public complex, air network and warehousing, substances and complex Transportation freight terminal, development of cargo establishment transportation port terminal) automated transportation of green brokerage and background logistics brokerage logistics industry land development devices industry policies of port Promoting informatization of logistics; Participation of Collection and Supplying Underground Ministry of standard bar international delivery center; advanced system; logistics; Commerce, code; standard construction construction of establishment of pipeline Industry and pallet; projects; collection and standardized construction Energy introduction of management of delivery complex packaging industry standard free trade zone logistics devices Construction and expansion of urban logistics Ministry of Establishment Promotion of complex Supplying urban Policy of Land, City, of urban international facilities; logistics facility green urban and logistics logistics in establishment and equipment logistics Construction policies regional level and improvement of connected logistics system Establishment of trade information network; trade automation Connecting Ministry of - system; - - oversea trade Trade supporting EDI network system; financial and insurance information Customs for Establishment Office of import and of tax Management of Customs - - export; operation information bonded warehouse Administration of customs free network zone
Chapter 4. Logistics Development Strategy for Cambodia 165 Section 4. Comprehensive Action Strategies
Comprehensive strategies for logistics development in Cambodia are presented by categorizing them as logistics infrastructure development and logistics system development. As for logistics infrastructure development, staged plans for 6 hubs(logistic complexes) and 9 logistics axes and expansion plans for transportation infrastructure have been presented. With regard to system development, establishment of a basic logistics plan and relevant bills along with facilitating policies for logistics industries such as a logistics information system were provided. Also, plans to share roles between governmental bodies including the Ministry of Trade and Industry and Ministry of Public Transportation were provided to propose effective policy plans.
166 2015 Knowledge Sharing Program Ⅲ Comprehensive Action Plans for Logistics Development in Cambodia
Chapter 4. Logistics Development Strategy for Cambodia 167 168 2015 Knowledge Sharing Program Ⅲ 2015 Knowledge Sharing Program Ⅲ Chapter 5. Conclusion
Kim Jonghak, Hong Kyoungsun (KRIHS)
Summary
In Chapter 6, comprehensive suggestions from this project have been proposed by categorizing three domains: expansion of a national logistics complex, establishment of a national logistics axis, and establishment of a logistics policy and system. Achievements from this project are to propose plans to develop Cambodian logistics infrastructure based on experiences in developing logistics in Korea. In addition, plans to acquire assets for initiating logistics strategies proposed from this study have been described in order to assist the Cambodian government in establishing action plans going forward.
Section 1. Comprehensive Suggestions on Policies
For this project, we would like to suggest the following three feasible policies based on the analysis of traffic volume between each region and its geographical characteristics.
□ Expansion of National Logistics Complexes
Chapter 5. Conclusion 169 In order to reduce logistics costs in Cambodia, establishment of national logistics complexes are required. In Cambodia, logistics facilities are not sufficient and scattered in each region, and therefore, an efficient transportation system has not been achieved. As a result, Cambodia lacks connectivity between each logistics complex, unable to meet the demands from the altered generation. This unreasonable logistics system causes unfavorable outcomes including an increase in logistics costs and traffic volume. In particular, Cambodia depends on imports for most industrial products and construction materials and therefore, its economic structure leads to an increase in market price from increased logistics costs. Thus, efforts for the advancement of a logistics system by constructing logistics complexes are especially required. 6 logistics complexes proposed from this project are available to apply the hub-spoke concept for an efficient logistics system by prioritizing logistics complexes which include the traffic volume of each province and adjacent regions. Based on generated traffic volume for each region, the outline of 6 logistics complexes has been described below.
Phnom Penh, the first and foremost prioritized region, is the capital area in which population and economic infrastructure are highly concentrated and requires efficient process for a logistics volume. Sihanoukville is the second prioritized region due to high traffic volume from ports and adjacent areas. Kampong Cham is the third prioritized region because it’s located near Phnom Penh and this region has a high population along with a high traffic volume in adjacent areas. Siem Reap is the fourth prioritized region due to its developed tourism industry and Battambang is the fifth region because it generates a high volume of agricultural products from its plains and is located near Thailand. Stung Treng's proposal for balanced development
170 2015 Knowledge Sharing Program Ⅲ nationwide has been placed in sixth position.
