Your Ministry is
in charge of three important sectors of the Cambodian
economy. Can you present us the main responsibilities
within every sector you represent?
In our Ministry we take care of the industry
sector with all the manufacturing plants of the
country including the water supply in urban areas
except for the municipality of Phnom Penh. The
second sector is energy. We are in charge of electricity
and any other kind of energy form like hydropower
or renewable energies excluding petroleum and
gas. The gas and petroleum was our responsibility
until end of 1998 when the CNPA (Cambodian National
Petroleum Authority) was created and took care
of this sector. The third sector comprehends all
mineral resources.
The Garment industry has been showing a steady
growth ever since the MFN status (Most Favoured
Nation) and the GSP (Generalized System of Preferences)
have been awarded to the country by the US and
the EU. What is the state of this industry nowadays
and what will it be after the end of the quota
in the year 2005?
The most developed sub-sector in the industry
sector is the garment industry. Most of the products
from the garment factories are exported. In 2002,
70% is exported to the U.S. market, 25% goes to
European Union, and another 5% to Canada, Latin
America, East-Europe, Japan and some other Asian
countries. The total amount exported in 2002 was
worth nearly 1.5 billion USD. The number of factories
has increased to 230, employing 228,000 laborers,
most of them are women. Most of the garment factories
are located in or around Phnom Penh, which implies
a big migration from the countryside to the city.
There is still room for the development of that
sub-sector for the next few years. We have the
opportunity, after 2005, to let this sub-sector
grow by improving the labor conditions and keep
our competitiveness, by offering other incentives
to investors. Our salaries are not the lowest
compared with those of Vietnam or China, but the
RGC (Royal Government of Cambodia) is looking
for creating further comparative advantages to
attract more investment.
We can also start to develop other non-quota
products. The export-oriented industry is one
of the main objectives of our government because
the domestic market is too small and the purchasing
power is still too low. Under the GSP and MFN
provided by the U.S. and other countries in Europe,
there are more than 6,000 articles that are accepted
by those countries for export from Cambodia. Right
now it is only the garment industry that plays
a very important role in the export to those countries,
but our Ministry is starting to promote other
industries like for instance the agro-industry.
Can you give us some facts and figures of
the agro-industry in Cambodia?
Presently there are no exact figures yet because
we are promoting the sector. But the opportunities
in Cambodia are huge. We have a mass of land available
for agricultural products. The northeastern part
of the country covered by basalt that we call
the "red soil" is perfect for the rubber
industry. Close to that area the soil is also
favorable to other agricultural products like
beans, soybeans, maize, corn, and every other
kind of tropical agricultural products. Due to
the fact that the management skills are not so
advanced it is still very difficult to market
those products. When some products are needed
the farmers produce them massively and the year
after they collapse the market, making the prices
go down. This is why I think the state has to
play a role in the management of the market and
the production.
One of the main issues for the economical
development of Cambodia is the creation of affordable
energy. Your Ministry has created the Energy Development
Plan to solve this issue. Could you give us the
main lines of this plan?
Cambodia has made a good pace of reform in the
power sector; the electricity law was promulgated
and the electricity regulator is established.
The organism is regulating the sector to ensure
the quality of supply, the safety and the compliance
with the standards, licensing the service providers
and setting tariff. We have formulated a strategy
for the development of the power sector, specifically
the electricity supply. Indeed electricity is
one of the key factors to develop the other sectors
of the economy. We have established a master plan
for generation of electricity and another master
plan for transmission to develop national grid.
The master plan for generation includes thermal
plants using gas, heavy fuel or coal, depending
on what is feasible or is available in Cambodia.
If gas were available offshore, a gas power plant
would be installed in Sihanoukville. We are also
looking at the possibilities of a coal power plant
development in coastal areas. The other development
projects for the generation of electricity are
hydropower projects, those that we have selected
as priority projects for development and for private
participation, including the bigger scale projects
to link to the regional grids, like the ASEAN
or the GMS (Greater Mekong Sub-region) grids.
Following our transmission master plan, the first
part to be developed is the southern grid from
Phnom Penh to border of Vietnam via Takeo, with
a link from Takeo to Sihanoukville through Kampot,
linking up to the expected gas power plant in
Sihanoukville. The idea is first to import from
Vietnam cheaper electricity towards Phnom Penh.
This transmission line is expected to start next
year and to be commissioned in 2006. At the other
side we can enjoy the electricity supply at a
cheaper cost by interconnecting with Thailand
in the northwest to Siem Reap and to Battambang,
passing through Banteay Meanchey. The grid linking
those three northern provinces will also go at
the same time as the southern grid. After that,
we link Phnom Penh to Battambang. Then we will
connect the major generation sites, especially
the hydropower plants.
The power importing strategy is first to widen
the domestic electricity market as currently the
market is very small because of the price. Once
we connected with Vietnam and Thailand, where
the electricity is cheaper, the local electricity
market will be growing up and when the demand
is big enough we can start to develop our own
bigger hydropower resources. We have launched
our offers to the private sector, foreigner or
local. Some hydropower sites have been visited
already by electricity companies. Battambang I
and Battambang II are being studied by joint Cambodia-Malaysian
consortium and Battambang III by a Korean company.
Russei Chrum have also been visited by some companies
and the study will commence soon. We need to develop
those hydro resources to achieve cheaper costs
of electricity.
