E&S Assessment Hung Vuong Vietnam - Proposal 2015 · 6/1/2016 · of value chain analysis through both formal training and hands-on approach to learning. The involvement of the researchers

E&S Assessment Hung Vuong Vietnam - Proposal

Agrifood Consulting International

CONSULTANT SERVICES TO PRODUCE VALUE CHAIN ANALYSIS

(VCA) OF THREE CAMBODIAN EXPORT PRODUCTS

INCEPTION REPORT

Ministry of Commerce General Directorate for International Trade Department of International Cooperation

Trade Development Support Program

(Grant No. TF093573, Programme ID No P109648)

By

Agrifood Consulting International

Jun 2015

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PREFACE This document is the Inception Report related to the assignment Consultant Services to Produce Value Chain Analysis (Vca) of Three Cambodian Export Products. The report1 is based on literature review, compilation of data, and key informant interviews conducted during the month of June 2015. The report has been prepared by Mr. Francesco Goletti, Mr. Joshua Kramer, Mr. Jean Claude Randrianarisoa, and Mr. Sorn Vichet. The Consultants would like to acknowledge the guidance and support of the Trade Training and Research Institute (TTRI) of the Ministry of Commerce (MOC), Royal Government of Cambodia (RGC). Francesco Goletti

President Agrifood Consulting International (ACI) Phnom Penh, 28 June 2015

1 To be cited as “Value Chain Analysis for Three Cambodian Export Products. Inception Report. Agrifood Consulting, Laurel, Maryland, US, June 2015.

Value Chain Analysis of Three Cambodian Export Products – Inception Report

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Contents ABBREVIATIONS ..................................................................................................................................... vi

1 INTRODUCTION ............................................................................................................................... 1

1.1 Objectives of the Inception Report ....................................................................................................... 2 1.2 Organization of the Inception Report ................................................................................................... 2

2 OVERVIEW OF THE PALM SUGAR VALUE CHAIN ............................................................................ 3

2.1 Global Sugar Trade and the Market for Sugar Substitutes ................................................................... 4 2.2 Trade of Palm Sugar from Cambodia .................................................................................................... 6 2.3 Production ............................................................................................................................................. 6 2.3.1 Potential of Production of Palm Sugar .................................................................................................. 7 2.3.2 Technology ............................................................................................................................................ 8 2.3.3 Organization of supply chain ............................................................................................................... 12 2.4 Demand and Market Trends ............................................................................................................... 12 2.4.1 Prices ................................................................................................................................................... 13 2.5 Value Chain Actors .............................................................................................................................. 13 2.6 Policies ................................................................................................................................................ 15 2.7 SWOT Analysis ..................................................................................................................................... 17 2.8 Information Gap Analysis .................................................................................................................... 18 2.9 Plan of Action for Palm Sugar Value Chain .......................................................................................... 18 2.10 References........................................................................................................................................... 19

ANNEX 1 COCONUT PALM SUGAR GLYCEMIC INDEX ........................................................................... 20

3 OVERVIEW OF THE BICYCLE VALUE CHAIN ................................................................................... 22

3.1 Introduction ........................................................................................................................................ 22 3.2 Evolution of Cambodia’s Bicycle Sector .............................................................................................. 22 3.3 Demand & Trade ................................................................................................................................. 24 3.3.1 Global Production Trends ................................................................................................................... 24 3.3.2 Global Demand Trends ........................................................................................................................ 24 3.3.3 Global Supply Trends .......................................................................................................................... 24 3.3.4 Cambodian Exports ............................................................................................................................. 25 3.3.5 Cambodian Demand & Imports .......................................................................................................... 27 3.4 Market Development & Trends .......................................................................................................... 27 3.4.1 Distribution ......................................................................................................................................... 27 3.4.2 Market Trends ..................................................................................................................................... 28 3.5 Preliminary Value Chain Mapping ....................................................................................................... 28 3.5.1 Key Actors ........................................................................................................................................... 28 3.5.2 Features .............................................................................................................................................. 28 3.5.3 Relations .............................................................................................................................................. 28 3.6 Production ........................................................................................................................................... 29 3.6.1 Production Cost & Product Pricing ...................................................................................................... 29 3.6.2 Structure of production ...................................................................................................................... 30 3.6.3 Volume of production ......................................................................................................................... 30 3.6.4 Technology .......................................................................................................................................... 30 3.6.5 Supply chain ........................................................................................................................................ 30 3.6.6 Labor ................................................................................................................................................... 30 3.7 Policies ................................................................................................................................................ 30 3.7.1 Trade Preferences ............................................................................................................................... 31 3.7.2 Anti-Dumping / Circumvention ........................................................................................................... 32 3.7.3 “Graduation” under EU Rules of Origin............................................................................................... 32 3.7.4 Regional Free Trade Agreements ........................................................................................................ 32 3.8 SWOT Analysis ..................................................................................................................................... 33


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3.9 Information Gap Analysis .................................................................................................................... 33 3.10 Plan of Action for Bicycle Value Chain Analysis................................................................................... 34 3.11 References........................................................................................................................................... 34 ANNEX 2: MANHATTAN AND TAI SENG EXPORT DATA (APRIL 2015)............................................................... 35 ANNEX 3: BICYCLE ASSEMBLY PROCESS ........................................................................................................... 37 A3.1 The Raw Materials ................................................................................................................................... 37 A3.2 The Manufacturing Process ..................................................................................................................... 37 A3.3 Assembling the Frame.............................................................................................................................. 37 A3.4 Assembling the Components ................................................................................................................... 38

4 OVERVIEW OF THE WOOD PROCESSING VALUE CHAIN ............................................................... 40

4.1 Introduction ........................................................................................................................................ 40 4.2 Evolution of Cambodia’s Wood Processing Sector ............................................................................. 41 4.3 Demand & Trade ................................................................................................................................. 42 4.3.1 Global Production Trends ................................................................................................................... 42 4.3.2 Global Demand Trends ........................................................................................................................ 43 4.3.3 Global Supply Trends .......................................................................................................................... 44 4.3.4 Cambodian Exports ............................................................................................................................. 45 4.3.5 Cambodian Demand & Imports .......................................................................................................... 47 4.4 Market Development & Trends .......................................................................................................... 48 4.5 Preliminary Value Chain Mapping ....................................................................................................... 48 4.5.1 Key Actors ........................................................................................................................................... 48 4.5.2 Features .............................................................................................................................................. 51 4.5.3 Relations .............................................................................................................................................. 51 4.6 Production ........................................................................................................................................... 51 4.6.1 Production Cost & Product Pricing ...................................................................................................... 51 4.6.2 Structure of production ...................................................................................................................... 52 4.6.3 Volume of production ......................................................................................................................... 52 4.6.4 Technology .......................................................................................................................................... 52 4.6.5 Supply chain ........................................................................................................................................ 52 4.6.6 Labor ................................................................................................................................................... 52 4.7 Policies ................................................................................................................................................ 52 4.8 SWOT Analysis ..................................................................................................................................... 52 4.9 Information Gap Analysis .................................................................................................................... 53 4.10 References........................................................................................................................................... 54 ANNEX 4: CATEGORIES OF WOOD PRODUCTS (44) PER THE ITC NOMENCLATURE ......................................... 55 ANNEX 5: EXPORT OF WOOD PROCESSED PRODUCTS BY CAMBODIA (SOURCE: MAFF) ................................. 56 ANNEX 6: LIST OF SAWMILLS AND WOOD PROCESSING FIRMS PROCESSING BY-PRODUCT OF FOREST ........ 57

5 CAPACITY BUILDING ...................................................................................................................... 63

5.1 Training ............................................................................................................................................... 63 5.1.1 Training in value chain analysis....................................................................................................... 63 5.1.2 Development of value chain analysis interview instruments ......................................................... 63 5.1.3 Field interviews with key value chain actors .................................................................................. 64 5.1.4 Write-ups of value chain characteristics ......................................................................................... 64

5.2 Dissemination Event – Validation Workshop ...................................................................................... 64 6 WORK PLAN................................................................................................................................... 65

7 ISSUES AND SOLUTIONS ................................................................................................................ 67

7.1 Issues ................................................................................................................................................... 67 7.2 Solutions .............................................................................................................................................. 67


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LIST OF TABLES Table 1 Number of Palm Trees by Province ............................................................................................ 7 Table 2 Price of Products in 2015 (Riel/kg) ........................................................................................... 13 Table 3 Export Prices of Powder Sugar (USD/kg) .................................................................................. 13 Table 4 Bicycle Companies in Cambodia Start Year, Location, and Country of Origin ......................... 28 Table 5 Average Prices of Bicycles Imported by the Netherlands from Cambodia .............................. 29 Table 6 Value and Average Price of Bicycles exported from Cambodia, April 2015 ............................. 30 Table 7 Bicycle ....................................................................................................................................... 35 Table 8 – Breakdown of Existing Forests by Category .......................................................................... 41 Table 9 – Global Production and Trade of Forest Products in 2013 ..................................................... 43 Table 10 Exports of Wood Products from Cambodia (Values in million $) ........................................... 46 Table 11 – Forest under private concessions ........................................................................................ 49 Table 12 – List of ELC still operating or asking for continuation by province ....................................... 49 Table 13 – Draft SWOT Analysis ............................................................................................................ 53 Table 14 Categories of Wood Products ................................................................................................ 55 Table 15 Export of Cambodia Wood Processed Products .................................................................... 56 Table 16 List of Sawmills and Wood Processing Firms ......................................................................... 57 Table 17 Value Chain Studies Deliverables and Dates .......................................................................... 65

LIST OF FIGURES Figure 1 Cambodian Palm Sugar Trees ................................................................................................... 3 Figure 2 Palms at one of the entrances of Angkor Wat. Angkor Wat is the symbol of Cambodia and the largest religious site in the world. .................................................................................................... 4 Figure 3 Top Global Producers of Sugar.................................................................................................. 5 Figure 4 Top Global Exporters of Sugar .................................................................................................. 5 Figure 5 Climbing up the palm tree to collect the sap ............................................................................ 9 Figure 6 Collecting palm juice ................................................................................................................. 9 Figure 7 Traditional tools to squeeze the flower. The long tool is for the male tree and the short one for the female tree. The small piece of wood is Popel wood. ................................................................ 9 Figure 8 Bamboo containers used to collect the sap from the flowers. The sap is collected daily from the trees. ................................................................................................................................................. 9 Figure 9 Plastic containers used to collect palm sugar flower sap ....................................................... 10 Figure 10. Process Flow to Produce Palm Sugar ................................................................................... 10 Figure 11 Boiling the sap collected from the palm tree ....................................................................... 11 Figure 12 Stirring the cooked juice/palm sugar paste immediately after it’s removed from the wok. This is to remove more water, cool down and crystallize the sugar. ................................................... 11 Figure 13 Plastic containers for sugar powder from the cooperative KAMPATRACO .......................... 11 Figure 14 Blocks of palm sugar, molded into palm leaves, soon after cooling. The sugar blocks could be used in this form for several months. .............................................................................................. 11 Figure 15 The Five Pillars of GI .............................................................................................................. 16 Figure 16 Delimitation of Areas for GI of Palm Sugar ........................................................................... 16 Figure 17 SWOT Analysis of Palm Sugar Value Chain in Cambodia ...................................................... 18 Figure 18 Bicycle Global Imports 2014 ................................................................................................. 25 Figure 19 Cambodia Bicycle Exports 2013 ............................................................................................ 26 Figure 20 Cambodia Bicycle Exports to EU and non-EU 2013 .............................................................. 26 Figure 21 SWOT Analysis for Bicycle Value Chain in Cambodia ............................................................ 33 Figure 22 Deforestation Rate in ASEAN countries during period 2000-2014 ....................................... 40


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Figure 23 Top-five Wood Products Importers and World Demand ...................................................... 44 Figure 24 Share of Values of Imports by Countries in 2014 ................................................................. 44 Figure 25 Top-five Wood Products Exporters and World Supply ......................................................... 45 Figure 26 Share of Values of Exports by Countries in 2014 .................................................................. 45 Figure 27 Values in Million $ of Export and Import of Wood Products by Cambodia .......................... 46 Figure 28 Destination of Wood Products from Cambodia Export in 2013 ........................................... 46 Figure 29 Share by Values of Cambodia Exports in 2013 and 2014 ..................................................... 47 Figure 30 Share by Values of Cambodia Imports in 2013 and 2014 ..................................................... 47 Figure 31 Preliminary Mapping of the Wood Processing Value Chain ................................................. 48 Figure 32 Distribution of Wood Processing Industry by Size (Base = 2,274 units) ............................... 51 Figure 33 Distribution of Wood Processing Industry by Age (Base = 2,274 units) ............................... 51 Figure 34 Work Schedule and Planning of Deliverables ....................................................................... 66


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ABBREVIATIONS

ACI Agrifood Consulting International AGOA American Growth Opportunity Act ASEAN Association of Southeast Asia Nations CTIS Cambodia’s Trade Integration Strategy EbA Everything but Arms EFSA European Food Safety Authority ELC Economic Land Concessions FA Forestry Administration FAO Food and Agriculture Organisation of the United Nations FDA Food and Drug Administration FLEGT Forest, Law Enforcement, Governance and Trade GI Geographic Indication GiX Glycemic Index GSP General System of Preferences HS Harmonized System ITC International Trade Center MAFF Ministry of Agriculture Forestry and Fisheries MOC Ministry of Commerce NGO Non-Government Organization RGC Royal Government of Cambodia SEZ Special Economic Zone TSDP Trade Development Support Program TTRI Trade Training and Research Institute VCA Value Chain Analysis VPA Voluntary Partnership MFN Most favored nation


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1 INTRODUCTION

1. Within the context of the Trade Development Support Program (TDSP), the Trade Training and Research Institute (TTRI) has received funding to commission value chain studies in line with the Ministry of Commerce (MOC) trade policy needs. The objective of the assignment is to carry out three Value Chain Analysis (VCA) studies of key Cambodian export products in line with Cambodia’s Trade Integration Strategy (CTIS) and to provide training services on selected topics for the MOC’s TTRI. 2. The three value chain studies to be carried out by the Consultant are: (i) palm sugar; (ii) bicycles; and (iii) wood processing.

3. The assignment consists in carrying out two main sets of activities: value chain studies and capacity building. This will be achieved through the combination of two pillars including: Value Chain Analysis and Participatory Learning.

4. The Value Chain Analysis (VCA) approach and methodology provides a sound basis for formulating policies and interventions that meet the goals of export promotion and sector development. The analysis will provide a detailed evaluation of each stage in the value chain and the stakeholder’s constraints and opportunities. It will also highlight the potential for exports and value addition through upgrading and investment in critical processes and infrastructure along the value chain.

5. Participatory Learning emphasizes the importance of working collaboratively with the key users of value chain analysis through both formal training and hands-on approach to learning. The involvement of the researchers and staff of TTRI in the value chain analysis, from its design stage to its report writing and dissemination stages, will maximize the learning experience. 6. The assignment will be carried out into three phases summarize as follows: 7. Phase 1 – Background Research. The Consultant Team will conduct background research and make a detailed work plan to implement the field work, the training and capacity building, and the preparation

of the reports. The Consultant Team will review the literature, collect relevant data, and analyze trends with the aim to identify key demand patterns and opportunities for Cambodian exports. Through this work, the team will identify the information gaps and, based on these gaps, the work plan will be prepared.

8. Phase 2 – Primary Research. The Consultant will organize the processing of data and information collected from value chain stakeholders. The Consultant will train key staff from MOC and TTRI. The trainees will be involved in the design and implementation of field and analytical work. A survey will be designed to collect information from the major locations providing the sources of supply for the value chain products. Upon completion of the survey work, the data will be entered in a computerized system and processed to tabulate the results. This will allow to identify preliminary findings for further analytical work in the next phase.

9. Phase 3 – Analysis. The analysis of three value chain studies will be finalized. The Consultant’s Team will start preparing a preliminary draft of the value chain studies and conduct a workshop to discuss

the draft with TTRI. Based on this initial workshop, the Consultant’s Tem will conduct further analysis including the feedback received in the workshop. This will lead to a new draft that will be discussed in a validation workshop. Prior to the validation workshop, the Consultant’s Team will prepare all relevant documents utilized in the report. After the validation workshop, a Draft Final Version of the value chain studies will be prepared and then finalized based on comments received.


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1.1 Objectives of the Inception Report

10. The objective of the Inception Report are: (i) To provide an overview of the three value chains based on review of the literature and

preliminary interview with value chain stakeholders and key experts (ii) To prepare a work plan for the overall assignment including both value chain analysis of

the three value chains and capacity building.

1.2 Organization of the Inception Report 11. The Inception Report is organized into 6 chapters as follows:

Chapter 1 Introduction Chapter 2 Overview of the Palm Sugar Value Chan Chapter 3 Overview of the Bicycles Value Chain Chapter 4 Overview of the Wood Processing Value Chain Chapter 5 Proposed Capacity Building Activities Chapter 6 Work Plan Chapter 7 Issues and Solutions


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2 OVERVIEW OF THE PALM SUGAR VALUE CHAIN 12. Palm sugar is a sugar that is extracted from the sap of palm trees. Numerous varieties of palm tree are tapped for their sugar, and the characteristics of each of these sugars is different in terms of taste, nutritional contents, health properties, and aroma. The two most widely known palm sugars are sugar from palmyra palms and coconut palms. Palm sugar from Cambodia is extracted from palmyra palms. 13. Palm sugar and coconut palm sugar are often confused. These sugars are similar in their uses and are made with similar processes but originate from different botanical sources and have a slightly different chemical compositions. Coconut palm sugar is produced from the sap of cut flower buds of the coconut palm tree (Cocos nucifera). Palm sugar is produced from the sap of various palm trees. This sap is collected from the top of the tree, after removing the flowers. Sources of palm sugar include the Palmyra palm (Borassus genus), the date palm (Phoenix dactylifera) and the sugar date palm (Phoenix sylvestris), and more recently, the saps of the sugar palm (Arenga pinnata) and nipa palm (Nypa fruticans).

14. The palm tree in Cambodia common name in Khmer is “Thnot”. The scientific name is “Borassus flabellifer” Sugar palm is a type of plant classified as palm tree with a single stem, large stump, and cylindrical trunk with height of 10-25m. Their roots have lateral characteristics and no main root. The trunk is rough and dark in color with diameter of 20- 60cm and varies according to the quality of soils. The bunch of leaves is a fan form and clustered on the top of the tree. Midrib of palm tree is thick and smooth; has yellow-green color when it is young; yellow-brown color when it is older; and has thorns along both edges in the form of chainsaw teeth. Male and female flowers of sugar palms are differentiated morphologically. Male flower of sugar palm has long and rounding form with size of 2-4 cm and length of 30-50 cm, whereas female flower has a form of rounding fruit with the length of 50-70 cm which yield fruits from 20 to 50. Sugar palm fruit is round and dark-brown color on the bottom part and green color on the top; and changes the color to dark-yellow when it ripens. The diameter of the palm fruit is 13-20 cm which varies according to the quality of the soil, the exploitation for sugar palm juice, and the age of the trunk.

Figure 1 Cambodian Palm Sugar Trees

15. Sugar palm is a popular plant in Cambodia, and it is an identity that Khmer people recognize as a view of their territory since the ancient time until present with an expression that “sugar palm tree is a shelter of Khmer house”.