From the perspective of policies, plans to expand national infrastructure including national logistics complexes can be categorized into two approaches. First, install facilities in need and establish basic plans to construct the remainder of the facilities. Second, establish basic plans and subsequently, expand the logistics complexes according to set priorities. There are no right or wrong answers for these approaches. However, if a national logistics complex has the proper functioning, planning after establishing the facilities might be a plausible option. Since population, economic and social infrastructure are concentrated in Phnom Penh, and Phnom Penh has been ranked as the top prioritized region, selecting an appropriate location and preferentially constructing a logistics complex needs be considered. Since a logistics complex is not a facility in which construction and operation are separated the way in which roads are, if an efficient logistics system has not been established, it may become an isolated facility from the market. Therefore, in order to achieve successful construction and operation of logistics complexes, they should be implemented as the PPP (Public-Private Partnerships) project. In addition, the government must provide overall systematic supports including standardization and informatization of logistics in order to achieve efficient operation and support for the logistics complexes.
□ Establishment of a National Logistics Axis
Logistics costs are composed of transportation costs which are incurred from transportation means and costs which occur from logistics complexes including unloading costs and storage costs. Transportation costs which are generated from the logistics axis are costs from the transportation system including roads and railroads and therefore, it is the characteristic that costs depend on efficiency of the transportation system.
Chapter 5. Conclusion 171 Cambodia has a radial form of a national arterial road system with Phnom Penh as the center. In addition, the paving ratio of the N1 digit road is high and various projects are in progress such as international supporting projects. Although future expansion of railroads is planned, so far, it is not possible to discern achievements. Even though Cambodia has optimal conditions for developing a inland waterway due to the Mekong River, there are no distinct operational achievements except for the new port in Phnom Penh. This is because the difference in water level is high between the dry season and rainy season. In order to establish an efficient logistics and transportation system, not only reduction in travel time of cargo from departure to arrival is required but also minimizing unloading work for trans-shipment between each mean of transportation is needed. In the mid/long term, introduction of a complex transportation system through the interconnection between different means of transportation is required. However, at present, establishing a systematic transportation network by focusing on efficient single transportation means is needed rather than aiming to establish a complex transportation system. 8 logistics axes proposed from this program, selecting the most appropriate transportation means per type of cargo handled for each axis and subsequently establishing transportation infrastructure, are advised. However, for this program, priority for each axis has been suggested based on full-size trucks due to limitation on acquiring relevant data. As for items to determine priority, two items which are demands on traffic and supply level of a transportation facility were considered in proposing the following priority for 8 axes using the IPA technique.
As for the analysis results for the Cambodian logistics axes, Axis 1, Axis 8,
172 2015 Knowledge Sharing Program Ⅲ Axis 5, and Axis 3 which are interconnected with Phnom Penh are highly prioritized. Axis 1, the main priority, connects Phnom Penh, considered the top priority for a logistics complex and Sihanoukville which is the second priority for a logistics complex in Cambodia. Thus, this axis has to be developed in advance because it has high demands on traffic and has a well established facility level and expansion plans. The second logistics axis is the axis which connects Phnom Penh (the top priority in developing a logistics complex) and Kampong Cham (the third priority in establishing a logistics complex), followed by Axis 5 (Phnom Penh – Siem Reap) and Axis 3 (Phnom Penh – Battambang). Priority of a logistics axis that has been proposed from this program, reflects the supply plans for each transportation facility including roads, railroads, and inland waterways, as well as the traffic demands and therefore, it could be utilized in considering logistics when expanding the Cambodian transportation network in the future. In particular, the reason why a logistics complex is needed to be constructed in Phnom Penh, is the same for the analysis of prioritizing a logistics axis. Thus, it has been considered that establishment of a national logistics complex in Phnom Penh is urgent.
□ Establishment of a Nationwide Logistics Policy and System
As described earlier, a logistics complex and logistics axis are physical facilities. In order for these facilities to be connected systematically and to facilitate internal operations, supports by policy and system are mandatory. Government must legislate the system through enactment. As for the corresponding acts, such acts should include the establishment of basic plans on logistics, logistics infrastructure, the logistics industry, and informatization of logistics as advised from this program. When a logistics system can be established based on the logistics system facilitated by the government, government and corporations may participate in logistics activities with close interconnection between the two entities. For example, introduction of a pallet which is the leading case for standardization of logistics lead by government, enables the mechanizing of the unloading process
Chapter 5. Conclusion 173 for corporate logistics and to reduce unloading time by handling heavy cargo which cannot be processed by human labor. In addition, it has the advantage which enables to load and transport cargo under a set standard when storing and transporting cargo. Although a corporation may pursue company-wide logistics standardization, nationwide logistics standardization plans should be established for exchange between other companies and interconnection with national logistics facilities. Whereas standardization of logistics can be enabled through the introduction and expansion of a standardized pallet, informatization of logistics needs further effort than standardization of logistics due to the need of cargo information exchange and networking between relevant organizations, establishment of e-documents, and others. As previously mentioned in the enhancement of systems from this program, it is advised to implement the informatization of logistics by an organization which can control relevant parties.
