Cambodia’s Regional Connectivity: Unlocking the Full Potential of Transport Corridors 1 CAMBODIA’S REGIONAL CONNECTIVITY: UNLOCKING THE FULL POTENTIAL OF TRANSPORT CORRIDORS 2024 2 CAMBODIA’S REGIONAL CONNECTIVITY: UNLOCKING THE FULL POTENTIAL OF TRANSPORT CORRIDORS ACKNOWLEDGMENTS The World Bank team for preparation of the The World Bank team gratefully acknowledg- report was led by Chanin Manopiniwes (Senior es the cooperation with the Ministry of Public Transport Economist) and Sadig Aliyev (Lead Works and Transport and other counterparts in Transport Specialist), and comprised Veas- Cambodia during implementation of the study. na Bun (Senior Infrastructure Specialist), Yin The government counterparts are not, how- Yin Lam (Senior Transport and Logistics Spe- ever, responsible for any of the conclusions cialist), Bowen Wang (Senior Transport Spe- in this report. cialist), Borith Long (Transport Consultant), Philip Sayeg (Transport Consultant), Lieven The views expressed in the report are those of Geerinck (Waterways Consultant), Paul Power the authors and do not necessarily reflect the (Railways Consultant) and Socheat Ath (Pro- views of the World Bank Group, its Executive gram Assistant), under the guidance of Ben- Directors, or the countries they represent. The edict Eijbergen (Transport Practice Manager, World Bank does not guarantee the accuracy, East Asia, and the Pacific) and Tania Meyer completeness, or currency of the data includ- (Country Manager for Cambodia). ed in this work and does not assume respon- sibility for any omissions, or discrepancies in The team appreciates valuable guidance and the information, or liability with respect to the comments received from peer reviewers: use of or failure to use the information, meth- Rajesh Rohatgi (Lead Transport Specialist ods, processes, or conclusions set forth. The and Program Leader), Cordula Rastogi (Senior boundaries, colors, denominations, and oth- Economist), Victor Aragones (Senior Trans- er information shown on any map in this work port Specialist), and Andrew Losos (Senior do not imply any judgment on the part of The Transport Specialist). World Bank concerning the legal status of any territory or the endorsement or acceptance of such boundaries. I CAMBODIA’S REGIONAL CONNECTIVITY: UNLOCKING THE FULL POTENTIAL OF TRANSPORT CORRIDORS EXECUTIVE SUMMARY CONTENTS ACRONYMS AND ABBREVIATIONS....................................................................................................................IV EXECUTIVE SUMMARY.....................................................................................................................................V CHAPTER 1 IMPORTANCE OF REGIONAL TRANSPORT CONNECTIVITY..................................................................1 1.1 Overview of Transport and Logistics Efficiency............................................................................. 2 1.2 Trends in Trade, Freight Demand and Modal Share.......................................................................4 CHAPTER 2: OVERVIEW OF THE TRANSPORT SECTOR AND CROSS-BORDER TRANSPORT FACILITATION.............10 2.1 Cross-Border Transport Facilitation............................................................................................ 11 2.2 Road Transport.......................................................................................................................... 14 Road Network............................................................................................................................ 14 Road Transport Industry.............................................................................................................16 Constraints.................................................................................................................................17 2.3 Inland Waterways and Maritime Transport..................................................................................19 Direct Maritime Traffic...............................................................................................................20 Cross-border Inland Waterway Transportation........................................................................... 22 Domestic Waterway Transport between Phnom Penh and the Provinces.....................................24 Constraints................................................................................................................................26 2.4 Rail Transport............................................................................................................................28 Rail Infrastructure and Operations..............................................................................................28 Current Rail Traffic.....................................................................................................................30 Market Potential........................................................................................................................ 32 Planned Railway Investments.....................................................................................................33 Constraints................................................................................................................................34 CHAPTER 3: CORRIDOR ANALYSIS................................................................................................................... 36 3.1 Description of the Three Selected Corridors............................................................................... 37 3.2 Corridor Analysis.......................................................................................................................39 Corridor A – East-West Road..................................................................................................... 40 Corridor B – Inland Waterway.................................................................................................... 44 Corridor C – Improved Existing Rail.............................................................................................51 3.3 Summary of Corridor Performance.............................................................................................53 CHAPTER 4: PROPOSED IMPROVEMENT DIRECTIONS...................................................................................... 55 4.1 Cross-Border Transport and Trade Facilitation........................................................................... 57 4.2 Develop Resilient and Connected Transport Network..................................................................58 Road Connectivity.....................................................................................................................58 Inland Waterway and Maritime...................................................................................................59 Railway Infrastructure and Operations........................................................................................60 BOXES Box 2.1 Analysis of Recent and Potential Rice Exports along the Mekong................................................26 Box 2.2 Use of Smart Seals in Transit Containers.................................................................................... 27 Box 3.1 Role of Inland Waterways in reducing GHG emissions.................................................................50 FIGURES Figure 1.1 Trends in External Trade Values 2010–2021 (US$ million)............................................................. 2 Figure 1.2 Growth in total TEUs (including empties) 2010–2022................................................................... 2 II CAMBODIA’S REGIONAL CONNECTIVITY: UNLOCKING THE FULL POTENTIAL OF TRANSPORT CORRIDORS CONTENTS Figure 1.3 Trends in External Trade Values 2010–2020 (US$ million)............................................................3 Figure 1.4 Logistic Performance Index.........................................................................................................3 Figure 1.5 LPI Ranking 2023 versus 2018.....................................................................................................4 Figure 1.6 Modal Shares of all Export/ Import Cargo Movements 2015-2022.................................................5 Figure 1.7 Modal Shares 2010-2022 based on all Export/Import TEUs (including empties)...........................5 Figure 1.8 Main Container Gateways 2015 and 2022 (all TEUs, including empties)........................................6 Figure 1.9 Distribution of Main Export and Import Products, Poipet 2016 and 2022 (Tons)............................ 7 Figure 1.10 Distribution of Main Exports & Imports by Commodity, PPAP 2021...............................................8 Figure 1.11 Distribution of Main Exports and Imports by Commodity, PAS 2022.............................................8 Figure 1.12 Distribution of Main Exports and Imports by Country, Phnom Penh Port 2021................................9 Figure 1.13 Distribution of Main Exports and Imports by Country, Sihanoukville Port 2022..............................9 Figure 2.1 2009 Waterway Transport Agreement between Cambodia and Viet Nam....................................12 Figure 2.2 Road Maintenance by MPWT and MRD (km)...............................................................................15 Figure 2.3 Road Pavement Condition 2022.................................................................................................15 Figure 2.4 Direct Maritime Links................................................................................................................20 Figure 2.5 Nautical Access to Kampot Port.................................................................................................21 Figure 2.6 Coastal Shipments using the Bassac River..................................................................................21 Figure 2.7 Connections between Cambodia and the US Market.................................................................. 22 Figure 2.8 Waterways in Cambodia............................................................................................................24 Figure 2.9 Current and Planned Sub-Feeder General Purpose Waterway Terminals..................................... 25 Figure 2.10 Current Railway Lines...............................................................................................................29 Figure 2.11 Rail Share of Container Transport from/to Phnom Penh to SAP (% of total TEUs).........................31 Figure 2.12 Fuel by Rail to PAS (kiloliters) 2018 estimate, 2030 projection, and 2022 Actual......................... 32 Figure 3.1 Three Identified Trade Corridors Showing Short– and Medium-Term Development Opportunities...........................................................................................................................38 Figure 3.2 Corridor A: Base Case (current highways) vs Project Case (improved highways + 40% reduction in border times)........................................................................................................................42 Figure 3.3 Corridor A: Estimated Transport Operating Cost per Ton for Selected Scenarios.........................43 Figure 3.4 Corridor B, with Two Access Routes to Cai Mep..........................................................................45 Figure 3.5 PPAP to Cai Mep via the Bassac River, and PPAP to Singapore...................................................47 Figure 3.6 Corridor B – Fastest Journey Time by Barge (Route i)................................................................48 Figure 3.7 Comparison Road Corridor: Phnom Penh – Bavet – Ho Chi Minh City, Vung Tau and Cai Mep......49 Figure 3.8 Corridor B: Waterway (Route i) vs Comparison Road – Estimated Transport Operating Cost per Ton and Journey Times.............................................................................................................49 Figure 3.9 Corridor C, Improved Existing Rail: Laem Chabang – Poipet – Phnom Penh – Sihanoukville Port (880 km)...................................................................................................................................51 Figure 3.10 Comparison Road Scenario – Thailand to Sihanoukville Port...................................................... 52 Figure 3.11 Corridor C: Estimated Transport Operating Cost per Ton and Journey Times for Selected Scenarios.................................................................................................................................53 TABLES Table 1.1 Trade Volumes at International Gateways 2022............................................................................6 Table 2.1 Border Recent Clearance Times.................................................................................................13 Table 2.2 Cambodia’s Road Network Pavement Coverage (2017-2022)...................................................... 14 Table 2.3 Impact of Flood Disruptions on Road Accessibility to Hospitals, Schools, and Jobs......................16 Table 2.4 Important Dimensions of Container Vessels................................................................................19 Table 2.5 Rail Freight Movements by Type 2022.......................................................................................30 Table 2.6 Fuel and Container Modal Split at Sihanoukville Port, 2022.........................................................31 Table 3.1 Estimate of Operating Costs......................................................................................................43 Table 3.2 Summary of Corridor Performance�������������������������������������������������������������������������������������������� 54 III CAMBODIA’S REGIONAL CONNECTIVITY: UNLOCKING THE FULL POTENTIAL OF TRANSPORT CORRIDORS CONTENTS ACRONYMS AND ABBREVIATIONS ADB Asian Development Bank ACTS ASEAN Customs Transit System AFAFGIT ASEAN Framework Agreement on the Facilitation of Goods in Transit AH Asian Highway ASEAN Association of Southeast Asian Nations ASYCUDA Automated Systems for Customs Data CBTA Cross-Border Transport Agreement (GMS) CITLS Comprehensive Intermodal Transport and Logistics System Master Plan for 2023–2033 CIQ Customs, Immigration and Quarantine CLA Cambodia Logistic Association CLV Cambodia-Lao PDR-Viet Nam DWT Deadweight (metric) tons ERIA Economic Research Institute for ASEAN and East Asia FACBRTC Framework Agreement for Cross-Border Railway Transport Connectivity (GMS) GDP Gross Domestic Product GMS Greater Mekong Subregion GPS Global positioning system Kg Kilogram Km Kilometer Kph Kilometer per hour LPG Liquid petroleum gas LPI Logistics Performance Index MT Master Plan for ASEAN Connectivity MPWT Ministry of Public Works and Transport NR National Road PPAP Phnom Penh Autonomous Port RGC Royal Government of Cambodia PAS Sihanoukville Autonomous Port SEZ Special Economic Zone SRT State Railway of Thailand ton Metric ton or 1,000 kg TEU Twenty-foot equivalent IV CAMBODIA’S REGIONAL CONNECTIVITY: UNLOCKING THE FULL POTENTIAL OF TRANSPORT CORRIDORS ACRONYMS AND ABBREVIATIONS EXECUTIVE SUMMARY A Report Objectives and Structure Cambodia’s export-driven growth has result- analysis and proposals described in this report ed in increased freight demand. Container- focus on the short to medium-term priorities. ized import and export cargo movement has By providing alternative insights on the role increased more than five-fold over the past and performance of the existing roads, water- 12 years. By 2030, it is expected that trade ways and maritime transport, railways, and volumes moving along highways and through cross-border trade facilitation the report is de- ports, airports, and warehouses will double. signed to complement the CITLS. Throughout However, high transport and logistics costs the course of this study, stakeholder consul- are major bottlenecks to Cambodia’s economic tations were conducted with involved public competitiveness and diversification. sector institutions and major private sector players in freight transportation and logistics3. The Royal Government of Cambodia (RGC) developed the Comprehensive Intermodal The report is structured as follows: Transport and Logistics System (CITLS) Mas- ter Plan for 2023–20331 to support improving • Chapter 1 – discussion of trade, transport, the performance and efficiency of the transport and logistics efficiency; trends in demand sector and supporting the achievement of the and modal competitiveness; and the current national development objectives as defined cross-border trade. in the RGC’s Pentagonal Strategy Phase 12. However, many of the projects put forward in • Chapter 2–analysis of the transport sub-sec- the CITLS are in the conceptual phase requir- tors covering roads, inland waterways, and ing further technical studies and prioritization maritime transport, and railways. prior to securing financing from the public and private sectors. • Chapter 3 – analysis of the three prioritized transport corridors by the study. This report prepared by the World Bank team aims to complement the RGC’s efforts by fo- • Chapter 4 – propose priority improvement cusing on immediate investments and policy directions. actions to unlock opportunities along the ex- isting transport corridors in Cambodia. The 1 Comprehensive Intermodal Transport and System Master Plan 2023-2033 (Royal Government of Cambodia, Au- gust 2023). The Master Plan aims to improve domestic and international connectivity and promote continued sustainable, and equitable, economic growth. It has four major objectives. The Master Plan identifies 174 priority projects, including 94 road projects, 8 railway projects, 23 inland waterway transport projects, 20 maritime transport projects, 10 air transport projects, 15 logistics projects, and 4 additional projects. These projects, including better interconnections among modes and logistics centers, are divided into 90 short-term and medium-term projects and 91 long-term projects. The total cost of these invest- ments is estimated at over $30 billion. Most of these investments are anticipated by the Master Plan to be implemented by private investors. 2 Pentangle Strategy–Phase 1 for Growth, Employment, Equity, Efficiency, and Sustainability: Building the Founda- tion Towards Realizing the Cambodia Vision 2050 (Royal Government of Cambodia. August 2023). 3 Consultations with the private sector were conducted with (i) shipping companies operating barges along the Me- kong River between Viet Nam and Cambodia; (ii) international shipping and logistics company that utilizes rail, road, and barges to transport cargoes to maritime ports; (iii) local companies mainly utilizing trucks between Cambodia and Viet Nam; (iv) several companies involved in rice production and trading; (v) Cambodian Logistics Association; (vi) Royal Railway (Cam- bodian railway concessionaire); and (vii) operators of boutique passenger cruise services between Viet Nam and Siem Reap. V CAMBODIA’S REGIONAL CONNECTIVITY: UNLOCKING THE FULL POTENTIAL OF TRANSPORT CORRIDORS EXECUTIVE SUMMARY B Country Context Economic growth averaged 7.1 percent over in Viet Nam have slightly outperformed road the period 1995–2021, enabling Cambodia transport to Viet Nam since 2015. Waterways to become a lower middle-income economy are suited to bulk and containerized transport by 2015. Growth has been driven by a few and have significantly lower transport costs export-oriented sectors, including the tour- per ton-kilometer than roads. ism, agriculture, garments, and construction sector. However, the COVID-19 pandemic led The World Bank’s Logistics Performance Index to a 3.1 percent contraction in 2020, followed 2023 (LPI) points to significant logistics chal- by a relatively subdued recovery with 3 per- lenges in Cambodia, which is ranked 115th out cent growth in 2021. By 2023, GDP grew by 5 of 138 countries. Furthermore, the time it takes percent, and in 2024, it is estimated to have to comply with border and export formalities increased to 5.34 percent. The deteriorating (for both imports and exports) is much higher global economy continues to pose challenges in Cambodia than in neighboring countries. to Cambodia’s export-driven economy. These inefficiencies in transportation and logistics are major bottlenecks constraining Almost all of Cambodia’s export growth over the diversification of the economy and its in- the past five years has come from North Amer- tegration into higher value-added regional and ica, which overtook the European Union in global value chains. 2019 to become Cambodia’s largest export market.4 The United States of America’s share Trade has been and will continue to be an of exports rose from 24 percent in 2018 to 41 important growth engine and determinant percent in 2021, while the European Union’s of Cambodia’s ability to meet its goals of be- share fell from 30 percent to 18 percent over coming a high-income country by 2050. To the same period. Asia’s share dropped from accommodate increased future trade flows, 46 percent to 41 percent over the same period. all modes must perform a larger and more ef- These markets increasingly require efficient ficient transport task. As in the recent past, and sustainable transport and logistics solu- significant new investment is planned in wa- tions. terways, roads, and ports that can underpin a sharp growth in trade demand. In particular, Recent trade measured by the use of twen- an 80 percent increase in the container han- ty-ton equivalent (TEU) containers grew from dling capacity of PPAP LM17 container termi- 317,200 TEUs in 2010 to 1,600,000 TEUs in nal is planned by 2029. There is a significant 2022 an increase of over 400%. The main opportunity to increase the share of exports container gateways are Sihanoukville Port for by inland waterways and by rail transport that maritime transport, and Phnom Penh Autono- have untapped potential. However, there are mous Port (container terminal LM17 located 28 several challenges, as listed below, that in- kilometers downstream of Phnom Penh) using crease the costs of trade and reduce efficiency, the Mekong River to Viet Nam, and using road speed, and reliability. As a result, the RGC is transport to Viet Nam via Bavet. Despite the prioritizing the development of regional con- continued investment in all transport modes nectivity and improved efficiency logistics, as in recent years, inland waterways that cater to one of its strategic pillars in the Pentagonal North American and Asian markets via transit Strategy Phase 1. 4 Cambodia Systematic Country Diagnostic (World Bank, 2023). VI CAMBODIA’S REGIONAL CONNECTIVITY: UNLOCKING THE FULL POTENTIAL OF TRANSPORT CORRIDORS EXECUTIVE SUMMARY C Key Challenges Transport and logistics constraints are in- • Bottlenecks exist along regional road cor- creasing the costs of domestic and cross-bor- ridors. Good progress has been made in der trade, creating inefficiencies in supply improving most national roads, including chains, and reducing Cambodia’s international connecting Phnom Penh with major trade competitiveness. These constraints are sum- gateways such as the Sihanoukville port. But marized below: a major gap exists along the regional East- West corridor (the section running from • Logistics and transportation costs are Siem Reap to the Oyadav checkpoint at the high. National logistics costs in Cambodia Cambodia-Viet Nam border). This corridor (2020) are estimated at 26 percent of GDP, connects Cambodia with Viet Nam, Thai- which is higher than most ASEAN countries, land, and Lao PDR, and is part of the Greater including Thailand (14 percent) and Viet Mekong Subregion (GMS) corridors and the Nam (20 percent). Transportation costs are Master Plan for ASEAN Connectivity (MPAC particularly high, representing more than 40 2025).6 The lack of development of this percent of total logistics costs (alongside corridor is a major constraint to economic warehousing), pointing to significant ineffi- growth and job creation in the less-devel- ciencies in the transport sector5. oped northeastern part of the country. • There are inefficiencies in border clear- • Waterway connectivity between Cam- ance and trade procedures. Border clear- bodia and Viet Nam is a vital asset but is ance is slow and costly due to poorly syn- underutilized due to capacity constraints chronized procedures among countries and and administrative barriers such as the inadequate cross-border facilities. Imple- inspection of transit containers. Maritime mentation of the national single window and ports in Viet Nam (such as Cai Mep and Cat ASYCUDA (Automated System for Customs Lai) accommodate liner container vessels Data) has been slow. The introduction of the bound for the United States and East Asia single-stop inspection and common control respectively and play an important role for area with Thailand and Viet Nam has been transit of Cambodian exports. Today, there delayed. are two river port hubs and six inland-water- way sub-feeder general purpose terminals • The infrastructure investment gap in Cam- in Cambodia; but their capacity is limited, bodia remains large. Public investment in constraining access and preventing optimal infrastructure accounted for only 3.2 per- consolidation of freight movements. This cent of GDP during 2019–2022, while esti- limited capacity inhibits barge connections mated annual investment needs are about of over 2,000 deadweight tons (DWT), which 10 percent of GDP. The transport sector is more cost-efficient for freight transport. accounts for a substantial portion of these The current inefficiencies in cross-border investment needs. About 85 percent of na- transit procedures have time and cost impli- tional roads are paved, but only 38 percent cations for Cambodia’s exports and imports of provincial roads and 10 percent of rural requiring collaboration between the neigh- roads have pavement, indicating a major gap boring countries such as Cambodia and Viet in climate-resilient last-mile connectivity. Nam to find mutually beneficial solutions. Maintenance spending is also inadequate; because of this, the current value of road as- • The full potential of railways in facilitat- sets is estimated to be more than one-third ing trade with Thailand has not been real- below their potential maximum net present ized, despite their capacity to play a more value. significant role. The role of the railways in 5 These figures represent data for 2018. 