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Figure 2 Palms at one of the entrances of Angkor Wat. Angkor Wat is the symbol of Cambodia and the largest religious site in the world.

16. In Khmer society, sugar palm tree has many advantages which include roots and male flowers of sugar palm tree used for traditional medicine to cure malaria and sexual diseases. Palm tree can be used for construction of houses, shelter for animals, boats, or construction materials. Currently, palm tree has been used as valuable crafting production in the market. Leaves for roof and wall of the houses, braiding mats, hats, boxes or trunks; and sometime can be used for inscribing or writing. Palm tree fruit and juice are popular within Khmer society. The very green palm fruit is used as vegetable for special food called Samlor Kako, green palm fruit is eaten and ripe palm fruit is used to make a jelly called Thnot Jelly.

17. The production of sugar from palm tree juice is a tradition of Khmer People since ancient time until present. However, it is only in the past 10 years that the production of sugar from sugar palm tree has started to be considered commercially and innovations have been introduced both in the technology and marketing of the product.

2.1 Global Sugar Trade and the Market for Sugar Substitutes 18. Global consumption of sugar for 2015/16 is forecast at 173.4 million metric tons and global export at 54 million tons. Current prices at $320/ton have shown a declining trend over the recent past, but the market for sugar substitutes (both artificial and natural) has been increasing and is forecast to reach over $14 billion by 2020. 19. Sugar substitutes market is expected to witness growth owing to rising concern over diseases such as diabetes and obesity. Sugar substitutes act as an alternative with low calorific value and majorly used as an artificial sweetener in health care, food & beverage and personal care industries. Increasing application scope of sugar substitutes in frozen foods, baked products and confectioneries is expected to have a positive impact on market in the near future.

20. Most commercial sugar is produced from two main sources: sugarcane and sugar beets with sugarcane accounting for about 75% of global production and sugar beets supplying nearly all of the remaining production. Other minor commercial sources include the date palm, sorghum and the sugar maple. 21. Brazil is the world's largest sugar producer (36% of the total), followed by India (the world's largest consumer with 29.1% of world production), the EU (15.5% of production), Thailand (11.4%)

http://en.wikipedia.org/wiki/File:Angkor_wat_temple.jpg


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and China (10.8%). Export are dominated by Brazil (24.4% of total exports), followed by Thailand 8.3%(), and Australia (3.7%)

Figure 3 Top Global Producers of Sugar

Figure 4 Top Global Exporters of Sugar

22. Artificial and natural sugar substitutes are increasing in importance. U.S. FDA has approved the use of aspartame, saccharin, sucralose, neotame and advantame as artificial sweeteners in numerous food & beverage applications. Similarly, European Food Safety Authority (EFSA) also approved the use of various sugar substitutes which includes aspartame as a low calorie product. Aforementioned regulatory support is expected to have a positive impact on sugar substitutes market in the near future. As of 2013, PepsiCo markets its low calorie carbonated drink Diet Pepsi on a global scale. Diet Pepsi mainly comprise aspartame as a flavoring agent and is approved by U.S. Food and Drug Administration (FDA), the UK Food Standards Agency, EFSA and Canada's Health Canada. Malaysian company PureCircle markets its sugar substitutes under the brand name Reb A, which is extracted from stevia plant and is 400 times sweeter than sugar with a reduced calorie value.


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23. Within this growing market for sugar substitutes, the market for natural substitutes is growing considerably, but it is still small relatively to overall market. Natural sugar substitutes already in the market include: maple syrup, agave syrup, molasses, honey, coconut palm sugar, stevia, xylitol, lo han, brown rice syrup, date sugar. Perhaps the main success in this category is stevia with an estimated market value of $8 billion2. 24. Palm sugar is produced in few countries mostly in Southeast Asia and South Asia. There are not available data on trade of palm sugar globally, but the volumes are likely to be tiny (less than 1,000 tons) relatively to the volume of sugar trade (54 million tons).

2.2 Trade of Palm Sugar from Cambodia 25. The main change in palm sugar in Cambodia over the past decade has been the emergence of a small industry involved in producing granulated sugar (often referred to as sugar powder) for export. Prior to 2005, there was virtually almost no production or export of palm sugar. The growth of the industry has been helped by the Ministry of Commerce (MOC) in 2010 through the designation of Geographic Indication (GI) for the palm sugar produced in the province of Kampong Speu. Traditionally, palm sugar has been consumed as either paste or in blocs. These traditional uses have a limited trade potential. However, in its granulated form, palm sugar can reach a wider market since its use is similar to white sugar. 26. Harmonised System (HS) does not have a separate HS code for palm sugars, instead it is traded under 1702.90; ‘sugars not elsewhere specified’. Therefore, it is difficult to assess global trade in palm sugar.

27. In the case of Cambodia palm sugar, there is no system of collection of data for exports. Interviews with the key actors however indicate very small volumes between 70 and 100 tons in 2014. Most of this amount is exported to Asian countries (Korea, Japan, Taiwan), Europe (France, Germany), and US. Overall, the value of trade in palm sugar is still tiny, although increasing. In 2014, the export value of palm sugar is estimated between $190,000 and $290,000. There are no imports of palm sugar in the country. Export prices of organic palm sugar vary between $2.7 and $2.9 per kg, while ordinary palm sugar prices vary between $1.4 and $1.6 per Kg..

2.3 Production 28. Production of palm sugar includes traditional uses (paste and bloc) for the domestic market and palm sugar powder (mostly for exports, around 100 tons; and a small share for the domestic market, around 30 tons). Most of the domestic consumption is in the form of paste which can be used for cooking or also directly. A preliminary assessment (which will be confirmed during field work in the implementation of the study) based on rapid appraisal conducted with 10 households from Phnom Penh and Kampong Cham indicate an average yearly consumption of 5 kg of palm sugar (in paste form) per household. Given a population of 2.8 million households, the overall volume of palm sugar (in paste form) produced in Cambodia is estimated to be about 14,000 tons. Converting the paste into powder form (applying a coefficient of 65%), this is equivalent to 9,100 tons of palm sugar powder. 29. Based on this estimate, the export volume (approximately 100 tons) is only one percent of total production.

2 http://www.stevia.co/opportunity/market-size


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2.3.1 Potential of Production of Palm Sugar 30. Palm sugar is obtained by processing the sap of flower of the palm sugar tree. MAFF does not maintain updated statistics on palm sugar trees. However, the latest statistics obtained from the Department of Planning and Statistics (DPS) indicate about 3 million trees in Cambodia. Four provinces have the highest number of palm trees (each with more than 10% of the total) and include Kampong Chhnang, Kampong Speu, Kampong Thom, and Prey Veng). Table 1 Number of Palm Trees by Province

Province 2005 2010

Percentage in 2010

Banteaymenchey 4,900 4,900 0.2%

Battambang 41,282 41,282 1.4%

Kampong Cham 120,455 120,455 4.0%

Kampong Chhnang 395,500 395,500 13.2%

Kampong Speu 311,132 311,132 10.4%

Kampong Thom 757,500 757,500 25.3%

Kampot 36,650 36,650 1.2%

Kandal 257,500 257,500 8.6%

Koh kong 3,438 1,420 0.0%

Kratie 42,785 42,785 1.4%

Phnom Penh 2,732 2,732 0.1%

Preh Vihear 7,899 7,899 0.3%

Prey Veng 348,594 348,594 11.6%

Pursat 167,654 167,654 5.6%

Siem Reap 138,997 138,997 4.6%

Steung Treng 14,400 13,000 0.4%

Svay Reing 135,040 135,040 4.5%

Takeo 215,878 215,878 7.2%

TOTAL 3,002,336 2,998,918 100.0%

Source. DPS/MAFF 31. Using a preliminary estimate3 of a productivity of 57 kg of palm sugar powder/tree, the potential for palm sugar production in Cambodia is 172,000 tons. The current estimated production of 9,100 tons represents only 5% of the potential. So the potential for expanding production of palm sugar is considerable. In terms of value assuming an export price of $2.7/kg, the potential of palm sugar is $464 million. 32. Of course, this potential does not take into account several economic and technical constraints such as:

Market absorption capacity

Constraints on labor

Physical access to the trees

Different ages of trees and varying productivity

Cost of production

3 Obtained by the Consultant during a preliminary field visit to Kampong Speu.


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Competition with other substitutes (eg coconut palm sugar) 33. At the same time, the potential calculated above assumes the same technology for production and processing of palm sugar that is in use today. The potential could be further expanded by innovations such as:

Cultivation of sugar palm trees in a plantation (eg 200 trees/ha)

Improved varieties of palm trees with higher sugar productivity (eg from 57 kg sugar/tree to 100 kg/tree)

Land expansion (eg instead of 3 million trees, expand to 6 million trees)

Improving cooking technology (eg larger and more efficient stoves)

Improving palm sap collection performance (eg instead of 57 kg/tree increase to 100 kg/tree)

Improved processing technology (eg from household based to factory system)

Improved packaging (eg vacuum)

Product development (eg candies, biscuits, cakes)

34. Relatively to cane sugar, the palm tree would require considerable less water (in fact the palm tree is drought tolerant), less inputs such as fertilizer and pesticides, and would have a positive effect on soil nutrition. Palm tree would be more environmental sustainable and more adaptable to climate change. In terms of sugar productivity, the palm tree could be more productive than sugarcane.

2.3.2 Technology 35. The processing of sugar palm sap into palm sugar consists of three main steps: collection, processing, and packaging.

Collection

36. During the harvest season starting in December and ending in June, farmers climb to the top of the palm tree and select the flowers to be used for extracting the nectar. After selecting the flowers, they use traditional instruments to stimulate sap production and they repeat the operation every morning for 3-7 days. Once they observe that the flower is ready to provide sap, farmers soak the flowers into normal water for one night by using bamboo or plastic containers. Then they complete the process by making a small cut into the flower and collect the sap into the containers by climbing the tree twice in the same day and getting all the sap from the selected flowers.


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Figure 5 Climbing up the palm tree to collect the sap Figure 6 Collecting palm juice

37. Traditionally farmers use bamboo containers to collect palm sap but recently they have started to use plastic containers because it is lighter and lasts longer. When collecting the sap, a small piece of PoPel or Koki wood is put inside the container to slow down fermentation process of palm sap and to protect from antioxidant. The amount of Popel (Shorea cochinchinensis Pierre) or Koki (Hopea in Dipterocarpaceae Family) wood in the container depends on the size of the container and the volume of sap to be received. Instead of Popel and Koki, chemicals such as Sodium Bensoat, Sodium Metabisulfite and Sodium Bisulfite can be used; however Sodium Metabisulfite and Sodium Bisulfite are being forbidden by Camcontrol and would not be acceptable for organic certification.

Figure 7 Traditional tools to squeeze the flower. The long tool is for the male tree and the short one for the female

tree. The small piece of wood is Popel wood.

Figure 8 Bamboo containers used to collect the sap from the flowers. The sap is collected daily from the

trees.

http://www.google.it/url?sa=i&rct=j&q=&esrc=s&source=images&cd=&cad=rja&uact=8&docid=Go2XBOPl2V-2MM&tbnid=kqpxWA-LvzRSTM:&ved=0CAUQjRw&url=http://xroadsconnection.blogspot.com/2012/02/palm-tree-and-making-palm-sugar.html&ei=cWKuU93yB_TP4QTOvICICg&bvm=bv.69837884,d.ZGU&psig=AFQjCNGjl5xHD4qm4ELP3uj_7tU3gXtcOQ&ust=1404023721745560


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Figure 9 Plastic containers used to collect palm sugar flower sap

Processing 38. Soon after (within 4 hours) collecting the sap, farmers put the sap in large vats of about 35 liters and boil it for about 2 hours to concentrate it and evaporate the moisture. Depending on how heavily the sugar is processed, it may be sold in the form of powder, paste, or it may be dried out and molded into blocks to make it easier to handle. 39. The cooking of sap is done using wood as fuel. With the help of organizations such as CIRP, CEDAC, and SNV farmers have been introduced to more efficient cook stoves able to produce heat more efficiently and with less smoke, thus reducing the cost of fuel and the production of smoke.

Figure 10. Process Flow to Produce Palm Sugar

Filtering the collected palm sap

Put inside Pan (about 35 liters of palm sap)

Cooking for 2-2.5 hours then take out from the stove

Agitation for 20 minutes till getting cool

Grinding/sieving with sieve (5kg of sugar)

Put inside plastic bag for sale


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40. Firewood is used as fuel for boiling the sap. Other fuels such as rice husk or gas are not used due to their non-availability or high prices4. 41. Apart from the introduction of more efficient cook stove, the cooking process is traditional using wood as fuel. As wood for fuel is increasingly scarce, it is likely that the cost of traditional cooking will increase in the future and the use of firewood is not sustainable for expansion of the industry. 42. Palm sugar varies in color from a light golden color to a rich dark brown. It tends to be extremely grainy, with dried forms being highly crumbly, and it is typically minimally processed. Many people like to use it in cooking because it is so coarse and unprocessed, and many Southeast Asian recipes call specifically for this type of sugar. The light processing leaves much of the flavor of the sugar intact, creating an almost molasses-like flavor.

Figure 11 Boiling the sap collected from the palm tree Figure 12 Stirring the cooked juice/palm sugar paste immediately after it’s removed from the wok. This is to remove more water, cool

down and crystallize the sugar.

Packaging 43. At the farm level, palm sugar in its powder form is put into plastic containers or plastic bags. For paste, plastic containers are used. For sugar bloc, palm leaves are used. In the case of companies such as Confirel and Sovannak, packaging is a little more sophisticated, but overall packaging technology for palm sugar is not yet well developed. For example, there is no vacuum packgaging.

Figure 13 Plastic containers for sugar powder from the cooperative KAMPATRACO

Figure 14 Blocks of palm sugar, molded into palm leaves, soon after cooling. The sugar blocks could be used in this

form for several months.

4 A comparison of different fuel prices will be conducted during the field work in Phase 2 of the study.


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2.3.3 Organization of supply chain 44. The supply of palm sugar is almost entirely sourced by smallholder farmers who collect sap and through a simple process of boiling produce different forms of sugar. There are no large size producers of palm sugar, the maximum amount produced by any producers is about 2 tons. They use their own trees or rent trees in other farmers’ fields. 45. There is no cultivation of sugar palm tree in a plantation form. Trees are growing either in paddy fields or in their periphery. 46. Some companies oriented to export or production of sugar powder buy sugar in larger quantities directly from farmers or from a cooperative. 47. Exports are done either directly to buyers or through the use of organic wholesale chain in the destination country. 48. There is one cooperative of palm sugar farmers in Kampong Speu (KAMPATRAC) and association for the promotion of palm sugar (KSPSPA). Companies such as CONFIREL, SAVANNAK organize their own farmers, particularly if organic certification is needed.

49. The palm sugar produced in Kampong Speu enjoys a status given by the Geographic Indication of the Ministry of Commerce.

2.4 Demand and Market Trends 50. While domestic consumption of palm sugar is steady and consists mainly of the paste and bloc form, the powder form is destined primarily to exports but is also found in local supermarkets, restaurants, cafés , hotels, and organic products shops. 51. Globally, the demand for alternatives to refined white sugar produced by either sugarcane or sugar beet is increasing. 52. The global consumer is paying increasing attention to organic products and healthy products with minimum refining. 53. The greatest health benefit of palm sugar is the low glycemic index5 (around 35 versus 90 for white refined sugar), which means that palm sugar does not have the blood-sugar spiking effect ('sugar high') that regular refined sugar causes.

54. Palm sugar is a nutrient-rich, low-glycemic crystalline sweetener that looks, tastes, dissolves and melts almost exactly like sugar, but it's completely natural and unrefined. This nectar from which palm sugar is produced is rich in a number of key vitamins, minerals and phytonutrients, including potassium, zinc, iron, and vitamins B1, B2, B3 and B6.

5 The low GIX property of palm sugar is based on so far limited scientific evidence. The study from the

Philippines that provides the finding of low GI is available on the website of a company that sells coconut palm sugar (See Annex 1). This doesn’t mean the number is inaccurate, but it would be important to have also another credible source. There are not studies yet on GI content of palm sugar from Cambodia. Therefore the GI property of palm sugar from Cambodia are not known with precision.


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55. Palm sugar is never refined or bleached like white sugar. So the nutrients it was made with are still in the product. That's rare for sweeteners, most of which are highly refined. Even stevia is highly refined in its white powder form (real stevia is a green herb).

56. Palm sugar is not a calorie-free sweetener. It has calories like any carbohydrate, but due to its relatively low glycemic index (GIX), its calories are absorbed into the bloodstream at a significantly slower rate than regular refined sugar. This property should be of interest to anyone who is monitoring their blood sugar levels and attempting to avoid blood sugar spikes. Palm sugar isn't medicine; it's a food with a surprisingly low GIX, considering its sweet taste. 57. The sugar palm tree is drought resistant, does not need much inputs (water, fertilizer, pesticides) and is considered sustainable and climate change resilient. This has an additional appeal for consumers who put value on environmental sustainability and climate change resilience.

2.4.1 Prices Table 2 Price of Products in 2015 (Riel/kg)

Products Buying from Farmer Selling to Companies

Powder Sugar 4,600 5,500

Paste Sugar 3,000 3,400

Block Sugar 4,600 5,500

Source: ACI field visit June 2015 Table 3 Export Prices of Powder Sugar (USD/kg)

Products Company 1 Company 2

Powder Sugar 2.9 (certified organic) 1.6

Source: ACI field visit June 2015

2.5 Value Chain Actors 58. Farmers. Farmers are smallholders often cultivating paddy during the rainy season. During the dry season they engage in palm sugar production collecting the sap from their own trees or from tree on the land of other farmers. The production unit consists usually of husband and wife and the labor division consists in the husband climbing the tree to collect the sap and the wife cooking the sap until it becomes sugar. In the case of sugar powder, additional labor is spent to sieve the crystallized sugar and reduced to a fine granulated form. A household engaged in palm sugar production can add between $1000 and $2000 dollar to the household income. Most production of palm sugar occurs between January and May. 59. Cooperatives. The Kampong Speu Palm Tree Agricultural Cooperative (KAMPATRACO) located in Trapeang Kampos Village, Phnom Touch Commune, Oudong District, Kampong Speu Province was established in 2011. Currently, the cooperative includes 100 members of which 65 are also the members of the Association for the Promotion of Kampong Speu Palm Sugar (KSPA), established in 2009. These 65 members are palm sugar producers, while remaining 35 member are not palm sugar producers. The Cooperative makes a business on palm sugar and agricultural inputs like rice seed, fertilizer, and pesticides, but the main income is from palm sugar. 60. In 2015, 30 members produced powder sugar for the Cooperative with a total volume of 60 tons, while the remaining members produced about 70 tons for CONFIREL. The Cooperative in the


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future will not allow private companies to buy directly from producers who are member of the cooperative, instead the purchase will have to be done through the management of the Cooperative. 61. The Cooperative in 2015 bought the following volumes from farmers: 60 tons of powder sugar, 15 tons of sugar paste, and 0.3t ons of block sugar with the price of Riel 4600/kg, Riel 3000/kg and Riel 4600R/kg, respectively.