Section 2. Project Achievement
Korea has suggested logistics complexes and logistics axes that connects these logistics complexes for systematic expansion of logistics infrastructure in the early stage of the enactment surrounding logistics plans for logistics development. Subsequently, the government expanded the logistics complex and traffic network based on this plan. In order to apply Korean’s background and experiences encompassing logistics development to Cambodia, 6 regional logistics complexes and 8 logistics axes were proposed based on the analysis of baseline data. Furthermore, Korea strived to create opportunities for logistics development in Cambodia through proposing policies for establishing logistics systems and organizations. This project aims to draw conclusions suitable for the current conditions in Cambodia through information on geographical features and data on traffic volume. These drawn conclusions were reviewed in a local briefing session.
174 2015 Knowledge Sharing Program Ⅲ The logistics infrastructure and measures for system improvement which have been proposed in this project conform to the Basic Plan on Logistics and it has been concluded this proposal can be utilized for publicizing the future logistics infrastructure system of Cambodia on both a national and international level.
Proposal of Cambodia Logistics Improvement Measures
6 Major Logistics Complexes 8 Domestic Logistics Axes
This is a proposal for financing the aspects that Cambodia needs such as establishment of a Basic Plan on Logistics and development of logistics complexes as part of the logistics development strategies proposed through this project.
1. Basic Plan on Logistics
In order to establish a Basic Plan on Logistics and development of logistics complexes, financing must be obtained. Financing for this project can be secured through the following systems.
1) Supporting Project for a Establishing Basic Plan on Infrastructure
This is a supporting project that discovers successful profitable businesses and establishes basic plans for industries with comparative advantages in Korea including urban development, water resources, and transportation. This provides both technical and financial support when corporations in Korea implement projects.
Supporting Project for Establishing a Basic Plan on Infrastructure Description Institution in Charge Ministry of Land, Infrastructure and Transport Supporting Field Overall infrastructure Description of SupportSupports technology and financing when implementing projects Project Size Up to 1 billion KRW for each project Source: Korea Research Institute for Human Settlements, 2014 KSP Advise on Policies for Developing Both Banks of Red River in Hanoi, Vietnam. 2015
176 2015 Knowledge Sharing Program Ⅲ 2) Global Infrastructure Fund (GIF)
This is a supporting project for securing continuous expansion in the international construction market by promoting the advancement of international infrastructure development projects of investment development corporations in Korea. It supports the financing of discovering new projects to assist Korean corporations to expand overseas and reduces the costs of initial investment to decrease investment risks.
Supporting Project for Global Infrastructure Funding Description Institution in Charge Ministry of Land, Infrastructure and Transport Supporting Field Overall infrastructure Support financing of feasibility study and funding of outstanding Description of Support projects Project Size Up to 500 million KRW for each project Source: Korea Research Institute for Human Settlements, 2014 KSP Advise on Policies for Developing Both Banks of Red River in Hanoi, Vietnam. 2015
3) Supporting Project for an Establishing International Construction Market
This is a supporting project where the government provides financial support for part of the project costs that have a high risk, for continuous growth of the international construction market and Korean corporations establishment of new markets.
Chapter 5. Conclusion 177
Supporting Project for Establishing an International Construction Market Description Ministry of Land, Infrastructure and Transport/International Institution in Charge Constructors Association Supporting Field Infrastructure Development Project led by MDB ∙ Supports feasibility study of projects ∙ Supports human resources for ordering organization and engineering training Description of Support ∙ Supports local contract negotiations and studies ∙ Supports dispatch of market research groups and market establishment 200 million KRW for each project (Feasibility study: 300 million Project Size KRW) Source: Korea Research Institute for Human Settlements, 2014 KSP Advise on Policies for Developing Both Banks of Red River in Hanoi, Vietnam. 2015
2. Expanding Logistics Complexes
For development of logistics complexes, it is recommended to obtain fiancing for SPC (Special Purpose Company) established through collaboration from Cambodia’s consortium and Korea’s consortium. The purpose behind establishing a SPC is to divided (asset securitization) the risks of the initial capital in order to efficiently implement the project and the development of infrastructure. Cambodia’s consortium relates to business in the field of logistics including transportation businesses and distribution businesses. The Cambodian government invites these private corporations to participate in the development of logistics complexes. Korea’s consortium consists of construction businesses and investors who have been gathered by the Korean government.