6 MPAC 2025 has been adopted by ASEAN member countries to “achieve a seamlessly and comprehensively connected and integrated ASEAN that will promote competitiveness, inclusiveness, and a greater sense of community.” MPAC 2025 focuses on five key areas: sustainable infrastructure, digital innovation, seamless logistics, regulatory excellence, and people mobility. VII CAMBODIA’S REGIONAL CONNECTIVITY: UNLOCKING THE FULL POTENTIAL OF TRANSPORT CORRIDORS EXECUTIVE SUMMARY regional trade is limited – estimated at less der trucking operations for factors such as than one percent of total domestic freight axle load, vehicle length and width, impos- movements. A shortage of existing rolling es constraints on efficient regional trucking stock and dilapidated infrastructure have operations. been the main constraints for the railway in attracting new businesses, including along • Climate-related natural disasters disrupt the rail link between Phnom Penh to Poipet. logistics supply chains. Cambodia is high- ly exposed to climate change impacts, in- • The trucking fleet is old and inefficient. cluding heavy rainfall and floods. Nine out The average age of trucks in Cambodia is of ten provinces analyzed face more than 15 typically 20 years or older, many of which percent loss of access to employment bases are imported secondhand. Compared to such as factories and agriculture when roads new trucks, secondhand purchases have are flooded. Furthermore, it is estimated that resulted in slower travel speeds, signifi- a seven-day closure of key road corridors by cantly reduced fuel efficiency, increased a 50-year flood event would result in a five maintenance costs, and generated higher percent indirect cost increase for trade part- emissions. Moreover, the absence of har- ners for each day of disruption from freight monized technical standards for cross-bor- rerouting or blockage.7 Proposed Investments to Improve 1 7 Cambodia Climate Change Development Report. (World Bank, 2023). D Cambodia’s Regional Connectivity The conclusions of the analysis of trade corri- el times that are unlikely to be a significant dors (Chapter 3) show the importance of im- driver of freight mode choice as long as trav- proving regional connectivity along the follow- el times are reliable. ing transport corridors (Figure ES1): • Corridor C: The Existing Rail corridor from • Corridor A: The East-West regional road Poipet – Phnom Penh – Sihanoukville Port corridor connecting Laem Chabang – Poi- (Cambodia-Thailand). For connection to pet – Siem Reap – Oyadav – Quy Nhon Thailand, upgraded existing rail is an alter- (Thailand–Cambodia–Viet Nam, and Cam- native to road transport with lower transport bodia–Lao PDR). The gap in international costs. road connectivity is due to the poor con- dition of the section in Cambodia between These prioritized corridors comprise part of Siem Reap and the border with Viet Nam the existing backbone corridors for the three (about 400km). Currently, due to poor con- modes – road, rail, and inland waterway – dition this corridor is lightly trafficked but it which can be improved with relatively lower is directly connected to Lao PDR and Viet costs and in the short-to-medium term (com- Nam and has significant development and pared to new greenfield corridors). They do international trade potential. not compete, but complement each other, by serving different geographic areas, regional • Corridor B: The existing Inland Waterway markets, and destinations. However, it is not- corridor from Phnom Penh – Vipassana ed that well-designed inland waterway and Kamsomnor – Cai Mep (Cambodia–Viet railway measures that cater to shipper pref- Nam). This is a key current trade corridor. erences would have important decarboniza- Greater use of waterway transport on the tion benefits in addition to economic benefits. Mekong River is an alternative to road to The following investments are proposed to en- Viet Nam with significantly lower transport hance Cambodia’s regional connectivity: costs although at the expense of longer trav- 7 Cambodia Climate Change Development Report. (World Bank, 2023). VIII CAMBODIA’S REGIONAL CONNECTIVITY: UNLOCKING THE FULL POTENTIAL OF TRANSPORT CORRIDORS EXECUTIVE SUMMARY FIGURE ES.1 Three Prioritized Trade Corridors Showing Short– and Medium-Term Development Opportunities Source: Study team. • Corridor A: Improve Siem Reap-Oyadav in the movement of freight, especially for Road as part of the East–West corridor be- exports to the United States and East Asia tween Thailand, Cambodia, and Viet Nam through the Mekong River and maritime (and the only road corridor connecting Cam- ports in Viet Nam. Priority investments to bodia with Lao PDR). Under MPAC 2025, this expand capacity and improve efficiency of road link is prioritized for improvement and the inland waterway include (i) supporting designation as Asian Highway 21, which con- PPAP investment plan for its phase 4 expan- nects Cambodia to Quy Nhon, an important sion of its main container terminal (LM17) domestic and regional shipping port in Viet to double its container-handling capacity; Nam. Investment in the main road infra- (ii) developing sub-river feeder ports and structure should be complemented by im- access roads for additional freight consol- provements to the condition and resilience idation (for example in Kampong Cham, of feeder roads linking to agriculture and Siem Reap, Kampong Chhnang, and Prek production areas, modernization of the bor- Kdam); (iii) capital dredging of the naviga- der-crossing facility, and the promotion of tion channels to accommodate larger ves- private investments to develop value-added sels; (iv) expanding the river barging; (v) services and consolidation facilities along improving navigation safety and efficiency; the corridor. To take full advantage of road and (vi) streamlining cross-border waterway investments, rationalizing duties, and spe- transit procedures. cial taxes on imports of new trucks and vig- orously pursuing harmonization of vehicle • Corridor C: Improve the existing railway op- technical standards would help incentivize erations and infrastructure links with Thai- the replacement of the outdated fleet with land. Priorities include (i) renovation of the larger, cleaner, and efficient vehicles. existing one meter gauge track along the 386 kilometers northern line (infrastruc- • Corridor B: Improve the inland waterway ture/track is owned by the public sector); (ii) connection with Viet Nam and farm hinter- acquisition and deployment of new rolling land in Cambodia. The Phnom Penh Auton- stock by Royal Railways, the railway conces- omous Port (PPAP) plays an important role sionaire; (iii) enhancement and digitalization IX CAMBODIA’S REGIONAL CONNECTIVITY: UNLOCKING THE FULL POTENTIAL OF TRANSPORT CORRIDORS EXECUTIVE SUMMARY of the signaling system; (iv) development of phase of upgraded railways that maximizes an improved legal and regulatory framework the benefits to be achieved for each dollar for railways operation; and (v) preparation of of investment. The feasibility of extending a forward business plan, including required the rail connection to PPAP’s LM17 container public and private sector actions to improve terminal should also be explored. railway operations. There is scope for de- tailed value-engineering to identify a first E Proposed Actions to Address Logistic and Cross-Border Transit Inefficiencies The study recommends a two-pronged ap- demonstrated efficiency and sustainabil- proach to address current inefficiencies in ity advantages over the other modes and trade, logistics and cross-border freight tran- are well-oriented to the main international sit and trade: markets. • Improved cross border trade facilitation • Take advantage of the immediate oppor- and more efficient transport movement fo- tunity to achieve enhanced utilization of cusing on relatively low-cost infrastructure, the current railway with modest invest- operational and management measures; ment and to expand its role in cross-bor- der movements (with Thailand and with • Implementing measures to reduce trade other markets via Sihanoukville Port). costs and promote smart logistics. • Inter-link waterways, roads, and railways • Synchronizing and streamlining border and multi-modal terminals thus develop- crossing procedures with those of neigh- ing multi-modal network that is inherent- boring countries. ly more resilient than individual networks working alone. • Modernizing the truck fleet with harmo- nized truck axle load limits and other tech- • Deploying weigh-in-motion technology nical features among the GMS countries. along key international corridors (e.g., NR1, AH21) to monitor the incidence of Connected transport networks focusing on truck overloading to preserve road assets completing the road network and improv- and facilitate more freight usage by rail ing its safety, further developing waterways, and waterways. maritime transport, and expanding the role of rail, as follows: A summary of the proposed actions that are set out in Chapter 4 is presented below (Ta- • Develop primary, secondary, and tertiary ble ES.1). The proposed actions are described road networks by focusing on current gaps as having short-term and medium-term prior- in links between the key economic zones ity – with short-term actions generally occur- and international gateways. Ensure such ring within a period of three years and medi- networks have sufficient established alter- um-term actions after that. natives at times of severe weather events. Improve traffic management and safety along highways and rural roads. • Maintain and develop further the current trunk and feeder waterways that have X CAMBODIA’S REGIONAL CONNECTIVITY: UNLOCKING THE FULL POTENTIAL OF TRANSPORT CORRIDORS EXECUTIVE SUMMARY TA B L E E S . 1 Proposed Actions to Address Logistic and Cross-Border Transit Inefficiencies Short-term Medium-term Enhancing cross-border transport and trade facilitation Continue to enhance cross-border trade movement Complete the negotiations on the GMS Framework efficiency through further automation and imple- Agreement for Cross-Border Railway Transport Con- mentation of single-stop inspection and a common nectivity and, in parallel, finalize key annexes and control area. technical arrangements. Complete the renewal of the early harvest arrange- Provide effective bilateral and tri-lateral coordination ments for the GMS Cross-Border Trade Agreement, to facilitate efficient regional, trade, and economic further harmonizing national requirements and en- corridors involving updating and maintaining trade hancing CIQ capacity. facilitation and associated agreements for all modes. Activate the Mekong Navigation Facilitation Com- Facilitate efficient multi-modal transport through an mittee to overcome constraints in smooth and safe effective regulatory framework to ensure appropriate navigation along the waterways between Cambodia investment and domestic capacity development. and Viet Nam. Facilitate better data access for investment and pol- icy making. Improving road connectivity Improve Corridor from Siem Reap to Oyadav, at Prioritize investment in climate resilience of critical the border with Viet Nam (Corridor A), including rural roads. cross-border facilities and linked tertiary roads. Facilitate developing a modern, safer, more ener- Investigate and provide additional traffic manage- gy-efficient, and lower-emission truck fleet with ment and safety measures along NR4, NR1, and NR5. technical standards that are better harmonized with GMS neighbors. Assess the implications for new axle load limits and impact on overloading and infrastructure deterio- ration. Developing inland waterways and maritime facilities Ensure the navigability and efficiency of the Mekong Develop an adequate end-to-end management sys- River and key ports for domestic and international tem along the main waterways. Enhance consolida- waterborne trade (Corridor B). tion from agricultural and production areas. Improve the capacity, safety, and quality of river Equip the Department of Waterways to efficiently navigation. manage inland waterways and enhance the market- ing capacity of inland waterways. Strategically improving the current railway Develop a 3-year rolling business plan to improve Improve the current meter gauge railway infrastruc- the railway sector. ture and rollingstock (Corridor C), focusing on the Northern Line and facilities to develop new markets. Undertake a value-engineering and feasibility study to determine the optimal level of investment in up- Complete a new feasibility study for a dual gauge grading the railway, including infrastructure and track to PPAP LM17 container port. rollingstock. Draft a new Railway Law that sets out the legal Progressively strengthen the capacity of the Depart- framework to bring to fruition a modern domestic ment of Railways for management of capital works railway network with high-quality regional connec- and maintenance. tions. Source: Study team, refer to Chapter 4. XI CAMBODIA’S REGIONAL CONNECTIVITY: UNLOCKING THE FULL POTENTIAL OF TRANSPORT CORRIDORS EXECUTIVE SUMMARY Delayed actions to address the critical iden- active facilitation by the National Logistics tified challenges may ultimately undermine Council and regular government and private Cambodia’s international trade competi- sector interaction. With the development of tiveness versus its regional peer countries. a common vision and improved coordina- However, vigorous and coordinated efforts tion among stakeholders, success can be can overcome the challenges in transpor- achieved through selective investments to tation and logistics faced currently by Cam- close the gap in infrastructure. In this light, bodia that are complex but not uncommon the investment program included in the Com- across the world. The complexity is related prehensive Intermodal Transport and System to the nature of the sector, which requires Master Plan 2023–2033 would benefit from coordinated efforts by multiple public sector further prioritization. Priority investments agencies s closer engagement with private should be complemented by policy actions sector stakeholders (such as freight forward- to unlock trade and export potential through ers, logistics companies, trucking associa- seamless cross-border transit, improved lo- tions, traders, and businesses). Institutional gistics and value chains, and the develoment coordination can be strengthened through of productive sectors. XII CAMBODIA’S REGIONAL CONNECTIVITY: UNLOCKING THE FULL POTENTIAL OF TRANSPORT CORRIDORS EXECUTIVE SUMMARY CHAPTER 1 IMPORTANCE OF REGIONAL TRANSPORT CONNECTIVITY 1 CAMBODIA’S REGIONAL CONNECTIVITY: UNLOCKING THE FULL POTENTIAL OF TRANSPORT CORRIDORS CHAPTER 1 1.1 Overview of Transport and Logistics Efficiency Trade continues to be an important growth of volume (i.e., tons) was slower at 7.8 percent engine for Cambodia. Exports and imports by over the same period. Based on these trends, it value grew by 340 percent or at a rate of 14.4 is expected that Cambodian firms will approx- percent per annum from 2010–2021. The value imately double the volume of goods moving of imports grew at 17.4 percent per annum, 60 along highways and through ports, airports, percent faster than exports that grew at 10.9 and warehouses by 2030 compared to 2022. percent per annum (Figure 1.1). In real terms, the total value of exports and imports by value Two-thirds of Cambodia’s exports by value grew by 110 percent or at a rate of 7 percent per are sent to highly competitive markets such annum from 2010–2021 about the same rate as as the United States of America, the Europe- real GDP growth over the period. Containerized an Union, and Singapore (Figure 1.3). Of the import and export cargo movements increased total value of exports, textiles and footwear by 400 percent from 2010–2022 (Figure 1.2).8 represented just over 50 percent; stone, glass, From 2015–2022, these containerized cargo and minerals represented 21 percent; and ag- movements grew by 130 percent or at an annu- ricultural products and foodstuffs represented alized compound growth rate of 12.5 percent. 11 percent.9 The sources of imports by value By comparison, growth in total exports and show that China has the dominant role (40 per- imports in containers and bulk cargo in terms cent) with Thailand (15 percent) and Viet Nam FIGURE 1.1 Trends in External Trade Values 2010–2021 (US$ million) 35000 Imports Exports 30000 25000 20000 15000 10000 5000 0 2020 2010 2014 2018 2019 2016 2013 2015 2021 2012 2017 2011 Source: Cambodia Trade Summary | WITS Data (worldbank.org) accessed March 7, 2023; UNCommtrade for 2021 data (accessed March 8, 2023). FIGURE 1.2 Growth in total TEUs (including empties) 2010–2022 1,592,718 Source: Study 694,654 team estimates using PPAP, PAS, and Customs data. Thailand’s 317,205 Aranyaprathet Customs House data 2010 2015 2022 used for Poipet. 8 Containerized cargo movements in twenty-foot equivalent units (TEU). 9 Cambodia Trade Summary | WITS Data (worldbank.org) accessed March 7, 2023; UNCommtrade for 2021 data 2 CAMBODIA’S REGIONAL CONNECTIVITY: UNLOCKING THE FULL POTENTIAL OF TRANSPORT CORRIDORS CHAPTER 1 (14 percent) having a lesser though significant Cambodia’s neighbors, Viet Nam and Thai- role. A wide variety of product types were im- land have outperformed Cambodia and Lao ported in 2020, including textiles and clothing PDR from 2018 to 2023 in terms of their global (33 percent); stone, glass, and metals (11 per- LPI ranking. While all four countries slipped cent); agricultural products (11 percent); fuels in their global rankings the effect was most (11 percent); and food products (7 percent). pronounced for Lao PDR and quite marked for Cambodia (Figure 1.5). Despite Cam- Cambodia’s high logistics costs, gaps in in- bodia’s overall slip in global ranking mainly frastructure, and weak supply chains have due to a drop in timeliness and international hindered the country’s economic diversifi- shipments, the logistics quality and customs cation.10 The World Bank’s Logistics Perfor- clearance and the efficiency in the quality of mance Index (LPI) 2023 points to significant transport and trade infrastructure showed a logistics challenges in Cambodia, which is small improvement while tracking and tracing ranked 115 out of 138 countries (Figure 1.4). Of showed significant improvement. FIGURE 1.3 Trends in External Trade Values 2010–2020 (US$ million) 1.3 Exports by Country 2020 Imports by Country 2020 North America 21,8% 15,6% 1,6% Vietnam 31,8% 5,8% Thailand 39,5% China incl. Hong Kong 5,1% Europe & Central Asia 13,7% Japan 15,0% Singapore 9,2% 3,4% 5,6% 2,0% 3,4% 13,9% Other Source: Cambodia Trade Summary | WITS Data (worldbank.org) (accessed March 7, 2023). FIGURE 1.4 Logistic Performance Index 5 1.4 4 3 2 1 0 2018 2023 2018 2023 2018 2023 2018 2023 2018 2023 2018 2023 2018 2023 OECD high income Singapore China Thailand Vietnam Lao PDR Cambodia LPI Score Efficiency of the clearance process score Quality of trade- and transport-related infrastructure score Source: Logistic Performance Index (World Bank 2023). 10 Special Focus. Supply Chain Disruptions in the Wake of Covid-19: Strategies to Reduce Logistics Costs (World Bank, 2022, p.2). 3 CAMBODIA’S REGIONAL CONNECTIVITY: UNLOCKING THE FULL POTENTIAL OF TRANSPORT CORRIDORS CHAPTER 1 FIGURE 1.5 LPI Ranking 2023 versus 2018 1.5 Cambodia 2018 Thailand 2018 Overall LPI rank 2023 Overall LPI rank 2023 140 120 120 100 Timeless 100 Customs Timeless 80 Customs 80 Clearance 60 Clearance 60 Process 40 Process 40 20 Tracking Infrastructure Tracking Infrastructure and Tracing and Tracing Logistics Quality International Logistics Quality International and Competence Shipments and Competence Shipments Vietnam 2018 Lao PDR 2018 Overall LPI rank 2023 Overall LPI rank 2023 120 120 100 100 Timeless 80 Customs Timeless 80 Customs 60 Clearance 60 Clearance 40 Process 40 Process 20 20 Tracking Infrastructure Tracking Infrastructure and Tracing and Tracing Logistics Quality International Logistics Quality International and Competence Shipments and Competence Shipments Note: A smaller number indicates a better ranking. Source: World Bank Logistics Performance Index, 2018 and 2023. (https://lpi.worldbank.org/). 1.2 Trends in Trade, Freight Demand and Modal Share Both sea and inland waterways increased that for total international trade (imports plus their share of all international cargo move- exports) of 19.0 million tons in 2022,11 the esti- ments by volume from 2015-2022 at the ex- mated share by modes was 32 percent carried pense of road transport. Both sea and inland by roads, 47 percent by sea, and the balance of waterways rely on private investment and op- 21 percent by inland waterways (Figure 1.6). In erations by private firms whereas road trans- contrast, road transport dominates domestic port is operated by private trucking firms that freight movements with a share of over 90 per- operate on highways provided by the public cent of domestic freight movements, including sector or new private expressways that are between agricultural and industrial production facilitated by the public sector. It is estimated areas and markets. 11 All cargo inclusive of containers, bulk, general cargo, and fuels. 4 CAMBODIA’S REGIONAL CONNECTIVITY: UNLOCKING THE FULL POTENTIAL OF TRANSPORT CORRIDORS CHAPTER 1 FIGURE 1.6 Modal Shares of all Export/ Import Cargo Movements 2015-2022 2015 2022 1.6 41,3% 11.9 million tons 19.9 million tons 40.5% 46.9% 31.8% 21.3% 18.2% Roads Inland Waterways Maritime Source: Study team estimates using PPAP, PAS, and the road border crossings at Bavet and Poipet. Thailand’s Aranyaprathet Customs House data used for Poipet. Note: All cargo totaling the sum of exports and imports in containers, bulk, general cargo and fuels. FIGURE 1.7 Modal Shares 2010-2022 based on all Export/Import TEUs (including empties) 2010 2015 2022 1.7 0.317 m. TEUs 10.7% 0.695 m. TEUs 22.8% 1.593 m. TEUs 47.1% 19.3% 26.7% 41,3% 20.8% 56.4% 26.2% Roads Inland Waterways Sea Source: Data for 2015 and 2022 from study team estimates using PPAP, PAS, and Customs data. Data for 2010 from Cambodia Trade Corridor Performance Assessment (World Bank, July 2014). The modal split is similar in terms of total percent carried by roads, 70 percent by sea, international TEU movements. Overall, esti- and 19 percent by inland waterways.12 mated total TEU movements have increased by 400 percent from 2010 when it was 317,200 Facilitating the 190 percent expansion of the TEUs to 1,592,700 TEUs in 2022 (Figure 1.7). inland role for container transport from 2015- From 2015-2022, inland waterway transport 2022 was a corresponding 270 percent ex- increased its share of TEU movements at a pansion of TEU handling capacity by PPAP. faster rate than roads and at the expense of Actual TEUs transported by inland waterways sea transport. As a result, it is estimated that grew from 145,000 to 417,000 TEUs per an- of all TEUs in 2022, 27 percent were carried num (growth of 190 percent over the period) by roads, 47 percent were carried by sea, and over the period 2015 to 2022. TEU handling the balance of 26 percent by inland waterways. capacity grew from 134,000 TEUs to 500,000 By comparison, in 2010 the shares of TEUs TEUs per year, respectively, over the same (including empties) were estimated to be 10 period.13 12 Cambodia Trade Corridor Performance Assessment (World Bank, July 2014). Figure 1. 13 PPAP Presentation, 2022, Slide 11. 5 CAMBODIA’S REGIONAL CONNECTIVITY: UNLOCKING THE FULL POTENTIAL OF TRANSPORT CORRIDORS CHAPTER 1 The main container gateways are Siha- ments generated by Sihanoukville Port or 3.1 noukville Port, PPAP’s container terminal percent of all Cambodia’s international con- LM17 (located 28 kilometers downstream tainer movements. of Phnom Penh) using the Mekong River to Viet Nam, and Bavet using road transport Poipet, recently replaced by the nearby St- to Viet Nam (Figure 1.8).14 Like inland water- ueng Bot border date in 2023, is primarily ways, road transport and port capacity have a bulk cargo facility and so its importance greatly increased. However, the relative share is underrepresented in Figure 1.8 which of export and import demand by these modes presents TEU movements. Viewed in terms has declined to that carried by inland water- of overall cargo movements, Poipet was the ways. While rail transport has a negligible most important land-based border crossing direct role in transporting goods across the (Table 1.1). Overall, total exports in contain- main land borders with Thailand (Poipet) and ers of general and bulk cargoes are estimated Viet Nam (Bavet without a current railway), in to have been 6.2 million tons. Total imports 2022 rail transport represented 6.6 percent of in containers of general and bulk and fuel are all Cambodia’s international container move- estimated to have been 12.8 million tons. FIGURE 1.8 Main Container Gateways 2015 and 2022 (all TEUs, including empties) 800.000 2015 2022 750.100 700.000 600.000 500.000 417.696 391.800 Source: Study 400.000 379.409 team estimates 300.000 using PPAP, PAS, 200.000 141.113 144.813 and Customs 100.000 16.928 45.513 data. Thailand’s Aranyaprathet 0 Customs House data used for Poipet. Poiphet Bavet PPAP PAS TA B L E 1 . 1 Trade Volumes at International Gateways 2022 Border Crossing/ Gateway Export (tons) Import (tons) Road Poipet 1,530,000 2,060,000 Bavet 979,000 1,292,000 Bavet (LPG) 0 171,000 Inland Waterways - Mekong Phnom Penh Autonomous Port 1,899,000 1,328,000 Fuel (other private companies) 0 817,000 Sea Sihanoukville port 1,778,000 5,225,000 Sihanoukville port (fuel) 0 1,890,000 Total (above) 6,186,000 12,783,000 Note: Excludes estimates of trade across smaller road borders such as Trapaeng Sre (Snoul), minor seaports (e.g., Kampot currently), and Kaom Samnor on the Mekong River at the border with Viet Nam. Total import and export tons in 2022 at Trapaeng Sre are estimated to be about 570,000 tons and at Kaom Samnor to be about 400,000 tons that are not accounted for in the table. Source: Study team estimates using PPAP, PAS, and Customs data. Thailand’s Aranyaprathet Customs House data used for Poipet. 14 The new Prey Vor border crossing for container traffic near Bavet is relatively lightly used; data not available to the study team. 6 CAMBODIA’S REGIONAL CONNECTIVITY: UNLOCKING THE FULL POTENTIAL OF TRANSPORT CORRIDORS CHAPTER 1 The composition of goods by type using each • Data currently available on total trade vol- gateway can vary significantly from year to umes using PPAP shows the dominant role year. However, the following characteristics of garments in exports in terms of TEUs is have been observed: apparent from construction materials for imports (Figure 1.10). As for roads, there • Data for Poipet (main border gate with can be considerable variation in the com- Thailand) shows that exports in years 2016 position of exports and imports from year to and 2022 were dominated by agricultural year; – while rice only represented 2 percent produce (Figure 1.9). Imports were dom- of exported TEUs in 2021, it was more signif- inated by cement and various consumer icant in 2018 when it represented 7 percent products.15 of TEUs. Fuel imports via inland waterway are handled by private companies and in • Detailed data on goods using Bavet (main 2022 represented 1.7 million tons (Table 1.1). border gate with Viet Nam) are not avail- able but in 2022 about 80 percent were in • Detailed data for exports and imports for containers and the rest were in bulk. In ad- Sihanoukville Port in 2022 (Figure 1.11) in- dition, an estimated 171,000 tons of liquified dicate that rice and garments represent petroleum gas (LPG) were imported in LPG just over half of exports and general car- trucks. goes (33 percent). For imports, general cargoes represented 52 percent and fuels and gas 35 percent. FIGURE 1.9 Distribution of Main Export and Import Products, Poipet 2016 and 2022 (Tons) Exports 2016 Imports 2016 1.9 12,5% 46,0% Vehicles All Types Cement Tapioca Drinks 87,5% Other 49,8% Other 2,1% 2,1% Exports 2022 Imports 2022 7,1% 4,9% 5,8% 4,8% 0,5% 18,4% Various Scrap Vehicles All Types Cassava Cement Other Drinks 86,6% Aluminum Scrap 72,0% Other & Components Source: Data for Poipet obtained from Thailand’s Aranyaprathet Customs House on the other side of the border. 