62. The Cooperative has sold the products to 6 companies namely; Farmlink (Kampot Province), Kata (in PP), Tep Gold (in PP), Sovannak (in PP) and Style Dalin (in PP). Next year, the cooperative plans to expand members producing powder sugar to about 150 producers due to high demand from Korean investors who want to make a contact purchasing 32 tons of powder sugar every month from the next season. To reach 150 powder sugar producers, the cooperative has to train more members and do a quality control every month. Associations 63. The Kampong Speu Palm Sugar Promotion Association (KSPSPA) includes 142 households producing palm sugar and six companies buying and exporting the GI product to countries including Japan, the United States, France and England. The household members are located within 15 villages belonging to 3 Communes and 3 Districts namely; Oudong and Samrong Tong District, Kampong Speu Province and Ang Snuol District, Kandal Province.

64. Exports of Kampong Speu palm sugar with geographical indication status increased this year thanks to growing demand from South Korea and France. According to KSPSPA president Sam Saroeun, exports of Kampong Speu palm sugar reached 75 tonnes this year, an increase of 50 per cent compared to the same period last year. The association is also planning to sign a deal with a Korean buyer this October, which will boost both sugar palm production and exports.

65. “Through a local exporter, Korean buyers are looking for a supply of 32 tons of sugar palm per month from us. If the deal happens, we will have to expand the production area to supply the growing demand,” Saroeun said.

Companies 66. In this preliminary visit, the Consultant was able to meet three companies: CONFIREL, SAVANNAK, and KATA. Other companies will be visited during Phase 2. 67. CONFIREL was founded in 2001 by Dr Hay Ly Eang in Cambodia with a unique belief: Improving the local populations’ life conditions by allowing them to use one of their major endangered natural resource: the sugar palm tree. This idea was put into practice by promoting its productions following various forms: sweets, wines, spirits, table sugar, and vinegar. Over the years, many products have been added to the Confirel range such as Kampot Pepper, Herbal Tea, probiotic products. This is the largest and best organized company in Cambodia producing palm sugar. In 2015 it exported 60 tons of palm sugar to several countries including Korea, Japan, Taiwan, France, Canada, and the US. About 20 tons of palm sugar are sold domestically. Products of CONFIREL are exported with different certification including organic certification from ECOCERT, USDA Organic, TUV Sud Good Manufacturing Practices, AB, and COORA. Confirel buys palm sugar from about 30 farmers who are ECOCERT certified; dries their products and eliminates impurity to assure consistent quality of the products and has a well-developed system of packaging. It exports directly and through chains of organic wholesalers.


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68. KATA started in 2012 focusing on exports of agricultural products from Cambodia, Over the past three years, it has exported black and white sesame to Japan and Korea, jasmine rice (Phka Malis) to Germany, and only recently in 2015 has started exports of palm sugar to Korea. The company buys from the cooperative KAMPOTRACO in Kampong Speu. By May 2015, the company has exported 3 tons of powder sugar to Korea and this year it expects to export 19 tons of palm sugar. 69. In 2009, French NGO GERES developed an improved cooking stove, designed to produce high quality granulated palm sugar, using up to 30% less wood-fuel than traditional stoves. An opportunity for the traditional producers to save costs on energy and to sell a higher quality product at a better price. To push the sales and foster the adoption of this new solution among traditional palm sugar producers, “SOVANNAK PALM SUGAR” brand was created and rapidly convinced regular customers: supermarkets, restaurants & tourist shops. In 2013, as the business was reaching a milestone, GERES decided to hand it over to a young Khmer entrepreneur willing to develop it. Sovannak Palm Sugar is now 100% Khmer company. Sales are about 10 tons.

2.6 Policies 70. On April 2, 2010, the Ministry of Commerce’s Department of Intellectual Property announced the registration of the first two geographical indications in Cambodia, for Kampot Pepper and Kampong Speu Palm Sugar. Applications for four more local products are currently pending. The registrations were made under an interim procedural order, “Prakas on the Procedures for the Registration and Protection of Marks of Goods Which Include a Geographical Indication” (No. 105 MOC, May 18, 2009), which sets forth the basic registration procedures and rights conferred by a GI. Under this order, only agricultural goods, foodstuffs, handcrafted goods and other goods produced or transformed in Cambodia are eligible for registration. Registrations are valid for an initial term of ten years, renewable for subsequent ten-year terms indefinitely. A complete Law on Geographical Indications is currently being drafted in order to meet Cambodia’s WTO obligations. The draft would allow for the registration of foreign GIs and establish a GI Board to administer the new system. 71. In partnership with GRET, the Ministry of Commerce and Ministry of Agriculture, CIRD facilitated to form and provide capacity building support to KPPA (Kampot Pepper Promotion Association) and KSPA (Kampong Speu Palm Sugar Promotion Association), and KAMPACO (cooperative of Kampot pepper producers). KPPA and KSPA are inter-professional associations comprising of farmers (majority) and market actors, which were registered with the Ministry of Interior. Their missions are to manage, promote and protect (under GI ministerial Prakas for the moment, GI law in the future) the Kampot peper GI (for KPPA) and Kampong Speu palm sugar GI (for KSPA) that were recently officially registered with the Ministry of Commerce as the first two Protected Geographical Indications in Cambodia.

72. It is widely believed the that GI for Kampot pepper has been very successful in establishing a brand and increasing the prices to producers, whereas the GI for Kampons Speu palm sugar has been less successful. It is not clear the reasons for the different success. It is a topic that will need to be examined during the course of the study. 73. The five pillar of GI include:

i. A "GI ORGANIZATION", generally an inter-professional organization which bring together

producers, operators and traders of the product. ii. A DELIMITATIONof the production area.The GI name shall be used only by producers and

operators within the delimited area.


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iii. A BOOK of SPECIFICATIONS which describe the good and the production methods. The GI name shall be used only for goods produced in compliance with these specifications.

iv. A CONTROL and TRACEABILITY system which guarantee that all the goods sold with the GI names have been produced within the delimited area and according to the Book of Specifications.

v. A PROVEN LINK between the specificity of the good and its origin, based on natural, geographical, historical or human factors.

Figure 15 The Five Pillars of GI

74. The specifications for Kampong Speu palm sugar have been developed with the help of the industry (e.g. CONFIREL provided input) and NGOs such as GRET, CEDAC, and Cambodia Institute for Research and Rural Development (CIRD).

Figure 16 Delimitation of Areas for GI of Palm Sugar


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75. The delimited geographical area for the production of Kampong Speu palm sugar consists in the following districts:

Oudong and Samrong Tong district, Kampong Speu province;

Ang Snuol district, Kandal province. 76. To produce “Kampong Speu palm sugar”, the producer has to harvest the sap of the palm trees which are in the district above and the palm trees have to grow on sandy soil with at least 0.80 meters of deep, gravel soil and well drained. The sap collection and the processing of “Kampong Speu Palm Sugar” have to be done in the 3 districts above. The packaging of “Kampong Speu palm sugar” can be done in these 3 districts above or in the bordering districts as below:

Kampong Tralach, Sameakki Mean Chey, Rolea Bier and Krong Kampong Chhang of Kampong Chhnang

Oral, Thpong, Phnom Sruoch, Basedth, Kong Pisey and Krong Chbar Mon in Kampong Speu

Kandal Stoeung and Ponhea Lueu in Kandal

Phnom Penh Municipality 77. Protected Geographical Indications are expected to raise more added-value and protects the producers from the competition with generic products through the isolation of niche markets. Therefore, GIs help to keep jobs in rural area though direct increase of prices of the production, and indirect benefit such as the development of tourism in the area. It is also a way to preserve cultural heritage and biodiversity. The extent to which this has happened for GI of Kampong Speu palm sugar has still to be assessed. Also, it is not clear how the control and traceability system for GI products actually works in practice.

2.7 SWOT Analysis

Strengths

Largely organic product

Minimum processing with no refining of sugar

Health benefit associated to low glycemic index

Rich in minerals and vitamins

Geographic indications

Cultural and landscape value

Sugar palm tree resistant to drought

Sugar palm tree requires minimum external inputs and is beneficial to the soil

High productivity of sugar palm tree in terms of sugar

Pleasant taste and fragrance

Weaknesses

Few farmers are organically certified

Technologies largely traditional

No research on production and breeding of palm tree

Collection highly labor intensive and not safe

Processing rudimentary

Lack of consistent quality and weak quality control assurance systems

Lack of research and extension

Little marketing research

Processing based on woodfire increasingly expensive and unsustainable

Availability of popel wood (used as organic anti-fermentation agent) declining

Opportunities

Tap the large potential for production

Establish small plantations

Branding of Khmer Sugar as organic and healthy product

Threats

Competition from similar products such as coconut palm sugar currently marketed globally by Philippines, Indonesia, India, and Sri Lanka


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Development of new technologies to improve productivity

Promote palm tree for building resilience to climate change

Crop and income diversification for farmers

Product development based on palm sugar as ingredient to bakery and confectionary industry

Figure 17 SWOT Analysis of Palm Sugar Value Chain in Cambodia

2.8 Information Gap Analysis 78. Cost of production. In order to assess incentives for farmers to engage in palm sugar production, the Consultant will assess the cost of production and the return to labor. This information will be critical to understand under which conditions palm sugar production could be expanded in Cambodia. 79. Margins. In order to understand incentives to investment by private enterprises, the Consultant will estimate margins for both enterprises and exporters of palm sugar. 80. Alternative technologies. The farmer and enterprise survey will allow the Consultant to inventory the existing technologies, their limitation, and the opportunity for upgrading the value chain. 81. Competition with other sugar products. For domestic demand, the focus will be on white sugar. For export demand, the focus will be on natural sugar substitutes. The Consultant will assess the driving factors to influence the demand for palm sugar vis à vis other substitutes. 82. Value of Geographic Indication (GI) and Organic Certification. The Consultant will assess the existing programs of geographic indication and organic certification of palm sugar currently pursued by the MOC and private sector in Cambodia and assess the costs and value of these programs. 83. Market demand. Both domestic demand for palm sugar and potential export demand will be assess through market surveys and interviews with buyers.

2.9 Plan of Action for Palm Sugar Value Chain 84. Survey of value chain actors. The will include a survey of farmers and companies involved in the production and marketing of palm sugar. It will consists of both quantitative and qualitative information and will be complemented by key informant interviews such as government officials, members and staff of the KSPSPA, and cooperative staff. The survey of farmers will take place in Kampong Speu and adjacent provinces. 85. Data Analysis. The data collected in the field will be processed and help address the information gaps identified I the previous section related to cost of production, incentive of farmers in palm sugar production, identification of alternative technologies, and value of GI and Organic Certification. 86. Workshops. The Consultant will organize a training workshops in value chain analysis, using examples of the palm sugar value chain and the other two value chains (bicycles and wood processing)


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of the assignment. A Validation Workshop will be held prior to the preparation of Draft Final and Final Reports. 87. Reports. The Consultant will prepare a number of reports: inception, training workshop, survey report, draft value chain study after completion of field work, final version of value chain study prior to validation workshops, validation workshop report, Draft Final Report, and Final Report.

2.10 References CIRD 2010. Book of Specifications of Kampot Palm Sugar, Cambodian Insitute for Research and Rural Development, Accessed 15 June 2015, http://www.cird.org.kh/files/Book%20of%20specification%20of%20Kampong%20Speu%20palm%20sugar_English.pdf International Association for Stevia Research 2004, World Market of Sugar and Sweeteners Markets and Markets 2015 Sugar Substitutes Market worth $14,355.0 Million by 2019, Accessed 23 June 2015 at http://www.marketsandmarkets.com/PressReleases/sugar-substitute.asp MOC and MAFF 2010 Protected Geographical Indications in Cambodia USDA/FAS 2015 Sugar: World Markets and Trade, United States Department of Agriculture, Foreign Agriculture Service

http://www.cird.org.kh/files/Book%20of%20specification%20of%20Kampong%20Speu%20palm%20sugar_English.pdf

http://www.cird.org.kh/files/Book%20of%20specification%20of%20Kampong%20Speu%20palm%20sugar_English.pdf

http://www.marketsandmarkets.com/PressReleases/sugar-substitute.asp


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ANNEX 1 COCONUT PALM SUGAR GLYCEMIC INDEX Source: http://coconutpalmsugar.com/Glycemic_Index_Explained.html

88. Coconut palm sugar has a glycemix inded (GIX) of 35. The Philippine Food and Nutrition Research Institute used the following procedure to determine the Glycemix Index (GI) value of coconut palm sugar:

Fifty grams (240 ml) standard glucose tolerance test beverage (Medic Orange 50, Product no. 089) and fifty (50) grams of coconut palm (Cocos nucifera) sugar was fed in random order to ten (10) human subjects.

Blood samples (0.3-0.4 ml) were collected after feeding through finger prick using a 7ml Vacutainer at zero (0) hour, and thereafter at every 15 min interval for 1 hour, and every 30 min or the next hour.

The serum was separated from the blood using a refrigerated Effendorf centrifuge, and analyzed for glucose levels on the same day using a Clinical Chemistry Analyzer after calibration with the glucose standard (Glucofix Reagent1: Menarini Diagnostics, Firenze, Italy).

The blood sugar levels of the ten (10) healthy human subjects given coconut palm sugar and reference glucose food samples were graphed against the time of study. The incremental area under the glucose response curve (IAUC) of the coconut palm sugar was calculated geometrically ignoring the area below the fasting level (Wolever et al.,1991). The Glycemic Index (GI) of the coconut palm sugar was calculated as GI = IAUC of the test food / IAUC of standard glucose multiplied by 100. It’s index value is 35.

Glycemic Index and Glycemic Load: 89. Glycemic Index takes into account the quality of the carbohydrate in a food and ignores its quantity. A glycemic index value therefore tells us only how rapidly a particular carbohydrate turns into sugar. It doesn’t tell how much of that carbohydrate is in a serving of a particular food. Both the things are important to understand a food’s effect on blood sugar. 90. Glycemic load considers the quality and the quantity of carbohydrate content of the foods. The following table gives a values for low, medium and high glycemic load for foods.

Low GI = 55 or less Medium GI = 56 - 69 High GI = 70 or more

*Values are with reference to Glucose. 91. Foods that have a low glycemic index invariably have a low glycemic load, while foods with an intermediate or high glycemic index range from very low to very high glycemic load. Therefore, you can reduce the glycemic load of your diet by limiting foods that have both a high glycemic index and a high carbohydrate content. 92. According to Dr. Trinidad, a scientist from the Food and Nutrition Research Institute - Department of Science and Technology the Glycemic Index (GI) is the glucose response of an individual from food relative to a standard glucose solution. Low G I food is good for proper control and management of diabetes mellitus (type II diabetes) and has been shown to lower total and LDL cholesterol. It is also good for weight maintenance therefore prevents overweight and obesity.

http://coconutpalmsugar.com/Glycemic_Index_Explained.html


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93. Their findings indicate the glycemic index of 35 for pure coconut palm sugar. Please note that some coconut palm sugar on the market, in particular palm sugar from Thailand, is also mixed with cane sugar and other malt based ingredients. The glycemic index value alone does not give accurate picture of the food. The glycemic load (GL) takes both the things into account. The glycemic load is the glycemic index divided by 100 multiplied by its available carbohydrate content. 94. The glycemic load of coconut palm sugar is 1.4, or 1 when rounded off.


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3 OVERVIEW OF THE BICYCLE VALUE CHAIN

3.1 Introduction 95. Since less than 10 years ago, Cambodia has improbably risen to be the 5th largest global exporter of bicycles, shipping US$412 million of bicycles in 2014.6 In recent years, bicycles have been among Cambodia’s most important global exports. By 2012, bicycle assembly had grown to account for 78% of output from light manufacturing, a critical sector for the country’s future economic growth. 96. The sector is now very much at a new crossroads. A confluence of three issues have weakened the country’s trade preference based comparative advantage, placing immense pressure on Cambodia’s bicycle assembly companies. These issues include:

EU anti-dumping measures taken against several Cambodian bicycle assembly companies;

EU move to “graduate” Malaysia and Singapore for rules of origin accounting; and

Approaching free trade agreements between the EU and Malaysia, Thailand, and Vietnam. 97. Having established a beachhead of an industry, the question is: How can Cambodia continue to upgrade its bicycle value chain to establish a sustainable bicycle industry? While the sector is a critical element of Cambodia’s economy, the country’s hold on the sector is tenuous. Cambodia share of the $10 billion international trade in whole bicycles is just 4%.7 And the sector’s reach into Cambodia can literally be measured by a handful of kilometers on the Cambodia-Vietnam border. Despite these challenges, the bicycle assembly and component manufacture offer enormous potential for the country, and in recent years the more established assembly companies in Cambodia have responded to mounting pressures by gradually increasing the value-added of their processes.

3.2 Evolution of Cambodia’s Bicycle Sector 98. The story of the transformations that have occurred within the Vietnamese bicycle sector offer important lessons for this emerging Cambodian industry. Since the first bicycle assembly company set up operations in Cambodia, their reasons for being in the country have been first and foremost Cambodia’s advantaged trade status, secondarily tax incentives offered by their presence within Special Economic Zones, and thirdly low wages. Vietnam’s vibrant bicycle industry was established on similarly unsteady ground. 99. Pulled by tax incentives offered by the Vietnamese government and pushed by EU anti-dumping measures in place for Chinese origin bicycles since 19938, a large number of primarily Taiwanese bicycle manufacturers started to set up operations there after 2000. By 2005, there were seven bicycle assembly plants in Vietnam, and the foreign bicycle firms that had established operations in the country were thriving. However, the bicycle industry in Vietnam suffered a severe blow in 2005 when the EU imposed anti-dumping duties on bicycles imported from Vietnam. Bicycle exports went from almost one million units a year to practically zero by 2006.

6 International Trade Centre 7 International Trade Centre 8 EU imposed anti-dumping duties on imports of bicycles originating in China since 1993 following the allegation of the European Bicycle Manufacturers Association (EMBA) that Chinese bicycle producers were dumping in the EU and squeeze them out of the market. The duty rate was initially set at 36% and raised to 48.5% in 2005. These measures have effectively eliminated exports of Chinese origin bicycles to the EU, which in 2014 accounted for less than 2% of Chinese direct bicycle exports.