The development of logistics complexes requires high initial costs in order to create infrastructure such as land development, ramps, water and sewage, and logistics warehouses and facilities. Due to the significant high initial costs, it is difficult for Cambodia to bear this cost from financing
178 2015 Knowledge Sharing Program Ⅲ through the government, private corporations, and private investments. Therefore, it is effective to use government funds from Korea in order to disperse the risks associated with initial costs and encourage participation of private companies in Cambodia for project implementation. If the risks associated with the high initial costs are reduced this way, the project may be implemented by joining forces with export financing departments of foreign banks.
Diagram of Project Structure
3. Comprehensive Measures for Financing
Within the ODA (Official Development Assistance), funds from ODA or the EDCF (Economic Development Cooperation Fund) can be utilized. It is presumed that both funding channels can be used for the establishment of a Basic Plan on Logistics and development of logistics complexes in
Chapter 5. Conclusion 179 Cambodia. In particular, it may be advantageous to use the ODA projects for a Basic Plan on Logistics as it is free of charge. For the development of logistics complexes, the establishment of infrastructure is required. This entails a high initial cost. Therefore, the Cambodian government needs to establish an integrated package plan that consists of utilizing the ODA funds provided by each ministry including the Ministry of Strategy and Finance, the Ministry of Foreign Affairs, and the Ministry of Commerce & Industry and EDCF provided by an import-export bank of Korea. In addition, it is highly important to prepare a legal system related to this project and show a strong will of implementing this project to private investors in Cambodia.
Utilization of ODA and EDCF ODA Funding EDCF Funding Supporting Conditions Free of charge Charged Within 85% of total Support Limit 100% project costs (May vary per project) Interest Rate on Loans - 0.1~2.5% annual interest Period of Repayment - Within 40 years All projects excluding the Applies to projects which Supported Facilities projects that have military conform to the objectives development plan
KOICA, 2013, Master Plan for Railway Network Development in Cambodia Ruth Banomyong, 2014.9, 「Developing National Logistics Policy: Lesson Learned from ASEAN」, World Bank National Trade Logistic Blueprint Workshop Asian Development Bank, 2014, Country Partnership Strategy Enrique Aldaz-Carroll, 2014.9, 「Improving rice trade logistics to help reach 1 million tons export target」World Bank National Trade Logistic Blueprint Workshop IRITWG, 2015, Overview on Transport Infrastructure Sectors in the Kingdom of Cambodia Belgian Technical Cooperation, 2006, Master Plan for Waterborne Transport on the Mekong River System in Cambodia, Final report(Volume 1 Main Report, Draft), September JICA, 2007, Prepared based on the Study on the Master Plan for Maritime and Port Sectors in Cambodia, March KINGDOM OF CAMBODIA, 2014, Cambodia Trade Integration Strategy 2014-2018 World Bank, 2014, Cambodia Trade Corridor Performance Assessment Ministry of Construction and Transportation, 1994, Basic Plan for Improving Cargo Logistics System to Cut Logistics Costs (1994~2003) Ministry of Land, Infrastructure and Transport Logistics Policy Division, 2016.3, Development History of Korea's Logistics Industry Ministry of Land, Transport and Maritime Affairs, 2011,「the Revised National Basic Plan on Logistics (2011~2020)」 Ministry of Land, Transport and Maritime Affairs MLTM, 2013, Second Comprehensive Plan for Development of Logistics Facilities(2013~2017) KRIHS, 2015, 2014 KSP Advise on Policies for Developing Both Banks of
References 181 Red River in Hanoi, Vietnam. 2015 Shin, Dong Sun, 2002, Research on Government Functions in the field of Logistics and Establishing Responsibilities, The Korea Transport Institute
Cambodia Ministry of Public Work and Transport , http://www.mpwt.gov.kh/ Cambodia Ministry of Rural Development , http://www.mrd.gov.kh/ Phnom Penh Autonomous Port, http://www.ppap.com.kh/ Cambodia Airport, www.cambodia-airports.com Sihanoukville Autonomous Port, http://www.pas.gov.kh/ Cambodia Ministry of Railway, http://royal-railway.com/ Korea Pallet & Container Association, http://www.kopal.or.kr/ Korea Free Economy Zone(KFEZ), http://www.fez.go.kr/global/why/incentive.do Korea Ministry of Government Legislation, http://www.law.go.kr/main.html State Secretariat of Civil Aviation(SSCA), http://www.civilaviation.gov.kh/ National Human Resources Development, http://www.nhrd.net National Logistics Information Center, http://www.nlic.go.kr Clarkson Research, https://clarksonsresearch.wordpress.com/ International Monetary Fund(IMF), http://www.imf.org/external/index.htm System Analysis and Program Development(SAP), http://go.sap.com/index.html KNOEMA, http://knoema.com/ International Monetary Fund(IMF), http://www.imf.org/ www.sap.com
182 2015 Knowledge Sharing Program Ⅲ Appendix. Logistics Functions & System
Section 1. Concept and features of logistics
1. Definition and role of logistics
1) Definition of logistics