15 Data are sourced from the Ayanprathet Custom House in Thailand which is more detailed than that from Cambodian Customs. 7 CAMBODIA’S REGIONAL CONNECTIVITY: UNLOCKING THE FULL POTENTIAL OF TRANSPORT CORRIDORS CHAPTER 1 FIGURE 1.10 Distribution of Main Exports & Imports by Commodity, PPAP 2021 Exports 2021 Imports 2021 1.10 2,0% 24,0% 41,0% 21,0% Food and Beverage Household Goods Garment Raw Materials 16,0% Garment Construction 77,0% Other Materials 11,0% 8,0% Rice Other Source: PPAP presentation 2022 Note: all export/ import cargoes, i.e., in containers and bulk but excluding fuel. FIGURE 1.11 Distribution of Main Exports and Imports by Commodity, PAS 2022 Exports 2022 Imports 2022 1.11 General Cargo 2,3% 1,4% 2,4% 31,3% 33,2% 7,5% Rice General Cargo Garment Garment Fruit Fuel & Gas Shoes / Socks Machinery 3,9% Wood Vehicle, 35,0% 6,1% Processing Motor, Bike 21,6% Vehicle, 51,5% Steel, 3,7% 0,2% Machinery, Cigarettes, Other Steam Coal Source: Annual Report (PAS 2022). Unofficial Translation. Note: all export/import cargoes (i.e., in containers and bulk). The destinations of exports by volumes Transit trade is currently limited but with through Phnom Penh’s ports (Figure 1.12) future potential for growth. Transit trade, al- and Sihanoukville Port (Figure 1.13) are heav- most all from Thailand to Viet Nam, rose from ily oriented to North America as are overall 41,000 tons in 2018 to 102,000 tons in 2021 exports (Figure 1.3). Due to the convenient lo- with a spike in 2020 where transit movements cation of PPAP’s container terminal (LM17) and of 144,000 tons was recorded. The number their nearby bulk terminals, there is a direct of containerized transactions averaged 70% connection to Viet Nam’s Cai Mep deep sea- of transit trade from 2018–2021 but in 2021 port. PPAP’s traffic has a stronger orientation reached 90 percent. With improvements in to North America (United States and Canada) infrastructure and trade facilitation among than Sihanoukville Port. Sihanoukville Port has the GMS countries the potential for growth in a relatively strong orientation to Europe (32 transit trade is significant. percent of total export containers) whereas PPAP’s ports do not. China is an important Detailed data on the origins and destinations export market for both ports but more so for of import and export goods by road are not Sihanoukville Port (11 percent) compared to available. However, they are likely to have a Phnom Penh’s ports (8 percent). In terms of stronger orientation to markets in Thailand imports, China dominates the cargo move- (via Poipet/ Stueng Bot) and Viet Nam (via ments for both Phnom Penh’s ports and Siha- Bavet) than trade using Phnom Penh and Si- noukville Port with it being more important for hanoukville Port. the latter (64 percent). 8 CAMBODIA’S REGIONAL CONNECTIVITY: UNLOCKING THE FULL POTENTIAL OF TRANSPORT CORRIDORS CHAPTER 1 FIGURE 1.12 Distribution of Main Exports and Imports by Country, Phnom Penh Port 2021 Exports 2021 Imports 2021 1.12 9% 25% 47% 8% 65% 9% 3% USA China 6% 9% Canada Vietnam Japan Europe China Malaysia 19% Other Other Source: PPAP presentation 2022. FIGURE 1.13 Distribution of Main Exports and Imports by Country, Sihanoukville Port 2022 Exports 2021 Imports 2021 1.13 2% 6% 6% 3% 4% 61% 7% 34% 7% USA EU 11% China China 22% Asia Asia UK USA 32% Japan EU Other Japan Source: Annual Report (PAS 2022). Unofficial Translation. To meet the desired growth in future trade dling capacity of PPAP LM17 container termi- flows, all modes must perform a larger and nal is planned by 2029. There is a significant more efficient transport task. As in the recent opportunity to increase the share of exports past, significant new investment is planned in by inland waterways and by rail transport that waterways, roads, and ports that can underpin have untapped potential. a sharp growth in trade demand. In particular, an 80 percent increase in the container han- 9 CAMBODIA’S REGIONAL CONNECTIVITY: UNLOCKING THE FULL POTENTIAL OF TRANSPORT CORRIDORS CHAPTER 1 CHAPTER 2 OVERVIEW OF THE TRANSPORT SECTOR AND CROSS-BORDER TRANSPORT FACILITATION 10 CAMBODIA’S REGIONAL CONNECTIVITY: UNLOCKING THE FULL POTENTIAL OF TRANSPORT CORRIDORS CHAPTER 2 2.1 Cross-Border Transport Facilitation Under the various bilateral and region- • The Southern Coastal Corridor as follows: al agreements quotas for vehicle passage (i) Laem Chabang to Hat Lek (border), Thai- across land borders between Cambodia and land connecting to Cham Yeam (border) and its neighbours vary by country. Under the Bi- Sihanoukville Autonomous Port, Cambodia; lateral agreements these quotas are currently and (ii) Sihanoukville Port to Prek Chak (bor- as follows: (i) with Thailand, 150 trucks each der) in Cambodia and Ha Tien (border) in way; (ii) Lao PDR, 40 trucks for each country; Viet Nam connecting to Rach Gia and Cau and (iv) Viet Nam, 800 trucks for each country. Mau in Viet Nam’s Mekong Delta. However, Under the tri-lateral agreement between Cam- the Southern Coastal Corridor is not consid- bodia–Viet Nam–Lao PDR (CLV), 150 trucks ered a trade corridor other than at the west- from each country are authorized to travel ern end along the Thai seaboard. among the three countries. Under the GMS Cross-Border Trade Agreement (CBTA), 500 • The north-south corridor from Siha- trucks from each country are permitted to trav- noukville port to Phnom Penh connecting el. During the Covid-19 pandemic, the permits to Trapeang Kriel at the border with Lao PDR issued to Cambodian truck operators under (opposite Nong Nok Khean, in Lao PDR). the ASEAN agreement lapsed. Under the ASE- AN Framework Agreement on the Facilitation Inland waterways using the Mekong Route of Goods in Transit (AFAFGIT), a quota of up are open for trade through legal processes. to 500 vehicles from each country are permit- With their common interest in increasing in- ted to travel. This Agreement was launched ternational trade, the Mekong River Commis- following the operationalization of the ASEAN sion’s member states (Cambodia, Lao PDR, Customs Transit System (ACTS) in November Thailand, and Viet Nam) included Freedom of 2020 between Singapore, Malaysia, Thailand, Navigation in the 1995 Agreement on Co-op- Cambodia, Laos PDR and Viet Nam. eration for the Sustainable Development of the Mekong Basin. This action provided a During the Covid-19 pandemic, most of the high-profile base for the Mekong River Com- cross-border points between Cambodia mission to start facilitating the negotiations with neighboring countries were closed. toward the 2009 Waterway Transport Agree- The CBTA operation under the early harvest ment between Cambodia and Viet Nam. The arrangements also expired but during 2024 Agreement also permits access to the river are being renewed. They cover the following system by foreign vessels (transit routes are road corridors: shown in Figure 2.1). The move was a histor- ic change that facilitated increased regional Thailand–Viet Nam. Laem Chabang and and international trade. From that moment Bangkok to Ayanyaprathet, Thailand, con- on, if there was full implementation of the necting to Poipet and Phnom Penh; and to Agreement, investors could be confident that Bavet and then to Moc Bai, Ho Chi Minh City cross-border shipping was based on a sound and Vung Tau, Viet Nam. legal structure. 11 CAMBODIA’S REGIONAL CONNECTIVITY: UNLOCKING THE FULL POTENTIAL OF TRANSPORT CORRIDORS CHAPTER 2 FIGURE 2.1 2009 Waterway Transport Agreement between Cambodia and Viet Nam Source: Navigation Program, the Mekong River Commission, 2009. The green-colored Regulated Waterways on the Mekong, Tonle Sap, Bassac and Vam Nao rivers, and selected canals can be used by Cambodian and Vietnamese vessels under the Agreement. The orange-colored Transit Routes are destined for maritime traffic and can be used by all sea-going ships under foreign flag under the Agreement. One of the cornerstones of the 2009 Water- for Cross-Border Railway Transport Con- way Transport Agreement was to establish nectivity (FACBRTC) for the Greater Mekong a Mekong Navigation Facilitation Commit- Subregion (GMS) was prepared in 2023 with tee which could implement and monitor the the support of the Asian Development Bank stipulations and responsibilities under the (ADB). Further negotiations are needed after Agreement. Unfortunately, the Committee which ratification by each country would oc- was never established and only a few ad hoc cur in parallel with finalization of key annexes meetings between Cambodia and Viet Nam and technical arrangements (for example, on were organized. The lack of such an institu- freight, passenger, technical standards, and tionalized committee means that: (i) there is phytosanitary requirements).16 It can therefore a room to improve joint efforts for deepening be expected that the ratified FACBRTC with the river transportation, improving the acces- annexes and technical arrangements would sibility, and conducting maintenance; (ii) the not be finalized until after 2025. countries are still using different regulations for navigation, pilotage, tariffs, and aids to The architecture of the FACBRTC mirrors the navigation; (iii) the implementing regulations CBTA for road transport in terms of scope. do not conform to international standards; and However, the design of FACBRTC is also at- (iv) border efficiency is not monitored closely tempting to address several weaknesses and for all cargo. shortcomings of CBTA. Improvements focus on the legal structure, the greater flexibility Cambodia established a bilateral agreement to adapt FACBRTC when necessary, in light of with Thailand on cross-border rail transport future transport, technological or regulatory in 2017. Cross-border transport between Cam- needs, the different institutional framework, bodia and Thailand by rail commenced at the and the progressive nature of its coverage and end of 2023. A draft Framework Agreement level of ambition. 16 Connecting the Railways of the Greater Mekong Subregion (Phase 2), financed by the People’s Republic of China Regional Cooperation and Poverty Reduction Fund, Final report, TA 9918 (ADB, 2023). 12 CAMBODIA’S REGIONAL CONNECTIVITY: UNLOCKING THE FULL POTENTIAL OF TRANSPORT CORRIDORS CHAPTER 2 Cross-border transport facilitation efficien- utes whereas the post-customs clearance time cy improved from 2019 to 2021. The 2021 in 2021 increased by about one hour compared and 2019 time-release studies measured the to 2019 result. In the area of Customs process- customs clearance time from the arrival of the ing, the average time for 2021 was similar to goods to the removal of the goods as well as 2019. For export clearance efficiency, that was the pre-arrival process procedure by measur- only measured at Sihanoukville Port, the over- ing time taken to request for licenses, certifi- all clearance time declined by about one hour cates, or permits conducted by other relevant to 3 hours and 44 minutes down from nearly government agencies and Customs.17 On av- 5 hours in 2019 (Table 2.1). The major reason erage, the 2021 Time-Release Study shows for the improvement in 2021 compared to 2019 that the overall clearance process for imports was the reduction in time taken from tempo- takes 2 days, 17 hours, and 13 minutes, which rary storage to the lodgment of the single is almost 20 hours shorter than was recorded administrative document. Other factors that in the 2019 Study (Table 2.1). The pre-Customs prevented further improvement have been the clearance time in 2021 dropped on average by high growth of export-import traffic, compli- almost 21 hours from 3 days, 6 hours, and 27 cated procedures, and incomplete use of tech- minutes in 2019 to 2 days, 9 hours, and 40 min- nology, and institutional inefficiency. TA B L E 2 . 1 Border Recent Clearance Times Imports 2021 2019 2015 Poipet border point 0d 3h 30m 3h 48m n.a. Bavet border point 0d 4h 16m 1d 7h 51m n.a. Phnom Penh Autonomous 4d 18h 24m 5d 18h 24m n.a. Port Sihanoukville Autonomous 2d 7h 18m 4d 2h 9 m n.a. Port Teng Lay Dry Port 1d 1h 55m 5d 16h 42m n.a. Phnom Penh SEZ 8d 12h 33m 2d 2h 1m n.a. Exports 2021 2019 2015 Sihanoukville Autonomous 0d 3h 44m 0d 4h 55m n.a. Port Poipet border point n.a. n.a. 0d 2h 30m Bavet border point n.a. n.a. 0d 1h 40m Source: Data for 2021 and 2019 from JICA, World Customs Organization, Japan Customs Organization. 2021; and Time- Release Study 2021. Data for 2015 from JICA, Presentation of Cambodia Logistics Master Plan 2018. Note: Data for 2015 is assumed to be export times. Opposite Poipet at Aranyaprathet in Thailand the Thai export time in 2015 was 30m. Opposite Bavet at Moc Bai in Viet Nam the Vietnamese export time in 2015 was 3h 30m. The World Bank is supporting the Gener- by Thailand’s Neighboring Countries Econom- al Department of Customs and Excise to de- ic Development Cooperation Agency (NEDA). velop a Single Stop Inspection and Common In addition, the Cambodian Government in- Customs protocol at Stueng Bot that has tak- tends to pilot the Cambodian Single-Window en over this function from the previous facili- system at least one location in the near future. ty at Poipet. The facilities are being developed 17 The reported clearance times mainly cover imports to Cambodia with information on export clearance times restricted to Sihanoukville Port. There is no up-to-date information available on clearance times at Aranyaprathet, Thailand, or Moc Bai, Viet Nam along the major land-based trade corridors. Time-Release Study 2021 (JICA, World Customs Organization, and Japan Customs Organization, 2021). 13 CAMBODIA’S REGIONAL CONNECTIVITY: UNLOCKING THE FULL POTENTIAL OF TRANSPORT CORRIDORS CHAPTER 2 2.2 Road Transport Road Network Of the total length of national, provincial borders) and 73 percent of the two-digit na- and rural roads of about 66,700 kilometers tional roads. While the length of paved pro- in 2022, the MPWT and the Ministry for Ru- vincial roads has nearly doubled between 2017 ral Development (MRD) are responsible for and 2022, the condition and pavement cover- about 18,800 kilometers of national and pro- age of provincial roads remain poor. Only 10 vincial roads, and 47,900 kilometers of rural percent of rural roads are paved. While average roads, respectively (Table 2.2). Across na- speeds have increased due to these improve- tional roads managed by the MPWT, the pave- ments, border clearance times though improv- ment coverage is 100 percent of the one-digit ing remain an obstacle to efficient cross-bor- national roads (connecting between national der trade movement. TA B L E 2 . 2 Cambodia’s Road Network Pavement Coverage (2017-2022) Road types Total length (km) Paved length (km) Paved rate (%) 2017 2022 2017 2022 2017 2022 National (1-digit) 2,254 2,254 2,254 2,254 100 100 National (2-digit) 5,007 5,178 3,525 3,764 70 73 Provincial 9,031 11,371 2,745 4,265 30 38 Rural 45,087 47,920 2,111 4,396 5 10 Total 61,379 66,723 10,635 14,679 17 22 Source: World Bank staff estimates based on data from MPWT and MRD, 2023. Among the improved highways are Nation- isting highway NR4. NR4 is not tolled and in al Road 5 (NR5) connecting Poipet (ma- practice overloading is not effectively moni- jor border gate with Thailand), and NR1 to tored. The current toll18 for use of the 175 kilo- Bavet (major border gate with Viet Nam), meters expressway by a heavy truck is about both connecting with Phnom Penh. A new US$60, adding 27 percent to the tariff of about expressway connecting Phnom Penh with Si- US$220 to ship a container (TEU equivalent) hanoukville Port was opened to traffic in 2022 one-way between Phnom Penh and the port. and a new expressway between Phnom Penh Without this added expense, the NR4 there- and Bavet commenced construction in June fore remains congested. Tariffs per TEU-ki- 2023. Among the regional corridors, gaps re- lometer are up to one-half of what they are in main along the highway connecting Siem Reap other corridors (for example, Bavet and Poi- and Oyadav, which has potential to become an pet) likely due to an ample supply of available economic corridor (part of the GMS Southern trucks and more intense competition. Economic Corridor) in the northeastern region linking Cambodia with Thailand, Lao PDR, and Keeping road assets in good condition and Viet Nam. resilient to natural hazards such as floods requires adequate management and main- Although the new 4-lane expressway be- tenance. From 2018 to 2022, the MPWT an- tween Phnom Penh and Sihanoukville Port nual budget of US$70 million remained the has been in operation for more than one year, same for maintaining on average 10,291 kilo- most heavy trucks continue to use the ex- meters of national and provincial roads or 55 18 With 20 percent discount in the first year of operation. 14 CAMBODIA’S REGIONAL CONNECTIVITY: UNLOCKING THE FULL POTENTIAL OF TRANSPORT CORRIDORS CHAPTER 2 percent of the national network. By contrast, Overloading of trucks can cause premature the MRD spent on average US$21.4 million to structural failure of road pavement and bridg- maintain about 3,529 kilometers of rural roads es, significantly shortening the economic life (7 percent of the network) each year (Figure of the road assets. Despite recognition of the 2.2). With the current maintenance level, the significance of overloading, local-level con- share of roads in good condition is 40 percent trol may be thwarted by non-functioning weigh for national roads (including both one- and stations due to poor implementation and weak two-digit national roads), 33 percent for pro- control on approval of illegal heavy vehicle vincial roads, and 23 percent for rural roads modifications that increase vehicle mass and (Figure 2.3). Due to insufficient maintenance, axle loads. Overloading also contributes to un- the current value of the road asset in Cambodia safe travel conditions and undue traffic injury. has reduced to about 36 percent compared Road safety has therefore been identified as to its potential maximum net present value. an important public health issue in Cambodia. Improvements are also needed in maintenance practices, including a full roll-out of the road asset management systems by MRD, and in- creased participation of the private sector. FIGURE 2.2 Road Maintenance by MPWT and MRD (km) 12,000 90 MPWT MPWT MPWT Annual Maintenance Expenditure MPWT MPWT 10,000 75 8,000 70 70 70 70 70 60 Km of Road Maintained 6,000 45 MRD MRD MRD MRD 4,000 30 MRD 22 25 25 2,000 20 15 15 0 0 2018 2019 2020 2021 2022 Source: World Bank Recurrent Repair Regular Maintenance Urgent Repair staff estimates based on data from MPWT MRD Budget MPWT Budget and MRD, 2023. FIGURE 2.3 Road Pavement Condition 2022 4% 13% 22% 21% 35% 61% 74% 46% 42% 33% 26% 23% Source: World Bank staff estimates based on data from MPWT National Road National Road Provincial Road Rural Road and MRD, 2023. 1 - digit 2 - digit Good Fair Poor 15 CAMBODIA’S REGIONAL CONNECTIVITY: UNLOCKING THE FULL POTENTIAL OF TRANSPORT CORRIDORS CHAPTER 2 Among 172 countries for 1999–2018, the rural road network was assessed for 10 most 2020 Global Climate Risk Index ranks Cam- populated provinces (Table 2.3). With a 1-in- bodia 12th among most disaster prone with 50-year flood, rural households in Battambang the infrastructure sector being particular- and Prey Veng would suffer 48 percent and ly vulnerable to the impacts of disasters.19 34 percent, respectively, of access to hospi- With only about 10 percent of rural roads cur- tals. Smaller but substantial losses of access rently paved, Cambodia’s rural road network is (greater than 15 percent) would occur for rural extremely vulnerable to flooding-caused dis- households in Banteay Meanchey, Kampong ruptions. Rural households rely on rural roads Cham, and Kandal. When measured by access for accessing key services such as schools, to high schools, rural students in Battambang, hospitals, markets, and employment in facto- Kampong Cham, and Prey Veng are impacted ries and agriculture plantations. The indirect most during floods with about 20 percent loss impact of flood disruptions on Cambodia’s of access. TA B L E 2 . 3 Impact of Flood Disruptions on Road Accessibility to Hospitals, Schools, and Jobs Accessibility loss in 50-year flood Baseline accessibility Province Population events Hospitals (%) Schools (%) Jobs (No.) Hospitals (%) Schools (%) Jobs (%) 1. Phnom Penh 2,281,377 96 95 526,852 -7.00 -2.80 -18.80 2. Kandal 1,201,581 87 79 342,707 -16.80 -8.50 -48.80 3. Prey Veng 1,057,720 60 47 25,648 -33.90 -19.60 -59.50 4. Siem Reap 1,014,234 75 64 43,485 -7.30 -4.70 -9.40 5. Battambang 997,169 73 65 38,781 -47.90 -21.30 -43.60 6. Takéo 900,914 76 70 71,009 -13.20 -5.40 -20.00 7. Kampong Cham 899,791 70 63 35,407 -18.30 -19.90 -71.20 8. Kampong Speu 877,523 64 51 110,554 -1.20 0.00 -19.10 9. Banteay 861,883 76 63 23,856 -24.90 -11.30 -41.20 Meanchey 10. Tboung 776,841 64 50 23,167 -3 -1 -28.70 Khmum Note: Accessibility to schools: Percentage of people with access to high schools within 30 minutes. Accessibility to hospitals: Percentage of people with access to referral hospitals within 60 minutes. Source: World Bank staff estimates based on geospatial analysis, 2023. Road Transport Industry panies mostly providing logistics services for agriculture and construction sectors, with a The road transport industry in Cambo- total of 1,100 to 1,400 trucks nationwide. There dia is fragmented. Consisting of 20 large are also the Level 3 operators who are unregis- companies that own about 2,400 trucks, the tered small carriers mostly providing services Cambodian Logistics Association (CLA) fo- for domestic trade, with 2,300 to 3,000 trucks cuses on international container freight that nationwide. In recent years, several interna- can be classified as follows: (i) Level 1, the tional companies such as APL Logistics, DSV, large-scale international freight forwarding Panalpina, Yusen Logistics, Evergreen Marine companies with a total of 800 to 1,000 heavy Corporation, Sinotrans Limited, China COS- vehicles nationwide, of which each company CO Shipping Corporation Limited, and Maersk has more than 10 vehicles; and (ii) Level 2, have contributed to the promotion of modern, the small- and medium-sized registered com- professional logistics services in Cambodia.20 19 2020 Global Climate Risk Index (Germanwatch, 2020). 20 Comprehensive Intermodal Transport and System Master Plan 2023-2033 (Royal Government of Cambodia, December 2023). 16 CAMBODIA’S REGIONAL CONNECTIVITY: UNLOCKING THE FULL POTENTIAL OF TRANSPORT CORRIDORS CHAPTER 2 Trucks averaging 20 years or older imply • A targeted approach to enforcement for less energy-efficiency and more polluting overloading and safety is needed. Cam- than modern trucks. The industry’s prefer- bodia would benefit from a more coordi- ence for imported secondhand trucks is due nated and efficient risk-based approach to to the 70 percent import tax applied to trucks assessing regulatory compliance inspection of any age.21 One consequence of the aged thus reducing the extent of weighbridges fleet is that trucks are relatively underutilized and other inspection facilities that tend not with heavy trucks typically traveling less than to be effective. The deployment of weigh- 60,000 kilometers per year. in-motion technologies possibly as a pilot project in addition to traffic management A World Bank study identifies the following and safety measures) would be beneficial key issues constraining the development of along selected international corridors (e.g., a modern, safe, and professional road trans- NR1, and the east-west road corridor section port industry:22 of Asian Highway 21 when upgraded). This measure would improve compliance and, as • There is a need to improve and effective- result, enhance safety, reduce overloading ly enforce existing regulations. Operator and delays to the benefit of the road trans- licensing and overloading of trucks is regu- port industry and the nation. Strengthening lated in order to harmonize with legislation MWPT’s monitoring of the freight logistics of neighboring countries. However, meeting industry (all modes) would be beneficial and the requirements to become an operator or could include variables such as: (i) empty driver is not stringent. Increasing the stan- running; (ii) weight-based–lading factor (ra- dards of operators and drivers is necessary tio of ton-kms moved to the available m3- to professionalize the industry. km carrying capacity); and (iii) overloading (proportion of vehicle-kms travelled with a • Legislative harmonization among the load in excess of legal weight limits). ASEAN countries remains a challenge. Although there are two important agree- ments governing cross-border movements Constraints (ASEAN and GMS CBTA) each country con- tinues to apply its own but differing technical Inadequate harmonization and efficiency standards. For example: (i) the permissible of cross-border procedures exists along length of an articulated vehicle in Cambo- the major international highway corridors. dia is 16 meters, but in Viet Nam it is 20 me- Problems identified just prior to Covid-19 in- ters; and (ii) the gross weight allowed on clude inadequate cross-border facilities, poor- an 18-wheel truck it is 40 tons in Cambodia ly synchronized cross-border procedures, and 45 tons in Thailand. Different technical slow implementation of single-window and standards for vehicle weight and dimensions ASYCUDA. Also, there was only partial link- leads to additional delays at borders. At the ing of ASYCUDA between border posts and 19th Government-Private sector forum (No- the Customs Department head office in Phnom vember 2023), among several key reforms Penh and quarantine. Electronic Data Inter- suggested, MPWT proposed to increase the change was not available at ports and import weight allowance for trucks from 40 to 45 licenses are not linked to ASYCUDA. There is tons with the rationale to reduce logistics less than 24 hours per day operation at some and transportation costs. Higher load limits border posts. Improvements in procedures would need strengthened roads and bridges were observed in 2021 compared to 2019. Fac- if with the new limits truck operators con- tors that have prevented further improvement tinue to overload trucks. A full assessment have been the high growth of export-import of the implications for new axle load limits traffic, complicated procedures, and incom- should be undertaken by MPWT possibly plete use of technology, and institutional in- with technical assistance. efficiency.23 21 Special Focus. Supply Chain Disruptions in the Wake of Covid-19: Strategies to Reduce Logistics Costs (World Bank, 2022, p.2). 