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100. While a small number of Vietnam based assembly companies shifted their focus to the domestic market, most factories either moved to nearby Cambodia or closed down. The EU trade measures had a ripple effect on parts manufacturers and other firms within the bicycle supply chain. Parts manufacturers were forced to focus on the export market. They had to choose between making intensive efforts to boost their competitiveness, or write off costly investments and shutting down. 101. The result for Cambodia was the start of a bicycle manufacturing and assembling industry centered in Bavet on the Cambodian-Vietnamese border. While Bavet had little then in the way of urban infrastructure, it did have the advantage of being close to Ho Chi Minh City – about an hour and a half away by car, making it twice as close to Ho Chi Minh City as Phnom Penh. This proximity makes it relatively easy for assemblers in Cambodia to source parts from manufacturers in Vietnam. 102. A critical new event for these businesses was the December 2005 approval of the establishment of Special Economic Zones (SEZ) within the Kingdom of Cambodian.9 The response was rapid with multiple SEZs established around the country starting from 2006, including two in Bavet: locally-owned Tai Seng SEZ and Taiwan-owned Manhattan SEZ. Among the first movers were subsidiaries of two Taiwan-based bicycle companies: Atlantic Cycle (operating now as A & J at Tai Seng SEZ in Bavet) was registered as QIP in 2005, followed by Best Way Industry Co., Ltd. (operating now as Speedtech at Manhattan SEZ in Bavet) which was registered as QIP in 2006. 103. Although the EU revoked its anti-dumping duties on Vietnamese bicycles in 2010, Vietnam based bicycle assembling companies have found that their bicycles are unable to compete against Cambodian bicycle assemblers for non-ASEAN exports due to Cambodia’s favorable trade status. However, Vietnam has experienced tremendous growth in several of the most valuable elements of the supply chain including frame and parts production, and electroplating and processing. Those firms that survived the 2006-2010 European Union anti-dumping sanctions now have a solid foundation in the country. 104. Today, there are four bicycle assembly companies currently operating in Cambodia, all of which are located in Bavet. A&J and Speedtech were joined by Smart Tech in 2011 and by Asia Leader International in 2013, both located in Tai Seng SEZ and both held by Taiwan-based parent companies. Cambodia’s bicycle sector emerged as a response to troubles for the sector in Vietnam, but its fastest rate of growth has occurred since the introduction of Everything But Arms (EBA) in 2009, followed by a relaxation of rules of origin import criteria in 2011. Additionally, the revocation of EU anti-dumping measures for Vietnam in 2010 has accelerated growth of that country’s bicycle supply sector, and served as a catalyst for growth of the sector in Cambodia. 105. Cambodia’s bicycle value chain is best viewed as an extension of a global supply chain that exists first and foremost because of the country’s import duty advantage. Recent EU anti-dumping measures put this tenuous advantage at risk, but also presents an opportunity to re-invest in upgrading Cambodia’s bicycle value chain, as Vietnam did a decade ago.

9 SEZs provide businesses within each zone with a number of fiscal incentives, including income tax, customs, and VAT benefits and are designed to offer a one-stop service for imports and exports, and have specially trained government officials stationed on site to provide administrative services. SEZs in Cambodia operate under the authority of the Cambodia Special Economic Zone Board under the umbrella of the Council for the Development of Cambodia (CDC).


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3.3 Demand & Trade 3.3.1 Global Production Trends 106. Bicycle production has become increasing sophisticated as manufacturers seek to both lower costs and increase margins through the use of more sophisticated, lightweight materials. Starting around 2005 the rapid rise in metal prices, particularly of steel, chrome and aluminum, which are important raw materials for the bicycle industry, started to squeeze manufacturers’ margins and profits. To offset the impact of sharp increase in raw material prices, manufacturers responded with lightweight, high-end models that incorporate carbon fiber frames. Such bicycles are usually promoted at higher prices as well as margins due to high quality and branding. 107. Manufacturers are also increasingly focusing on adding sophisticated features to the bicycles. Novel features such as advanced shifting systems are making the bicycles easier to ride. Bicycles are becoming more specialized with re-designed features. 108. Other major trend in the bicycles market is the surging demand for Electric Bicycles that is bolstering the overall bicycle sales. Increasing gasoline prices coupled with need for environment-friendly means of transportation are driving customers towards electric bicycles that operate as a standard two-wheeler, but with a battery support. China represents the largest producer and consumer of electric bicycles in the world and is expected to continue its leadership in the coming years.

3.3.2 Global Demand Trends 109. The global bicycle industry is forecast to experience sustained growth over the coming years to reach an estimated US$64.1 billion by 201810, up from US$51.0 billion in 2014. Growing fitness consciousness among people, rising energy prices, growing congestion due to increasing population and the number of cars on roads is expected to support sustained growth of the industry. 110. Bicycle sales have historically moved in tandem with GDP growth. However in recent years demand for bicycles has increased amid worsening automobile traffic, high gasoline prices and greater concern about pollution. The shift might even be traced back to the 1997 adoption of the Kyoto Protocol, which obligated nations to reduce greenhouse gases: the global bicycle market has grown an average of 4% a year since then compared with 2.5% a year during the previous two decades, according to research from investment bank, Credit Suisse. 111. Asia-Pacific dominates the bicycles market worldwide, in terms of both global demand and supply, with three countries: China, Taiwan, and Cambodia accounting for 58% of the total value of global export in 2014 according to International Trade Centre. European, with seven of the top ten bicycle exporting countries, trail Asia-pacific in terms of bicycle sales. With growing demand, many large cities in Europe including Barcelona and Paris initiated programs such as bicycle loan facility. The US represents the other prominent market for bicycles. The United States is the 11th largest exporter of bicycles, but the world’s single biggest market, accounting for roughly 20% of global demand.

3.3.3 Global Supply Trends 112. Overall, the global bicycle trade is characterized by a relative concentration of production in a handful of countries and a relative of dispersion of global demand. Whereas, roughly 75% of total 2014

10 “Global Bicycle Industry 2014-2019: Trends, Forecast, and Opportunity Analysis”, Lucintel, May 2014


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exports originated in just five countries, global imports were more dispersed with 75% of total imports going to 16 different countries.

Source: Trademap

Figure 18 Bicycle Global Imports 2014 113. China, the world’s largest producer of bicycles, has benefited from the trend of increased global demand. Although the country produces 67% of the world’s total supply of bicycles, most of them are low-end units that sell for less than US$100 apiece. Taiwan, the second largest producer, has benefitted even more. Better known for making semiconductors than bicycles, Taiwan’s bicycle manufacturing history goes back to the early 1970s, when the island earned the nickname the “Bicycle Kingdom” after producers started to win original equipment manufacturer (OEM) deals from US companies such as Schwinn seeking to shift production to lower cost countries. The label held true in the 1980s when Taiwanese production overtook Japan’s, although production flagged in the 1990s amid a strengthening of the New Taiwanese Dollar and the onset of competition from mainland China. 114. Taiwan’s largest bicycle makers responded to this new competitive pressure by shifting their focus to mid- and high-end bicycles. As a result, the average selling price of Taiwan’s bicycles has increased nearly five-fold over the past decade, and the value of Taiwan’s bicycle exports nearly tripled, to US$1.2 billion in 2009 from US$480 million in 2002. Today, leading Taiwanese companies Giant and Merida hold 10% and 4% market share, respectively, of the global market for US$2,000-plus bicycles. 115. Major players include Accell Group N.V, Atlas Cycles (Haryana) Ltd., Avon Cycles Ltd., Bell Sports Corporation, Caloi Inc., Campagnolo S.r.l, Cannondale Bicycle Corporation, Currie Technologies Inc., Cycleurope AB, Diamondback Bicycles, Giant Bicycle Inc., Hamilton Industries Ltd., Hero Cycles Ltd., Merida Industry Co. Ltd., Miyata Industry Co. Ltd., Montague Corp., Pacific Cycle Inc., Raleigh UK Ltd., Shimano Inc., Specialized Bicycle Components Inc., SRAM Corporation, Trek Bicycle Corp., and Tube Investments of India Ltd.

3.3.4 Cambodian Exports 116. Since the first bicycle manufacture established operations in Cambodia in 2006, Cambodian bicycle exports have grown exponentially with the most rapid increase in growth occurring in recent years. From 2010 to 2014, the value of exports increased by 56% each year, with production output being entirely geared towards export. Bicycle exports rank just behind garments and footwear as Cambodia’s largest export category.

18%9%

8%

7%

5%

4%

4%3%

3% 3%

36%

Bicycle Imports, by value (2014)United States ofAmericaJapan

Germany

United Kingdom

Netherlands

France

Belgium

Spain

Canada

Australia

Others

36%

18%8%

6%

4%

3%

3%

2%

2% 1%

17%

Bicycle Exports, by value (2014)

China

Taiwan

Netherlands

Germany

Cambodia

Italy

Belgium

Portugal

Spain

Bulgaria

Others


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117. According to information for the month of April 2015 obtained from the Ministry of Commerce for exports from Tai Seng and Manhattan SEZ, where the four active bicycle assembly companies are located, EU exports accounted for 88% of total exports. Of the 29 countries receiving Cambodia origin bicycles during the month, 16 were in the EU. The USA and Canada accounted for 9% of exports, leaving 3% going to 10 other countries. Germany was, by a wide measure, Cambodia’s largest trading partner for bicycles.

Source: MOC

Figure 19 Cambodia Bicycle Exports 2013

118. In 2013, Cambodia exported assembled bicycles to 55 countries (versus 36 in 2009). Cambodian bicycle exports are heavily geared toward the EU, with 81% of all 2013 exports by value going to the EU. Of the remaining share, roughly 10% of exports going the USA and Canada. The remaining 9% of exports was sent to a diverse mix of 33 countries, according to International Trade Center data. Cambodia’s largest trading partner for bicycles, by far is Germany, Europe’s largest bicycle market, which has consistently received between 30-40% of all Cambodian bicycle exports.

Source: Trademap

Figure 20 Cambodia Bicycle Exports to EU and non-EU 2013

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119. Growth of Cambodia’s bicycle exports are obviously highly dependent on the EU market. Indeed the rapid growth of the sector can be attributed to the trade preferences extended to Cambodia. The introduction of EBA in 2009, eliminated import duties and quota restrictions on all Cambodian origin product (other than arms) that qualified against rules of origin requirements. In 2011, EU rules of origin requirements were relaxed, such that only 30% of the components (by value) of an assembled bicycle need to be sourced from within Cambodia or its regional trade partners, which encompasses all of ASEAN. The evolution of these measures is the principal reason for the rapid increase in exports from 2011. Although other countries also offer reduced or duty free schemes for Cambodia origin bicycle these measures are significantly more restrictive than current measures and thus more difficult to access.

3.3.5 Cambodian Demand & Imports

120. Although Cambodia is the world’s 5th largest exporter of bicycles, it has no domestic production for the domestic market. As detailed below, Cambodia’s bicycle assembly industry is entirely export focused. Thus all bicycles used domestically must be imported from abroad. The country’s domestic market is small and its population is relatively low income. It is unlikely to be able to support a domestically focused manufacturing operation.

121. In Cambodia, bicycles are overwhelmingly used for personal transportation, rather than recreation or sport. The population that depends on bicycle for transportation are eager to ‘graduate’ up to a motorized vehicle rather than continue to use a bicycle. For the overwhelming majority of Cambodians, given a choice between a bicycle and motorcycle / scooter, the latter would be the obvious choice.

122. Historically, there has been a robust trade of used bicycles, mostly of Japanese origin. These bicycles continue to make up the majority of supply and demand into the domestic market. More recently, with Cambodia’s growing wealth, imports of new bicycles have increased, principally coming from either of the two largest global exporters, China and Taiwan. During our shop surveys, the VCA team saw that many (recently established) shops stock very high-end bicycles. At one shop, when we inquired about a $13,000 road racing model, we were told that the shop sells about 4-5 per year, and this was only one of several such models. Clearly, the trend toward a healthier lifestyle, or at least high-end bicycle as status symbol, has come to Cambodia, at least among a select few. 123. The VCA team interviewed seven bicycles shops around Phnom Penh. At each shop, the team received nearly identical answers. No shop carried any products that were ‘Made in Cambodia’. Bicycles were imported from either China or Taiwan. Spare parts were imported from either China, Taiwan, Thailand, or Vietnam. All shops were aware of the existence of bicycle assembly factories in Bavet but all said that those bicycles were exclusively for the export market.

3.4 Market Development & Trends

3.4.1 Distribution

124. Cambodia’s bicycle sector currently consists of four assembly companies located within Tai Seng and Manhattan SEZ in Bavet. Although, to date we have not been able to make contact with these companies, based on conversations with government officials, other market players, and our own estimations, we believe that 100% of the materials used for bicycle assembly are sourced from outside Cambodia, including the boxes used for packing. These companies are entirely exported focused and do not sell any output into the domestic market. We understand the reason for this being that if these companies sold even a single bicycle, their entire operation would be subject to taxation as a


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Cambodian company.11 Although it would be possible to establish a separate company dedicated to the Cambodian market, we speculate that this has not occurred because the small size of the local market.

3.4.2 Market Trends

125. As the Cambodia’s bicycle assembly companies have matured, there appears to have been a gradual upgrading of the quality of bicycle exports from the country.12 In its early years, the sector experienced a relatively high product defect rate and lower overall product quality.13 However, over time quality has improved, and assembly companies have moved beyond component assembly to frame assembly. Overall, bicycles produced in Cambodia consisted chiefly of entry-level and low-entry bicycles sold by prominent European and American brands.

3.5 Preliminary Value Chain Mapping

3.5.1 Key Actors 126. Cambodia’s bicycle sector consists of four assembly companies located within the two SEZs in Bavet. A fifth company, Opaltech, announced that it closed its Cambodian assembly operations, presumably in anticipation of EU anti-dumping measures that were put in place against it in June 2015. Table 4 Bicycle Companies in Cambodia Start Year, Location, and Country of Origin

3.5.2 Features

127. All of the bicycle assembly companies are subsidiaries of Taiwan based international bicycle manufacturers, underscoring that country’s strength in the global bicycle trade. These companies first entered Cambodian in 2006 due to the occurrence of two events: 1) EU anti-dumping measures imposed on Vietnam origin bicycles in 2005; and 2) the establishment of SEZs in Cambodia starting from 2006. We believe that if either of these two events had not occurred, it is less likely that a bicycle sector would have ever been established in Cambodia.

3.5.3 Relations

128. [No available information pending company interviews and factory tours.]

11 Thus these companies would be subject to VAT and import/export taxes as a Cambodian company. 12 Could not be verified. Statement based on a survey of news articles and discussions with market players. 13 “Cambodia: Focusing on Exports, www.biketaiwan.com, May 2013.

Company Start Location Country Capacity Employees

A&J (Atlantic Cycle) 2006 Tai Seng SEZ Taiwan N/A N/A

Smart tech 2011 Tai Seng SEZ Taiwan N/A N/A

Speedtech (Best Way) 2006 Manhattan SEZ Taiwan N/A N/A

Asia Leader International * 2013 Tai Seng SEZ Taiwan N/A N/A

Opaltech * N/A Kandal Province Taiwan N/A N/A

* Subject of EU anti-dumping measures. Opaltech announced closer of operations as of April 2015.

http://www.biketaiwan.com/


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3.6 Production 129. Cambodia’s bicycle supply chain is limited to bicycle assembly. Assembly consists of two main components: frame assembly and components assembly. (Refer to Annex 3 for a detailed explanation of bicycle assembly). Frame assembly is further up the value chain since components are assembled on to the bicycle frame. In the case of a tube frame (generally steel, aluminum, or alloy), frame assembly consists of cutting and welding the tubes (e.g. “tailoring the tubes”) into a bicycle frame and then “finishing” the frames with paint or chrome plating. Component assembly consists of organizing and attached the key components to the frame (such as derailleurs and gear shift levers, handelbars, crankset, etc.) and then packaging a semi-assembled bicycle in a box which is typically delivered to a retail store where a finished bicycle is assembled on-site for sale. 130. Assembly operations in Cambodia have gradually expanded beyond component assembly to finishing and more recently frame tailoring.

3.6.1 Production Cost & Product Pricing 131. Cambodia is not the region’s lowest cost producer of assembled bicycles. Bicycle assemblers must rely on parts imported from Vietnam, China, and Taiwan, incurring a significant transportation cost. Cambodian assemblers also do not enjoy a significant advantage on labor costs. In late 2014, the Vietnamese Ministry of Labor set a new minimum monthly wage floor for the country at between VND2.15 million-VND3.1 million (US$101.4-US$146.2) depending on region. This minimum is roughly similar to Cambodia’s current garment worker minimum monthly wage of US$128. This is an example of the trend toward a gradual equalization of wages in the Mekong region. 132. According to Comext data, the CIF price for Cambodian origin bicycles to the Netherlands averaged around US$190 (€140-150) in early 2014. With an average 2013 sale price of US$1,055 (€791)

in the Netherland and US$693 (€520) in Germany (the two highest priced bicycle markets in Europe, respectively),14 Cambodian origin markets appear to be positioned at the lower end of the segment.

Table 5 Average Prices of Bicycles Imported by the Netherlands from Cambodia

133. Comext data supports information that we were able to obtain for the month of April 2015 from the Ministry of Commerce. During April, the four companies located at Tai Seng and Manhattan SEZ shipped a 183,860 bicycles to 29 countries. These bicycles has a CIF value of US$ 63.1 million, which equates to an average price of US$ 218 per bicycle. Also notable, is the importance of these companies

14 “European Bicycle Market; 2014 Edition”, Colibi (Association of the European Bicycle Industry) & Coliped (Association of the European Two-Wheeler Parts' and Accessories' Industry), 2014.


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to Tai Seng and Manhattan SEZs. Speedtech accounted for 38% of total exports from Manhattan SEZ during April. A&J, Smart Tech, and Asia Leader accounted for 91% of exports from Tai Seng. Table 6 Value and Average Price of Bicycles exported from Cambodia, April 2015

Source: MOC

3.6.2 Structure of production


3.6.3 Volume of production


3.6.4 Technology


3.6.5 Supply chain

137. Cambodia’s bicycle sector is part of a supply chain can be said to not reach more than five kilometers into the country. The four active assembly companies are all located in Bavet SEZ which are located within approximately five kilometers of the Cambodia-Vietnam border. These companies source all parts from Vietnam. Cambodia’s contribution to the supply chain is currently limited to labor.

3.6.6 Labor

138. In discussion with a Ministry of Commerce official stationed in Bavet, he estimated that each of the four assembly companies in Bavet employs about 1,000 laborers.

3.7 Policies 139. Tariff preferences have played a critical role in determining the growth and directly of Cambodia’s exports. Cambodian exports enjoy duty-free market access under a variety of duty-free quota-free programs that developed and some developing countries have put in place for Least Developed Countries. In addition, they enjoy duty-free (or highly preferential) access within ASEAN and benefit from the free trade agreements concluded with ASEAN dialogue partners.

Company Units Value (US$) Price / Unit %

A & J * 61,934 15,745,110 254 39%

Speedtech 64,991 12,365,180 190 31%

Smart Tech 43,428 10,259,640 236 26%

Asia Leader International 13,507 1,750,015 130 4%

Bicycle Sales 183,860 40,119,944 218 100%

Manhattan N/A 32,659,948 N/A N/A

Tai Seng N/A 30,481,340 N/A N/A

Tai Seng + Manhattan N/A 63,141,288 N/A 64%

* Not including $16,290 of parts sent to four countries during the month.


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140. The advantage that Cambodia enjoys because of duty free access depends on the height of MFN (i.e. non-preferential) import duties in the importing country. For those products for which MFN duties are high, the duty-free access provided by these preferential trading arrangements improves dramatically Cambodia’s competitive position. In the EU for example, the average MFN duty on bicycles is 14%. These magnitudes are large when compared to profit margins, and will increase significantly – in some cases doubling – the profitability of producing for export in Cambodia, as compared with producing the same goods for export in a country that does not enjoy duty-free privileges. This advantage provides an important incentive to invest and expand exports in those sectors – provided that the investor has some certainly that the advantage will be in place long enough to at least recover his capital invested.

3.7.1 Trade Preferences 141. Cambodia enjoys two significant trade advantages over most other countries: inclusion in the international Generalized System of Preferences (GSP) Plus scheme; and the EU’s Everything But Arms (EBA) scheme.