The concept of logistics began from the military terminology meaning logistics and it has been defined by various experts in the private sector. Smykey & Londe (1970) define it as, “Auxiliary activity in the manufacturing sector to sales, warehouse position to supply adequate quantity of products at the right price at the right place, transport methods, storage methods, and an activity that requires a rational combination, such as, communication.” J. Copper et al. (1994) define it as, “Movement and storage of relevant information flow and wealth from the beginning to the end of the supply chain.” According to the American Logistics Association (1998), “Logistics is a process of planning, executing, and controlling efficient and effective flow of goods, services and related information from the supply point to the consuming point to meet the demands of the customer.” MoonGyu Yoon (2008) defined logistics as, “An activity that comprehensively manages, plans, and controls seeking to optimize the management technical activities from the procurement of raw materials through accurate sales forecasting, production, and follow-up to the consumption stage to the flow of goods.” In combining all the various definitions, logistics can see viewed as an “act which includes planning, controlling, and managing activity to overcome time and space, environmental, and financial resistive elements which exist during the process of transport, storage, packaging, cargo, and logistics information in order to maximize the benefits of subjects of cargo
Appendix. Logistics Functions and System 183 movement from one point to another a certain point.” The ultimate goal of logistics is to provide goods and services of the appropriate state at the right place and time at a minimum cost. Logistics activities are largely classified into three areas of supply, material management, and distribution. Material logistics is a process of procuring materials to provide them to the plant, and material management is a process for smooth and secure supply of these materials. As a key part of logistics, distribution is defined as all of the actions involved in delivering the produced product to the consumer.
2) The role and importance of logistics
From an national economic point of view, rationalization of logistics enables a convenient and broader view of commerce, and the reduction of logistics costs induces improvement of the company’s constitution and suppresses inflation. Also, it maintains and improves the quality of various products to provide a quality service to the customer. In addition, through enhanced investment in infrastructure and other facilities, investment opportunities for national economic growth and development can be increased and promote the development of local communities. From a socio-economic perspective, logistics serve as a role which adjusts the distance of the production and consumption location, temporal distance, price distance, numerical distance, quality distance, etc. In particular, the increase in international freight due to increased global exchanges are making today’s logistics role increasingly important. From a separate corporate perspective, efficient design and operation of a logistics system reduces transportation costs, leading to an inevitable increase in corporate profits. Logistics costs are more than 10% of the national GDP, which is 10% or more of individual companies sales that accounts for a large portion of sales. The role of logistics can be said to be of enormous importance as the current state shows an exponential increase in logistics costs with the continuous increase in goods
184 2015 Knowledge Sharing Program Ⅲ movement(purchases, returns). In addition, due to the possibility of various marketing through logistics, it can be utilized as a means to promote sales functions and reduce inventory through efficient inventory management. Also, fast and accurate delivery and various customized products allow for an increase customer satisfaction and continue to ensure customer confidence.
2. Logistics and supply chain relationship
Supply chain is a network of organizations and business processes of the logistics of converting materials to supply goods or final products and distributing the final product to the customer. The supply chain connects suppliers, manufacturing plants, warehouses, logistics complexes, retail discount stores, and customers in terms of the products and services reaching the consumer. In general, by integrating, managing, and controling all activities through strategic supply chain management, cooperates seek a sustainable competitive advantage.
Supply Chain Concepts
Logistics, being a part of the supply chain, manages materials to enable distribution to the factory, and then, it performs processes related to the logistics supply of products from the factory to the consumers including transportation, storage, packing, and loading and unloading. An information management system combines all of these processes organically to perform logistics management efficiently.
Appendix. Logistics Functions and System 185 Logistics Concept
3. Logistics System
Process of the supply chain system comprising a logistics system is shown in . If you represent a raid chain system as a node and link nodes, the node will be the logistics facilities or logistics performance element, and the link will be the route between two nodes. In other words, it is a transport network. The supply chain system includes the entire process ranging from the origin to the consumer. Suppliers transport materials from the origin to factories, factories use the materials to manufacture and assemble goods, and manufactured goods reach consumers through the logistics complexes. As mentioned earlier, a logistics system is responsible for a portion of the supply chain system. It plays a role of managing and supplying materials to the factories and distributing the products to the consumers from the factories. Products that move through a link is done through selecting appropriate freight transportation, marine transportation in the case of international transport, and most domestic transport accounts for truck transportation.