22 Investing in Logistics for Sustainable Economic Growth Background Studies for The Preparation of Cambodia Logistics Master Plan (World Bank Group, 2018). 23 Time-Release Study 2021, World Customs Organization and Japan Customs Organization (JICA 2021). 17 CAMBODIA’S REGIONAL CONNECTIVITY: UNLOCKING THE FULL POTENTIAL OF TRANSPORT CORRIDORS CHAPTER 2 Post-Covid-19 there has been a slow take- anticipated trade growth, these facilities would up of the ASEAN Agreement and CBTA also be expected to merely keep pace with cross-border traffic rights. Cross-border growing demand. Despite new expressways trade facilitation at road checkpoints relies on being largely used by passenger vehicles, the bilateral agreements and the ASEAN Agree- current pricing of the expressway to Siha- ment on exchange of traffic rights. Legislative noukville is not attractive to truck operators harmonization among ASEAN countries on or shippers who prefer to use NR4. Express- technical standards for trucks remains chal- way toll pricing needs to be reviewed for future lenging. Even with the two important agree- expressway concessions are structured. This ments governing cross-border movements would also help ensure that new public-private (ASEAN and GMS CBTA), each country con- partnerships are affordable, including from a tinues to apply its own but differing technical government fiscal risk perspective and the end standards. Previous permits issued by MPWT users’ perspective regarding the levels of tolls to Cambodian truck operators lapsed during and tariffs levied. the Covid-19 period. Information from the Cambodian Trucking Association and from The highways connecting between Siem discussions with Customs officials at border Reap and Oyadav are in need of upgrading. posts indicates that few Cambodian truck op- This corridor has the potential to become an erators have applied to renew these permits. economic corridor in the northeastern region The main reason appears to be that Cambodi- linking Cambodia with Thailand, Lao PDR, an truck operators prefer to transfer goods at and Viet Nam. The road forms part of the the border (for example, to Vietnamese trucks) GMS Southern Economic Corridor. Proposed rather than carry the goods to the destination for upgrading as part of the new Intermodal within Viet Nam as their vehicles are subject Transport Master Plan and the Master Plan to Vietnamese regulatory requirements that for ASEAN Connectivity (MPAC) 2025, the Cambodian truck operators may find difficult road is to be known as Asian Highway 21.24 to meet. Connecting highways 19/19B in Viet Nam are being upgraded under the Central Highlands There is rapidly growing demand for im- Connectivity Improvement Project financed by proved highway management. Extensive the World Bank.25 highway improvements have been made along the main trade corridors to Poipet (NR5) and Gaps also remain in the secondary network Bavet (NR1), but these are merely keeping connecting between provincial centers and pace with growing traffic and trade demand. the highway network (1-digit highways). There is scope to improve traffic management Improved, more resilient connections are along these and other highways to improve ef- needed in the tertiary road network linking ficiency and traffic safety particularly to better villages and farming areas to towns and to ag- separate roadside development and pedestri- ricultural processing facilities and transport an and local motorcycle activity from through terminals. The gaps will continue to need at- traffic. tention even with extensive expressway de- velopment. Strengthening of secondary roads New expressways are being developed, but and small bridges would enhance supply chain appropriate pricing and traffic manage- resilience; so even if they are inundated, they ment are critical to optimizing expressway can be open to traffic sooner without sustain- use and benefits to the economy. A new ex- ing serious damage. Multi-modal solutions pressway developed as a private concession to also have an important role to play in mini- Sihanoukville was recently opened. Construc- mizing disruptions and enhancing resilience. tion of a new four-lane expressway to connect from Ring Road 3 in Phnom Penh to Bavet, Low utilization by truck fleet limits the po- passing Phnom Penh Port’s main container tential improvement in logistics cost due to terminal LM17, started in June 2023. Due to the new transport infrastructure. The Cambodi- 24 MPAC 2025 is adopted by ASEAN member countries to “achieve a seamlessly and comprehensively connected and integrated ASEAN that will promote competitiveness, inclusiveness, and a greater sense of Community.” MPAC 2025 focuses on five key areas: sustainable infrastructure, digital innovation, seamless logistics, regulatory excellence, and people mobility. 25 Viet Nam: Central Highlands Connectivity Improvement Project (World Bank, approved June 2017). 18 CAMBODIA’S REGIONAL CONNECTIVITY: UNLOCKING THE FULL POTENTIAL OF TRANSPORT CORRIDORS CHAPTER 2 an Logistics Association in discussion confirm to the Cambodian truck fleet bring aged (about that transport cost is a key factor driving the 20 years old) with high operating costs, and choice of routes and not small savings in travel its relatively low utilization, that reduces the time. In part the high sensitivity to cost is due potential to cover fixed costs. 2.3 Inland Waterways and Maritime Transport Waterborne transportation in Cambodia is di- transport connection between Cambodia vided into three categories for this report: and overseas ports beyond Cambodia/ Viet Nam. • Maritime transport. Transport by sea-going and coastal ships between overseas ports • Domestic commercial waterborne trans- and the ports of Sihanoukville and Kampot, port. Inter-provincial commercial feeder and ports on the Mekong River System. transport by inland waterways on the Me- kong River System within Cambodia. • Regional cross-border waterborne trans- port. Transport by inland waterway river An overview of the typical dimensions of con- boats crossing the border between Cambo- tainer carriers in terms of DWT, draft (depth dia and Viet Nam (Corridor B as described in of water to float a ship), and TEU capacity re- Chapter 3). This inland waterway transport ferred to in this report is provided in Table 2.4. offers a direct link between Phnom Penh and the Cai Mep port, a mother port,26 south of Ho Chi Minh City, Viet Nam, and is a vital TA B L E 2 . 4 Important Dimensions of Container Vessels Type DWT Draft in meters TEU capacity A. Barges 1,000 2.2-2.6 80   1,500 2.5-3.0 120   2,000 3.5-3.8 160     3,000 3.6-4.0 240 4,000 3.8-4.2 350 B. Sea-River Vessels 2,000 3.5-4.5 120-180   3,000 4.5-5.5 160-220   4,000 5.8-6.2 280-360   5,000 6.0-6.4 380-500 C. Sea-Going Vessels 10,000 8.2-8.8 700-1,000   20,000 9.4-10.0 1,500-1,800   30,000 10.5-11.2 2,500-3,000     50,000 11.0-12.0 4,000-4,400   70,000 12.3-13.0 5,800-6,200   90,000 13.2-14.0 7,800-8,200 140,000 14.0-14.8 11,500-12,000 Notes: • The deadweight tonnage (DWT) of a vessel measures the total maximum weight of cargo that the vessel can carry, including the weight of fuel, stores, water ballast, fresh water, crew, and passengers. • Barges differ from sea-going vessels in that they generally do not transport ballast water. This distinction contributes to the usual scenario where the DWT for barges surpasses that of sea-going ships with equivalent cargo capacities. • TEU capacity: number of twenty-foot equivalent unit containers a carrier can take. Source: World Bank staff estimates. 26 Mother vessels serve major ports that can be described as mother ports. While the average capacity of a mother vessel is about 10,000 TEUs, the largest mother vessels today have a capacity of up to 24,000 TEUs. By comparison, the largest vessels that can use the Sihanoukville Port today are about 1,800 TEUs. In October 2020, Cai Mep received Maersk Line’s EEE vessel Margrethe Maersk with close to 20,000 TEU (APM Terminals. https://www.apmterminals.com/en/news/ news-releases/2020/201027-cmit-receives-largest-container-vessel-in-Viet Nam-s-history) accessed September 25, 2023). 19 CAMBODIA’S REGIONAL CONNECTIVITY: UNLOCKING THE FULL POTENTIAL OF TRANSPORT CORRIDORS CHAPTER 2 Direct Maritime Traffic Sihanoukville Port, a listed company that op- Because of the limited draft along the Cam- erates the nation’s primary maritime port, bodian coast and Sihanoukville’s absence has been growing rapidly. The Sihanoukville from the global maritime routes, there are Port has registered a 9.7 percent annual growth no mother container vessels servicing Cam- rate in container traffic from 392,000 TEUs in bodian seaports. There are however liner 2015 to 750,000 TEUs in 2022, with the lat- services that offer direct shipments between ter carrying about 5 million tons of cargo. In Sihanoukville Port and Europe, but these are addition, Sihanoukville Port handled 115,000 carried by smaller than mother vessels. The tons of general cargo and 1.9 million tons of number of TEUs being handled per calling ves- fuel imports in 2022. With a current draft of sel reached a record level of 1,071 TEU per call 9.2 meters, Sihanoukville Port is undergoing in 2021.27 As shown in Table 2.4, the equivalent an expansion with an increase in draft to 14.5 maximum container vessel capacity for a fully meters and construction of a new container ter- laden vessel for the current draft of 9.5 meters minal of 350 meters in length by 2025. The rail- would be 1,500–1,800 TEUs.28 In an interna- way connects directly to the Sihanoukville Port tional context, these vessels are small thus dock although the railway loading and unloading requiring transshipment in Singapore, Port length is limited to 100 meters. Klang, or other Asian hub ports (Figure 2.4). FIGURE 2.4 Direct Maritime Links Sihanoukville Cai Mep Kampot Source: Study team based on consultations with shipping companies in Cambodia. Map base – Google Maps, September 21, 2023. Transhipment in Singapore and Port Klang A second etc. maritime port, Kampot Multipur- of the project, the port’s container capacity is pose Port, is under development. It is the first set to double to 600,000 TEUs by 2030. This private port in Cambodia with an estimated new port could offer similar advantages and cost of US$1.5 billion. The port’s multi-pur- limitations with regards to overseas maritime pose design envisions a water depth of 14-15 links as does the current Sihanoukville Port. meters and the ability to accommodate ships Ships could sail directly to Asian ports but for of up to 100,000 DWTs. The feasibility of these other international shipments transit in Malay- plans is contingent upon addressing import- sia, Singapore, or Thailand would be required. ant offshore shoals. During the second phase 27 Preparatory Survey for Sihanoukville Port New Container Terminal Expansion Project (Nippon Koei Co., Ltd. for JICA, 2022). Page 4-3. 28 While it is said Sihanoukville Port can accommodate container vessels of up to 50,000 DWT, the vessels must be partially laden because of the constraints of its 9.2 meters depth. 20 CAMBODIA’S REGIONAL CONNECTIVITY: UNLOCKING THE FULL POTENTIAL OF TRANSPORT CORRIDORS CHAPTER 2 FIGURE 2.5 Nautical Access to Kampot Port Source: Navionics Maps 2023, with authors’ additions. While there are a few direct connections via the Lower Bassac River, ultimately reaching sea-going vessels operating between PPAP regional ports (Figure 2.6). In this context, the container terminal (LM17) and Singapore Can Tho Port in Viet Nam could serve as an ad- and on occasion to Thai ports, such routes ditional option for cargo topping up or unload- remain somewhat limited. These vessels ing, given that the stretch between Can Tho follow the Transit Route, navigating through and the estuary offers greater depth and can the Mekong River, Vam Nao River, and then accommodate vessels of up to 10,000 DWT. FIGURE 2.6 Coastal Shipments using the Bassac River Source: Study team based on consultations with shipping companies in Cambodia. Map base – Google Maps, September 21, 2023. 21 CAMBODIA’S REGIONAL CONNECTIVITY: UNLOCKING THE FULL POTENTIAL OF TRANSPORT CORRIDORS CHAPTER 2 Cross-border Inland Waterway Transportation Currently, Cambodia’s options are to either: Transit cargo moving between Phnom Penh (i) transport containers via seagoing vessels and Cai Mep, situated on the global maritime to nearby mother ports like Singapore, Laem route to international markets, is facilitated Chabang, Port Kelang; or (ii) barge containers by shuttle barges. With a draft of 15 meters, directly from Phnom Penh to Cai Mep Port in Cai Mep’s deep seaport is capable of accom- Viet Nam, both of which occur today (Figure modating Post-Panamax30 container vessels 2.7). Cai Mep Port – a deep seaport located of up to 120,000 DWT and is a mother port right on the global east-west trunk shipping for global traffic, both eastbound and west- line connecting Europe, the Middle East, South bound. Mother ports accommodate liner ves- Asia, South-East Asia, and East Asia – attracts sels bound for the United States and Europe larger vessels than Laem Chabang Port, one of without the need for transshipments. The the largest ports in the region.29 newly built 24,188 TEU container ship, the m/v OOCL Spain, one of the world’s largest vessels, is now calling at Cai Mep Port in its Asia-Europe service.31 FIGURE 2.7 Connections between Cambodia and the US Market Source: Study team based on consultations with shipping companies in Cambodia. Map base – Google Maps, September 21, 2023. 29 Preparatory Survey for Sihanoukville Port New Container Terminal Expansion Project (Nippon Koei Co., Ltd. for JICA, 2022). 30 Post-Panamax ships are a class of vessels that exceed the maximum size parameters set by the Panama Canal’s original locks. Post-Panamax ships typically have a length of over 294.13 meters (965 feet), a beam exceeding 32.31 meters (106 feet), and a draft beyond 12.04 meters (39.5 feet). They can carry 5,000 to 14,000 TEUs of cargo. (Source: www. inboundlogistics.com) 31 OOCL Service routes. [https://www.oocl.com/eng/ourservices/serviceroutes/aet4/Pages/default.aspx] accessed September 21, 2023. 22 CAMBODIA’S REGIONAL CONNECTIVITY: UNLOCKING THE FULL POTENTIAL OF TRANSPORT CORRIDORS CHAPTER 2 Maintaining a secure and efficient direct con- containerized road transport via Bavet over nection to the Cai Mep mother port in Viet the same period (Figure 1.7). Importantly, the Nam is of importance, supported by a robust trade volumes passing through Viet Nam’s transport network whether by road or inland main ports offer significant benefits to the waterways. With the establishment of an ap- host country. Notably, 74 percent of the ex- propriate institutional framework, a mutual port goods destined for the United States and commitment to enhance regional and inter- Canada pass through Cai Mep Port, amount- national trade, and diligent implementation ing to approximately 1.4 million tons. The of the 2009 Waterway Transport Agreement, remaining 26 percent utilize other ports like usual concerns about cross border customs Cat Lai, Vung Tau and Saigon ports. In terms arrangements can be addressed, fostering of imports, about 0.66 million tons bound for productive collaboration between the two Phnom Penh pass through Cai Mep Port. In countries in the future. total, about 2.07 million tons (exports and im- ports) of PPAP traffic use Cai Mep Port, which Since the signing of the Waterway Transport is just over half of PPAP total imports and ex- Agreement in 2009, the inland waterway ports in 2022 of 4 million tons. transport industry has experienced remark- able growth. Containerized traffic along the Another crucial component of cross-border Mekong River has surged from 62,000 TEUs in inland waterway transport is the cruise boat 2010 to an impressive 418,000 TEUs in 2022, industry. Although still in the early stage, cruise a 570 percent increase32. The public listing of vessels plying between the Mekong Delta in Viet Phnom Penh Autonomous Port in December Nam and Siem Reap (Chhong Kneas) will in- 2015 also appears to have further bolstered crease in numbers and in size. The main obsta- containerized inland waterway transport traf- cle is the restricted river depth along the Great fic. From 2015 to 2022, container movements Lake during the low water season. The cruise between Viet Nam and Cambodia via inland vessels therefore halt their activities on the Lake waterway transport exceeded the growth of in February but restart in June each year. 32 PPAP and the barge operators face challenges with the availability of containers for individual vessel movements, but these are common operational issues and are manageable. 23 CAMBODIA’S REGIONAL CONNECTIVITY: UNLOCKING THE FULL POTENTIAL OF TRANSPORT CORRIDORS CHAPTER 2 Domestic Waterway Transport between Phnom Penh and the Provinces Domestic inland waterway transport plays Penh has expanded the capacity of LM17 and an essential role for the transport of goods other facilities. Phnom Penh is well advanced to and from Cambodia. Cambodia has a to undertake its Phase 4 expansion of LM17 well-connected waterway network with a to- to increase its container-handling capaci- tal navigable length of 1,750 kilometers along ty to 900,000 TEUs per year by 2030 (from the Mekong, Tonle Sap, and Bassac Rivers 500,000 TEUs in 2023). Planned as part of (Figure 2.8). This importance of this domestic Phase 4 is a new rice processing facility. How- network is its river connections of many agri- ever, upstream of Phnom Penh, there are sub- cultural centers with the PPAP container port stantial navigational restrictions along both LM17 and other facilities through feeder ports. the Mekong and Tonle Sap rivers. To facilitate such domestic feed trade, Phnom FIGURE 2.8 Waterways in Cambodia Source: MPWT Navigation Coordination Committee. 2009. Calibrating the Navigable Waterways of the Mekong River System into a Classification Standard. Prepared by Eng. Freddy Wens. In addition, Phnom Penh is also planning to general purpose terminals today include the expand its network of sub-feeder general new downstream terminal LM26 that is under purpose terminals from six to 11 in the near development at the Viet Nam border. Planned future. These sub-terminals are important for for the future are five new sub-feeder general the growth of sustainable waterborne trans- purpose terminals with two located upstream port in Cambodia (compared to heavy truck- along the Tonle Sap River, one on Tonle Sap at ing) and connect the agricultural hinterland to Siem Reap, and two upstream along the Me- Phnom Penh and overseas. The six sub-feeder kong River (Figure 2.9). 24 CAMBODIA’S REGIONAL CONNECTIVITY: UNLOCKING THE FULL POTENTIAL OF TRANSPORT CORRIDORS CHAPTER 2 FIGURE 2.9 Current and Planned Sub-Feeder General Purpose Waterway Terminals Note: LM = Lower Mekong, UM = Upper Mekong, TS = Tonle Sap; Brown color terminals are in operation or under development, blue color terminals are planned. Map base – Google Maps, September 21, 2023. Source: Information provided to the study team by PPAP. The four planned, new sub-feeder general about 100 kilometers from the capital, and purpose terminals are all in the design phase along the deep and navigable Tonle Sap but three only have nearby road access. Of River. The Phnom Penh has done extensive the planned sub-feeder terminals, the most hydrographic surveys to determine accessi- important are: bility; there are three minor shallow spots to be dredged between Phnom Penh and TS24. • UM1, multimodal feeder terminal just north Consultants to the World Bank Team who of Phnom Penh has deep river access and visited TS24 in November 2023 found that road connections. the planned port is strategically situated, boasting a prime location and considerable • TS30, Chong Kneas (Siem Reap Port) has potential. Most of the rice is grown close to limited access in the dry season to boats Kampong Thom – Kampong Chhnang. The of only about 20 DWTs. Even cruise boats location of TS24 would be on the left bank of cannot venture to Siem Reap during the dry the Tonle Sap without access to the current season. There is road access. To open up road network. There is a new private port the full potential of Chong Kneas as cargo located in close proximity to TS24 but it is port and cruise boat harbor, a deep naviga- primarily targeting the iron-ore products of tion channel will need to be dredged all along the mines in the north of the country. TS24 the Great Lake. This will require detailed will focus more on agricultural products. economic, environmental, and hydromor- phological studies. • TS20, Prek Kdam Port. The Tonle Sap is a deep and navigable river up to Prek Kdam. • TS24, Kampong Chhnang Port is located However, there is no current road access between Siem Reap and Phnom Penh and available. 25 CAMBODIA’S REGIONAL CONNECTIVITY: UNLOCKING THE FULL POTENTIAL OF TRANSPORT CORRIDORS CHAPTER 2 To enhance the competitiveness and sus- East Asian markets. Further, the upper and tainability of Cambodia’s exports in general, lower Mekong Rivers should be maintained to it is critical to continue use of the Mekong ensure all-year-round navigability for larger (and Bassac) rivers to access Cat Lai and vessels. The development of a domestic vessel other Viet Nam ports, for the main Asian design and shipbuilding industry offers po- and North American markets the route is tential to develop modern, low emission, and currently serving. Dependent on the destina- efficient vessels appropriate for Cambodia. In tion markets, this key inland waterway corridor addition, the sub-feeder terminals described should carry over half of all formal rice exports above offer the potential for securing new and other exports particularly to Asia while Si- customers for barge transport, and meeting hanoukville and the new Kampot port may be their needs and those of existing customers, better placed for European and some South- efficiently, as amplified in Box 2.1. BOX 2.1 Analysis of Recent and Potential Rice Exports along the Mekong Cambodia’s rice exports totaled 637,000 tons per year in 2022 with about 60 percent destined to China. Prior to 2018, about half of exported rice used barges shipped from PPAP terminals to access Cat Lai Port in Viet Nam prior to being loaded on to ships to China and other Asian markets. More recently, Cambodian rice exporters are required by cross-border authorities to apply for a transit license and a phytosanitary transit certificate. This leaves many exporters with the attendant risks of inspections and unpredictable delays and having to divert their rice export shipments to Sihanoukville Port. As a result, in 2022 Phnom Penh estimated that 16 percent of total rice exports used barges to access Vietnamese ports, about one-third of the value in 2018. Use of Sihanoukville Port, while a short-term solution to address the risk of delay in Viet Nam, the export route via Sihanoukville Port affects the competitiveness of Cambodia’s rice exports compared to the route using the Mekong to Viet Nam. The transport cost to Cat Lai Port by barge from Phnom Penh, for example, is about US$4 per ton (without profit, handling, administration, storage and feeder transport costs added) and about US$7 per ton by rail to Sihanoukville Port and double the price by road. More- over, sailing distances from Sihanoukville Port are longer and/or ship departures less frequent to China, Japan, or potential new markets such as the Philippines and Indonesia. Source: Study team with some information provided by Columbia University’s Capstone Project 2023, Improving the Competitiveness of Cambodia’s Rice Exports. Constraints Among several constraints identified that The process of clearing the goods at the bor- affect more efficient trade facilitation, in- der is only limited to daytime operations. In termodal transport, and logistics along the fact, Article 17 of the 2009 Waterway Trans- Mekong River System, the inadequate imple- port Agreement does not include a stop at the mentation of the 2009 Waterway Transport border but rather a single stop at entry and a Agreement is significant. For an international single stop at destination. An uninterrupted river system to be effectively maintained and voyage between LM17 and Cai Mep should take improved, the presence of a common institu- no more than 21 hours. But due to inadequate tional body is essential. Under the bilateral implementation of the Agreement, voyages agreement between Cambodia and Viet Nam, can take 26 hours or longer due to nighttime the Mekong Navigation Facilitation Committee closure. should consist of high-level Executive Coun- cil that is responsible for navigation, a Board, Long and uncertain transit times are expe- Working Groups, and a Waterway Transporta- rienced by container shipments by road and tion Consultative Group. The detailed terms of inland waterways travelling between Cam- reference for the structure and functioning of bodia and Viet Nam ports despite the bilater- the Committee were formulated and agreed to al Agreement on Goods in Transit. Shipping by both countries in 2010. companies and freight forwarders have indi- 26 CAMBODIA’S REGIONAL CONNECTIVITY: UNLOCKING THE FULL POTENTIAL OF TRANSPORT CORRIDORS CHAPTER 2 cated their concerns about the time it takes features, including GPS, radio frequency for the cross-border processing of cargo entry identification, and sensors, these advanced permits and lengthy phyto-sanitary controls of monitoring devices are fitted with sensors that agricultural products. collect data such as temperature, humidity, vibration, and location. With precise tracking To ensure the integrity of containers in tran- of container locations, the sensors promptly sit which cross border authorities could be detect unauthorized opening of containers or concerned about, emerging technologies tampering. Containers fitted with Smart Seals like Smart Seals offer promising solutions could potentially be afforded preferential treat- (Box 2.2). These Smart Seals can be seam- ment, expediting their passage through des- lessly integrated into containers during their ignated Green Lines to minimize delays and loading at the port. Equipped with advanced enhance security.33 BOX 2.2 Use of Smart Seals in Transit Containers Europe has successfully tested Smart Seals (Eye-Seal being the most advanced) as a track and trace technology. Transit containers with a Smart Seal installed do not have to be checked by Customs because the device offers a breach detection solution. That means the device is installed inside the container upon loading, and its sensors will alarm and monitor if the doors are unlawfully opened. With the use of GMS and GPS, the device can identify location and time of any container breach and inform the authorities. Shippers that place a Smart Seal inside their containers offer registered and full security against opening their containers. Such a transit container would not be required to be opened, would be given a priority Green Lane, and would avoid delays along the route. The Smart Seals are purchased and in- stalled by cargo owners. If this system allows better and faster passage, the cargo owners and freight forwarders have no problems with covering the costs. Source: Study team based on best practices in Europe (Source: https://mag.wcoomd.org/magazine/wco-news-103/ developing-an-ecosystem-of-trust-at-the-uk-border/). Navigation restrictions along the Mekong Until now, PPAP has performed most of the River pose challenges for larger and more operational needs within Cambodia such as cost-efficient barges (exceeding DWT deepening the river, installing aids to navi- 3,000). The Mekong Estuary is a hydrody- gation, and hydrographic surveys and chart- namically complex environment, necessitat- ing. PPAP needs to keep waterways deep and ing comprehensive morphological studies safe to have 24/7 access to their ports and to evaluate sustainable dredging needs and terminals. However, their focus should be on the associated long-term maintenance cost. port-related businesses. International best However, such analysis should be coordinat- practice dictates that the services of maintain- ed between both Cambodia and Viet Nam. ing the waterways deep and safe should be the Depth limitations along the Upper Mekong responsibility of the Waterways Department and Tonle Sap rivers, coupled with a shortage under MPWT for which it would receive suffi- of cargo terminals, hinder convenient feeder cient annual budget to provide these services barge connections, which represent the most through contracting specialized companies. cost-efficient mode for bulk and container- Moreover, the Department should have the ized freight transport. To address the issue of boats, vehicles, equipment, and instruments sedimentation and navigational hindrances, before starting. Alternatively, initiating a sys- specialized dredging vessels and equipment tem of performance dredging by the private are required. sector is another option. In any case, clear legal and financial responsibilities must be established beforehand. The operational and financial requirements for such services are substantial. 