Generalized System of Preferences (GSP) Plus: enhanced preferences means full removal of tariffs on thousands of product categories as those covered by the general arrangement. GSP+ is granted to countries which ratify and implement international conventions relating to human and labor rights, environment and good governance. While there are common features across countries, GSP is implemented differently by different countries.

Everything But Arms (EBA): arrangement for least developed countries (LDCs), which grants duty-free quota-free access to all products, except for arms and ammunitions. EBA is part of the EU GSP scheme.

142. These trade schemes allow for duty free imports to world’s key bicycle consumer markets. Whereas a bicycle exporter domiciled in a country that is not part of a GSP scheme will be required to pay a 14% import duty to the EU and an 11% duty to the USA, Cambodia origin bicycles are imported duty free, provided exporter meet the rules of origin requirements for the exports. 143. Under the GSP, exported products have to originate in the beneficiary country. To be considered as originating in the country of export, products have to meet certain origin requirements. While products wholly obtained in the exporting country are naturally considered as originating there, the products manufactured with materials from other countries are considered so only if they have undergone sufficient working or processing. The requirements refer to technical criteria, the added value or other economic criteria. For Cambodia origin assembled bicycles this translates to a 25% value added threshold to the parts brought in for assembly. 144. EBA rules of origin requires that at least 30% of the contents of exported products have to originate in the country, but, under the special waivers, certain exported products, including bicycles from Cambodia are allowed to have cumulative origin with ASEAN countries or the EU15. For exports from Cambodia to the USA under the GPS, the rules of origin requirement is a minimum 35% and the qualifying member countries of ASEAN, namely, Cambodia, Thailand, Indonesia and the Philippines, are treated as one country for GSP rules of origin requirements. Duty free exports to the US and other markets that offer a trade reference to Cambodia are, however, more difficult to access due to tighter restrictions and higher levels of scrutiny/reporting. Additionally, accounting for different rules of origin requirements is a significant burden for both companies and to government officials who must administer the different regimes. Cambodia currently issues twelve different certificates of origin, each one reflecting a separate and distinct set of rules of origin.

15 As of 2014, components from Malaysia and Singapore no long qualify for local origin.


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3.7.2 Anti-Dumping / Circumvention 145. Anti-dumping is a measure to rectify the situation arising out of the dumping of goods and its trade distortive effect. Thus, the purpose of anti-dumping duty is to rectify the trade distortive effect of dumping and re-establish fair trade. The anti-dumping duty action imposed since 1993 by the European Union upon bicycle imports from China into the EU is now a ‘textbook’ example of an anti-dumping measure. The EU currently levies a 48.5% on Chinese bicycle imports, and though a few companies are excluded this has practically annihilated Chinese origin bicycle imports into the EU. The EU vigorously monitors attempts by Chinese manufactures to circumvent this anti-dumping measure. Stemming from circumvention, the duty has been extended to Indonesia, Malaysia, Sri Lanka, Tunisia, Vietnam, and more recently to Pakistan, the Philippines, and now also Cambodia. 146. The EU regards that a bicycle whose components consist of 70% or more of Chinese origin by value of the assembled product as circumventing its Chinese bicycle anti-dumping measures. In June 2015, The European Commission imposed a 48.5% import tariff on the shipments of Cambodian bicycle exporters it accuses of flooding the European Union market with low-cost, Chinese-manufactured bicycles. The anti-dumping duty was imposed on bicycles shipped to the EU from Cambodia, Pakistan and the Philippines after a nine-month investigation found that many bicycles were manufactured in China, but transshipped via these countries to circumvent the EU’s duties on bicycles originating in China. 147. The Commission excluded three Cambodian companies – A&J, Smart Tech and Speedtech Industrial – from the anti-dumping duty in return for their cooperation with investigators and no evidence of Chinese sourcing. Tariffs were explicitly imposed on two others – Asia Leader International and Opaltech. As noted above, Opaltech announced plans to close its Cambodian assembly factory in April 2015.

3.7.3 “Graduation” under EU Rules of Origin 148. Both the EU and Canada have begun a process of revising their GSP programs with an eye to “graduating” more advanced developing countries from their GSP programs. Until 2014, components from anywhere in ASEAN were effectively recognized as being of local origin. Cambodian exporters had no problem claiming 30% ‘local’ origin to satisfy the EU rules of origin requirement. However, in 2014, the EU graduated Malaysia and Singapore from its GSP program. As regards bicycles, this means that inputs from Singapore and Malaysia, both of which are important producers of bicycle parts, are now counted as part of the “foreign” 70% content. This has made it more difficult for many bicycle models to meet the rules of origin. 149. In the near term, policy must address the loss of cumulation with Malaysia and Singapore. The Government has responded to this challenge by encouraging bicycle producers to engage in a higher level of manufacture and encouraging bicycle parts manufacturers to get established in Cambodia. The Government has asked the EU for a three-year derogation from their decision on cumulation, in order to prevent injury to its bicycle industry while these policies are taking effect.

3.7.4 Regional Free Trade Agreements 150. Three ASEAN Members – Malaysia, Thailand, and Vietnam – are in the process of negotiating free trade agreements with the EU. When their agreements are concluded, these three countries will become direct competitors with Cambodia for investors seeking duty-free access to the European market. The impact that this will have on Cambodia depends entirely on rules of origin. Since the rules


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governing these free trade agreements are currently under negotiation, it is not possible at present to assess fully this impact. It is known, however, that EU rules of origin for their free trade agreement partners allow a free trade partner to cumulate inputs produced in other free trade partners. For example, once these free trade agreements are in place, a Vietnamese bicycle exporter would be able to count parts imported from Malaysia as Vietnamese for purposes of determining whether a Vietnamese bicycle meets EU rules of origin. This is in contrast to the situation facing Cambodia where, as described above, cumulation with Malaysia will not be possible after 2013. 151. The competitive position of Cambodia’s bicycle producers will be affected by these differences in cumulation possibilities. The EBA rule of origin for bicycles requires that no more than 70% of the ex-factory price should consist of ‘foreign” inputs. If the rule of origin for bicycles in the EU-Vietnam free trade agreement is the same, then a bicycle producer in Vietnam will clearly have easier rules of origin and more flexibility in sourcing inputs and Vietnam will become the preferred investment destination for bicycle manufacturers seeking duty free access to the EU market. Even if the rule of origin in the EU-Vietnam agreement is more stringent and specifies that no more than 50% of the ex-factory price should consist of foreign inputs, Vietnam could still be the preferred investment location if inputs from Malaysia, Singapore, and other countries with free trade agreements with the EU account for more than 20% of the ex-factory price.

3.8 SWOT Analysis

Strengths

Favorable trade relationship with the EU and USA

SEZ incentives

Low cost labor

Weakness

Dependence on SEZ incentives

Weak manufacturing infrastructure

Small domestic market

Opportunity

Attract parts manufactures to Cambodia

Increase supply to regional market

Threats

Expansion of EU anti-dumping measures

Figure 21 SWOT Analysis for Bicycle Value Chain in Cambodia

3.9 Information Gap Analysis

152. Though requested though the Ministry of Commerce, we were not able to obtain basic information such as the number and location of all registered bicycle companies in Cambodia. Additions, we were not successful despite repeated attempts to visit the assembly companies operating in Bavet. Following is a summary of key information gaps. 153. Company information:

Structure of Production

Labor

Marketing and Exports

Future plans 154. Quantitative data:


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Confirm if only 4 active bicycle assembly companies.

Confirm if Worldtech, Cronus, Strongman operated in Cambodia the past, and if so start/stop dates, location, and reasons for leaving.

Volume, unit volume, and value of exports for all bicycle assembly companies currently operating in Cambodia, for each of the last 5 years.

3.10 Plan of Action for Bicycle Value Chain Analysis 155. The analysis herein is based on desktop research and interviews with stakeholders operating at the periphery of Cambodia’s bicycle sector. The successful completion of this analysis depends on our ability to interview management at assembly companies and our ability to tour their factories. Without this access, this value chain analysis will have little to add to anyone’s understanding of the sector. Additionally, as noted above we require access to company and trade data that is currently collected and retained by the Ministry of Commerce.

3.11 References BMU 2013 Cambodia:Focusing on Exports, in www.biketaiwan.com BMU 2013 The Vietnamese Bicycle Industry, in www.biketaiwan.comLooking Official Journal of the European Union 2014, COMMISSION IMPLEMENTING REGULATION (EU) No 938/2014 of 2 September 2014 Official Journal of the European Union 2015, COMMISSION IMPLEMENTING REGULATION (EU) 2015/776 of 18 May 2015 RGC 2014 Cambodia Trade Integration Strategy 2014-2018 World Bank 2015 Cambodia: The Investment Climate Assessment. Creating opportunities for Firms in Cambodia Accessed the following sites: http://www.prnewswire.com/news-releases/global-bicycle-industry-2013-2018-trend-profit-and-forecast-analysis-213518621.html http://raivereniging.nl/ecm/?id=workspace://SpacesStore/2dcf4ea4-c647-4303-95a8-ac0045f8448b http://www.madehow.com/Volume-2/Bicycle.html

http://www.biketaiwan.com/

http://www.biketaiwan.comlooking/

http://www.prnewswire.com/news-releases/global-bicycle-industry-2013-2018-trend-profit-and-forecast-analysis-213518621.html

http://www.prnewswire.com/news-releases/global-bicycle-industry-2013-2018-trend-profit-and-forecast-analysis-213518621.html

http://raivereniging.nl/ecm/?id=workspace://SpacesStore/2dcf4ea4-c647-4303-95a8-ac0045f8448b

http://www.madehow.com/Volume-2/Bicycle.html


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ANNEX 2: MANHATTAN AND TAI SENG EXPORT DATA (APRIL 2015) 156. The following information is data published on the Ministry of Commerce for exports from Tai Sang and Manhattan SEZ during the month of April 2015. Table 7 Bicycle

Smart Tech Set Units Value (US$) Price / Unit %

Germany 178 29,491 7,465,010 253 73%

United Kingdom 24 7,148 1,742,990 244 17%

Canada 9 3,738 590,416 158 6%

Slovenia 2 2,451 365,782 149 4%

Austria 7 600 95,442 159 1%

Total - Bicycle 220 43,428 10,259,640 236 100%

A & J Set Units Value (US$) Price / Unit %

United Kingdom 37 29,504 6,396,236 217 41%

Belgium 115 19,594 5,443,899 278 35%

Italy 8 1,610 515,408 320 3%

Sweden 14 1,507 489,637 325 3%

Germany 9 1,059 476,070 450 3%

USA 10 1,609 359,075 223 2%

Canada 15 1,387 354,770 256 2%

Japan 5 780 226,254 290 1%

Denmark 3 571 216,577 379 1%

India 7 695 195,575 281 1%

Czech Republic 2 790 189,205 240 1%

France 3 365 143,014 392 1%

Ukraine 1 294 100,850 343 1%

Slovenia 2 343 93,357 272 1%

Netherlands 2 362 92,262 255 1%

Korea 1 110 92,140 838 1%

Norway 3 341 88,202 259 1%

Estonia 1 275 76,026 276 0%

Israel 3 270 61,581 228 0%

Switzerland 2 106 54,012 510 0%

Singapore 2 144 43,457 302 0%

Croatia 1 120 25,399 212 0%

Taiwan 15 98 12,102 123 0%

Total - Bicycle 261 61,934 15,745,110 254 100%

A & J Set Units Value (US$) Price / Unit %

Germany 4 70 5,803 83 36%

Italy 2 200 5,159 26 32%

United Kingdom 3 250 4,865 19 30%

Switzerland 2 8 462 58 3%

Total - Parts 11 528 16,290 31 100%


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Asia Leader Set Units Value (US$) Price / Unit %

Sweden 13 12,558 1,644,136 131 94%

India 1 315 41,887 133 2%

Netherlands 2 309 34,026 110 2%

Finland 1 325 29,965 92 2%

Total - Bicycle 17 13,507 1,750,015 130 100%

Speedtech Set Units Value (US$) Price / Unit %

Germany 123 35,428 7,609,358 215 62%

USA 30 15,326 2,138,106 140 17%

Denmark 6 4,785 844,906 177 7%

Poland 8 1,811 462,238 255 4%

Netherlands 7 3,478 401,745 116 3%

Austria 8 998 312,043 313 3%

France 6 1,057 201,288 190 2%

United Kingdom 2 337 142,942 424 1%

Canada 3 407 60,891 150 0%

Croatia 2 219 48,329 221 0%

Slovenia 2 202 41,329 205 0%

Latvia 3 385 41,127 107 0%

Australia 1 468 40,813 87 0%

Hungary 3 90 20,065 223 0%

Total - Bicycle 204 64,991 12,365,180 190 100%


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ANNEX 3: BICYCLE ASSEMBLY PROCESS16

A3.1 The Raw Materials 157. The most important part of the bicycle is the diamond-shaped frame, which links the components together in the proper geometric configuration. The frame provides strength and rigidity to the bicycle and largely determines the handling of the bicycle. The frame consists of the front and rear triangles, the front really forming more of a quadrilateral of four tubes: the top, seat, down, and head tubes. The rear triangle consists of the chainstays, seatstays, and rear wheel dropouts. Attached to the head tube at the front of the frame are the fork and steering tube. 158. For much of the bicycle's history the frame was constructed of heavy, but strong, steel and alloy steel. Frame material was continually improved to increase strength, rigidity, lightness, and durability. The 1970s ushered in a new generation of more versatile alloy steels which could be welded mechanically, thereby increasing the availability of light and inexpensive frames. In the following decade lightweight aluminum frames became the popular choice. The strongest metals, however, are steel and titanium with life-expectancy spanning decades, while aluminum may fatigue within three to five years. 159. Advances in technology by the 1990s led to the use of even lighter and stronger frames made of composites of structural fibers such as carbon. Composite materials, unlike metals, are anisotropic; that is, they are strongest along the axis of the fibers. Thus, composites can be shaped into single-piece frames, providing strength where needed. 160. The components, such as wheels, derailleurs, brakes, and chains, are usually made of stainless steel. These components are generally made elsewhere and purchased by the bicycle manufacturer.

A3.2 The Manufacturing Process 161. Seamless frame tubes are constructed from solid blocks of steel that are pierced and "drawn" into tubes through several stages. These are usually superior to seamed tubes, which are made by drawing flat steel strip stock, wrapping it into a tube, and welding it together along the length of the tube. Seamless tubes may then be further manipulated to increase their strength and decrease their weight by butting, or altering the thickness of the tube walls. Butting involves increasing the thickness of the walls at the joints, or ends of the tube, where the most stress is delivered, and thinning the walls at the center of the tube, where there is relatively little stress. Butted tubing also improves the resiliency of the frame. Butted tubes may be single-butted, with one end thicker; double-butted, with both ends thicker than the center; triple-butted, with different thicknesses at either end; and quad-butted, similar to a triple, but with the center thinning towards the middle. Constant thickness tubes, however, are also appropriate for certain bikes. 162. The tubes are assembled into a frame by hand-brazing or welding by machine, the former being a more labor-intensive process and therefore more expensive. Composites may be joined with strong glue or plastic binders. The components are generally manufactured by machine and may be attached to the frame by hand or machine. Final adjustments are made by skilled bicycle builders.

A3.3 Assembling the Frame

16 Excerpted from “http://www.madehow.com/Volume-2/Bicycle.html#ixzz3dNLub1WD”


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163. Tailoring the tubes: The metal is annealed, or softened by heating, and hollowed out to form "hollows," or "blooms." These are heated again, pickled in acid to remove scale, and lubricated. The hollows are measured, cut, and precision mitered to the appropriate dimensions. Frame sizes for adult bicycles generally run from 19-25 inches (48-63 cm) from the top of the seat post tube to the middle of the crank hanger. Next, the hollows are fitted over a mandrel, or rod, attached to a draw bench. To achieve the right gauge, the hollows pass through dies which stretch them into thinner and longer tubes, a process called cold drawing. The tubes may be shaped and tapered into a variety of designs and lengths. The taper-gauge fork blades may have to pass through more than a dozen operations to achieve the correct strength, weight, and resilience. 164. Brazing, welding, and gluing: Tubes can be joined into a frame either by hand or machine. Frames may be brazed, welded, or glued, with or without lugs, which are the metal sleeves joining two or more tubes at a joint. Brazing is essentially welding at a temperature of about 1600°F (871°C) or lower. Gas burners are arranged evenly around the lugs which are heated, forming a white flux that melts and cleans the surface, preparing it for brazing. The brazing filler is generally brass (copper-zinc alloy) or silver, which melt at lower temperatures than the tubes being joined. The filler is applied and as it melts, it flows around the joint, sealing it. 165. Aligning and cleaning: The assembled frames are placed into jigs and checked for proper alignment. Adjustments are made while the frame is still hot and malleable. The excess flux and brazing metals are cleaned off by pickling in acid solutions and by washing and grinding the brazing until it is smooth. After the metals have cooled, further precision alignments are made. 166. Finishing: The frames are painted, not only to create a more finished appearance, but also to protect the frame. The frame is first primed with an undercoat and then painted with a colored enamel. Paint may be applied by hand-spraying or by passing the frames through automatic electrostatic spraying rules of origin. The negatively charged frames attract the positively charged paint spray as the frames rotate for full coverage. Finally, transfers and lacquer are applied to the frame. Chrome plating may also be used instead of paint on components such as the fork blades.

A3.4 Assembling the Components 167. Derailleurs and gear shift levers: Depending on the style of bicycle, the gear shift levers are mounted either on the down tube—popular on racing bikes—on the stem, or on the handlebar ends. A cable is attached, which extends to the front and rear derailleurs. Front derailleurs, which move the chain from one drive sprocket to another, may be clamped or brazed onto the seat tube. Rear derailleurs may be mounted with bolt-on hangers or integral hangers. 168. Handlebars, stems, and headsets: Handlebars may be raised, flat, or I dropped. They are bolted to the bicycle stem which is then fitted into the head tube. The headset components, including bearings, cups, and locknuts, are attached to the head tube. The headset allows the fork to turn inside the head tube and thus makes steering easier. 169. Brakes: The brake levers are mounted to the handlebars. Cables extend to the brakes and are fastened to the calipers. Tape, made of plastic or cloth, can then be attached to the handlebars and the ends are plugged. 170. Saddles and seat posts: Seat posts are generally steel or aluminum alloy and are bolted or clamped into position. The saddle is generally made of molded padding and covered with nylon or plastic materials. Although leather was the norm for saddles for a long time, it is less commonly used today.


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171. Cranksets: The crankset supports the pedals and transfers power from the pedals to the chain and rear wheel. Cranksets consist of steel or aluminum alloy crank arms, chain rings, and the bottom bracket assembly of axle, cups, and bearings. They are attached with bolts and caps into the bottom bracket of the bicycle frame. The pedals are then screwed to the ends of the crank arms. 172. Wheels, tires, and hubs: Wheel manufacturers conform to the A J International Standards Organization (ISO) system for wheel diameter and tire sizes. Wheels may be constructed by machines, which roll steel strips into hoops that are welded into rims. The rims are drilled to accept spokes, which are laced one round at a time between the rim and hub flange. A wheel must be trued, or straightened, in radial and lateral directions to achieve uniform tension. Next, the rim liner, tire, and inner tube are attached. The chain may also be fitted onto the bicycle. Rear wheels are fitted with a free-/ wheel, consisting of several cogs and spacers, which frees the rear wheel from the crank mechanism when the rider stops pedaling. Wheels are attached to the bicycle frame by means of an axle which runs through the hub of the wheel. The axle may be tightened with bolts at the ends or with quick-release skewers.


