Best operating costs in Kingdom: TMX – The Phnom Penh Post

Cambodia has the lowest operating costs among nine countries in Asia that are recognised as major manufacturing hubs, according to Asia-Pacific business transformation consultancy TMX.

However, the Kingdom ranks eighth in terms of competitiveness due to interlinked challenges in areas such as talent acquisition and development, logistics and digitalisation, the Singapore-based firm pointed out.

TMX looked at Cambodia, India, Indonesia, Malaysia, Myanmar, the Philippines, Singapore, Thailand, and Vietnam for its The Great Supply Chain Migration Breaking down the Cost of Doing Business in Asia report published in November.

The consultancy conducted a comparative analysis of the nine countries using a variety of cost and condition indicators.

The average total operating costs for a manufacturing firm in Cambodia ranges from $65,313-220,125 per month, versus leader Singapore at $366,561-853,450 and second-ranked Thailand at $142,344-291,730, the report said.

However, as shown in the reports country competitive scorecard, Cambodia and Myanmar are lagging their peers in the region.

The risk level in Myanmar has increased significantly since the beginning of 2021. Political instability has resulted in violence and the economy has stalled because of the ongoing situation.

Limited physical infrastructure and the military regimes suspensions of internet and other telecommunications services have hindered commercial activities and business operations, the report said.

Although Singapore is undoubtedly the most expensive for manufacturing, the city-state also takes the number one spot for competitive location among the nine countries, it added.

This is due to the countrys leading score in ease of doing business, as well as availability of skilled talent, efficient logistics systems, and its role as an early adopter of manufacturing digitalisation, TMX explained.

On the other hand, Cambodia and Myanmar are at the bottom of the value chain.

Cambodia and Myanmar are categorised under the basic assembly lines stage and would be suitable for manufacturing operations in sectors such as textile[s] and garments, footwear, and resource-based processing, the report said.

Though less competitive, these two countries also offer the lowest costs.

Moreover, the two nations also offer the most affordable warehouse rental rates, at $2.5 and $3.4 per sqm per month, the report added.

Anthony Galliano, the group CEO of financial services firm Cambodian Investment Management Co Ltd, said that while Cambodia continues to develop its infrastructure and upgrade its skills, the report reflects that demonstrable progress is needed for the Kingdom to remain competitive in the future.

The countrys future competitiveness in ASEAN should not be built on a foundation of cheap labour costs but as a technologically advanced manufacturing hub, he opined.

The textile industry is a sunset industry which migrates to low cost labour countries, the Kingdoms future will be based on highly skilled manufacturing workers and embracing the digital revolution, he said.

RMAs first-ever motor vehicle assembly plant is symbolic the nations future as the country competes with neighbouring Thailand, Vietnam, and Indonesia for FDI [foreign direct investment] in high-end manufacturing and assembly, Galliano stressed.

He was referring to RMA (Cambodia) Plc, which according to its CEO, is all set to manufacture US auto major Ford Motor Cos Ranger pickups and Everest SUVs at its plant in eastern Pursat province that is expected to go online in early April.

TMX classified Cambodia and Thailand as dormant countries when it comes to logistics, suggesting that they are deemed relatively costly and less skilful in the field, but have potential to improve in terms of cost and performance.

Galliano added that the Law on Investment and recent tax incentives are welcome progress in signalling Cambodias strategy of human resource competitiveness and advancement and the acceleration to digitalisation.

The Ministry of Public Works and Transport continues to do a superb job developing the nations infrastructure, particularly in roads and ports.

Directionally the government is on the right track, but needs to do more in advancing businesses adoption of new technology and digital solutions and to boost the adoption of new tech among enterprises, he said.

The report also noted that utilities and telecommunications account for about 16 per cent of total costs in most countries.

Overall, electricity forms the largest proportion of costs among these components. Cambodia has the most expensive electricity rates while Vietnams electricity rates are the most affordable.

As for telecommunication costs, the more developed the countries are, the lower the telecommunication costs. As a result, Myanmar and Cambodia have the highest internet costs while Singapore and India provide the most affordable rates, TMX said.

The report went on to say that Thailand, the Philippines, Indonesia, India and Vietnam offer a sizeable and relatively affordable labour pool.

These countries often offer abundant employment opportunities but fewer highly skilled talent in many sectors with talent competitiveness scores ranging between 40.9 and 33.4.

Cambodia and Myanmar have the lowest cost of labour, though they stand relatively low in talent competitiveness. A large percentage of the labour force remains low-skilled, which may be more suited for basic assembly lines, it added.

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Best operating costs in Kingdom: TMX - The Phnom Penh Post