33 Belgium introduces smart seals on shipping containers to fight drug trade (Brussel Times, September 8, 2023). https://www.brusselstimes.com/681077/belgium-introduces-smart-seals-on-shipping-containers-to-fight-drug-trade. 27 CAMBODIA’S REGIONAL CONNECTIVITY: UNLOCKING THE FULL POTENTIAL OF TRANSPORT CORRIDORS CHAPTER 2 There is a need to improve institutional Cambodia lacks a fleet of commercial barg- capacity on management of modern wa- es or coastal vessels. The absence of ship- terway and maritime transport. Hitherto, yards, slipways, facilities, equipment, and Sihanoukville and Phnom Penh Autonomous skilled personnel for building new barges or Ports have been the main port authorities in conducting repairs is a challenge. However, the country. They are autonomous and public- establishing a national shipbuilding industry in ly listed but remain state-owned corporations. the long term, even on a small scale, is key to It is understood that the government intends support a motivated and capable shipping in- to open the coastal and riverine waterways to dustry. The development of a shipbuilding and allow more private ports. It is essential that a ship repair sector would significantly enhance competent authority exists for the maritime domestic and regional shipping capabilities. and river sectors to ensure that technical, safety, security, and operational standards The inland waterway transport sub-sector are maintained, with adequate commercial lacks an independent agency to promote and viability and cargo consolidation. market inland waterway transport and con- solidate fragmented cargo, reflecting exist- The absence of adequate road connections ing established models worldwide. There are to all PPAP terminals and lack of rail access competing public interests in waterways for to LM17, despite the completion of Ring Road navigation, sand mining, water supply, fishing, 3, are among key constraints. Adequate con- and ecology that should be harmonized. Inland solidation facilities such as warehousing and waterway transport infrastructure managers inland container depots are necessary for cer- must actively manage relationships among tain cargo like rice. The pressing need for mod- the public sector agencies and private sector ern container gantry cranes is evident as the firms. current outdated shore cranes at PPAP (LM17) contribute to slow loading and discharging operations. Upgrading terminal equipment is essential for improved efficiency. 2.4 Rail Transport Rail Infrastructure and Operations Cambodia has two railway lines with a total 2009 and its assets conceded to a private op- length of 652 kilometers that operate as a erator. Under a public-private partnership, a single railway system. The 386-kilometers private concessionaire (sold in 2014 and re- Northern Line and the 266-kilometers South- named Royal Railway Cambodia) was grant- ern Line were built in the 1930s and 1965-1969, ed exclusive rights to run commercial railway respectively (Figure 2.10). In addition, a 6.5-ki- services under a 30-year agreement. In turn, lometers branch line linking the Phnom Penh the concessionaire assumed the end-user railway station with petroleum depot facilities risk posed by uncertain traffic development along the Tonle Sap River was recently con- and infrastructure conditions. A new Railway structed. In the early 2000s, the railway was Department within MPWT was established in a dilapidated condition due to the civil war to supervise and regulate the concessionaire 20 years earlier. Following an ADB technical with respect to safety and the use of the infra- assistance initiated in 2006, 420 kilometers structure assets. of the then existing railway infrastructure was rehabilitated.34 Further, the state-owned Royal Railway of Cambodia was dissolved in 34 Report and Recommendation of the President to the Board of Directors: Proposed Loan and Administration of Loan to the Kingdom of Cambodia for the Greater Mekong Subregion: Rehabilitation of the Railway in Cambodia Project. Manila (Loan 2288-CAM) (ADB, 2006). 28 CAMBODIA’S REGIONAL CONNECTIVITY: UNLOCKING THE FULL POTENTIAL OF TRANSPORT CORRIDORS CHAPTER 2 FIGURE 2.10 Current Railway Lines Source: Comprehensive Intermodal Transport and System Master Plan 2023-2033 (Royal Government of Cambodia, December 2023). Cambodian rail tracks are meter gauge35. rail link to PPAP container terminal LM17 nor This gauge is common with the existing rail- to Siem Reap. The northeast of the country is ways in Thailand and Viet Nam, whereas the not connected to rail. new Lao PDR–China Railway is standard gauge (1,435 millimeters). Standard gauge railway Royal Railway’s freight train operations are technology is superior to meter gauge and is currently focused on the Southern Line link- used by 75 percent of the world’s railways. ing Phnom-Penh with Sihanoukville Port. The Northern Line has not been upgraded to Unlike most other ports in South-East Asia, the same technical standard as the Southern rail has on-dock access to Sihanoukville Port Line. The Southern Line has concrete sleepers (though short at 100 meters) and a container that support 20-ton axle loads whereas the terminal within the PAS boundary. Train op- Northern Line permits only 15 tons on steel erations on the Northern Line linking Phnom sleepers between Phnom Penh and Sisophon. Penh to the bridge at the border began in Trains must operate at slower speeds along the 2019 and were governed by a bi-lateral agree- Northern Line, which reduces interoperability ment between Thailand and Cambodia on and train performance. The Royal Railway op- cross-border operations. Due to the outbreak erates a dry-port near Phnom Penh where con- of Covid-19 in February 2020, cross-border tainers are picked-up or delivered. It also has trade by rail was interrupted. The line became sidings to private dry ports in the Phnom Penh operational in 2022 after completion of up- area. The average age of Royal Railway’s 199 grading and repair works by 2019 and following wagons (for containers and fuel), passenger the Covid-19 pandemic. Some freight trains are coaches, and locomotives are all over 25 years. operating along the Northern Line to transport milled rice for export via Sihanoukville Port by Despite many years of planning and studies, using a specially developed siding within a pri- there are no direct rail connections to neigh- vately owned rice and agricultural processing boring Lao PDR and Viet Nam. There is no facility. Commercial, cross-border rail freight 35 1,000 millimeters distance between the rails. 29 CAMBODIA’S REGIONAL CONNECTIVITY: UNLOCKING THE FULL POTENTIAL OF TRANSPORT CORRIDORS CHAPTER 2 operations commenced in the second half of old and slow. The journey from Phnom Penh 2023. However, the main cargo pattern in 2023 to Sihanoukville takes about eight hours at an is intermodal, by road in Thailand and by rail average operational speed of just over 30 kilo- in Cambodia. meters per hour. A strategy for developing the passenger train business is needed. Trains are Royal Railway operates daily passenger controlled by a communications-based train trains services to and from Battambang and control system that uses telecommunications three times weekly services between Phnom between the train and track equipment for traf- Penh and Sihanoukville. Passenger trains are fic management and infrastructure control. Current Rail Traffic Royal Railway’s current main business seg- Line connecting to Sihanoukville Port. For ments are the transport of fuel from Siha- comparison purposes, total rail freight in 2008 noukville Port to Phnom Penh and container was 194,000 tons indicating a growth of 290 transport between Phnom Penh and Siha- percent over 2008–2017.36 In 2022, the rail- noukville, mainly in the direction to Phnom way carried 912,00 tons of freight (Table 2.5) Penh. In 2017, the railway carried 39,000 having dropped from 1.1 million and 1.0 million passengers and 760,000 tons of freight with tons in 2020 and 2021, respectively. three-quarters generated by the Southern TA B L E 2 . 5 Rail Freight Movements by Type 2022 Type Tons Containers 508,000 (55.6%) Fuels Diesel (Sokimex, SL and Battambang) 183,085 Gasoline (Sokimex, SL) 39,624 Diesel (Tela, Bat Doeung) 13,159 Gasoline (Tela, Bat Doeung) 725 Diesel (Tela, NL) 77,424 Gasoline (Tela, Boeung Pring) 57,135 Sub-total (fuel freights) 371,000 (40.7%) Non-fuels Cement (Chip Mong Insee Cement, Kampot) 19,052 Motorcars <1,000 Fertilizer 2,100 Ballast 11,403 Sub-total (non-fuel freight) 33,000 (3.7%) Total 912,000 (100.0%) Source: Royal Railway. 36 Masterplan for Railway Network Development in Cambodia (Koica, 2014). Table 6.5.4 30 CAMBODIA’S REGIONAL CONNECTIVITY: UNLOCKING THE FULL POTENTIAL OF TRANSPORT CORRIDORS CHAPTER 2 Overall, the rail freight and passenger mode ed 20 percent and 7 percent, respectively, shares of the domestic transport task are low of these markets in 2022 (Table 2.6). Due to and negligible for direct cross-border trade. competition from trucks, rail’s share of con- For 2017, an analysis for the Intermodal Master tainer traffic declined from a peak of 9 per- Plan estimates that total domestic passenger cent in 2017 (Figure 2.11). Having cut freight movements were 184 million passengers (of train running times between the 260-kilo- which 39,000 rail passengers represented meters rail distance between Phnom Penh 0.02 percent of the total). The situation for rail and Sihanoukville from eight hours prior to freight movements in 2017 was more prom- track rehabilitation and use of communica- ising. Rail’s 760,000 tons of freight in 2017, tions-based train control to four hours, Royal compared to the domestic total of 82.51 million Railway currently runs 13 freight trains a day tons indicates rail’s freight mode share was in each direction along the Southern Line, in- 0.9 percent. In 2022, with growth in rail traffic cluding trains used to reposition fuel and flat- but also rapid growth of the economy (nearly bed wagons. At present, due to the shortage 7 percent per annum real GDP growth) and of rollingstock, the Southern Line is operating growth in freight movements, it is likely that in at about 40 percent of capacity.37 Additional 2022 the railway represented about 1 percent rollingstock, new passing loops, and inno- of total domestic freight demand. vation such as double stacking of containers would increase the operating capacity. There The railway performs better in the transport is also similar or greater spare capacity on the of fuel and containers between Sihanoukville Northern Line. Port to Phnom Penh where it had an estimat- TA B L E 2 . 6 Fuel and Container Modal Split at Sihanoukville Port, 2022 Modes TEU containers Fuel Imports in tons Road 700,100 (93.4%) 1,457,226 (79.7%) Rail 49,589 (6.6%) 371,000 (20.3%) Total 750,100 (100.0%) 1,828,226 (100.0%) Source: PAS Annual Report (2022). Unofficial translation, page 22 for containers and total fuel imports, Table 1 for 2022 fuel movements by rail. FIGURE 2.11 Rail Share of Container Transport from/to Phnom Penh to SAP (% of total TEUs) 800 Road Rail 5.6% 6.0% 6.6% 700 6.3% 600 7.2% 500 9.0% 400 300 Source: PAS Annual Reports (2021 & 2022). 200 Unofficial Translation, 100 Table 1 for 2022 rail fuel 0 2017 2018 2019 2020 2021 2022 movements 37 Estimate of World Bank team. 31 CAMBODIA’S REGIONAL CONNECTIVITY: UNLOCKING THE FULL POTENTIAL OF TRANSPORT CORRIDORS CHAPTER 2 Market Potential There are several reasons for the low mar- it did not have the capacity to increase the ket share of railways in domestic freight frequency of trains due mainly to shortage and passenger traffic markets despite a of rollingstock. There are also infrastructure 400 percent growth in Cambodia’s imports constraints mainly along the Northern Line. and exports from 2010 to 2021. Rail transport There appears to be potential to increase rail only restarted in 2010 after a long absence. container and other freight traffic by 150 per- Freight hauls and passenger trips are short cent given the current reserve track capacity which is a difficult market for railway transport. assuming sufficient rollingstock and adequate It is challenging for any rail carrier to achieve latent demand. high margin returns from hauling containers on railway wagons, and especially so on short Fuel transport has continuing growth poten- hauls where trucking is most competitive. The tial. A study by the Economic Research Insti- shortage of rollingstock is a key constraint to tute for ASEAN and East Asia (ERIA) examined attracting new business. Infrastructure con- alternative fuel supply options for Cambodia. dition on the Northern Line limits operating ERIA projected that the volume of fuel trans- performance. ported by rail from Sihanoukville could grow from 160 million liters in 2018 to 600 million Container business shows growth potential liters by 2030.38 While the forecast by rail from for railways. Since Sihanoukville Port han- 2018 to 2030 represents a projected 275 per- dled 47 percent of all international container cent increase from 2018, in 2022 the volume of (TEU) movements for Cambodia in 2022, rail’s fuel transported by rail was 436 million liters share represented 3.1 percent of all Cambo- indicating that the ERIA projection is likely to dia’s international container movements. Rail be achieved earlier than 2030 if additional lo- is competitive with trucking in the Phnom Penh comotives and rail fuel tankers are acquired to Sihanoukville corridor; but until recently, (Figure 2.12). FIGURE 2.12 Fuel by Rail to PAS (kiloliters) 2018 estimate, 2030 projection, and 2022 Actual 700,000 Fuel by rail (Kiloliter) 600,000 500,000 600,000 400,000 ERIA projection 300,000 160,000 436,471 Actual 200,000 ERIA est. 100,000 Source: Study team’s 2018 2030 2022 calculation. 0 Royal Railway is increasing train operations cent of exports were cassava and 72 percent on the Northern Line to gain a share of the of imports were cement in 2022). There is significant volumes of imports that are cur- immediate potential for expanded cross-bor- rently transported by truck. In 2022, 1.5 mil- der rail operations between Cambodia and lion tons of freight were exported to Thailand Thailand as evidenced by Royal Railway’s via Poipet, and another 2.1 million tons were new agreement with Thailand’s PTT Public imported almost all by truck. Most of these Limited Company to commence fuel imports goods were in the form of bulk traffic (87 per- from Thailand’s Eastern Seaboard by rail. As 38 “Optimal Future Petroleum Supply Chain” in Cambodia Petroleum Master Plan 2022-2040, ERIA and General Department of Petroleum, Ministry of Mines and Energy of Cambodia (eds.), ERIA Research Project Report FY2021 No. 21, (Jakarta: ERIA, pp.96-116). 32 CAMBODIA’S REGIONAL CONNECTIVITY: UNLOCKING THE FULL POTENTIAL OF TRANSPORT CORRIDORS CHAPTER 2 of mid-2023, the rail connection to Thailand then to southern China, a 10–13-days journey, was not open for commercial operations. Fuel comparable in time by sea to China’s Eastern imports from Thailand by land transport used Seaboard. Thailand’s State Railways of Thailand (SRT) or trucks to transport to the border where Toward the end of 2022, Royal Railway was transfer was made to truck or rail. Under the listed on the Cambodian Stock Market as new agreement, Royal Railway will utilize 134 a publicly listed company (shares are not special purpose fuel or LNG wagons provided traded) and successfully finalized a US$34 by PTT to transport these products from PTT million bond issue. This money is being used terminals in Thailand to Cambodia. Royal Rail- for improving tracks on the Northern Line way has commenced to carry car imports from (concrete sleepers, new and wider track base), Thailand along the Northern Line. The RMA building new sidings into silos and warehouses Automotive and Ford opened a car assembly of new customers, and buying 340 second- plant with a production capability of 9,000 hand wagons (initially from South Africa) plus vehicles per year at Pursat between Phnom some secondhand locomotives. Royal Railway Penh and Battambang offering the potential is attempting to obtain increased business for carriage by rail to end markets. from agricultural producers. For example, Royal Railway has built a new rail siding along Royal Railway is also looking at the possi- the Northern Line in the vicinity of Battambang bility of cooperation with the State Rail- to serve the major rice producers in the area. ways of Thailand to connect to China. Royal Rice had mainly been shipped by truck to PPAP Railway could use SRT wagons to transport LM17 container terminal then transported by goods by rail from Cambodia via SRT network inland waterways to Viet Nam ports. With the between Aranyaprathet, Thailand, and Vien- new rail siding, rice is now transported by rail tiane, Lao PDR. In Vientiane, goods could be to Sihanoukville Port. transshipped to the Lao China Railway and Planned Railway Investments The upgrading of Northern and Southern rail (and complex) institutional structures would lines and a new rail line to Bavet is proposed be needed to oversee coordinated project de- by the Comprehensive Master Plan on Cam- velopment and implementation. bodia Intermodal Transport and Logistics System 2023–2033. The estimated invest- In the future, by 2050, the Comprehensive ment for all three projects is US$1.425 billion. Master Plan proposes a network of electri- These investments would apply to rail fixed fied, high-speed, standard gauge railways. infrastructure and exclude rollingstock both The lines would include a new northern rail- of which are the responsibility of the private way (with capability of 160 kilometers per railway concessionaire for the existing railway hour) connecting to Poipet and Thailand, rail lines. The proposed Phnom Penh–Bavet line links to the Cambodia-Lao PDR border, and is envisaged to extend to Ho Chi Minh City and a rail link to the Cambodia-Viet Nam border. nearby Vietnamese ports, a total distance of The preliminary results of an initial assess- about 300 kilometers. A cross-border rail con- ment by the project proponent to develop the nection has been discussed by Cambodia and proposed, new high-speed railway (standard Viet Nam over the last two decades. Cambo- gauge, electrified) between Phnom Penh and dia’s preference is to build a line from Phnom Poipet (382 kilometers) indicates the project Penh to Ho Chi Minh City via Bavet/Moc Bai (in could cost more than US$4 billion. While fea- Viet Nam) but the rail master plan for Viet Nam sibility study is ongoing, financing of this rail prioritizes a longer line via Snoul and does not development is not yet confirmed. mention a line via Bavet. A feasibility study of the line via Bavet has not yet been undertaken. Because the proposed project involves build- ing and operating an international railway, new 33 CAMBODIA’S REGIONAL CONNECTIVITY: UNLOCKING THE FULL POTENTIAL OF TRANSPORT CORRIDORS CHAPTER 2 Constraints The existing railway is under-utilized due to Lao PDR-China Railway, that is with signifi- a shortage of rolling stock and poor infra- cant investment and financing provided by structure condition. The Northern Line be- China. However, considering the estimated tween Sisophon and Phnom Penh is the most cost (US$4.5 billion), it is likely the tariffs constrained with low operating speeds (34-30 would be relatively expensive making it less kilometers per hour), constrained axle loads competitive compared to road transport. It (15 tons), and an absence of continuous weld- will be important for the RGC to decide care- ed track. Improvement of the existing Northern fully on commercial structure and conces- and Southern rail lines is urgently needed to sion scheme of the proposed public-private facilitate an increased role for the railway in partnerships to ensure efficiency gains and domestic and international transport move- manage potential fiscal and contingent lia- ments. bilities from the investment. The proposed new high-speed railway lines • Construction. Some of the key parameters (standard gauge and electrified) could for the proposed investment are not yet transform surface transport in Cambodia, available but require careful consideration. but these investments are very costly and require a long implementation period, and • Training. Training needs will be significant prior to a decision to proceed require robust with a change from diesel power and meter technical and economic studies. The railway gauge operations to standard gauge and would be the starting point for shifting some electric technology. of the transport of cargo and passengers from road. However, a decision on implementation The potential of the Phnom Penh–Poipet should not be made in haste because there high-speed rail project’s potential perfor- are several matters that need careful consid- mance would be seriously degraded unless eration. Thailand’s railway between the Cambodian border and Chachoengsao (major railway • Rail gauge. The proposed new railways are junction south-east of Bangkok) is upgrad- standard gauge (1,435 millimeters between ed to a similar standard. Interchange facil- rail tracks) as opposed to 1,000 millimeters ities would otherwise be needed at the bor- on the existing railway. The new railway der because the railway system in Thailand would not be interoperable with the exist- is presently entirely meter gauge. It might be ing (concessioned) railway. The new rail- best to consider a regional high-speed rail way would likely attract business from the project to develop a continuous double track Northern Line, making it redundant; and the and electrified railway from Bangkok through Southern Line would become isolated. The Phnom Penh to Ho Chi Minh City. Such a re- viability of the concession would be affected. gional high-speed rail connection would then connect to the planned high-speed rail line be- • Electrification. The railway will require a se- tween Bangkok and Vientiane (by 2030), thus cure and reliable power supply. Cambodia’s eventually connecting to the Lao PDR–China power transmission system has gaps and Railway.39 is unreliable especially during dry season. The potential for improving existing power The distance of 150 kilometers to Bavet is supply or using alternate sources for pow- short so an onward connection to Viet Nam ering the new railways such as batteries or is important. Despite the potential of a high- hydrogen should be examined. speed railway connecting to Ho Chi Minh City and nearby ports, the rail line would still be • Financing. From preliminary information only about 260 kilometers long or well below on the Poipet project, it seems likely that it the minimum length of about 400 kilometers would be built and operated similar to the at which high-speed rail can be competitive 39 Capital-Poipet express rail project making headway (The Phhnom Penh Post, January 24, 2023) 34 CAMBODIA’S REGIONAL CONNECTIVITY: UNLOCKING THE FULL POTENTIAL OF TRANSPORT CORRIDORS CHAPTER 2 timewise with air and road transit. However, Cambodia does not have a modern railway there are several challenges including: (i) the policy nor a railway law. There is currently an new railway is proposed as standard gauge unclear description of the roles of the govern- while existing railways are meter gauge; (ii) a ment and private sector for railway investment, high-level railway bridge (37.5 meters clear- renewal and operations nor of the principles for ance) over the Mekong River downstream of setting of tariffs or for regulation of more than PPAP LM17 container terminal may be re- one railway operator. This has hindered the quired with engineering challenges and in- development of the existing railway and the vestment impact if the most direct route to development of new rail lines. The Conces- Bavet is to be followed; (iii) there are likely to sion Agreement between the RGC and Royal be difficulties in synchronizing railway devel- Railway is the only regulation governing rail opment on the Viet Nam side with Cambodia’s transport. The Concession Agreement is ad- rail development to Bavet; and (iv) even if a ministered by the Railway Department within railway on the Viet Nam side can be quickly MPWT. Royal Railway sets its own safety rules developed to Ho Chi Minh City, onward con- and standards. The Railway Department in nections to Vietnamese ports are dependent theory conducts compliance audits on safety on development of Viet Nam’s national railway and infrastructure maintenance. network. The implication of these challenges taken together is that the development of the new railway as an effective transport option will likely take longer than planned. Hence, it would appear to make more sense in the long term to connect a new railway between Phnom Penh and Ho Chi Minh City to Sihanoukville Port and to Bangkok via Poipet. 