186 2015 Knowledge Sharing Program Ⅲ Supply Chain System
Products that are delivered immediately without being stored in warehouses as stock after being received from the logistics complex is called the cross-docking system. This system aims to save time and money by eliminating the non-productive stock and to promote the smooth flow of products. Products that have arrived are delivered to each consumer directly from the logistics complex after the classification process. Therefore, the synchronization of the delivery can be said to be critical.
Cross-Docking System
Appendix. Logistics Functions and System 187 4. Function of Logistics
1) Shipping
(1) The definition of transit
Transit is divided into shipping and transport. It is an activity that delivers the shipping object physically from the origin location to the destination. Long-distance transport is mainly over a 'long distance' with mass transport that moves between logistics complexes. Delivery means short distance with small transport that moves between the logistics complexes to individual stores.
Concept of Transport
(2) Components of Transport
Features of transportation include overcoming the location and physical distance of cargo and the increased efficiency of transport when the three elements, means of transport, transportation infrastructure, and operation works in harmonization. Means of transport is made up of freight cars, rail, air, marine, and pipelines. Transport infrastructure means the road network, rail network, airport facilities, port facilities, pipelines, warehouses and
188 2015 Knowledge Sharing Program Ⅲ logistics complexes. Operation mainly includes administrative aspects of its related facility, such as optimum site selection, determining the optimum transport route, vehicle scheduling, and information sharing. 2) Storage
(1) Definition of Storage
Storage is an activity that manages and maintains cargo at a warehouse, a logistics complex or at a particular space over a period of time. An appropriate storage space, method, and location is determined based on the cargo items, status, destination, and movement time. This process is necessary as it adjusts the temporal goods due to the temporal mismatch that exists between supply and demand by production and consumption.
(2) Features of the Archive
Archiving basically serves to store and distribute the product. In addition, it creates a temporary effectiveness through adjusting the distance of production and consumption as well as function as inventory management to regulate supply and demand. In addition, it can also reduce issues caused by the lack of customer responsiveness through securing customer orders with a prompt response using the stored cargo and preparing for unexpected incidents, such as natural disasters and material supply problems by ensuring the inventory beforehand.
Appendix. Logistics Functions and System 189 Internal Storage
3) Packaging
(1) Definition of Packaging
Packaging means to protect the value and status of a product during its transport of freight, storing, and handling during the distribution process, as well as wrapping the products with appropriate materials or containers to promote sales. It can be seen as a versatile activity in which protecting the cargo’s (materials, semi-finished products, finished products, returns, used products, waste products, etc.) biochemical value and promoting efficient transportation to increase the level of service.
(2) Classification of Packaging
Packaging is divided largely into consumer packaging and transportation packaging. Transportation packaging is for the convenience and ease of cargo handling, whilst consumer packaging is to ultimately increase sales with commercial packaging for marketing purposes. In recent years, originating from developed countries, there has been a movement to introduce a packaging technique that considers the environment in commercial packaging. Packaging is divided into the following four types.
190 2015 Knowledge Sharing Program Ⅲ Forms of Packaging
1st Packaging – Ease of Handling 2nd Inner-Packaging – Ease of Handling 3rd Outer-Packaging – Marketing, Sales Promotion 4th Packaging by Freight Transport – Container Ship, Aircraft Packaging etc.
4) Loading and Unloading
(1) Definition of Loading and Unloading
In the logistics activity process, loading and unloading of cargo can be defined as an act of loading and unloading cargo into various means of transportation and an act of loading and unloading cargo within a storage warehouse, or other relevant operations. The greater the number of cargo loaded and unloaded, the higher the probability of damage. As such, sophistication and rationality is required while handling cargo. An automatic loading and unloading system is constantly being developed and introduced as a trend.
(2) Rationalization Principles of Loading and Unloading
There are some principles in promoting rational loading and unloading
Appendix. Logistics Functions and System 191 activities. First, unnecessary work needs to be eliminated and transport activities needs to be improved. If possible, gravity should be used to reduce force resistance and it is necessary to maintain smooth flow. Also, efficient a logistics system should be built and various loading and unloading machinery should be used to increase mobility and reduce labor. It is important to prevent loss due to a variety of safety issues by establishing and following the safety rules for all related tasks.