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4 OVERVIEW OF THE WOOD PROCESSING VALUE CHAIN

4.1 Introduction 173. The global trend of using more wood products from plantation does not yet happen in Cambodia despite the existence of tree plantation activities undertaken in the past years. Yet, natural forests remain the main supply of wood products, resulting in a reduction of the forest covers. The most recent Forestry Statistics of Cambodia (Forestry Administration, 2012) revealed a total forest cover of 10.36 million hectares, representing about 57.07% of total land. About ten years earlier, Cambodia forest covers were estimated at 11.39 million hectares according to the same source covering the 2002-2003 periods. Thus over the pace of 10 years, Cambodia forests suffered a loss of about 1.03 million hectares. The remaining forest covers vary significantly across provinces; from less than 5% in Tonle Sap, Prey Veng, and Takeo to more than 80% in Stung Treng, Mondul Kiri and Preah Vihear (FA, 2012). 174. In the same line of idea and according to the World Development Indicator (WDI); Cambodia is exploiting much of its wood resources in the past decade compared to other countries in the ASEAN

region (22). A comparison of the data from the 2000 (baseline) and the 2014 (end line) shows that Cambodia has the highest deforestation rate close to 3%, followed by Myanmar at 1.8%; and Indonesia at 1.4%. At the other end of the spectrum is Vietnam with a gain of 2% and the Philippines with an overall increase of 1.5% on the total forest covers. 175. In terms of forest areas, Cambodia ranks 52 out of more than 215 countries in the world, with forest areas estimated at 98,392 square kilometers in 2013. Globally, this represents 0.25% of the entire world forest areas. Other surrounding ASEAN countries are ranked above Cambodia; Myanmar is at 20th; Malaysia at 29th; Thailand at 31th; Lao at 36th; and Vietnam at 40th (WDI, World Bank).

Figure 22 Deforestation Rate in ASEAN countries during period 2000-2014 Source: WDI

176. In its National Strategy Development Plan, Cambodia set a target of getting back to 60% of forest cover. This requires substantial effort to reverse the existing unsustainable trend. Among the

actions, the Ministry of Agriculture, Forest and Fisheries (MAFF) had identified actions such as tree


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plantation that private entrepreneurs within the Economic Land Concessions (ELC) project should invest on17; along with the use of rubber trees as possible source of wood at the time of renewal of the plantation (Agricultural Strategy Development Plan 2014-2018). Indeed, the terms of reference of private entrepreneurs in the ELC program specifically include tree plantation. In addition, the Forest Administration (FA, Cambodia Forest Cover Change 2006-2011) suggested transforming 532,615 hectares of non-forest land into tree plantation areas. The RGC also implemented a series of law aiming a reducing illegal logging, transportation, and marketing of forest resources. 177. Currently, the major sources of wood products in Cambodia remain the natural forests: from the clearing of forest by the ELC entrepreneurs, the exploitation of productive forests in some case managed by the communities.

178. The current forest plantations consist of two main species: acacia and eucalyptus. This later is

more commonly planted by farmers in Prey Veng, Svay Rieng, and Takeo. Eucalyptus tree could be exploited by the age of 8 years. On the other hands, industrial forest plantation is marginal. For example, the MAFF (2014) shows target of 22,300 hectares of reforestation in 2015, and call upon private engagement to attain the objective. Indeed, in the agricultural strategy, the RGC will promote reforestation with an objective of at least 25,000 hectares each year. As achievement, from 2008 to 2013, MAFF reports total tree plantation areas of 104,377 hectares, of which close to 90% are made by private companies.

179. MAFF targets to expand forestry community management from 476 in 2014 to 520 in 2015. The total forest area under forestry community management was estimated at 397,745 hectares in 2012 (FA, 2012) involving 451 community forest.

180. The global trend is to see the development of short rotation hardwood plantation to replace the timber and raw material from natural forests as source of wood products.

181. The figures in Table 8 shows the overall distribution of existing forests in Cambodia, using MAFF source as reported in EFI (2014). Table 8 – Breakdown of Existing Forests by Category

Areas Size (million hectares) Regulated by

Protected Areas 3.0 Ministry of Environment

Protected Forests 1.5 MAFF

Community Forests 2.0 MAFF

Forests under Private Concessions 3.2 MAFF

Production Forests 1.2 MAFF

Source: EFI (2014), MAFF

4.2 Evolution of Cambodia’s Wood Processing Sector

17. The ELC program started in 1996. It granted land for free for economic activities including agriculture, agro-industrial plantation, and export processing. The program aims to boost economic development in rural areas, as well as providing jobs for the population. As of June 2012, the RGC had granted 1.2 million hectares of land to 118 domestic and foreign investors. In May 2012, the RGC had enabled a law targeting higher efficiency and better management of the ELC program.


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182. Wood processing industry in Cambodia remains small, providing little value added to the economy. Export is mainly dominated by wood in the rough18 and sawn wood, without further processing with the exception of plywood, veneers, marquetry, and frames. 183. In 2014, Cambodia ranked 65th out of 214 countries in terms of the values of exported wood products (based on Cambodia declaration). The 2014 total values of export are about $176.6 million, representing 1.5% of the overall Cambodia export in that year (ITC data19). The paper and paperboard industry, however, presents a large gap: in 2014 Cambodia imported $ 203.4 million for paper, paperboards, labels and other paper-based products, up by 34% from the 2013 imports of $ 151.8 million. 184. The Royal Government of Cambodia (RGC) is working on the promotion of the wood sector. In the National Strategy Development Plan (NSDP) 2009-2013 and the NSDP 2014-2018 the RGC expects to increase the required investment on the wood industry by 81%, from $90 million during the first period 2009-2013 to $164 million during the second period 2014-2018. The aim is to reach annual growth rate between 8 to 9% for the sector, i.e. 1 to 2 percentage points above the average growth rate of the country (NSDP 2009-2013; NDSP 2014-2018).

4.3 Demand & Trade 4.3.1 Global Production Trends 185. FAOSTAT shows a steady growth of global wood production since 2009, after the economic downturn of the 2008-2009. Round wood, sawn wood, wood pellets and wood-based panels had pulled the production, and compensated the stagnation of the production of pulp and paper due to lower consumption from China. 186. More than half of the global production of wood pellets targets export markets. The overall world production increases by 12%, from 19.6 million tons in 2012 to 22 million tons in 2013. The market is though dominated by the Northern America and Europe, accounting for 96% of the production. The five largest producers are the US, Germany, Canada, Sweden and Latvia, with total production of 12.2 million tons representing 55% of global production. 187. The productions of sawnwood20 and wood-based panels21 are growing in several regions. For sawn wood, the 2013 global productions of 421 million cubic meters, and increase of 4.6% compared to 2012, are pulled by the Chinese import. The increase is up to 22% compared to the 2009 production. In 2013, the Asia-Pacific region produced 122 million m3, which represent about 29% of the global production, but remains net importer with 43 million m3 gap. The top five sawnwood producer countries are The US, Canada, China, Russian Federation, and Germany.

18 Wood in the rough is a specification of wood product by the International Trade Center and defined as timber in the natural felled state, tree stumps and roots, but which may have branches, sapwood, inner or outer bark and rough protuberances removed. Minor processing, such as having been split by wedges or hewn into baulks are acceptable. Wood sawn into typical or nominal lumber sizes such as S2S and S4S are not categorized as Wood in the rough. 19 International Trade Center data uses the categories of sub-products presented in Annex A. The database includes the values of import and exports as well as the country of origin of the transactions. 20 By definition, sawnwood encompasses planks, beams, boards, laths that exceed 5 mm in thickness. It includes sawnwood that is planed, unplaned, grooved, chamfered, beaded, etc… but exclude wood flooring. 21 Wood-based panels include four products: veneer sheets, plywood, particleboard, and fiberboard.


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188. For wood-based panels, the global production increased by 7.8% in 2013, from 332 million in 2012 to 358 million m3 in 2013. In the Asia-Pacific region, the regional plywood production attained 216 million m3, which corresponds to 60% of the global production. This region has seen an increase of 59% of its wood-based panel production between 2009 and 2013. The improvement on the Russian Federation wood processing industry had also change the shape of the production, resulting in higher outputs and higher export. Asia is a net importer for wood-based panels, with excess production ranging from 3.5 to 5 million m3 each year. The top-five wood-based panel producers are China, the US, Russian Federation, Germany, and Canada; and provides 67% of the global production.

189. Production of industrial wood in the rough is also increasing from 1,537 million cubic meters in 2009 to 1,737 cubic million meters in 2013. The increase is pulled by the production in Asia-Pacific regions, which nonetheless remain a net importer of industrial roundwood (gap of 34 million m3). About 54% of global productions are from 5 countries: The US, China, Brazil, Russian Federation, and Canada. Significant proportion of wood in the rough from Brazil and China are from planted forests. Global exports of round wood are relatively small, with a market dominated by the Russian Federation.

190. Production of papers and wood pulps remains stationary in the past four years, as well the production of fiber-furnish22. The global production for fiber-furnish is estimated at 400 million m3. The leading fiber-furnish producers and exporter is the US, with relatively important contribution of recovered paper pulp from paper recycling.

191. Production of marquetry and furniture are relatively small compared to the other wood sub-sectors. Data from the ITC shows that in 2014, the global import for this sub-sector of wood processing is about $1.8 billion, and the market for frames and furniture is about $1.23 billion. Table 9 – Global Production and Trade of Forest Products in 2013

Product Unit 2013 Production

Change compared to

2000

2013 export Change compared to

2000

Roundwood Million m3 3,591 4% 137 16%

Wood fuel Million m3 1,854 5% 8 129%

Industrial round wood Million m3 1,737 3% 128 12%

Sawnwood Million m3 413 9% 124 10%

Wood-base panels Million m3 358 92% 77 36%

Veneer and plywood Million m3 146 119% 29 30%

Particle and fiberboards Million m3 212 77% 49 40%

Wood Pulp Million tons 174 2% 58 50%

Other fiber pulp Million tons 14 -10% 0 20%

Recovered paper Million tons 215 50% 56 125%

Paper and paperboard Million tons 398 22% 109 12%

Source: FAOSTAT, 2014

4.3.2 Global Demand Trends 192. According to the International Trade Center data, the global demand for wood products reached $144.8 billion dollars in 201423. The top-five importer countries are China (16%); the U.S (12.0%); Japan (8%); Germany (6%); and the U.K (5%). By regional markets, the EU is the largest consumers of wood in the world, accounting for 65% of the global demand. The demand trends in

22 Fiber-furnish are the raw material used to manufacture paper and paperboard. 23 Data from FAO suggests $274 billion international trade in wood production in 2013, including paper and paperboard trade.


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each of these countries are all increasing, however with variability in the magnitude: steady in China and the U.S; moderate in Japan; and relatively low in European countries (FAO STAT, 2014).

Figure 23 Top-five Wood Products Importers and World Demand Source: ITC

Figure 24 Share of Values of Imports by Countries in 2014 Source: ITC

193. The increase of the total value of the global imports is strong with an annual growth rate above 8.2%, which corresponds to $8.5 to 9 billion per year. If the forecast is based on a continuous increase of the demand at the same rate as in the past 5 years, the global demand for wood products could reach $215 billion by 2020. 194. Wood in the rough: The major importers are European countries such as Austria, Germany, Sweden, and Finland (30 million m3), in addition to China. The demand from these five countries accounts for 60% of the global imports in 2013. About 20% of China’s demand on roundwood (46 million m3) is from import.

195. Sawnwood: The increase of the global demand is again pulled by the steep increase of the demand in China, from 42 million m3 in 2009 to 88 million m3 in 2013. The demand in the U.S. had also increase though at lower magnitude, from 63 million m3 to 83 million m3 over the same period.

196. For wood-based panels, the highest demand came from the largest producers i.e. China, USA, Russian Federation, and Germany. The fifth highest consumption country is Brazil.

197. For the past five years, China remains by far the largest importer of raw material for paper and paperboard. The other countries are Germany, the US, Korea, and Italy. Together, the values of the imports from these countries account for 62% of the global import. About 30 to 40% of the supply of fiber-furnish in China, Germany, and Korea depends on import. 198. The top-five importers of wood pellets are all European countries: UK, Denmark, Italy, Belgium, and Sweden; and account for 74% of the global import in 2013.

4.3.3 Global Supply Trends 199. According to the International Trade Center data, the global supply for wood products reached $142.2 billion dollars in 2014 (Figure 25). Overall, the global wood supply is dominated by few countries, the top-ten supplier (out of 218 countries) accounts for 56% of the global demand, and the top-20 accounts for 73% of the global demand (Figure 26). In this ranking, Cambodia is at the 65th with a total export of $176.6 million in 2014. 200. Over the next decades, woods from plantation will be more preponderant in the global industrial wood market, along with a reduction of the supply of large diameter logs (Alan et al, 2000).


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The prediction was an increase by 67% of the wood from plantations, from 624 million cubic meters in 2000 to 1,043 million cubic meters in 2010. In Asia, the increase would be from 32% in 2000 to 46% in 2020, and 48% in 2040.

Figure 25 Top-five Wood Products Exporters and World Supply Source: ITC

Figure 26 Share of Values of Exports by Countries in 2014 Source: ITC

201. The analysis by sub-sector shows that five countries dominated the sawnwood export, with 60% of the global market share (FAO STAT, 2014). These are Canada, Russian Federation, Germany, Sweden, and Finland, which supply 75 million m3 of sawnwood to the world market in 2013. 202. Two out of the five largest exporters of wood-based panels are in the ASEAN market (Malaysia, Thailand), another one in East Asia (China) and the remaining two are Germany and Canada. The increase on the global supply is pulled by the jump of 75% of Chinese production over the period 2009-2012. Currently, the domestic demand in China is also growing putting a halt on its export. Within this sub-sector, plywood and veneers production accounts for 41% of the WBP supply production in 2013 at 146 million m3. The increase on the production of fiberboards and particle board remains low.

203. In the past four years, exports of roundwood from Russia and France are declining but the global exports remains steady because of the increases from other lead export countries (USA, New Zealand, and Canada).

204. For wood pellets, the top-five exporters are among the largest producers i.e. the US, Canada, Latvia; with two other countries Portugal and the Russian Federation. These countries supply 56% of the overall global export of 12.5 million tons in 2013.

4.3.4 Cambodian Exports 205. Cambodia exports wood products to two dozens of countries, the main and regular clients are China, the US, Vietnam, Thailand, and Singapore. Japan joined the list in 2012 with export value of $1.46 million (4th partner). Over the past years, Cambodia exports of wood products are increasing. Data from Trademap shows an annual $25 million increase on the values of exports24. This trend took into account the low performance of 2012 when export values were only at $ 21 million, i.e. 60% lower than the 2011 export of $52 million and 44% lower compared to the 2011 export of $38 million. For 2014, data feeding the Trademap system from partner countries show a steep increase of export to

24 Exports from Cambodia were estimated from reported imports from other countries, which are indeed higher than the reported recorded figures from Cambodia.


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$176 million, which represents more than 130% of 2012 and about 8% higher compared to the previous year 201325.

Figure 27 Values in Million $ of Export and Import of Wood Products by Cambodia Source: ITC

Figure 28 Destination of Wood Products from Cambodia Export in 2013 Source: ITC

206. According to the data reported by Cambodia on the export of wood products, China remains the main partner for Cambodia’s wood export with 53% of the total value exported in 2013 (Trademap, based on import data from Cambodia to partner countries). Indeed, China had been interested in the wood processing industry in Cambodia since the independence of the country. During the Sihanouk regime, China bilateral investment focused on establishing a plywood plant and a 5,000-ton paper mill factory (Chhair S. et al, 2014). Export to European countries were marginal. 207. Consolidated data on the import of different countries from Cambodia supports the 2013 patterns that China and Vietnam are the main destination for Cambodia wood products, with 82 to 84% of the Cambodia exports. During the 2009 to 2013 period (5 years), the total import of China from Cambodia amounts to $184.8 million (40% of Cambodia total exports) and the total import of Vietnam sums to $204 million (44% of the Cambodia total exports). The export figures during the period 2010-2014 show similar patterns with 82% of total exports from Cambodia to China and Vietnam.

Table 10 Exports of Wood Products from Cambodia (Values in million $)

Partners 2009-2013 Period 2010-2014 Period

Export to all countries 464.9 100% 588.5 100%

Export to China 184.8 40% 316.2 54%

Export to Vietnam 204.0 44% 167.2 28%

Source: ITC 208. Cambodia exports of wood products are yet dominated by unprocessed or roughly processed wood, leaving few-to no value added to the country. In 2014, about 90% of the exports are wood in the rough and sawn wood; only 5% is constituted by plywood, veneers, and laminated woods. The remaining 5% are from various sub-sectors including pellets, construction woods, flowing, marquetry, and furniture. 209. According to the 2014-2015 Annual Report for Agriculture Forestry and Fisheries; there are about 467 small, medium, and large enterprises legally processing forest products. They supply both the domestic and the export demand. In addition, there are about 690 depots of forest products targeting the domestic demand. However, in light of the type of wood products exported by

25 These data are from the importing countries, which are much higher than the exports reported by Cambodia in the ITC database.


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Cambodia, it is more likely that the wood processing industry is yet dominated by small units, capable of supplying domestic demand but not equipped to be able to provide export quality wood products. 210. In sum, Cambodian exports aim at the ASEAN market mainly China and likely consist of supplying wood manufacturing companies to this regional markets.

Figure 29 Share by Values of Cambodia Exports in 2013 and 2014

Source: ITC 211. Statistics from MAFF (Annex B) is another source of information on wood products exported by Cambodia from 2009 to 2014. However, the data provided only the quantities exported so the need for further analysis that the consultant will conduct later.

4.3.5 Cambodian Demand & Imports 212. A large part of Cambodia demand for woods is yet constituted by household energy consumption. The NSDP 2014-2018 aims at reducing the percentage of households relying on wood energy to 52% by 2018; a sharp decline of 10 percentage points from 62% in 2009. 213. For other wood products, domestic demand consists of wood for construction and flooring, wood-based panels especially plywood, furniture and handicraft. In 2014, Cambodia imported $13.1 million of wood products, up by 89% compared to the import in 2013. Plywood, veneers, laminated wood, wood particles and chips dominate Cambodia imports. These categories accounted for 65% of the imported values in 2014 and 88% in 2013 (Figure 29). In 2014, Cambodia also imported $1.24 million of construction woods and $450,000 worth of furniture.

Figure 30 Share by Values of Cambodia Imports in 2013 and 2014

Source: ITC


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4.4 Market Development & Trends 214. For domestic demand, a study by the Forest Administration and GTZ (FA, 2004) estimated the demand for wood product for domestic consumption at 240,000 m3 in 2020 and 307,000 m3 in 2030. This includes sawn timber for building houses with projected demand around 200,000 m3 in 2015 and 260,000 m3 in 2030. 215. For furniture, the demand will follow the increase of the living condition of the Cambodian people. In addition, the domestic demand for luxury wood is also increasing. Currently, most of the furniture is marketed in Phnom Penh; the supply came from different provinces closer to the wood production and collection sites e.g. Steung Treng, Kratie, Pailin, Siem Reap, Oddar Meanchey, and Beung Trabek district. In 2004, the FA study estimated at 290 the number of small manufacturers of furniture in Cambodia, half of that are located in Phnom Penh. Discussions with current furniture makers in Phnom Penh pointed out that they mostly polish and refine the furniture from the provinces, before sales. The total annual demand for wood for furniture is estimated at 21,000 m3, of which 20% would be luxury wood. The production targets mostly domestic consumption but some are also exported.