35 CAMBODIA’S REGIONAL CONNECTIVITY: UNLOCKING THE FULL POTENTIAL OF TRANSPORT CORRIDORS CHAPTER 2 CHAPTER 3 CORRIDOR ANALYSIS 36 CAMBODIA’S REGIONAL CONNECTIVITY: UNLOCKING THE FULL POTENTIAL OF TRANSPORT CORRIDORS CHAPTER 3 3.1 Description of the Three Selected Corridors The corridor analysis described in Chapter graded as a new expressway to the border, 3 focuses on three of Cambodia’s transport and construction is imminent on a connect- corridors (Figure 3.1). These were prioritized ing expressway in Viet Nam. from among Cambodia’s three major transport corridors and three secondary transport corri- • Potential for short-to-medium term im- dors as identified by the Comprehensive Mas- provement (3-5 years): The selected ter Plan on Cambodia Intermodal Transport existing corridors have potential for im- and Logistics System 2023–2033. Selection provement in the short-to-medium term. of these corridors was based on the following The new green field expressways and rail- considerations: ways, which are being considered as part of the Master Plan and are passing parallel • Complementarity with the Master Plan: A to the existing corridors, are not included in review of the corridors defined in the Com- this study as their implementation requires prehensive Intermodal Transport and Lo- major land acquisition, significantly higher gistics System Master Plan for 2023–2033 investments, and longer implementation identifies the key trade corridors that tra- time. With the designation of the east-west verse the following main external gateways: highway corridor between Siem Reap and (i) Poipet to Thailand; (ii) Bavet to Viet Nam; Oyadav connecting to Viet Nam as Asian (iii) Phnom Penh to Viet Nam along the Me- Highway 21, this current secondary corridor kong river; and (iv) Sihanoukville Port and was also considered due to its development other seaports (in future). Poipet has both potential. rail and rail options while Sihanoukville and the other future seaports have existing road, Consequently, the corridors selected for new expressway, rail, and other proposed further analysis are: (i) the east-west road connections in the Master Plan. Where the corridor section of Asian Highway 21 (Thai- RGC has already approved extensive im- land-Cambodia-Viet Nam, and Lao PDR); (ii) provement works focusing on particular existing inland waterway connecting to ports modes along these corridors these locations in Viet Nam; and (iii) existing railway con- would have been redundant for further anal- necting to Poipet (border gate with Thailand) ysis. For example, the analysis in this study and Sihanoukville Port. These corridors are did not focus on the road corridors to Poipet not competing and are not assessed against and Bavet. In the former, RGC has upgraded each other. Therefore, the study focuses on the highway NR5 to four-lane standard and identifying critical gaps along each corridor to is proposing a new expressway. Similarly, enhance their economic potential. the road connection to Bavet is being up- 37 CAMBODIA’S REGIONAL CONNECTIVITY: UNLOCKING THE FULL POTENTIAL OF TRANSPORT CORRIDORS CHAPTER 3 FIGURE 3.1 Three Identified Trade Corridors Showing Short– and Medium-Term Development Opportunities Corridor A = East-West Road: Laem Chabang – Poipet – Siem Reap – Oyadav – Quy Nhon (1,204 km) Corridor B = Inland Waterway: Phnom Penh –Komsomnor Border – Ho Chi Minh City – Cai Mep (370 km) Corridor C = Improved Existing Rail: Laem Chabang – Poipet – Phnom Penh – Sihanoukville Port (880 km) Source: Study team. Corridor A – East-West Road Corridor B – Inland Waterways Connectivity: Laem Chabang – Poipet – Siem Connectivity: Phnom Penh –Komsomnor Reap – Oyadav – Quy Nhon (1,204 kilome- Border – Ho Chi Minh City – Cai Mep (370 ters); through Thailand, Cambodia, Viet kilometers) through Cambodia and Viet Nam; Cambodia and Lao PDR. From Laem Nam. Connecting from Phnom Penh (30 km Chabang (Thailand), this east-west road cor- downstream of Phnom Penh), this important ridor crosses the border to Poipet, Cambodia, trade route uses the Mekong River to connect where it travels east-west through Siem Reap to Cai Mep and nearby ports including Cat Lai to the northeast border with Viet Nam at Te Le Port, Ho Chi Minh City. Improvements to en- Tanh after which it continues to Quy Nhon Port able greater navigability, safety and facilitation of Viet Nam. The focus on the report analysis of cross-border trade movements are need- is the Cambodian section between Siem Reap ed. Greater use of the Lower Bassac river (the and Oyadav given that highways in Thailand stretch downstream of the Vam Nao Pas in Viet are generally in good condition and the Viet Nam) is also a possibility in the future. This Nam section is being upgraded with World waterway corridor parallels the important road Bank financing with planned completion by corridor connecting between Phnom Penh – end of 2024. This corridor is also proposed Bavet – Ho Chi Minh City, Vung Tau and Cai for upgrading as part of MPAC 2025 and to be Mep ports south of Ho Chi Minh City (295 km) known as Asian Highway 21. It forms part of the that is under major upgrading at present and is GMS Southern Economic Corridor. therefore not considered in detail in this report. A new toll expressway is under construction between Phnom Penh and Bavet and a four- lane expressway is proposed to be constructed by 2028 between Moc Bai (opposite to Bavet) 38 CAMBODIA’S REGIONAL CONNECTIVITY: UNLOCKING THE FULL POTENTIAL OF TRANSPORT CORRIDORS CHAPTER 3 and Ho Chi Minh City.40 Cross-border capaci- to the Northern Line Railway to Phnom Penh ty was recently doubled with the construction and then on to Sihanoukville Port (NR4). The of the Prey Vor border facility located close to highway sections between Poipet and Phnom Bavet. Attached to this corridor is a network of Penh are under major improvement, including upstream inland waterways that act as feed- expansion to four lanes. A new toll expressway er routes with sub-feeder terminals linked to was recently opened between Phnom Penh Phnom Penh. and Sihanoukville Port parallel to road NR4. Given the major recent and ongoing road up- grading, the road corridor is not considered in Corridor C – Improved Existing Rail detail in this report. The selected corridors link the Special Eco- Connectivity: Laem Chabang – Poipet – nomic Zones (SEZs), which are major de- Phnom Penh – Sihanoukville Port (880 ki- mand generators for transport and logistics lometers) through Cambodia and Thailand. services in the region. As of 2019, Cambo- The main focus is the existing meter gauge dia had 54 SEZs located in four main areas: (i) Northern Line railway that has been con- Phnom Penh; (ii) Sihanoukville; (iii) Manhattan nected to the Thai meter gauge system since (Svay Rieng along NR1, about 40 kilometers 2019. Operating between Poipet and Phnom from the border at Bavet); and (iv) Tai Seng/ Penh, the Northern Line is constrained by axle Bavet. All SEZs operate under the authority of limits (15 tons) on old bridges, but a 30-40 the Cambodia Special Economic Zone Board kph operating speed is possible. The exist- under the umbrella of the Council for the Devel- ing Southern Rail Line has a higher operating opment of Cambodia. Each SEZ offers a ‘one- speed (50 kph) and a higher axle load (20 tons) stop-shop’ where all government services are so is not the first priority for improvement giv- offered in one building such as the General De- en the limited fiscal space. On the Thailand partment of Customs and Excise, the Ministry side, the meter gauge railway track between of Commerce, the Council on the Development Bangkok and Aranyaprathet (opposite) Poi- of Cambodia, and the Labor Ministry. Export pet is proposed to be double tracked by 2030. and import clearance for the SEZs is usually Within Cambodia, highway NR5 runs parallel completed at the warehouse of the firm. 3.2 Corridor Analysis Gaps and potential improvements for each interventions) and the various improvement selected corridor were analyzed from end scenarios (with specific interventions) as a to end.41 The analysis examines the features time–distance diagram. of the individual discrete waterway, road, and railway sections, their standards and condi- tion, and the influence of these factors to es- To facilitate the corridor analysis and the timate travel time and adding the available potential for travel time improvement re- information on cross-border trade clearance quired assumptions on current and po- times at relevant border crossings. The time tential, future, improved border crossing required for pre-departure customs clearance times. As shown in Section 2.1, there is no at the origin and post-arrival customs clear- recent, published information available for ance at the destination are not included in the export trade facilitation times at the main analysis. The results of analysis are presented land borders and export/ import times at the in the following sections for the base case (cur- border crossing on the Mekong River between rent and likely future situation without specific Cambodia and Viet Nam despite there being 40 Three years, $255 million: Ho Chi Minh City-Moc Bai Expressway Overruns Original Cost Estimate (VnEXpress International, September 2022). 41 It is not however expected that all goods would travel from end to end such as from a port in one country to a port in another; rather, the corridors were defined to include relevant production zones and markets along the corridors and to illustrate the potential to make each corridor more efficient. 39 CAMBODIA’S REGIONAL CONNECTIVITY: UNLOCKING THE FULL POTENTIAL OF TRANSPORT CORRIDORS CHAPTER 3 an assessed overall improvement in cross A will likely carry mainly domestic products border trade facilitation from 2019 to 2021. to markets except in the vicinity of Viet Nam For the corridor analysis set out below, esti- where there is likely to be relatively short-dis- mates of current border crossing times were tance, cross-border trade, while in the long made based on field work, industry estimates term it has potential to capture transit freight and previous studies. The potential for an im- and generated cargo from other corridors. This provement in these facilitation times to both corridor also links to NR13 in Lao PDR, which is reduce them and make them more predictable the only transport connection between Cam- is a significant driver of corridor improved cor- bodia and Lao PDR. ridor performance as shown below. The po- tential improvement was an estimate made The road distance between Laem Chabang, by the study team taking into account the Thailand to Quy Nhon Port in Viet Nam via circumstances of each border crossing plus Cambodia is 1,203 kilometers. Thailand the range of measures available that are: (i) highways 331/359 are generally in good con- promoting measures to reduce trade costs dition over their 245 kilometers length be- smart logistics including; (a) full automation tween Laem Chabang Port, Thailand, and the and transparency in customs clearance; (b) Aranyaprathet border check point, Thailand/ introducing Smart Seals for containers to avoid Cambodia. Of the total corridor distance, the tampering; and (c) implementing advance car- roads between the Poipet on the Cambodian go information and prearrival processing; (ii) side of the border with Thailand via Siem Reap synchronizing and streamlining border cross- to Ratanakiri province near the border with ing procedures including acceleration of the Viet Nam, a distance of about 500 kilometers, single stop inspection/common control area is in the most need of improvement. protocol at major border crossings to facilitate streamlined and efficient transit of freight, (iii) The Quy Nhon Port in Viet Nam’s Bình Đinh improving domestic institutional between the Province is a secondary port in Viet Nam’s government and the private sector facilitat- Central Region connecting to the Mekong ed by the National Logistics Council; and (iv) Delta, western Viet Nam, Cambodia, and promoting vigorous bilateral and regional co- Lao PDR. It has regular though infrequent ordination including: (i) better implementation maritime routes connecting to international of the 2009 Waterway Transport Agreement ports, including in China, South Korea, Ja- between Cambodia and Viet Nam; (ii) reacti- pan, Singapore, and Thailand. Quy Nhon and vation of cross-border traffic rights for trucks nearby Thi Nai Wharf have a general terminal under the ASEAN and GMS CBTA agreements; and can handle container vessels up to 50,000 and (iii) similar for rail in the future. tons with specialized terminals for vessels from 5,000 to 10,000 tons. The port is planned to be expanded to handle a larger quantity of Corridor A – East-West Road fuel shipments. Related ports in the province include Nhon Hoi Wharf serving the Nhon Hoi Economic Zone and local terminals servicing satellite development in Dong Da, De Gi and The corridor begins in Laem Chabang Tam Quan. Total tonnage in 2020, including port connecting to Poipet inside Cambo- domestic cargo and containers, was about 11 dia where it continues to Siem Reap along million tons.42 the east-west section of the Southern Eco- nomic Corridor between Siem Reap to the The 164-kilometer section connecting Oyadav border post with Viet Nam. Under between Poipet and Siem Reap is not pro- MPAC 2025, it is proposed to improve most of posed for upgrading indicating the road is this east-west highway and to designate it as in fair-to-good condition. A southern bypass AH21. Within Viet Nam, highway QL19 con- of the city is being considered by MPWT. High- nects between Te Le Tanh close to the border ways 64 and 78 connecting between Siem with Cambodia and Quy Nhon, an important Reap and Ratanakiri over a distance of 498 ki- domestic and regional shipping port. Corridor lometers consist of two 3.5-meter wide paved 42 Quy Nhon port handles 11 million tons of cargo in 2020 (Viet Reader Viet Nam, December 31, 2020). 40 CAMBODIA’S REGIONAL CONNECTIVITY: UNLOCKING THE FULL POTENTIAL OF TRANSPORT CORRIDORS CHAPTER 3 lanes with 1.5-meter paved shoulders on both Within Viet Nam, Highways QL19 and sides. An assessment prepared for MPWT in QL19B connect between Te Le Tanh close 2018 indicates that the original double bitumi- to the border with Cambodia and Quy Nhon nous surface treatment on the existing pave- Port. They are being upgraded from a Class ment has cracked and created potholes, which IV to a Class III (11 meter-wide carriageway would need to be fixed.43 Overall, the road is in consisting of one lane for car and one lane for poor-to-fair condition with the road pavement motorcycle each direction) under the Central deteriorated over the 170 kilometers length be- Highlands Connectivity Improvement Project tween Sam Ang and Ratanakiri. The pre-feasi- financed by the World Bank. These works are bility study for this Cambodian two-lane road in progress with some road sections complet- section of the overall corridor was completed in ed by end-June 2023 and the remaining by 2019 and recommended extensive upgrading December 2024. of the pavement primarily within the current right of way.44 Based on the earlier study, a preliminary business case was completed in 2022 that investigated the financial business case for upgrading the route.45 Analysis of Corridor Efficiency Base Case – Current Highways Base case performance. The results of the analysis of the base case scenario shows that Speed Assumption. Average road speeds to traverse the 1,203-kilometers route from in Thailand were assumed to be 65 kilome- Laem Chabang to Quy Nhon Port would take ters per hour, while in Cambodia the speed an estimated 37 hours (Figure 3.2). This es- between Siem Reap and Ratanakiri was as- timate of total travel time along the corridor sumed to be 35 kilometers per hour based on includes an assumed clearance time in total the current road conditions, and in Viet Nam of 3 hours at the border with Thailand, that is 45 kilometers per hour.46 30 minutes at Aranyaprathet on the Thai side and 2.5 hours at Poipet on the Cambodian side Assessment of trade facilitation arrange- (Table 2.1) and 6 hours at the border with Viet ments. At the border between Thailand and Nam (3 hours each side in line with the average Cambodia, it is understood that single-win- of border crossings in the region).47 Since per- dow customs clearance arrangements may be mits to through-run generally lapsed during in place on the Thai side of the border. Sin- the Covid-19 period , transfer between trucks gle-window arrangements do not exist at the at the border is generally assumed to occur. It border between Cambodia and Viet Nam. The is likely that transhipment would take at least entire sections of the corridor in Cambodia and one hour, but this time has not been factored Viet Nam between the border with Thailand to into the calculations as it is minor and common Quy Nhon Port were not included as agreed to the base and improvement cases. The total routes under the early harvest arrangements border clearance time is almost 25 percent of for the CBTA. the total estimated journey time. 43 Initial Environmental and Social Impact Assessment: Siem Reap to Ratanakiri National Roads Upgrading Project (SRNRUP) (MPWT, October 2018) 44 ASEAN Initial Priority Infrastructure Project Pipeline. Upgrading of Siem Reap to Ratanakiri National Road (EY, December 2019). Financed by the Australian Foreign Affairs and Trade. 46 Cambodia. Higher Level Business Case for the Siem Reap – Ratanakiri Road Improvement (EY. October 2022). For MPWT, with funding of PPIAF. 46 Estimates of road speed were derived from Google maps and study team assessments for Corridors A to C. 47 Referring to Table 2.1, the clearance times for 2015 for these border crossings appear to be for exports only, whereas in 2019 and 2021 they represent import times. Further there is no recent information on the clearance times on the Thai and Vietnamese sides of the border. Accordingly, the times referred to are assumed to be representative of the current average of import and export clearance times at these locations. 41 CAMBODIA’S REGIONAL CONNECTIVITY: UNLOCKING THE FULL POTENTIAL OF TRANSPORT CORRIDORS CHAPTER 3 Project Case – Improved Highways + Reduction in Border Clearance Time The improved highway scenario (shown in case.48 The corridor passes through several Figure 3.2) includes a 50 percent reduction less-developed provinces of Cambodia and overall in clearance times at Poipet, Oyadav would have the potential to support the devel- and Te Le Tanh, offers a time saving of about opment of sustainable agriculture, ecotourism 12 hours or 32 percent compared to the base with improved ‘last-mile’ connectivity. FIGURE 3.2 Estimate of Operating Costs Time (hrs) 40.0 37.0 Base Case 35.0 30.0 25.0 24.9 Project Case Thai-Cambodia 20.0 Border Quy Nhon Port 15.0 Laem Chabang 10.0 Cambodia- Viet Nam Border 5.0 Siem Reap 0 0.0 200.0 400.0 600.0 800.0 1000.0 1200.0 1400.0 Distance (km) Source: Study team. The travel time and transport component shown in Table 3.1. The potential for reducing of logistics cost per ton over the entire cor- the transport component of logistics cost per ridor length was estimated. Assumptions ton in the improvement scenario compared to of truck, train, and barge operating costs the base case scenario is about 10 percent as for future cross-border train operations are shown in Figure 3.3. 48 2019 pre-FS indicates that the proposed upgrading has an estimated investment cost of US$450 million (2018 prices) and includes the following components: (i) road surface treatment with 100 percent asphalt concrete pavement within existing pavement widths; (ii) maintenance of 17 bridges; (iii) maintenance of existing drains; (iv) installation of some new drains along road edge; (v) installation of road signs and markings; (vi) selected climate change features such as slope protection and storm water dissipation; and (vii) past flooding in the areas that run through Lower Sesan II (hydropower dam) catchment suggests that major upgrading is needed in low-lying (flood prone) areas (both upstream for closed gates scenario and downstream for open-gate scenario. 42 CAMBODIA’S REGIONAL CONNECTIVITY: UNLOCKING THE FULL POTENTIAL OF TRANSPORT CORRIDORS CHAPTER 3 TA B L E 3 . 1 Estimate of Operating Costs Indicator Parameter Rail operating cost (63% average loading at 40 kph) $0.035 per ton-km Inland Waterway barge (DWT 2,000 – 3,000 at 15 kph) $0.01 per ton-km Heavy Truck (31-ton payload – 75% average loading): Distance driven per year (kilometers) 75,000 Hours driven per yar 2,200 Vehicle operating cost per ton-km (Average speed 50 kph and higher) $0.073 Estimate of delay cost per hour of delay (based on truck) Depreciation ($/vehicle-km) $0.064 Delay cost/ hour:   Labor cost/ US$ per hour (1.8 crew per truck hour)  $5.0 50% depreciation ($/truck hour)  $1.1 Opportunity cost of freight in transit (per hour) $16.5 Est. cost of delay per truck $ /hour $22.6 Estimated cost of delay $ per ton hour (used for truck and train) $0.70 Estimated transshipment cost per ton for road and rail $5.0 Notes: • Highway Design Model indicates speed at 40 kph would be 3% higher; and at 30 kph would be 14% higher. • An opportunity cost of freight in transit of $0.50 per ton-hour was used. Although this value is higher than the Highway Design Model-4 default value for Asia of $0.15 per ton-hour, it is closer to what was found by a relevant 2006 feasibility study where values for ton-hour were: (i) bulk freight $0.2–$0.5 per ton-hour; and (ii) containers $0.2–2.0, the ranges for both types of freight dependent on the category of freight with the values expressed in circa 2005 prices. Kunming- Haiphong Corridor–Multimodal Transport Demand Model. TA-4050 (ADB, February 2006). • Truck operating costs assume articulated 31 ton Payload Trucks. • Freight train operating costs assume a 800 ton maximum payload. Based on World Bank analysis of State Railways of Thailand’s data in 2016 and Study Team’s own estimates of GMS railway operating costs. • Inland waterway ferries cost per ton-km. Based on Study Team’s own estimate for Mekong Delta. Source: Study team calculations. . FIGURE 3.3 Corridor A: Estimated Transport Operating Cost per Ton for Selected Scenarios $120 $100 $96 $80 $60 $40 $90 $20 $0 Base Case Project Case Highways (1203km) Improved Source: Study team. Highways (1203km) 43 CAMBODIA’S REGIONAL CONNECTIVITY: UNLOCKING THE FULL POTENTIAL OF TRANSPORT CORRIDORS CHAPTER 3 The economic benefits from reduced trans- count rate of 9 percent) or 2.3 (with a discount port cost and travel time were estimated with rate of 12 percent). At the current low daily the Economic Internal Rate of Return of 25.1 traffic volumes of a few hundred vehicles per percent. The 2019 Pre-Feasibility Study49 was day with few trucks the potential for generated conducted in 2019 to assess the rehabilitation traffic is high – across the whole route traffic and upgrading of the existing northern road generation of about the same as the inverse of corridor between Siem Reap to Ratanakiri (ap- that due to the overall reduction in travel time proximately 390 kilometers), which is a part of is likely (i.e., +30% assuming an elasticity of a transport corridor stretching from the Stue- -1.050). ong Bot cross-border facility (with Thailand) to Ratanakiri, near Viet Nam. The benefit-cost ratio was estimated to be 3.0 (assuming a dis- Corridor B – Inland Waterway Shuttle barges. The main transport modality prospects are promising, albeit necessitating along this important trade corridor is by DWT additional dredging efforts. These vessels fol- 2,000 (160 TEU) to DWT 3,000 (240 TEU) low the transit route, traversing through the shuttle barge. The Mekong River connects di- Mekong River, Vam Nao River, and then the rectly to Cai Mep port and nearby ports (refer Lower Bassac River, ultimately reaching re- to Figure 3.1). The cross-border trade volume gional ports (Figure 3.4). In this context, the of 4.0 million tons (exports + imports) using Port of Can Tho could serve as an additional the Mekong River between Cambodia and Viet option for cargo loading or unloading, as the Nam in 2022 (refer to Table 1.1) grew at 8.9 per- stretch between Can Tho and the estuary of- cent per annum from 2.2 million tons in 2015. fers greater depth and can accommodate ves- Of the 4.0 million tons transported in 2022, sels of up to DWT 10,000. 0.8 million was bulk cargo, 2.4 million was in containers, and 0.8 million was fuel imports. Corridor B can be extended upstream to in- corporate inland waterway transport for the Most of the cargo handled by the main termi- transshipment of goods between the feeder nal of PPAP LM17, arrives or leaves the termi- terminals such as Kampong Cham and Kam- nal by truck, with most being containerized. pong Chhnang with PPAP LM17. Domestic in- The remaining cargo comes by barges from land waterway transport plays a pivotal role in the feeder terminals. There is no rail connec- the transportation of goods to and from Cam- tion to LM17. Custom clearance is done at LM17 bodia thanks to a well-connected waterway and takes two to eight hours. Because LM17 network spanning a total navigable length of still does not have specialized and high-speed 1,750 kilometers along the Mekong and Tonle gantry cranes, the containers are discharged Sap Rivers. The domestic waterway network, and loaded by single-point swing cranes. Op- particularly the Tonle Sap and Upper Mekong erations at LM17 are conducted 24-hours per Rivers, presents an opportunity for the con- day, ensuring continuous movement of goods. nection of numerous agricultural centers along these rivers with PPAP LM17 that is being dou- Sea-going and sea-river vessels. An alterna- bled in size, and other related facilities through tive to utilizing shuttle barges between Phnom the existing and planned sub-feeder ports (re- Penh and Cai Mep is to opt for direct sailing fer to Figure 2.9). using DWT 5,000 (380-500 TEU) coastal ves- sels or sea-river vessels between PPAP and The main route used to transport goods by Singapore or other regional seaports in Asia. inland waterways between LM17 other PPAP Presently, maritime traffic along the Mekong terminals and private fuel terminals uses River System is somewhat limited, but the shuttle barges or vessels that operate along 49 ASEAN Initial Priority Infrastructure Project Pipeline, “Pre-feasibility report on Upgrading of Siem Reap to Ratanakiri National Road.” 10 December 2019. 