Loading and Unloading Work
5) Logistics Information
(1) Definition of Logistics Information
Logistics information is all the information that allows for efficient logistics management by being organically combined with transport, storage, handling, packaging, etc. constituting logistics activities ranging from production to consumption. The role of information makes it possible for each function of logistics to maintain ties with one another to achieve efficiency. Today, it is not an overstatement to say that the key to a successful logistics industry is in the systematic logistics information system.
192 2015 Knowledge Sharing Program Ⅲ (2) Types of Logistics Information
Logistics information is typically divided into adjustment and operational activities information, strategy, management and business activities information, logistics activities subject information, and each information includes details as follows:
Types of Logistics Information
Appendix. Logistics Functions and System 193 Section 2. Logistics Decisions
1. Step-by-step Logistics Decisions
Various decisions are made at each phase for the logistics process. Decision-making is a very important process that should be delicately dealt with in order to achieve successful and efficient operation of the entire logistics system. First, the raw materials provider should decide which raw materials to use and how much, how to manage those materials, to which factory such materials can be most effectively provided, and how to transport them. Storage and logistics complexes should decide where to establish their workplace, how their layout and space is allocated, how to manage incoming products, how much stock to store in their inventories, and how much they should receive in terms of storage cost. Transport companies decide upon transport facilities, means of transportation, transport routes, amount, each unit of transport, duration of transport, and loading/unloading procedures. In recent years, an optimized transport scheduling system and realtime location tracking system using cutting-edge technology is becoming a reality.
Major decision makers within the logistics system are producers, shippers, carriers, forwarders, governments, and consumers. They decide upon various logistics issues through their interests and mutual transactions. Producers are corporate or private entities that produce the goods. Customers are entities that consume the goods. Shippers generally purchase goods from the producers and sell them to generate profit. In many cases, producers also take the role of a shipper. Shippers use transport services generally provided by transport companies to send their goods domestically or internationally.
Decision-making and Mutual Transaction between Shippers and Transport Service Providers
Transport companies establish and operate transport infrastructure and provide various transport services. Today, transport service providers in the logistics system can be categorized into ocean carriers, land carriers, and port terminal operators. From a decision-making standpoint, port terminal operators transport and manage vehicles and cargo from port complexes, so they should be independently regarded as a carrier, entirely separate from ocean or land carriers. Ocean carriers transport cargo from harbor-to-harbor, port terminal operators take care of cargo arriving at
Appendix. Logistics Functions and System 195 harbors, land carriers are in charge of transporting goods from harbors or points of departure to each destination. In a complex transport network such as these, decisions on service charges and transport routes are made by mutual transactions among the carriers. In a globalized transportation market such as the one we see today, one should understand the mechanism between these carriers to set a competitive and profitable service charge, minimize transport costs, and provide quality services. Ocean carriers generally take a leading position in the cargo transport system, because all kinds of transport is available for ocean carriers to choose from thanks to multimodal transport. Ocean carriers can select harbors they would like to embark/disembark, and select certain land carriers to manage local transport. As such, all works and procedures for harbors and land carriers are decided by the transport route the ocean carrier chooses.
Decision-making and Mutual Transactions among Carriers
Forwarders are transport brokers who deal with all work that is required after cargo are transferred from consignors until the cargo is delivered to a consignee. They are responsible for assembly, store/release, shipment, transport, insurance, storage, and delivery of the cargo. Government agencies are a combination of various departments, local
196 2015 Knowledge Sharing Program Ⅲ governments, research institutions, and associations of a public nature dealing wholly or partially with logistics decision-making. As much as they are public organizations, they prefer prosperity and development of state and local communities over profit, and conduct investment and management of facilities. One notable example of a government agency is the port authorities that has became a major decision maker as harbors have developed alongside an increase in international trade. Port authorities take responsibility in building, expanding, and managing harbor infrastructure. In many cases, port authorities outsource management of harbor terminals to private contractors. In exchange, they decide upon various strategies, policies and restrictions, and monitor how each harbor is being operated.
Appendix. Logistics Functions and System 197 Section 3. Logistics System Design
Pertaining to logistics system design, all four elements of logistics system design should be considered, these include: logistics network design, logistics process design, logistics organization design and logistics information system design. An efficient and systematic logistics system cam be implemented when each design is properly configured and balanced between the designs.