4.5 Preliminary Value Chain Mapping

Figure 31 Preliminary Mapping of the Wood Processing Value Chain

216. A preliminary mapping shows the big group of players in the wood processing value chain: the producers, the sawmills, the wood processors, and the distribution (domestic or export). Though the export of unprocessed wood is illegal, data from FAO and ITC had shown trading of wood in the rough i.e. roundwood with the minimum processing, thus the arrow from production to exports and domestic use. The most common path would be from wood production to sawmill then transport of sawnwood to the next level i.e. domestic sales or exports. 217. The domestic and export blocks would include several sub-groups from the buyers, domestic and foreign wholesalers, domestic retailers, and the end-consumers of wood products.

4.5.1 Key Actors


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218. Three major groups of actors ensure the production of raw wood products: the clearing from ELC, production from community forests, and tree plantation. Other sources include wood from hydropower projects, imported timber, and confiscated timber after court judgment and auctions, and harvesting coupes (EFI, 2014). 219. The Forestry Statistics (2012) indicates the existence of 451 community forests which are managing 397,745 hectares of forests, thus possible sustainable source of wood products. EFI (2004) presented a table showing the list of forest concessions (still valid after the RGC took back some forest concessions) under private management, which in total reaches 3.37 million hectares and would constitutes major source of wood products. Table 11 – Forest under private concessions

Province Name Area (hectares)

Kampong Thom Colexim Enterprise 147,187

Kratie Casotim Enterprise 131,380

Mondoulkiri, Kratie, Kampong Cham SI. International 467,484

Kampong Speu, Koh Kong SI. International 298,598

Kratie, Kampong Thom Pheapimex Fuchang Cambodia 137,475

Stung Treng 221,250

Stung Treng, Ratanakiri 350,000

Preah Vihear Cambodia Chemdar Plywood 103,300

Siem Reap Sam Rong Wood Industry 200,050

Kratie, Stung Treng Everbright CIG Wood 136,376

Pursat, Kampong Speu Suer Wood IPEP 94,418

Kg Cham, Kratie, Preah Vihear Timas Resources 161,450

Koh Kong, Pursat Silveroad Wood Products 215,460

Koh Kong 100,000

Pursat, Battambang You Rysaco 214,000

Siem Reap, Preah Vihear TPP Cambodia Timber 395,900

Total 3,374,328

Source: EFI (2014) 220. ELC are associated with sawn mill as these units often process their timber on site. Data from MAFF (2012) shows that 38 wood processing units linked to ELCs (among the initial 98 ELCs) are yet operating and another six are currently requesting to continue their operations (Table 12). The consultant plans to visit some of these units during the field work, but the effectiveness of such work plan depends on several factors including specific introduction letter from the MOC and TTRI, and the willingness of the unit staff to answer the questions of the study and to provide the consultant key data related to supply, markets, and prices. The full list of ELCs, including those with expired license, is presented in Annex C.

Table 12 – List of ELC still operating or asking for continuation by province

Name of the firms Operating Asking for Continuing

Steung Treng 1. Green Sea Agriculture Co, Ltd 2. Ang En Associate Lawyer

1. Sal Sophea Investment 2. Po Mady Investment

Group 3. Siv Gak Investment

Kratie 3. Sok Samrach Co, Ltd 4. Chhong Hong Rubber Co, Ltd 5. New Line Cam PTY, Ltd 6. Sing Bay O Tek

5. Asia World Ag. Development

6. Duong Sruoch Rubber Dev


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7. Duoung Sruoch Eastern 8. Bonh Phuoc Kratie Rubber 9. China Dynamic Investment

Kampong Thom 10. HMH Co, Ltd (El Taral) 11. Sok Samnag CRCK

Ratanakiri 12. CRD (Cheng Bo Ying) 13. MDP Ltd 14. Chaing Ly Inv.

Mondoulkiri 15. Pacific Company Ltd 16. Pacific Grand Company Ltd 17. Pacific Lotus Company 18. Pacific Bright Company 19. Duong Sruoch Company 20. Ly Rithy Group

Kandal and Phnom Penh 21. Brightway Furniture Co, Ltd 22. Wood Co, Ltd 23. MDS Import Export 24. Phirom Import Export Co, Ltd 25. Leang Sroun Heng 26. Hammer Wood Cam

Kampong Cham 27. Meing Lyheng 28. Cambodia Chemdar Plywood 29. Thavy Inv. (Memot and Svay

Teap) 30. Kong Heng Tanak 31. Lim Bunna

Koh Kong province 32. CETIC International Hydropower Development

Pursat 33. MDS

Preah Vihear 34. Duong Sruoch, Romdoh Sre 35. Duong Sruoch (Kolen) 36. Unit in Rovieng 37. China Gate Rovieng

221. Beyond the industrial saw mill in the list presented above, other sawmills would consist of small units equipped with mechanical saw to split and cut logs. These units are more likely to be located closer to the final consumers (Phnom Penh and other large cities). 222. The wood processing block in the Figure 31 includes several types and several sizes of actors depending on the sub-sectors. For furniture and handicraft, wood processing consists mainly of small entrepreneurs using skilled labor and small equipment such as electric or mechanical circular saw and chisels. For plywood and wood-based panels, there are some relatively large plants in Phnom Penh (eg Angkor Plywood Co., Chemdar Plywood Co; see more in Annex 6). These plants also manufacture veneers using luxury wood. Wood processors would also include pellet producers.

223. Using data from the National Institute of Statistics, Chhair et al (2014) calculated that in 2011; about 2.95% (2,294 units) of the registered establishments in Cambodia work in the wood, paper and printing industry (Figure 32). Most of these establishments are micro (84%), which often do not have paid employees. Small units account for about 12%; and medium and large size establishment each accounts for 1.5%. Establishment working in the furniture and handicraft business could partially use wood as raw material26, thus possible additional units in the wood processing value chain. There are 3,031 establishments of this nature in 2011, resulting in a possible overall total of 5,305.

26 Some of these furniture and handicraft units use other raw materials such as stone, iron, clay, etc.


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Figure 32 Distribution of Wood Processing Industry by Size (Base = 2,274 units)

Figure 33 Distribution of Wood Processing Industry by Age (Base = 2,274 units)

224. According to the same study (Chhair et al, 2014); the average number of employees per wood processing unit is about 5.5 (excluding handicraft and furniture makers). Such low average supports the dominance of micro and small enterprises in the sector (Figure 32). For the sake of comparison, the national average number of employees per unit is 7.2; and could go as high as 14.9 for the textile, wearing apparels and footwear and 10.2 for the construction sector. 225. By age, more than half of the establishments in the wood processing sector started less than 10 years ago: 42% in the last five years and 14% between five and ten years old (Figure 33). Source from FA (2004) indicated that half of the wood processing units are located in Phnom Penh and half in the provinces. Data from MAFF (2014) also reported that there are 467 factories that legally process forest products in 2013, in addition to 690 depots of forest products for the domestic market.

4.5.2 Features 226. To be developed after meeting with the main actors in the value chain, especially wood processing entrepreneurs.

4.5.3 Relations 227. To be developed after meeting with the main actors in the value chain, especially wood processing entrepreneurs. 228. The Cambodia Timber Industry Association is the coordination body among the actors in the value chain. So far, no information has been obtained from the entity. It is one of the key informants the consultant will need to talk with.

4.6 Production 1. To be developed after meeting with the main actors in the value chain, especially wood processing entrepreneurs.

4.6.1 Production Cost & Product Pricing 229. To be developed after meeting with the main actors in the value chain, especially wood processing entrepreneurs.


52

4.6.2 Structure of production 2. To be developed after meeting with the main actors in the value chain, especially wood processing entrepreneurs.

4.6.3 Volume of production 230. To be developed after meeting with the main actors in the value chain, especially wood processing entrepreneurs.

4.6.4 Technology 231. Technology for each subsector will be developed, with suggestions for improvement if necessary.

4.6.5 Supply chain 232. To be developed after meeting with the main actors in the value chain, especially wood processing entrepreneurs.

4.6.6 Labor 233. To be developed after meeting with the main actors in the value chain, especially wood processing entrepreneurs.

4.7 Policies 234. In 2011, Cambodia started the negotiation of a Voluntary Partnership Agreement (VPA) with the European Union, and with support from the Forest, Law Enforcement, Governance and Trade (FLEGT) facility. FLEGT is the EU system aiming at improving governance and promoting trade of legally produced timber. Each country has its own VPA, tailored to the prevailing laws and forest rights, with involvement of various stakeholders such as farmers, NGOs, etc. After implementation of the VPA and a successful evaluation of the mechanism, Cambodia can export FLEGT licensed timber and processed wood to the European Union. 235. More generally, Cambodia exports may get free market access to most of the ASEAN countries. Export to Europe would benefit from the Generalized System of Preference (GSP) scheme, more specifically the Everything but Arm (EbA) mechanism.

236. Export to the U.S. may benefit from the extension of the American Growth Opportunity Act (AGOA) until 2015 as processed wood is included in the list of tax exempt goods. However, the 1900 Lacey Act and its 2008 amendment will limit export of wood if Cambodia fails to successfully implement its law against illegal logging and natural forest preservation. Indeed, the Lacy Act prohibits trade in plants that have been illegally taken possessed, transported, or sold to the U.S. 237. Export of wood to Australia will be also regulated by the Australian Illegal Logging Prohibition Act of 2012.

4.8 SWOT Analysis


53

238. The following table will be completed after getting more inputs from discussions with key actors in the value chains. Table 13 – Draft SWOT Analysis

Strengths Weaknesses

Forest area representing more than 50% of total area

National Strategy includes move toward more sustainable wood production through plantation and community forestry management

Difficulty in getting reliable supply data?

Lack of skilled wood handcrafters

Cost of transportation

Opportunities Threats

Partnering with the EU FLEGT project, Australian Illegal Logging Act, lacey Act

Increasing global demand for wood products

Gap on supply for roundwood, sawnwood, and fiber furnish in Asia Pacific region

Large gap on paper and paperboard for domestic demand

Difficulty in certification of legal logging, a requirement to export to developed country markets (US, EU, Australia)

Competition from other natural forest rich countries in ASEAN e.g. Myanmar, Lao

4.9 Information Gap Analysis 239. Attempts to reach entrepreneurs involved on wood processing industry had been so far hampered by the lack of “letter of introduction” from TTRI and the Ministry of Commerce. The wood industry is a quite sensitive sector in Cambodia, thus the reluctance of many respondents to meet with the consultant without signed letter from the authority. Even with the letter, there is a risk that entrepreneurs will not respond to the key questions required to conduct the value chain analysis. 240. Analysis by sub-sector: For wood processing, the analysis will be conducted by sub-sector. The Consultant identified the following: roundwood, sawnwood, S2S and S4S, wood-based panel, pellets, furniture, handicraft, and flooring and construction woods. During the field work data collection, the Consultant will try to discuss with a couple of entrepreneurs or group of entrepreneurs within each sub-sector.

241. Cost of production. In order to assess incentives to enter the wood processing business, the Consultant will assess the cost of production and the return to labor for each sub-sector. The cost of wood production would be assessed from the cost of tree plantation such as Teak or Acacia. 242. Margins. In order to understand incentives to investment by private enterprises, the Consultant will estimate the margins for each sub-sector.

243. Cost of Investment. The Consultant will estimate the average costs of investment for each sub-sector to enter each type of business in order to provide entrepreneurs an idea of the requested financial requirements. The average interest rate and the loan duration when borrowing money for investment are also requested. 244. Alternative technologies. The enterprise survey will allow the Consultant to inventory the existing technologies, their limitation, and the opportunity for upgrading the value chain.


54

245. Competition between households use and export of wood processing. Export of wood products will be under strong competition from the domestic demands, which are mainly wood for energy, construction and in smaller magnitude wood for furniture and handicraft. The Consultant will assess the driving factors to reduce the competition among these two main uses. 246. Market opportunities. Both domestic demand for wood processing products and potential export demand will be assess through market surveys and interviews with buyers and secondary data.

247. Other costs: To complete the competitiveness of Cambodia wood product for export, the Consultant will collect the cost of transportation between main forest zones and Phnom Penh, as well between Phnom Penh and the port of export or the nearest border; the fees and other taxes when transporting wood products, royalties to the RGC, taxes and tariffs for exported and imported wood products. The costs of freight to and from Cambodia to the main and possible countries of imports and exports are also required for the competitiveness analysis.

248. Other information: The loss during the processing e.g. loss of weigh drying, loss of wood during sawing, and the use and prices of by-products are also necessary information to collect.

4.10 References Alan O., Miller R., (2000), Wood Supply and Demand Issues in the Pacific Rim, New Zealand Journal of Forest, November 2000 Chhair S., Ung L., (2014), Economic History of Industrialization in Cambodia, Learning to Compete, Working Paper No 7. EFI (2014), Understanding timber flows and control in Cambodia in the context of FLEGT FORESTRY ADMINISTRATION, (2011), Cambodia Forest Cover Change 2006-2010. Phnom Penh, Cambodia. FAO (2014), Forest Products Statistics; 2013 Global Forest Products Facts and Figures

Forestry Administration, CGFP/GTZ (2004), Project for the study on the use and supply of timber/wood in Cambodia

MAFF (2014), Evaluation of Agricultural Strategic Development Plan, 2014-2018.


55

ANNEX 4: CATEGORIES OF WOOD PRODUCTS (44) PER THE ITC NOMENCLATURE Table 14 Categories of Wood Products

Product code Product label

'4403 Wood in the rough

'4407 Wood sawn/chipped lengthwise, sliced/peeled

'4412 Plywood, veneered panels and similar laminated wood

'4402 Wood charcoal (including shell or nut charcoal)

'4408 Veneer sheets&sheets for plywood &other wood sawn lengthwise

'4414 Wooden frames for paintings,photographs, mirrors or similar objects

'4420 Wood marquetry & inlaid wood; caskets & cases or cutlery of wood

'4418 Builders' joinery & carpentry of wood

'4421 Articles of wood, nes

'4409 Wood continuously shaped along any edges

'4401 Fuel wood; wood in chips or particles; sawdust&wood waste&scrap

'4419 Tableware and kitchenware of wood

'4410 Particle board and similar board of wood or other ligneous materials

'4415 Packaging materials of wood

'4416 Casks,barrels,vats,tubs etc. of wood

'4417 Tools, tool & broom bodies & handles, shoe lasts of wood

'4413 Densified wood, in blocks, plates, strips or profile shapes

'4411 Fibreboard of wood or other ligneous materials

'4404 Hoopwood; split poles; piles, pickets, stakes;chipwood

'4405 Wood wool; wood flour

'4406 Railway or tramway sleepers (cross-ties) of wood


56

ANNEX 5: EXPORT OF WOOD PROCESSED PRODUCTS BY CAMBODIA (SOURCE: MAFF) Table 15 Export of Cambodia Wood Processed Products

Product 2009 2010 2011 2012 2013 2014 TOTAL

Log - - - - - - -

Sawn Timer - - - - - - -

S2S & S4S 484.000 816.000 501.000 1,763.000 144.000 12.309 12,009.309

Veneer - - 858.000 200.000 4,500.000 2,000.000 82,045.000

Plywood - - 297.000 - 1,500.000 - 50,279.000

Furniture - 7.000 108.000 - - - 392.000

Flooring board 250.000 - 824.000 - 283.723 - 3,050.723

Railway sleeper - - - - - - 1,824.000

Square wood with a maximum width/thickness of 25cm 3,141.000 13,074 25,212 12,230 33,314 73,079 160,518.000

processed wood under high pressure of sawndust - - - - - - 314.000

Wood toy - - - - - - 21.000

Daily used Equipment and tools (m3) - - - 2,000.000 - 200.000 2,365.000

Processed wood from acacia and Eucalyptus camaldulensis Dehnh (m3) - - - - - - 211.000

Processed wood from acacia and Eucalyptus camaldulensis Dehnh 993.000 - - - - 250.000 9,255.000

Acacia venner and Eucalyptus camaldulensis Dehnh (Ton) - 32,257.000 68,000.000 15,000.000 18,223.000 3,000.000 149,480.000

Sawn timer of Aquilaria crassna Pierre (Ton) 10.000 - - - - - 10.000

Veneer made from processed wood (ton) - - - - 1,000.000 899.000 1,899.000

TOTAL (m3) 3,875.00 13,897.00 27,800.00 16,193.00 39,742.00 75,292.00 313,029.00

TOTAL (Ton) 10.00 32,257.00 68,000.00 15,000.00 19,223.00 3,899.00 151,389.00

TOTAL (CBM) 993.00 - - - - 250.00 9,255.00

Value Chain Analysis of Three Cambodian Export Products – inception Report

Agrifood Consulting International 57

ANNEX 6: LIST OF SAWMILLS AND WOOD PROCESSING FIRMS PROCESSING BY-PRODUCT OF FOREST Table 16 List of Sawmills and Wood Processing Firms