50 An elasticity of -1.0 for travel time implies a 10% increase in demand for a reduction in travel time of 10%. 44 CAMBODIA’S REGIONAL CONNECTIVITY: UNLOCKING THE FULL POTENTIAL OF TRANSPORT CORRIDORS CHAPTER 3 the Mekong River within Cambodia and Viet via Cat Lai port is 428 kilometers. The second Nam. There are two main routes that vary at route (Route ii in Figure 3.4) traveling via the the Viet Nam end in the last one-third of Cor- Mekong Estuary to Cai Mep port is shorter at ridor B. The first route (Route i in Figure 3.4) 370 kilometers. traveling between PPAP LM17 and Cai Mep port through the Chao Gao canal and passing FIGURE 3.4 Corridor B, with Two Access Routes to Cai Mep Source: Study team based on Consultations with Shipping Companies in Cambodia. Map base – Google Maps, September 21, 2023. Larger shuttle barges take Route ii to avoid tuary and Vung Tau is in open water, smaller the limited capacity of Cho Gao Canal.51 Im- and lightly constructed barges may lack the portantly, this route does not provide the op- necessary seaworthiness. It remains unclear tion for partial loading or discharging at Cat what Vietnamese regulations govern the Lai. In terms of travel time, it can be slightly safe construction of vessels navigating these shorter if the vessels can navigate the estuary coastal waters, but it would be reasonable at the optimal time, specifically between me- to assume there are restrictions in place. In dium and high tide. The estuary has a depth of Europe, analogous situations have led to the only 2.8 meters during low tide but exceeds 5 development of specialized sea-river vessels meters during high tide. There is a potential that use strengthened double-hull barges per- risk of an approximately eight hour delay if the mitted to navigate at sea under predefined sea timing with the tidal window is not well-coor- conditions and within a specified safe distance dinated. There are plans to upgrade the Cho from shore. Gao Canal. The initial leg of this journey spans 73 kilo- One drawback of opting for Route ii is the meters and typically requires approximate- wave and wind conditions in the open sea. ly 4 hours to reach the Cambodian border. Since the segment between the Mekong Es- 51 Cho Gao Canal’s depth of 3.7–3.9 meters (low-tide) is sufficient for container barges of 2,000 DWT (160 TEUs); however the volume of barge traffic and constrained width (minimum 35 meters) of these larger vessels means that such vessels until must wait eight hours for a high tide or travel via the Mekong Estuary. Currently being upgraded, the work when completed will allow the canal to meet the standard of a Grade 2 inland waterway route, with over 3.5 meters in depth (low tide) and over 50 meters in width. 45 CAMBODIA’S REGIONAL CONNECTIVITY: UNLOCKING THE FULL POTENTIAL OF TRANSPORT CORRIDORS CHAPTER 3 During this stretch, the Mekong River main- eventually reaching Cai Mep; or Route ii, which tains a depth of over 5 meters with few ob- entails continuing downstream along the Me- structions. Illuminated polyethylene buoys as- kong River to its estuary and then navigating sist with night navigation, although it is worth coastal waters directly to Cai Mep in Vung Tay noting that these buoys have been in use since Bay. Sea-going vessels, coastal vessels, or sea 2006 and their maximum lifespan is 20 years. river vessels are obliged to follow Route ii. Upon reaching the border on the Cambodian side, the barge drops anchor and awaits Cus- The Ministry of Transport of Viet Nam and toms and Immigration clearance. Once this the World Bank are implementing a new proj- process is completed, the barge proceeds ect for developing waterway corridors and slightly beyond the Vietnamese side of the logistics in the Southern region under financ- border, where the clearance procedures are ing by the World Bank. It will include reno- repeated. Normally, this entire process takes vating and upgrading the East-West transport around 2 hours; however, it can extend to up corridor connecting the Mekong Delta region, to 9 hours if the barge arrives after the daytime from its main port of Can Tho to HCMC port to operating hours of the border control. The cur- HCMC port, and improving the North-South rent border control procedures and nighttime transport corridor connecting the southeast closures do not align with the stipulations of region and industrial cities like Dong Nai with Article 17 in the 2009 Transport Agreement, HCMC port and the Cai Mep Thi Vai deep sea- which requires 24-hours operation. port cluster. These developments will contrib- ute to better passage of the barges. Shuttle barges operating between the bor- der to the entrance of the Vam Nao Pass in The Cho Gao Canal is classified as a Water- this area do not stop here but continue their way Category II South, with a depth ranging journey along the Mekong River.52 Navigat- from 3.7 to 3.9 meters and a channel width ing this 48-kilometer stretch typically takes varying between 35 to 80 meters. This is approximately 2.7 hours. Downstream of the not accessible to sea-going vessels, coastal border, there are shallow patches that neces- vessels, or sea river vessels. Furthermore, the sitate periodic dredging. Night navigation is limited bridge clearances prevent taller barg- permitted in this section, and there are no es from passing through, resulting in reduced scheduled stops. cargo capacity. Another significant challenge in this canal is the high traffic density, leading For shuttle barges destined for Cai Mep, to congestion. Currently, approximately 2,000 the journey continues along the Mekong for vessels transport goods along this 29-kilome- another 150 kilometers, taking roughly just ters canal daily. There are plans to upgrade the over eight hours to reach the entrance to Cho Gao Canal. the Cho Gao Canal. Nighttime navigation is also allowed in this part with no stops sched- Exiting the Cho Gao Canal, passage contin- uled. Most of this stretch of the Mekong River ues for 26 kilometers along the Vam Co River maintains a depth exceeding 5 meters, even and 45 kilometers along the Saigon River in during low tide and the dry season. However, total about 4 hours sailing to Cat Lai Port. there are specific areas that require dredging Night navigation is allowed so no stops here. maintenance. Depths are more than 5 meters in the Saigon River. Most of the shuttle barges have com- The entrance to the Cho Gao Canal is situated bined Cat Lai and Cai Mep containerized car- at My Tho, just 5 kilometers downstream of go on board so first Cat Lai is done, then Cai the My Tho Bridge, the first bridge built over Mep. The distance between Cat Lai and Cai the Mekong River in the Mekong Delta. At this Mep ports is 55 kilometers or a bit more than point, barges have the option to choose their 3 hours traveling time. route to Cai Mep: either Route i, which involves passing through the Cho Gao Canal, followed by the Saigon River, Vam Co, Cat Lai Port, and 52 However, certain sea-going vessels, such as those importing gas from Thailand, use the Vam Nao Pass to access the Bassac River, and enter the sea by the Bassac estuary. 46 CAMBODIA’S REGIONAL CONNECTIVITY: UNLOCKING THE FULL POTENTIAL OF TRANSPORT CORRIDORS CHAPTER 3 FIGURE 3.5 PPAP to Cai Mep via the Bassac River, and PPAP to Singapore Source: Study team based on Consultations with Shipping Companies in Cambodia. Map base – Google Maps, September 21, 2023. An additional existing route to Cai Mep and DWT. The use of the Lower Bassac River could direct passage to Singapore could increase also open opportunities for 5,000 DWT (feed- the utilization of the Lower Bassac River. His- er) seagoing vessels between Phnom Penh and torically, most shipping companies have con- Singapore. The journey time between PPAP centrated their transportation routes along the LM17 and Singapore would be between 2.5 and Mekong River. However, the Lower Bassac Riv- 3.3 days. er, located downstream of the Vam Nao Pass, provides accessible, deeper, and safer access For travel to Cai Mep, the next 114 kilometers to the Viet Nam Delta. Enhanced value can be lead to the Bassac Entrance, passing through achieved by integrating voyages that involve the Quan Chan Bo Channel, which has been partial loading and unloading at Can Tho Port fully excavated by Viet Nam. There are sev- and loading and unloading at Cai Mep Port. eral advantages and disadvantages of using Passage times would be similar to the LM17– the Bassac Estuary for travel to Cai Mep port. Cai Mep through the Mekong Estuary (Figure The main advantages are: (i) no delay at the 3.5). Instead of continuing their route along the estuary waiting for high tide; (ii) the possibility Mekong River, vessels would make a right turn of integrating cargo at Can Tho; and (iii) larger at the five kilometer long Vam Nao Pass that vessels up to 380 TEU can be used. The dis- connects the Mekong and Lower Bassac rivers. advantages are: (i) higher fuel consumption; They then proceed on an 80-kilometers jour- (ii) specialized sea river vessels are needed to ney to Can Tho Port, where cargo can be con- cross the open sea between the estuary and veniently topped up. Beyond Can Tho, the river Vung Tau; and (iii) adverse sea conditions may depth accommodates vessels of up to 10,000 potentially extend the passage time. Analysis of Corridor Efficiency The fastest passage time following Route i, is about 26 hours, and the slowest passage currently used by barges, in connection with time is 35 hours (Figure 3.6). These total jour- the Mekong Corridor between LM17 and Cai ney times include a minimum border clearance Mep, including custom clearance in Cai Mep, time of 2 hours in total (one hour on each side 47 CAMBODIA’S REGIONAL CONNECTIVITY: UNLOCKING THE FULL POTENTIAL OF TRANSPORT CORRIDORS CHAPTER 3 of the border) which can increase to by about 6 the largest barges that could use this Route hours on average if vessels arrive at night when i without waiting for the tide would be about the border is closed (opening hours are 6 am to DWT 3,000 (240 TEUs), corresponding to the 6 pm). When the canal widening is completed, largest barges currently in use. FIGURE 3.6 Corridor B – Fastest Journey Time by Barge (Route i) Time (hrs) 30.0 Cai Mep Port 25.9 hrs 25.0 Vam Co River 20.0 Cho Gao Canal Cat Lai 15.0 Saigon River 10.0 PPAP’s LM17 Vam Nao Pass 5.0 Cambodia - Viet Nam Border 0.0 0.0 50.0 100.0 150.0 200.0 250.0 300.0 350.0 400.0 450.0 Source: Study team Distance (km) River-sea vessels (DWT 4,000 up to 360 years.53 New expressways will be completed TEUs) could use Route ii via the Mekong between Phnom Penh and Ho Chi Minh City Estuary during high tide taking a minimum by 2030. journey time of 23 hours. Depending on the tide and whether the border is closed at night, The road comparison case assumes that the the journey time could rise by about six hours, expressways on both sides of the border are the same as for Route i. These river-sea ves- completed by 2030, and there is a 45 percent sels would be larger than the largest barges in reduction in current cross-border clearance use and would have shorter travel time to Cai times. The results of the analysis of improved Mep Port than barges using Route i, and they road scenario via Bavet shows that to traverse would be able to cope with the open conditions the 295-kilometers route from Phnom Penh and normal range of wave heights in the Me- to Cai Mep Port would take 7.9 hours when kong Estuary. the new expressways are completed.54 Com- pared to the use of waterway taking 27 hours The comparison road corridor is the parallel between PPAP LM17 and Cai Mep, the road main road corridor from Phnom Penh to Ho would be 70 percent faster although the bulk Chi Minh City, and Vung Tau and Cai Mep and container traffic using the waterway would Ports south of Ho Chi Minh City (295 kilo- not be sensitive to travel times of less than a meters). Of the total corridor distance, slightly day. More important is consignment reliability more than half follows NR1, also known as AH1, to meet scheduled ship departures from Viet between Phnom Penh and Bavet (166 kilome- Nam ports and the cost per ton of these con- ters) on the Cambodian side of the border with signments compared to road. Viet Nam. The corridor is also identified by the Vietnamese Government as one of its most im- portant economic corridors in the next 10–30 53 The-most-important-economic-corridors-for-next-10-30-years (VietNamnet, August 15, 2022). 54 Included in the total journey time is an assumption of a 0.7-hour reduction in clearance times at Bavet down to one hour, and a 1.5-hour reduction in clearance time at Moc Bai down to 2 hours. The reduced total border clearance time of 2.2 hours represents almost 60 percent of the improved journey time reduction of 3.8 hours, the rest being due to road improvements. 48 CAMBODIA’S REGIONAL CONNECTIVITY: UNLOCKING THE FULL POTENTIAL OF TRANSPORT CORRIDORS CHAPTER 3 FIGURE 3.7 Comparison Road Corridor: Phnom Penh – Bavet – Ho Chi Minh City, Vung Tau and Cai Mep Time (hrs) 9.0 7.9 hrs 8.0 Ho Chi Minh City 7.0 6.0 Cai Mep Port 5.0 NR1: Krong Svay Rieng Expressway 4.0 QL22-QL52-QL51 NR1: Neak Leoung (129km) 3.0 2.0 Phon Penh Cambodia - Viet Nam 1.0 Border (Bavet/Moc Bai) 0.0 0.0 50.0 100.0 150.0 200.0 250.0 300.0 Source: Study team Distance (km) The theoretical effect on transport costs of Road transport is also complementary to the use of the current inland waterway barg- waterway transport. Despite the clear cost es verses use of truck along the road corri- advantage of the use of inland waterway to dor to Viet Nam via Bavet was examined. The transport goods to Vietnamese ports, some largest vessels operating today are barges of logistics companies based in Cambodia offer about DWT 3,000 (240 TEUs). However, the a back-up road service to transport goods by main advantage is the potential cost advan- road to Cai Mep. The transport service is aimed tage of barges using the Mekong River (Routes at shipments that would normally use inland i or ii) compared to road transport via Bavet. waterways but are at risk of missing their ves- Using barges, would give a US$12 per ton re- sel departure from Cai Mep. Hence, this back- duction or almost a 50 percent cut in transport up road service is complementary to the use costs including an allowance for feeder trucks of inland waterways. compared to the use of road via Bavet (Figure 3.8) although the travel time would be about 17 hours longer than by NR1. FIGURE 3.8 Corridor B: Waterway (Route i) vs Comparison Road – Estimated Transport Operating Cost per Ton and Journey Times $30 $25 $24 25.9 $13 $20 7.9 $15 $10 $5 $0 Transport cost per ton Travel time (hrs) Comparison Improved Highways (295km) Source: Study team Waterways Cambodia / Vietnam (Route A, 428km) 49 CAMBODIA’S REGIONAL CONNECTIVITY: UNLOCKING THE FULL POTENTIAL OF TRANSPORT CORRIDORS CHAPTER 3 Inland waterways have been effective at re- transport between Cambodia and Vietnamese ducing Greenhouse Gas Emissions for con- ports by attracting road freight to inland water- tainerized transport. Cambodia’s National ways. A cumulative GHG emission reduction Determined Contribution (NDC) to the United of 135,000 tons over 2015–2022 is estimated Nations Framework Convention on Climate due to the investment in inland waterways. Change (UNFCCC) identifies reductions from Continued improvement in Inland waterways freight transport as an important area for mit- and railways in the future is expected to sig- igation but with the mitigation measure being nificantly reduce GHG emissions across the proposed being to shift freight from road trans- transport network since overall freight demand port to rail transport55. Inland waterways play a is growing rapidly. far greater role for domestic and international freight transport today than rail transport and since 2015 has competed effectively with road BOX 3.1 Role of Inland Waterways in reducing GHG emissions While road transport’s share of the containerized freight task between Cambodia and Viet Nam was just over 30% in 2010 (with waterways carrying the balance) it had grown to 45% by 2015 due to ex- tensive road investment (refer figure below). Due to PPAP’s major expansion of the capacity of the LM17 container terminal from 150,000 TEUs to 500,000 TEUs56 annually in 2022, inland waterways curtailed the growth in containerized road freight to Viet Nam, and slightly reduced road’s mode share to below 45% by 2022 (refer figure below). Without the significant investment by PPAP in LM17 and other waterway improvements it is likely that road transport’s share of the Cambodia–Viet Nam freight task would have continued to grow likely hitting about 70% by 2022 (still lower than road freight’s 90% share of the total domestic freight task). Compared to this alternative 70% road mode share scenario, the actual historical growth trend where waterway transport curtained road transport’s share to below 45% in 2022, is esti- mated to have reduced direct, cumulative Green House Gas emissions by 135,000 tons from 2015–2022. 70.0% % of TEUs by road (Cambodia-Viet Nam) 80.0% 70.0% 60.0% 50.0% 40.0% 44.8% 30.0% 45.4% 20.0% 10.0% 0.0% 30.4% 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 Historical road mode split Scenario A road mode split (70% by 2022) Source: Study team. 55 Cambodia’s Updated Nationally Determined Contribution (The Kingdom of Cambodia. 2020). Published by the General Secretariat of the National Council for Sustainable Development/Ministry of Environment. 56 A TEU or Twenty-foot Equivalent Container. 50 CAMBODIA’S REGIONAL CONNECTIVITY: UNLOCKING THE FULL POTENTIAL OF TRANSPORT CORRIDORS CHAPTER 3 Corridor C – Improved Existing Rail The entirety of Corridor C extends from Laem that for the comparison of improved road Chabang Port, Thailand, to Sihanoukville scenario that takes account of feasible mea- Port, Cambodia. It focuses on the current sin- sures to reduce the border clearance time. gle-track, meter gauge railways in Thailand Most cross-border rail border freight would and within Cambodia with a total length of 888 only travel over a portion of the entire corridor kilometers. The focus of Corridor C is the exist- length, for example Phnom Penh to Bangkok. ing meter gauge Northern Line railway that has With the purchase of new rollingstock and been connected to the Thai meter gauge sys- minor investment in improved infrastructure tem since 2019. Operating between Poipet and cross-border rail traffic could be facilitated, Phnom Penh, the Northern Line is constrained possibly reaching around 500,000 tons per by axle limits (15 tons) on old bridges, but a annum in the next five years or a little less than 30-40 kilometers per hour operating speed is 10 percent of total cross-border movements at possible. The existing Southern Rail Line has a Poipet by that time. higher operating speed (50-60 kilometers per hour and a higher axle load of 20 tons). Hence, The improved rail scenario assumes the ex- it is not the first priority for improvement. On isting meter gauge track would be upgrad- the Thailand side, the meter gauge railway ed, primarily focusing on overcoming the track between the Chachoengsao railway constraints along the Northern Line (Figure junction, located 150 kilometers south-east 3.9). The assumed improvements are consis- of Bangkok, and Aranyaprathet (opposite) Poi- tent with proposals of the new Comprehensive pet is proposed to be double tracked by 2030. Master Plan on Cambodia Intermodal Trans- There is potential for increased domestic and port and Logistics System 2023–2033. The cross-border use of the railway with selected journey time along the entire corridor by rail investments along the Northern Rail Line and would be 21.2 hours, including the same total new rollingstock. border clearance time of 1.5 hours, a reduc- tion of 4.3 hours or a 17 percent reduction compared to the existing rail scenario. More Analysis of Corridor Efficiency importantly, the reliability and capacity of the upgraded railway would be greatly improved. Use of either of these two railway scenarios An analysis of movements along the current would allow connection to the planned high- rail corridor without improvement was first speed railway to be completed between Bang- undertaken. The analysis shows that the total kok and Vientiane, Lao PDR, by 2030 that journey time would be 25.5 hours; total bor- would also connect to the Lao China Railway. der clearance time of 1.5 hours would match FIGURE 3.9 Corridor C, Improved Existing Rail: Laem Chabang – Poipet – Phnom Penh – Sihanoukville Port (880 km) Time (hrs) 25.0 21.2hrs 20.0 Phnom Penh Krakor Sihanouk Ville 15.0 Port 10.0 Krong Kampong Laem Chabang Battambang Chnang 5.0 Thai - Cambodia Border 0.0 0.0 100.0 200.0 300.0 400.0 500.0 600.0 700.0 800.0 900.0 1000.0 Source: Study team Distance (km) 51 CAMBODIA’S REGIONAL CONNECTIVITY: UNLOCKING THE FULL POTENTIAL OF TRANSPORT CORRIDORS CHAPTER 3 The comparison road corridor includes high- The comparison highway scenario assumes ways in Thailand between Laem Chabang border clearance times are 1.5 hours in total Port to the border with Cambodia that are reduced from the current 4.0 hours (Figure generally in good condition. Within Cambodia 3.10).57 It is also assumed that the average from Poipet to Phnom Penh, the main highway road speed along the entire corridor, which is is NR5 and is a key section of Asian Highway 1 mainly due to the recent upgrade along NR5, which connects to Bavet. The entire length of is 55 kilometers per hour (increased from the NR5 (408 kilometers) has now been recently previous 45 kilometers per hour) giving a to- upgraded to four-lanes, generally with a me- tal travel time of 16.1 hours. Further, trucks dian and paved shoulders. Although a new crossing the border are assumed to not have four-lane expressway between Phnom Penh to transship goods due to the use of ASEAN or and Sihanoukville Port has been in operation CBTA permits. For trucks that must transship since October 2022, almost all heavy trucks goods, they would use one of several privately continue to use the existing highway NR4 that owned dryports in Cambodia that are located remains congested. along NR5 in close proximity to the Thai-Cam- bodia border. FIGURE 3.10 Comparison Road Scenario – Thailand to Sihanoukville Port Time (hrs) 18.0 16.1hrs 16.0 Phnom Penh 14.0 Krakor Sihanouk 12.0 Ville Port Axis title 10.0 8.0 Krong Kampong 6.0 Laem Chabang Battambang Chnang 4.0 Thai - Cambodia 2.0 0.0 Border 0.0 100.0 200.0 300.0 400.0 500.0 600.0 700.0 800.0 900.0 1000.0 Distance (km) Source: Study team Axis title The transport component of logistics cost The improved rail scenario offers a 40 per- per ton over the entire corridor length was cent reduction in transport cost although a estimated for the improved rail and the com- 40 percent longer travel time compared to parison road scenario.58 Given that the trains road transport (Figure 3.11). Transshipping can already operate along the Northern Line, goods between truck and trains at the border the effect on transport costs of a transfer to rail offers little advantage compared to the high- at Poipet and of using rail the whole distance way scenario and performs poorly in terms of between Laem Chabang and Sihanoukville transport cost per ton with no speed advan- ports was examined. This third scenario as- tage compared to the improved rail scenario. sumed trucks use the improved NR5 and the new expressway between Poipet and Siha- noukville Port, but that goods are transferred to Thai trains at the border. 57 The improved border clearance time assumes the Thailand clearance time of 0.5 hours remains while the Cambodian side’s clearance time is assumed to be reduced from 2.5 hours to 1.0 hour giving a total clearance time of 1.5 hours. This improved time is considered to be quite feasible since the border crossing capacity for immigration and customs clearance has been significantly expanded recently. This same improved border clearance time is assumed to apply to the two railway scenarios. 58 Only accounts for transport operating costs and therefore excludes tolls, customs duties and other logistics charges (e.g., storage, port fees) and logistics company administrative charges and profit. 52 CAMBODIA’S REGIONAL CONNECTIVITY: UNLOCKING THE FULL POTENTIAL OF TRANSPORT CORRIDORS CHAPTER 3 FIGURE 3.11 Corridor C: Estimated Transport Operating Cost per Ton and Journey Times for Selected Scenarios $70 $65 $62 $60 $50 $40 $38 $30 $20 21.2 16.1 21.8 $10 $0 Improved rail LC port Comparison improved Comparison improved to SAP (888km) highways (888km) highways + rail poipet to SAP (887km) Transport cost per ton Travel time (hrs) Source: Study team 3.3 Summary of Corridor Performance The main features of each of the three corri- estimated to cut transport costs by 50 percent dors and the potential to improve transport compared to use of the nearby parallel road via and trade efficiency are summarized in Table Bavet, although travel times would be longer 3.2. though reasonably reliable assuming customs inspection becomes more predictable. For For East-West Road (Corridor A), the main Corridor C, improvement of the existing rail improvements needed are along Cambo- line, mainly between Poipet and Phnom Penh, dia’s section of the corridor between Siem would likely also facilitate greater use of this Reap and Oyadav at the border with Viet mode since it has the potential to cut freight Nam. With a cut in border crossing times by transport costs by 40 percent. 