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During your presentation you presented renewable
energy sources as a priority for your ministry,
what are your priorities on those matters?
First of all we have formulated the Rural Electrification
Strategy. This strategy includes program for rural
electricity development and investment. The electricity
development program includes grid extension to
the areas that are close to an existing grid and
the development of stand-alone systems with diesel
generators for villages and small communities
and the development of renewable energy sources
with projects like the micro-hydro in the northeastern
or western part of the country, and the solar
power energy. This solar energy system is still
relatively expensive but we need that development
and we are asking for assistance from the developed
countries. Japan for example is helping with small
installations mainly for lighting.
This program of rural electrification is expected
to be financed by donors and the World Bank. The
first five-year program for rural electrification
is expected to commence soon, and the World Bank
is mobilizing resources to finance it. In the
rural electrification strategy, one of the main
components is to create the Rural Electrification
Fund (REF) to subsidize one part of the rural
electrification investment; the other sources
of financing are: (1) longer term loan from local
commercial bank designated by the World Bank and
(2) self equity. This way we can assist in the
investment in the rural electrification projects.
We are launching this program and formulating
the sub-decree and royal-decree for the creation
of this fund. Maybe next year or at the end of
this year the fund will be established, the Board
will be put in place, and the Rural Electrification
Program will be started.
Cambodia is known worldwide for its rubies,
but there are more mineral resources in the Cambodian
soils. Can you give us an image of the current
situation of the mining sector of the country?
We have a lot of indications of mineral resources
in Cambodia, but so far there is not much development,
only construction material such as stone, gravel
or sand is being developed. There was also phosphate
extraction for fertilizer, but the fertilizer
plant was not able to work well, this is because
of the quality and technology.
According to you what are the main investment
possibilities in the three sectors your Ministry
represents?
We would like to promote the investment in agro-industry
as we have a very good soil and products of excellent
quality. The main issue is how to manage to produce
the quality and quantity for export. Each farmer
has its own small piece of land and its own production
technique. I think that to promote the development
of this sub-sector, production cooperative or
association gathering few hundred farmers owners
of the land should be formed. The investor would
introduce technology, construct irrigation systems,
acquire mechanical equipment and fertilizers,
then buy products and transform to export. You
can help the people in the association to develop
itself. There is no need to buy the land, just
gather the owners of the land to form such an
association. There have been examples like in
Kandal province; investor gathered farmers owners
of about ten thousand hectares of rice field to
form an association, then the final product is
sold at an agreed price to the investor, which
in turn processes and exports it.
In the small and medium industry sub-sector,
the problem is that the development is quite slow
because of accessibility to finance and technology.
These two things result in low competitive advantages
with countries in the region.
In the power sector we would like to invite investors
to come develop our hydropower resources. This
is a very good opportunity, once we have linked
our network with the neighboring countries, we
can even sell the excess of power to them. The
GMS countries have signed the Inter-governmental
Agreement for Power Trade. So once we have interconnection
between the countries we can sell towards the
neighboring countries.
For water supply, I mentioned that except for
Phnom Penh, the other urban areas are the responsibility
of our Ministry. We have set a target for 2015
to supply about 60% of the total population. The
supply will be tap water from a pipe, not pit
water. This is one opportunity for investment
also. The private sector can participate in the
water supply development in urban areas throughout
the country. The World Bank is assisting us to
make a study to select the urban areas that have
more than one thousand households to be accommodated
in that development. We are conducting feasibility
study, listing selected areas for private participation.
This is an ongoing project; the list will be issued
soon. In connection to that sector, we are going
to pass a law on water supply and sanitation,
establish a regulator to regulate the sector,
set the tariff and to issue licenses to suppliers,
the same we had done in the electricity sector.
Can you tell us what is your career path?
My background is electrical engineering. I completed
my Ph.D. studies between 1995 and 1997. I got
my Doctorate degree in Business Administration
at the Southern California University. Before
the Khmer Rouge regime, between 1970 and 1975
I was a professor of electricity at the People
University and Technical University in Phnom Penh.
In 1975, the same as the other Cambodians, I was
sent by the Khmer Rouge regime to a countryside
working in the rice field in Kampong Cham province.
We had to work hard, very hard with nothing to
eat. Then in 1979, after the liberation of the
country I came back to Phnom Penh, worked as chief
electrician at a distillery and was nominated
as the director of the factory in 1980. In 1984,
I was designated as a vice-minister of this Ministry
and promoted as a secretary of state in 1994.
I have held this almost same position for 19 years.
What would be your final message for investors
interested into Cambodia?
We would like to invite investors to invest in
any sub-sector that the Ministry is responsible
for, including the manufacturing, especially in
the agro-industry. We are going to establish an
industrial area to facilitate the investment,
and facilitate the operation of the manufacturing
sector. The power sector has a good potential,
especially the hydropower resources. We are very
pleased to invite the investors to participate
in the mineral resources development. We have
a lot of indication of minerals, even after the
overexploitation by the Khmer Rouge; we still
have gold and gemstones. Gemstone is still a very
good potential for the country. The last sub-sector
is water supply in urban areas throughout the
country, there are also good opportunities for
private participation in that sector, because
we are going to establish the law and the regulator
for that sector.
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