No Company’s Name Location source/ product Situation Remarks

Steung Treng Province

1 Cassava Powder Producing

Samaki Commune, Steung Treng

- Economic Land - Processing

wood

No operation

permanently

2 GG World Group Cambodai

Samaki Commune, Steung Treng


wood

No operation

expired

3 Grand Land Agriculture Development (Cambodia) Co., Ltd

Kbal Romeas Commune, Se San


wood

Moved out permanently

4 Sal Sophea Investment Kom Phan Coomune, Se San


wood

No operation

Asking for continuing

5 Sopheakika Investment… Kbal Romeas Commune, Se San


wood

Moved out expired

6 Po Mady Investment Group

Sre Kor Commune, Se San


wood

No operation


7 Green Sea Agriculture, Co.,Ltd

Sakaki Commune, Steung Treng


wood

Operating 1 year

8 Siv Gak Investment Kbal Romeas Commune, Se San


wood

No operation


9 UN Inter Trading & Development Group



wood

No Operation

Expired

10 Research Mining Development



wood

No Operation

1 year

11 Ang En Associate Lawyer Sre Kor Commune, Se San


wood

Operating 1 year

Kratie Province

12 Green Island Agricultural Development (Cambodia)

Kbal Damrey Commune, Samboo


wood

No operation

1 year

13 Asia World Agricultural Development (Cambodia)

Kbal Damrey Commune, Samboo


wood

No operation


14 Tong Min Group….Cambodia

Sambok Commune, Kratie


wood

No operation

Expired

15 Sok Samrach Co., Ltd 2 Thnuo Commune, Snuol

- Dy Dok Company

- Plywood

Operating 1 year

16 Duong Sruoch (Dong Po Kratie Rubber Development)

Roluos Meanchey Commune, Samboo


wood

No operation

Expired



17 Duong Sruoch (Dong Nay Kratie Rubber Development)

Or Krieng Commune, Samboo


wood

No operation


18 Chhon Hong Rubber Co.,Ltd

Kampong Cham Commune, Samboo


wood

Operating 1 year

19 Chan Sophea Development

Damrey Phong Commune, Chloung


wood

Moved out Expired

20 CHPB Co.,LTD Kampong Cham Commune, Samboo


wood

No operation

Expired

21 New Line Cam PTY.,LTD Roluos Meanchey Commune, Samboo


wood

Operating 1 year

22 Sing Bay O Tek Kampong Cham Commune, Samboo

Station Operating 15 years

23 Duong Sruoch EASTERN RUBBER

Kreum Commune, Snuol


wood

Operating 1 year

24 Binh Phuoc Kratie Rubber

Kreum Commune, Snuol


wood

Operating 1 year

25 Thy Vin (Doung Nay) Or Krieng Commune, Samboo


wood

Expired

26 China Dynamic Investment

Roluos Meanchey Commune, Samboo


wood

Operating 1 year

Kampong Thom Province

27 H.M.H Co., Ltd (changed to El Tara)

Balang Commune, Baray

- Cultivating tree - Processing

wood

Operating 1 year

28 Duong Sruoch Chhouk Commune, Brasat Samboo

- Cultivating tree - Processing

wood

Moved out Expired

29 Ratanak Cam A Go Industry., Ltd

Tom Ring Commune, Sandann


wood

Moved out Expired

30 Tan Bien Kampong Thom Rubber Development

Kro Ya Commune, San Tok


wood

No operation

Expired

31 Gold …San (Cambodia) A/C


- Economic Land - Industry

No operation, No mill

Expired

32 Seng Saravuth Meanrith Commune, Sandann

- Forest (ព្រៃគុប) Moved out Expired

33 Duong Sruoch Meanrith and Tan Bien



wood

Moved out Expired

34 KOL VEASNA INVESTMENT

Salavisay Commune, Brasat Balng


wood

Moved out Expired

35 Sok Samnag C.R.C.K Dang Kambith Commune, Sandann

- Economic Land Operating 1 year



- Processing wood

36 Chea Mey Meanpich Group

Dang Kambith Commune, Sandann


wood

No operation

9 months

Ratanakiri Province

37 30/4 GIALAI (Cambodia) Co., Ltd changed to Day Dong Yer

Bok Nhe Commune, Or Yadav


wood

Moved out Expired

38 Heng Development Changed to ( 7 Makara Thary….)

Nhang Commune, Angdoung Meas


wood

Moved out Expired

39 Kiri Development Phnom Kok Commune, Vern Sai


wood

Moved out Expired

40 Duong Sruoch …..Rubber Development

Phnom Kok Commune, Vern Sai


wood

No operation

Expired

41 Duong Sruoch ….Ratanakiri Rubber Development

Taveng Ler Commune, Taveng


wood

No operation

Expired

42 Heng Brother Malik Commune, Angdoung Meas


wood

Moved out Expired

43 C.R.D Changed to Cheng Bo Ying

Laak Commune, Or Chom


wood

Operating 1 year

44 Rubber …..B.M…Stock Seda Commune, Lom Phatt


wood

No operation, No mill

Expired

45 Holdy Eco Industry (Cambodia)

Trapeang Kraham Commune, Koun Mom


wood

No operation

Expired

46 M.D.H……,LtD Talev Nhang Commune, Angdoung Meas


wood

Operating Asking for continuing

47 Chea Chanrith Development

Kok Commune, Bakeo


wood

No operation

48 Chaing Ly Investment Malik Commune, Angdoung Meas


wood


Mondoulkiri Province

49 Coviphama Co., Ltd Buo Sra Commune, Pich Da


wood

No operation

Expired

50 D.T.C Group Co.,Ltd Pochrey Commune, Pich Da


wood

No operation

Expired

51 Varanasy Co.,Ltd Buo Sra Commune, Pich Da


wood

Moved out Expired

52 Muhibbah Masteron Cambodia JV. LTD

Chong Phleas Commune, Keo Sima


wood

No operation

1 year



53 Mean Sochea Trading Buo Sra Commune, Pich Da


wood

Moved out Expired

54 Rithy Mony Samnang Leap

Ya Commune, Koh Nhek

- Forest - Processing

wood

Moved out 1 year

55 Pacific….Company Limited



wood

Operating 1 year

56 Pacific Grand ….Company



wood

Operating 1 year

57 Pacific Lotus………Company



wood

Operating 1 year

58 Pacific Bright……..Company



wood

Operating 1 year

59 Duong Sruoch …..Kratie Company

Sre Preah Commune, Keo Sima


wood

Operating 1 year

60 Ly Rithy Group Sre Sangkom Commune, Koh Nhek


wood

Operating 1 year

Siem Reap Province

61 Samrong Rubber Industry P.T.E

Sre Noy Commune, Varin


wood

Moved out Expired

62 Ken Limited (Duong Sruoch-Bun Ravuth)

Sre Robeng Commune, Svay Ler


wood

Moved out Expired

63 Duong Sruoch Sre Robeng Commune, Svay Ler

- Processing wood

Moved out Expired

Kandal Province and Phnom Penh

64 BRIGHTWAY FURNITURE Co.,Ltd

Perk Commune, Ang Snuol

- Importing and buying furniture

Operating 1 year

65 …..Wood Co., Ltd Prek Ang Chanh Commune, Mouk Kampol

- Collecting and buying plywood

Operating 2 year

66 MDS Import Export Perk Commune, Ang Snuol

- A Tai - Handicraft

Operating 5 year

67 Phirom Import Export Co., Ltd Handicraft

Phnom Penh Thmey, Sen Sok

- Imported - Processing

wood

Operating Asking for continuing since 2012

68 Leang Sroun Heng Prak Pra, Meanchey - Imported - Processing

wood


69 Hammer Wood Cam Kraing Thnong, Por Senchey

furniture Operating 1 year

Kampong Cham Province

70 Meing Lyheng Tonle Bit Commune, Thbuong Khmom

- Concession forest

- Processing wood

Operating Permanently



71 Cambodia Cherndar Plywood

Ampil Commune, Kampong Siem

- Concession forest

- plywood

Operating Permanently

72 Men Saron Cham Kravein Commune, Memot

- Economic land - Processing

wood

Moved out Expired

73 Thavy Investment Dar Commune, Memot

- Buying cultivated tree

- Processing wood

Operating 3 years

74 Thavy Investment Roka Po5 Commune, Thboung Khmom


- Processing wood

No operation

3 years

75 Thavy Investment Svay Teap Commune, Chamkar Ler


- Processing wood

Operating 3 years

76 Kong Heng Tanak Chop Commune, Thboung Khmom


- Processing wood

Operating Expred

77 Lim Bunna Trapeang Thloung Commune, Pon Nhea Krek

- Dam - Processing

wood

Operating 1 year

Koh Kong Province

78 Khiev Sosileap Bakk Khlong Commune, Mondoul Sima

- Dam - Processing

wood

Moved out Expired

79 Timber Green Co., Ltd Bakk Khlong Commune, Mondoul Sima

- Dam - Processing

wood

Moved out Expired

80 CETIC International Hydropower Development

Dang Peng Commune, Sre Ambil

- Dam Kirirom3 - Processing

wood


Odormeanchey Province

81 Angkor Sugar Co., Ltd Koun Kreal Commune, Samrong


wood

No operation, no mill

1 year

82 ……………. - Economic Land - Processing

wood

No operation

Expired

83 ………………….. Koun Kreal Commune, Samrong

No operation

Expired

84 ……………………. No operation

Expired

Pursat Province

85 M.D.S Or Sorm Commune, Veal Veng

- Dam - Processing

wood

Operating Expired

86 Pheapimik Group Cher Tom Commune, Krakor


wood

On operation

Expired

Preah Vihar Province



87 Duong Sruoch……… Cham San Commune, Cham San


wood

Moved out Expired

88 Duong Sruoch- Thy Nga Rieb Rouy Commune, Ro Vieng


wood

No opearation

Expired

89 Duong Sruoch- Romdoh Sre

Romdoh Sre Commune, Cham San

- Social Land - Processing

wood

Operating 1 year

90 Duong Sruoch Srayang Commune, Kolen

- Social Land - Processing

wood

Operating 1 year

91 Sila Damich Srayang Commune, Kolen


wood

No operation

Expired

92 ………………… Rovieng - Collecting and buying

- Processing wood

Operating 1 year

93 China Gate …(Cambodia) Romdoh Commune, Rovieng

- ELC and buying - White Charcoal

Operating 1 year

Preah Sihanoul Province

94 Green Rich Group., Ltd Lek3, Mith Pheap - Buying cultivated tree

- Wood Chip

Moved out Expired

95 HMM. International Co., Ltd

Bittrang Commune, Prey Nop

- Cultivated tree - Wood Chip

Moved out Expired

96 C.X.T Preah Sihanouk Town

- Cultivated tree - Wood Chip

Moved out Expired

97 Camagra Investment Group Co., Ltd

Preah Sihanouk Town

- Concession Land and buying

- Processing wood

Moved out Expired

Kampong Speu Province

98 Reaskey Samaki 2000 Treng Troyeung , Phnom Srouch

- Cultivated tree - Charcoal

No operation

Expired



5 CAPACITY BUILDING 249. Capacity building during the assignment will consist of two set of activities: training and dissemination events.

5.1 Training 250. Training will consist of both formal training through the delivery of training course and informal on-the-job training in which the staff will participate in the implementation of the study. 5.1.1 Training in value chain analysis 251. We will implement a training activity with selected staff of MOC and TTRI in the use and analysis of VCA. We propose a 3-day course in which both the theory and practice of VCA is presented. Our training will consist of a short theory presentation and a number of practical exercises that will enable participants to conduct value chain mapping, assess governance structures, and propose strategic enhancements for improving value chains. We will use our case studies as exemplars in our training to brainstorm and create an initial value chain mapping that can aid us in the development of value chain interview instruments in the second phase of the project. The final outline of the training will be discussed and agreed with the client. Our proposed outline for the training course will include the following modules:

Setting the stage: Agricultural value chains and supply chain management. This will provide concepts of value chain analysis and theoretical contributions/antecedents; an overview of the landscape of value chain analysis; a historical overview; what VCA is and isn't; differences between it and supply chain management; and why it is important. Discussions will highlight issues of coordination and transactions cost economics as unifying theme. This module will include a group exercise: “What is a value chain?”.

Value chain promotion and prioritization: metrics for intervention and chain choice. Methods for choosing a value chain for promotion – placing boundaries on analysis and defining scope. This module will include a group exercise: “Selecting a value chain for promotion,” that will be used throughout the training course to illustrate the VCA method.

Mapping the value chain: This module provides the basics on mapping the value chain, including a group exercise: “Mapping your value chain”.

Governance in value chains: This module explains why power, coordination, and value chain structure matter for (almost) everything in VCA. We include a group exercise: “Identifying governance mechanisms in your value chain”.

Upgrading and strategic choice: This module reviews considerations for how/where/why to intervene in value chains, including a group exercise where we define the upgrading vision and strategic choice in chosen value chains.

Data requirements for VCA: This module provides an overview on methods to collect data, data considerations (dynamics, seasonality, etc.), and the livelihoods contexts of selected chains. This provides the basis for discussions in the next phase of activities.

252. The Consultants will prepare training material both in English and Khmer.

5.1.2 Development of value chain analysis interview instruments 253. After the Inception Phase of the assignment, the Consultant will develop and review value chain interview instruments with the selected staff of TTRI. An important part of this exercise will be to validate and test these instruments with stakeholders in the field (pretesting). We will emphasize interviewing



techniques and best practices to ensure that the semi-structured tools are utilized to their best potential. Thus, we will incorporate practice sessions between team members to test and harmonize their interviewing skills and improve their data collection and transcription abilities. 5.1.3 Field interviews with key value chain actors 254. The training session will lead to the administration of field interviews with key value chain actors. For each chain prior to fieldwork, we will scope out the relevant regions and groups of stakeholders to visit and to try to ensure that representative actors are chosen. Our approach to fieldwork will be a snowball sampling approach that “follows the chain” from production through trade, distribution, and processing, to final retail. Our interviews will further extract information that highlights the dynamics of the value chain, in terms of how trade flows may vary by season, and how chains have evolved over the past 3-5 years to get a sense of their evolution. As possible, focus group discussions will be utilized to maximize the number of participants that are interviewed. Transcripts will be developed and translated in both Khmer and English, while primary data provided from the interviews will be summarized in tabular format. After the data have been collected, they will be organized into a database by a data entry team and processed to produce easily to interpret tables and graphs.

5.1.4 Write-ups of value chain characteristics 255. From the field interviews, the Consultants in collaboration with TTRI will develop successive and improved drafts of the value chain case studies. Each draft will include a motivation for the choice of the chain, a thorough chain mapping, an assessment of governance and transaction mechanisms, identified patterns and potential for upgrading in the chain, and an evaluation of the beneficiaries of the current value chain organization and possible scenarios to add value to both smallholders and the chain itself.

5.2 Dissemination Event – Validation Workshop 256. For each value chain, a validation workshop will be held that summarizes the key findings and policy recommendations from the study. The capacity building team comprising selected staff of TTRI and MOC will be involved in the organization and conduct of the event. The Consultants will be responsible to prepare the supporting documents and make key presentation. The presentations will be followed by a brainstorming session in small groups to discuss findings, which will be reported back in plenary and discussed at length. Refined policy conclusions and recommendations will be discussed and drafted at these workshops.



6 WORK PLAN 257. The overall assignment will be completed in 5 months (one month less than the 6 months mentioned in the contract). The following table indicate the dates for the key deliverables. Table 17 Value Chain Studies Deliverables and Dates Mobilization Date: June 10, 2015

No. Deliverables Date Time After Mobilization

Days Week Month

1 Inception Report and Work Plan 28-Jun 18 2.6 0.6

2 “Training of Researchers” workshop report 25-Aug 76 10.9 2.5

3 Survey Report 31-Aug 82 11.7 2.7

4 Draft of Value Chain Study after completion of field work 15-Sep 97 13.9 3.2

5

Final versions of each Value Chain Study before their validation 25-Sep 107 15.3 3.6

6 Relevant documentations for validation workshop 30-Sep 112 16.0 3.7

7 Validation Workshop report 10-Oct 122 17.4 4.1

8

Final versions of the value chain studies including revisions requested during validation workshops 20-Oct 132 18.9 4.4

9 Draft Final Report 30-Oct 142 20.3 4.7

10 Final Report 7-Nov 150 21.4 5.0



Figure 34 Work Schedule and Planning of Deliverables

Month

Day

No. Activity

1 PHASE 1 - BACKGROUND RESEARCH

1.01 Review literature

1.02 Compile available trade data

1.03 Assess demand volumes

1.04 Identify market trends and opportunities

1.05 Identify requirements for Cambodian exports

1.06 Conduct information gap analysis

1.07 Prepare plan of action for phase 2

1.08 Prepare Inception Report

2 PHASE 2 - PRIMARY RESEARCH

2.01 Conduct training workshop

2.02 Design survey

2.03 Train survey team, pretesting, and logistics

2.04 Conduct Survey

2.05 Conduct Data Entry

2.06 Process survey Data

2.07 Prepare Survey Report

3 PHASE 3 - ANALYSIS

3.01 Prepare draft of three value chain studies

3.02 Conduct workshop on preliminary draft

3.03 Further analyze includng feedback frm workshp

3.04 Prepare new draft of final report

3.05 Prepare all relevant documents

3.06 Conduct validation workshop

3.07 Prepare final version of value chain studies

3.08 Prepare Draft Final Report

3.09 Prepare Final Report

Output 10 – Final Report

Output 1 – Inception Report and Work Plan Output 6 – Relevant documentations needed for the individual Value Chain Study validation workshop

Output 2 - “Training of Researchers” workshop report Output 7 – Validation Workshop report

Output 3 – Survey Report Output 8 – Final versions of VC studies including revisions requested during validation workshop

Output 4 – Draft of each Value Chain Study after completion of field work Output 9 – Draft Final Report

Output 5 – Final versions of each Value Chain Study before their validation

28 1 7 2821 28 1 7 14 21 28 1 7 14 2128 1 7 14 21

October November

1

June July August September

1 7 14 21 28 147 14 21

3

4

5

6

7

8

9

1

3

4

5

67

89

1

2

2

10

10



7 ISSUES AND SOLUTIONS

7.1 Issues 258. The implementation of the assignment depends on the solution of some issues as follows: 259. Issue No. 1: Availability of respondents for field work and interviews. In the case of the palm sugar value chain the Consultant has already established contacts and the implementation of the field work will only require a general letter of introduction of the Team. In the case of the bicycles value chain, we understand that there are only four companies located in the Special Economic Zones (SEZ) of Bavet. The visit to the companies and their cooperation in answering questions will be critical to obtain the information needed for the value chain analysis. During the Inception Phase, the Consultant had difficulty in meeting the companies due to either their non-availability. Similarly, in the wood processing value chain, the Consultant will need to meet with different companies and obtain information through survey and key informant interviews. This task might prove to be difficult given the sensitivity of the forest sector. 260. Issue No. 2: Access to data. Access to information related to registration of companies. In order to have a factual basis for the value chain analysis it will be necessary to know which companies in different value chains exist. The registration data of companies at the MOC will be needed. This is not an issue for the palm sugar value chain. In the case of the bicycle industry, we know about the four companies in Bavet, but it is necessary to double check if other companies are registered. In the case of wood processing value chain, the Consultant has already obtained a list from the Forestry Administration, but it would be important to double check with the database of the MOC. In addition to data on registration, it would be useful if TTRI/MOC could facilitate obtaining data on volumes, unit prices, and value of exports for all bicycle assembly companies currently operating in Cambodia, for each of the last 5 years. 261. Issue No. 3: List of staff involved in capacity building. For the implementation of the capacity building activities, it would be important to identify the staff of MOC and TTRI who will be involved in either the formal training courses or in the informal on-the job training. In order to ensure effectiveness of the training, it would be useful to have the list of the staff, their current position, and background in value chain analysis.

7.2 Solutions 262. Letters of Introduction. For both the bicycle and the wood processing value chain, the Consultant will require letters of introduction explaining the purpose of the assignment. The support of MOC and TTRI will be crucial to gain access to the companies, and interview with key respondents. In the case of bicycles companies, it will be important for the Consultant to visit their factories in order to better appreciate the actual operations. In the case of the wood processing industry, it will be necessary to conduct a survey covering different subsectors of the value chain. The Consultant will prepare the survey questionnaire and share it with TTRI to ensure that the questions could be answered by the respondents. 263. Access to the MOC list of registered companies for the bicycle value chain and the wood processing value chain will be needed. It would be appreciated if TTRI could facilitate obtaining the list before the commencement of field work in Phase 2.

264. Available data on exports of bicycles companies would allow to make a more thorough assessment of their marketing strategy and identify options to upgrading the value chain. The Consultant understands that these data are regularly submitted to the MOC as part of their reporting requirements.



265. In order to have sufficient time to get the list of staff involved in capacity building with indication of current responsibilities and background in value chain analysis, the Consultant has scheduled the training course in late August. That should provide sufficient time to TTRI to identify the staff who are most likely to benefit from the training activities planned under the assignment.

Documents

E&S Assessment Hung Vuong Vietnam - Proposal 2015 · 6/1/2016 · of value chain analysis through both formal training and hands-on approach to learning. The involvement of the researchers