40 percent, the journey time can be reduced by one-third (from 37 to 25 hours). Corridor A The strategic advantages of continuing to also has strategic importance for Cambodia as develop the role of inland waterways along the only corridor with a connection to Lao PDR the Mekong and Bassac rivers are clear since in the north of the country. The investment in they offer efficient and sustainable access to this corridor does not only fill the regional con- key ports in Viet Nam serving Cambodia’s nectivity gap but also enables this econom- main international markets. Complementing ically underdeveloped part of the country to the further expansion of Sihanoukville and benefit from enhanced connectivity and link to Kampot seaports, Cambodia secures a strong the regional supply chains. Investment in the logistics connectivity to external markets. Rail corridor can be complemented by improving transport provides access to Sihanoukville the condition and resilience of feeder linking Port for fuel and container transport; and this to agriculture and production areas, promot- role can be greatly expanded. At the same ing private investment to develop value added time, the role of rail for cross-border transport and freight consolidation services along the is in its infancy and has great potential to grow. corridor and improving efficiency of logistics International road transport is important but is and cross-border trade through targeted mea- more expensive than waterway, sea, and rail sures. transport although it is highly complementary to these other modes. Importantly, roads serve There is significant potential to reduce trans- villages, production zones, and towns that are port costs compared to road use where in- not served by waterways and railways. land waterway (Corridor B) and railway (Cor- ridor C) can be used. Greater use of inland waterways to connect to Vietnamese ports is 53 CAMBODIA’S REGIONAL CONNECTIVITY: UNLOCKING THE FULL POTENTIAL OF TRANSPORT CORRIDORS CHAPTER 3 TA B L E 3 . 2 Summary of Corridor Performance Corridor name and Features Trade role Performance connectivity Corridor A – East- Condition – 2 lanes in Since the road passes With road West Road poor to fair condition through relatively improvements between Laem Chabang – Poipet between Siem Reap poor provinces, when Siem Reap and Oyadav – Siem Reap – Oyadav – and Oyadav (northeast improved it has the in Cambodia and a cut Quy Nhon (1,204 km) border with Viet Nam). potential to boost in border crossing time Thailand section of local economies. This by 40%, the journey (Thailand–Cambodia– the corridor is in good corridor provides the time can be reduced Viet Nam; Cambodia– condition, and the Viet only road connectivity from 37 to 25 hours Lao PDR) Nam section is being between Cambodia and (for the entire corridor upgraded with World Lao PDR. Thailand–Cambodia- Bank financing with Viet Nam). expected completion by December 2024. Corridor B – Inland Major trade corridor. Significant corridor for Improved inland Waterway Connecting from container traffic, bulk waterway transport can Phnom Penh – LM17, the route uses cargo, and fuel imports. cut transport costs by Vipassana Kamsomnor the Mekong River to Since 2015, container 50% compared to use – Cai Mep (428 km) connect to Cai Mep port traffic using the Mekong of road via Bavet, but in Viet Nam and nearby River has kept pace with the travel time would be (Cambodia–Viet Nam) ports, including Cat Lai TEU movements along longer at about 18 hours. Port, Ho Chi Minh City. the comparison road As long as efficient Improvements to enable corridor via Bavet. trade facilitation leads greater connection to to reliable travel times upstream sub-feeder shippers would still find ports, navigability, waterways with low safety, and facilitation operating cost attractive of cross-border trade for freight transport. movements is needed. Greater use of river- Greater use of the sea vessels (4,000 Basaac river in future is DWT and 350 TEUs) is also a possibility. possible by using the Mekong Estuary at high tide. Corridor C – Improved The Northern Rail Line Most important land- Use of the improved Existing Rail is constrained to an based trade route meter gauge railway Laem Chabang – operating speed of 30- between Thailand and has the potential to cut Poipet – Phnom Penh 40 kph. The existing Phnom Penh (northern transport costs by 40% – Sihanoukville Port Southern Rail Line has a section). Connects compared to use of (880 km) higher operating speed key agricultural trucks but with slightly (50+ kph). and industrial areas longer travel times. (Cambodia–Thailand) within Cambodia to Sihanoukville Port (southern section). Source: Study team. 54 CAMBODIA’S REGIONAL CONNECTIVITY: UNLOCKING THE FULL POTENTIAL OF TRANSPORT CORRIDORS CHAPTER 3 CHAPTER 4 PROPOSED IMPROVEMENT DIRECTIONS 55 CAMBODIA’S REGIONAL CONNECTIVITY: UNLOCKING THE FULL POTENTIAL OF TRANSPORT CORRIDORS CHAPTER 4 The results of the Sector Assessment (Chap- relatively lower costs and in the short-to-me- ter 2) and Corridor Analysis (Chapter 3) pro- dium term (compared to new greenfield corri- vide important information to assist the RGC dors). They do not compete but complement to focus on investments that could be imple- each other serving different geographic areas, mented in the short-to-medium term with regional markets, and destinations. relatively modest financing and yield high impact. This focus complements the priorities The improvement directions are presented set out in the Comprehensive Master Plan on below. The proposed measures are described Cambodia Intermodal Transport and Logistics as having short-term and medium-term pri- System 2023–2033. The prioritized corridors ority – with short-term measures generally in this study comprise the existing backbone occurring within a period of three years and corridors for the three modes – road, rail, and medium-term measures after that. inland waterway – which can be improved with Short-term Medium-term • Enhancing cross-border transport and trade facilitation • Continue to enhance cross-border trade movement • Complete the negotiations on the GMS Framework efficiency through further automation and implemen- Agreement for Cross-Border Railway Transport Con- tation of single-stop inspection and a common control nectivity and, in parallel, finalize key annexes and tech- area. nical arrangements. • Complete the renewal of the early harvest arrange- • Provide effective bilateral and tri-lateral coordination ments for the GMS Cross-Border Trade Agreement, to facilitate efficient regional, trade, and economic further harmonizing national requirements and en- corridors involving updating and maintaining trade hancing CIQ capacity. facilitation and associated agreements for all modes. • Activate the Mekong Navigation Facilitation Commit- • Facilitate efficient multi-modal transport through an tee to overcome constraints in smooth and safe nav- effective regulatory framework to ensure appropriate igation along the waterways between Cambodia and investment and domestic capacity development. Viet Nam. • Facilitate better data access for investment and policy making. Improving road connectivity • Improve Corridor from Siem Reap to Oyadav, at the bor- • Prioritize investment in climate resilience of critical der with Viet Nam (Corridor A), including cross-border rural roads. facilities and linked tertiary roads. • Facilitate developing a modern, safer, more energy-ef- • Investigate and provide additional traffic management ficient, and lower-emission truck fleet with technical and safety measures along NR4, NR1, and NR5. standards that are better harmonized with GMS neigh- • Assess the implications for new axle load limits and bors. impact on overloading and infrastructure deterioration. Developing inland waterways and maritime facilities • Ensure the navigability and efficiency of the Mekong • Develop an adequate end-to-end management system River and key ports for domestic and international wa- along the main waterways. Enhance consolidation from terborne trade (Corridor B). agricultural and production areas. • Improve the capacity, safety, and quality of river nav- • Equip the Department of Waterways to efficiently man- igation. age inland waterways and enhance the marketing ca- pacity of inland waterways. Strategically improving the current railway • Develop a 3-year rolling business plan to improve the • Improve the current meter gauge railway infrastructure railway sector. and rollingstock (Corridor C), focusing on the Northern • Undertake a value-engineering and feasibility study to Line and facilities to develop new markets. determine the optimal level of investment in upgrading • Complete a new feasibility study for a dual gauge track the railway, including infrastructure and rollingstock. to PPAP LM17 container port. • Progressively strengthen the capacity of the Depart- • Draft a new Railway Law that sets out the legal frame- ment of Railways for management of capital works and work to bring to fruition a modern domestic railway maintenance. network with high-quality regional connections. 56 CAMBODIA’S REGIONAL CONNECTIVITY: UNLOCKING THE FULL POTENTIAL OF TRANSPORT CORRIDORS CHAPTER 4 4.1 Cross-Border Transport and Trade Facilitation Measures are needed to overcome the con- delays such as implementing Smart Seals straints to efficient cross-border movement on containers. along roads, waterways, and railways. The measures listed here are by nature relatively • Facilitate better data access for investment low cost and are mainly operational and man- planning and policy making, for example: agement measures: (i) better and more up-to-date data on trade volumes by type and on trade movements by mode at a national level; (ii) use of individual Short-term border crossings; (iii) features and improve- ment needs at border crossings related to causes of undue delay in facilitating border • Continue to enhance cross-border trade clearance; and (iv) traffic volumes, traffic movement efficiency across land borders composition and growth trends. It would through further automation, reinstatement also be beneficial for MPWT to strengthen its of the green lanes, implementation of Cam- monitoring of the freight logistics industry bodian single window, and implementation (all modes) by improved collection of data of single stop inspection and a common con- on variables such as: (i) empty running; (ii) trol area. Clearance times at borders can be weight-based–lading factor (ratio of ton- time consuming due to various factors such kms moved to the available m3-km carrying as insufficient use of automation, residual capacity); and (iii) overloading (proportion inefficiencies in compliance processes, dif- of vehicle-kms travelled with a load in excess ferences in operating times on each side of of legal weight limits). a border, and inadequate technical capacity. • Complete the renewal of the early harvest Medium-term arrangements for the GMS Cross-Border Trade Agreement along with further har- monization of national requirements and • Complete the negotiations on the Frame- enhanced capacity building of Customs, work Agreement for Cross-Border Railway Immigration and Quarantine Agencies at Transport Connectivity for the Greater the border. These improvements would Mekong Subregion. Work with other GMS complement the ASEAN Agreement on countries, likely with continued support of exchange of traffic rights. However, Cam- the Asian Development Bank, to complete bodian truck operators appear reluctant to negotiations and ratifications of the draft renew their permits with MPWT under the FACBRTC and in parallel finalization of key ASEAN Agreement because of the difficulty annexes and technical arrangements. of Cambodia’s aged truck fleet meeting Viet Nam and Thailand’s technical requirements • Facilitate efficient multi-modal transport for trucks. through an effective regulatory framework to ensure appropriate investment and the • Through enhanced bilateral coordination, development of domestic capacity to pro- activate the Mekong Navigation Facilita- vide efficient and safe logistics services. tion Committee defined in the 2009 Wa- Cambodia’s liberal policy on allowing inter- terway Transport Agreement, to overcome national logistics firms to establish opera- constraints in coordinating smooth and safe tions in Cambodia has provided a boost to navigation along the waterways between domestic logistics efficiency in recent years Cambodia and Viet Nam. Administrative and should be continued. Further, an appro- and operational constraints, such as cus- priate investment and regulatory framework toms clearances and nighttime closures, call would also foster the growth of the domestic for collaborative assessments and solutions logistics industry through technology and by both nations. Straightforward solutions knowledge transfer. are available to address transit container 57 CAMBODIA’S REGIONAL CONNECTIVITY: UNLOCKING THE FULL POTENTIAL OF TRANSPORT CORRIDORS CHAPTER 4 • Provide effective bilateral and tri-lateral and navigation agreements for all modes; coordination to facilitate efficient region- and coordinating maintenance and new in- al, trade and economic corridors involving vestment along regional corridors to ensure updating and maintaining trade facilitation adequate connectivity and efficiency. 4.2 Develop Resilient and Connected Transport Network The overall approach advocated is to develop demonstrated efficiency and sustainabil- connected transport networks focusing on ity advantages over the other modes and completing the road network and improv- are well-oriented to the main international ing its safety, further developing waterways, markets. maritime transport, and expanding the role of rail, as follows: • Take advantage of the immediate oppor- tunity to achieve enhanced utilization of • Develop primary, secondary, and tertiary the current railway with modest invest- road networks by focusing on current gaps ment and to expand its role in cross-border in links between the key economic zones movements (with Thailand and with other and international gateways. Ensure such markets via Sihanoukville Port). networks have sufficient established alter- natives at times of severe weather events. • Inter-link waterways, roads, and railways Improve traffic management and safety and new multi-modal terminals thus de- along highways and rural roads. veloping multi-modal networks that are inherently more resilient than individual • Maintain and develop further the current networks working alone. trunk and feeder waterways that have Road Connectivity Short-term be enhanced with complementary secondary road improvements connecting to agricultur- Improve over 400 kilometers of NR64 and al production zones. It is equally important to NR78 from Siem Reap to Oyadav, at the bor- investigate the feasibility of new logistics cen- der with Viet Nam (Corridor A). The road is ters at Siem Reap and new dry ports closer to in poor-to-fair condition and is the key gap in the border crossing (for example on Corridor the international road corridors. The aim is to A) near Oyadav at the border with Viet Nam improve the quality and resilience of the two- or in other locations where demand for these lane road plus shoulders within the existing 10 services is unmet. meter right of way. The 2022 feasibility study proposed that the road be conventionally pro- Investigate and provide additional traffic cured but maintained using an Output- and management and safety measures along Performance-Based Road Contract for an NR4, NR1, and NR5. Identification and design as yet to be determined period. Preparation of potential measures should be carried out: of a final business case, safeguards assess- ment, design, and contract documents for • NR4 continues to experience significant both construction and the Output- and Per- recurrent congestion due to continued formance-Based Road Contract is needed heavy truck use even with the new parallel once a decision to implement the project is expressway (Phnom Penh–Sihanoukville made. These highway improvements could Port). There is potential for improved traf- 58 CAMBODIA’S REGIONAL CONNECTIVITY: UNLOCKING THE FULL POTENTIAL OF TRANSPORT CORRIDORS CHAPTER 4 fic management and safety measures along truck axle load limits among the GMS coun- NR4. Although extensive rehabilitation and tries is worthwhile but it would be advisable expansion of NR5 to 4 lanes (Poipet – Phnom for MPWT to assess the full implications on Penh) has been completed there is little seg- the truck industry, on road assets and oth- regation from roadside land use. Improved er factors. Deployment of weigh-in-motion traffic management and safety measures are technology along key international corridors also likely to be needed on NR4. (e.g. NR1/ AH21) would be an important means of monitoring the incidence of over- • Traffic management and safety measures loading. would be needed along NR1 to Bavet even when the new expressway is completed. Extensive rehabilitation and maintenance Medium-term of NR4, and NH1 between Poipet and Bav- et respectively, has been ongoing over the Prioritize strategic investment in climate re- last decade, and new four-lane expressways silience of critical rural roads. With a massive between Phnom Penh and Ho Chi Minh City rural road network of 47,920 km, Cambodia are underway. However, since high truck use must spend its rural road investment strate- of NR1 is likely even after the expressway is gically by focusing on communes where the completed, and there is little segregation of rural accessibility gap is most severe and adjacent land use, modest capacity expan- where climate risks have the highest nega- sion, traffic management, and safety mea- tive impacts. It is recommended that the RGC sures would be required along NR1. develop a strategy for the prioritization of in- vestment and maintenance on critical part of • Assess the implications for new axle load its network focusing on climate resilient ac- limits and impact on overloading and infra- cessibility gains. structure deterioration. Harmonization of Inland Waterway and Maritime Facilitate the development of a modern, saf- Improve the capacity, safety and quality of er, more energy-efficient and lower-emission river navigation. Within the framework of the truck fleet. In the medium term, a reduction joint work under the Mekong Navigation Facil- in the punitive import taxes for trucks would itation Committee, start preparing: reduce the price of modern, higher-payload trucks that are more likely to meet Thailand • Joint planning between Cambodia and Viet and Viet Nam’s technical standards thus fa- Nam for river-regulating works. cilitating more seamless cross-border truck operations. • Rules and procedures supporting the safe navigation of vessels on the Cambodian Mekong River System. Short-term • A technical regime for approval of plans Ensure the navigability and efficiency of the and construction of Cambodian cross-bor- Mekong River (Corridor B) for domestic and der vessels. international waterborne trade. These im- provements would further expand the trade • Reporting of marine accidents on the Me- capacity between Phnom Penh and Cai Mep kong River System. Port in Viet Nam that directly serves East Asian and North American markets. At the same • Prevention of oil pollution from ships along time, greater use of these waterways would the Mekong River System. significantly reduce transport costs compared to use of road via Bavet. • Joint work on facilitating border passages such as implementation of Smart Seals in containers (refer to Box 2.2). 59 CAMBODIA’S REGIONAL CONNECTIVITY: UNLOCKING THE FULL POTENTIAL OF TRANSPORT CORRIDORS CHAPTER 4 Medium-term • Develop a River Information System to pro- vide modern day/night aids to navigation, Develop an adequate end-to-end manage- modern communication (VHF/radar), and ment system along the main waterways, with vessel tracking systems (for example, Au- the backing of proper studies and bilateral tomatic Information System). cooperation, including link the cross-bor- der Mekong Route/Phnom Penh with the • Upgrade the hydrographic facilities and In- upstream sections of the Mekong/Kampong land Electronic Navigational Charts (IENC) Cham hinterland, and on the Tonle Sap/ Kam- with fast transit logistical support boats. pong Chhnang hinterland: • Establish an environmental focal point to • Conduct studies and update the waterway promote “clean” river transportation, focus- classifications based on regular hydrody- ing on strategic prevention of environmental namic modelling and engineering studies on damage from waterway infrastructures or the potential for river improvements. from shipping or port accidents. Reducing emissions on the vessels and in ports and • Dredge the navigation ‘hot spots’ (de- the introduction of green ships with low pending on the situation, either perfor- emissions would be useful. This environ- mance-based dredging or purchase of ment focal point would also be able to pre- two-cutter suction dredgers 500 with an- pare Dredging Environmental Management cillary equipment). Procedures, and Waste Management Plans. • Install, where appropriate, permanent riv- Enhance the marketing and capacity of in- er-regulating structures. land waterways as a sub-sector: • Conduct studies on the sub-feeder terminals • Create an independent agency to promote and their access (road and rail). and market inland waterway transport (for example, inland waterway transport promo- • Develop Kampong Chhnang sub-feeder ter- tion center), reflecting existing established minal. models worldwide. Equip the Department of Waterways to effi- • Develop an inter-university program in wa- ciently manage inland waterways: terborne transport operations and manage- ment to develop high-skilled personnel. • Develop the capacity of the Inland Water- ways Department to manage waterway and • Re-instate the Cambodian ship-building maritime safety and to take the responsi- industry (efficient low-emission barges). A bility of ensuring adequate access of the useful pilot project could be the introduction waterways to the ports. of reinforced sea-river barges (with green ship technologies). Railway Infrastructure and Operations Short-term 48 passenger railway stations, strengthening track and replacing old railway bridges, that Undertake value-engineering and feasibil- constrain the axle load to 15 tons compared ity study to determine the optimal level of to the Southern Line’s 20 tons, and contin- investment to upgrade the railway. Of the uously welding the railway track as for the total potential investment in fixed infrastruc- Southern Line. However, based on discussions ture identified by the Comprehensive Master with Royal Railway, a cheaper more targeted Plan on Cambodia Intermodal Transport and investment could be usefully carried out as a Logistics System 2023–2033, up to US$250 first phase toward the larger investment. In million would likely be required to upgrade the reaching this potential, Phase 1 works should Northern Line fully including upgrading the be determined following an appropriate feasi- 60 CAMBODIA’S REGIONAL CONNECTIVITY: UNLOCKING THE FULL POTENTIAL OF TRANSPORT CORRIDORS CHAPTER 4 bility study examining the full upgrading of the C): Improving the existing railway, focus- Northern Line. Following the feasibility study, ing initially on the Northern Rail Line, to proposed improvement works would need to increase domestic freight operations and be designed and project preparation (business to cross-border train operations between case, safeguards assessment, procurement Thailand and Cambodia. More detailed val- and governance options) carried out. These ue engineering will be required to determine improvements would facilitate faster, more priority works. reliable freight transport movements. New freight train rollingstock would be needed to Complete a new feasibility study for a dual realize the potential provided by these im- gauge track to PPAP LM17 container port. provements.59 This line has already been designed. The de- sign would need to be updated as well as carry- Determine the share of the investment that ing out sufficient due diligence (business case, should be borne by the  Government and procurement and safeguards assessment). Royal Railway. The Government of Cambo- The total length of the line would be about 42 dia owns the railway fixed infrastructure, and kilometers allowing for integration with the the private Royal Railway is responsible for existing railway. rollingstock and infrastructure rehabilitation, maintenance, and improvement. A potential Undertake technical and economic feasi- proposed investment of about US$765 million bility to prioritize new railway proposals: for the upgrading of the entire railway has been identified by the new Comprehensive Master • Undertake detailed feasibility studies for Plan on Cambodia Intermodal Transport and important projects. Logistics System 2023–2033. The poten- tial investments include an estimate for new • Initiate bilateral agreements with neigh- boring countries to jointly study new freight train rollingstock that is the responsibil- cross-border lines. ity of Royal Railway indicating a potential fixed infrastructure investment of about US$500 • Identify multi-lateral or other development million.60 partners to assist the coordination of these bilateral efforts and to assist the financing Develop a 3-year rolling business plan for of the feasibility studies. the improvement of the railway sub-sec- tor: (i) investment in infrastructure; (ii) in- Draft a new Railway Law that sets out the vestment in rollingstock; (iii) new policies to legal framework to bring to fruition a modern promote a sustainable shift to rail transport; domestic railway network with high-quality (iv) legislation to underpin new policies, and regional connections. Subjects that should (v) new institutional arrangements to govern be covered include the roles of the public and sector development and standards. private sector, the principles for investment including in regional connections, renewal Progressively strengthen the capacity of the and operations, the framework for regulation Department of Railways for the management of more than one operator and the approach of: to setting of technical standards. The subject • Capital investment management for rail- matter is complex, and the potential contents way network development. would need to be discussed among the rele- vant government departments and stakehold- • Maintenance works and programs. ers. Subject matter experts should also be de- sirably involved in this process and during the Medium-term drafting of the law. Technical assistance from a development partner to provide this expertise Improve the current meter gauge railway and enhancement of the capacity of local staff infrastructure and rollingstock (Corridor would be valuable. 59 An additional 6 freight train sets each consisting of two locomotives and 54 wagons would cost about US$60–80 million, assuming second hand equipment is purchased, and a doubling of the rail freight task to about two million tons per year is permitted. 60 Phased-in according to demand, each freight train could carry about 125,000 to 150,000 tons per year indicating that the rail freight task could grow from today’s 900,000 tons to over 4 million tons per year. 61 CAMBODIA’S REGIONAL CONNECTIVITY: UNLOCKING THE FULL POTENTIAL OF TRANSPORT CORRIDORS CHAPTER 4 62 CAMBODIA’S REGIONAL CONNECTIVITY: UNLOCKING THE FULL POTENTIAL OF TRANSPORT CORRIDORS CHAPTER 4