Logistics System Design Elements
1. Logistics Network Design
A logistics network is a set of all the features and activities that are related to transport, ranging from the supply point (generating), point of goods and services, through to the demand point, and it can be shown in various forms in accordance to the steps of the flow and its characteristics. Logistics network design includes the material supplier location, factory location, number of warehouses and their location, number of logistics complexes and their location, product allocation and management methods, transportation and schedule, vehicle travel route, and consumer location and
198 2015 Knowledge Sharing Program Ⅲ its type, as well as a variety of decision making issues, sometimes it even includes a contingency plan prepared for unexpected situations. Logistics Network Design Elements
2. Logistics Process Design
The logistics process design includes the warehouse and logistics facility location strategy, inventory management strategy, transportation strategy, and their performance has a direct impact on the customer service level. Thus, according to an efficient logistics process design and combination, the level of customer service can be improved.
Logistics System Design Elements
Appendix. Logistics Functions and System 199 3. Logistics Organization Design
It is very important to design a logistics organization from a strategic management process standpoint of a company. Traditionally, management has been separated by specialization of each department. Such management had no problem as long as each department took responsibility for its own management, without any coordination with other departments. However, dynamic change and complexity of today's era called for a new logistics strategy and process management. Today, logistics organization is a closely tied web of interdepartmental and external coordination, thanks to the advancement of information technology. Mutual flow of information supports efficiency of a logistics system through an active logistics organization structure, requiring speed and precision when dealing with customer needs.
Logistics Organization Design
200 2015 Knowledge Sharing Program Ⅲ 4. Designing a Logistics Information System
A logistics information system refers to a computer system for supporting the management of all information related to logistics including transport, storage, load/unload, packaging, and distribution processing. Establishing a logistics information system can allow quick and precise logistics activities in all areas, and allows for immediate action in all kinds of emergency situations. Designing a logistics information system requires the support of cutting-edge technology. Notable logistics information technologies include CVO (Commercial Vehicle Operation), EDI (Electronic Data Interchange), EPOS (Electronic Point of Sale), RFID (Radio Frequency Identification), and as for management systems, there are storage management systems, inventory management systems, and optimized vehicle route programs.
Appendix. Logistics Functions and System 201 Section 4. Trends in Logistics Industry
1. Change in Quantity of Transported Goods
The amount of world container trade has shown a continuous increase from 1999 to 2014. From 60 million TEU in 1999 to 170 million TEU in 2014, the amount of goods transported has grown by almost three-fold. Yearly data indicates a 4~14% increase compared to previous years except for 2009. 2009 recorded a 8% drop, reflecting a direct impact from the economic recession. World Container Trade
Source: Clarkson Research Service Limited Quantity of goods transported is known to have a direction correlation with various economic indicators. Statistically, economic recession led to drops in the amount of trade. GDP growth rate, a notable economic indicator, shows a pattern very similar to the amount of goods transported. According to , continuous world GDP growth stalled only in 2009. Among advanced nations, there was a 4% drop in 2009. Among developing nations the growth rate was drastically reduced. As previously mentioned, this can be understood as having a close correlation with a drop in world container trade in 2009.
202 2015 Knowledge Sharing Program Ⅲ World GDP Growth Rate
Source: International Monetary Fund(IMF) Trends in the amount of goods transported can be measured by looking into the predictive value of economic indicators. Quantity of goods transported to and from harbors refers to the quantity of goods transported by marine transportation which makes up the majority of international trade. The quantity of goods transported to and from harbors shown in matches with yearly GDP growth rate. The rates dropped in 2009, but as the current world GDP growth rate seems to maintain a 5% growth rate, it is likely that there will be no significant impact on the logistics industry until 2017.
Quantity of Good Transported through Harbors Worldwide
Source: International Monetary Fund(IMF)
Appendix. Logistics Functions and System 203 2. Change of Environment in Logistics Industry
Today, the logistics industry is going through an ever-changing environment, and companies will face difficulties if they cannot make appropriate adjustments. Today's logistics industry can be described as production based on customer demand, customized ordering, selecting major businesses, outsourcing, globalization, strategic partnerships, and M&As. Unlike the outdated push method which was initialized production before customer orders, now the pull method undergoes production based on customer demands, cutting inventory costs and meeting customer needs. Such method allows for customized orders, raising the satisfaction of individual customers and flexibility in production. Also, many businesses are setting aside the old practice of expanding their business into other areas, and instead are selecting major businesses to concentrate their efforts into. In areas where they lack confidence or efficiency, companies outsource these areas to other special subcontractors. Side-by-side with a rise in international trade, globalization is becoming a trend that represents the logistics industry. Also, a strategic partnership and M&A to maximize profit and business efficiency are also becoming fundamental elements of survival in today's competitive world. Today’s Logistics Industry
