The Scottish economist Adam Smith (1723-1790), known as “the father of economics” courtesy of his book, An Inquiry into the Nature and Causes of the Wealth of Nations, was, unsurprisingly, well-versed in the importance of trade and, therefore, logistics. As he wrote, “Every man lives by exchanging.” Those words remain as true today as when he first put them in print. The world may be a far more sophisticated place, but some things have not changed. Khmer Times’ Sok Chan, spoke with two men who practise Smith’s pronouncement: Executive Chairman of Singapore’s YCH Group Robert Yap and Executive Director of Infrastructure Asia in Singapore Seth Tan – via the internet – on the benefits of their joint establishment of the Phnom Penh Logistics Complex (PPLC) to Cambodia in promoting efficient trade flows. The following is edited for clarity and brevity.
- KT: Could you talk a bit about Infrastructure Asia and why you got involved with the Phnom Penh Logistics Complex in Cambodia?
Seth Tan: Infrastructure Asia is part of the Singapore government. It was established by Enterprise Singapore and the Monetary Authority of Singapore to support infrastructure financing, growth and development in the region.
We were set up as both a public office and public service because we saw that the private sector could be more relevant than it is in regional infrastructure in comparison to other regions in the world. The percentage of involvement and investment by the private sector in ASEAN, or even in Asia infrastructure, is much lower than other regions in terms of percentage.
We hope that, through our efforts, we connect ASEAN governments, relevant experts, developers and investors to meet the specific infrastructure needs of their countries. We also work with global players in the regional infrastructure ecosystem and leverage the collective capabilities and networks of various government agencies to catalyse more trade and investments into infrastructure in the region.
Take, for instance, the Phnom Penh Logistic Complex. Our involvement in this project started in February 2019 when I made a first trip to Cambodia and met with relevant ministries. We noticed at that time that Cambodia was very seriously looking at optimising the logistics sector and has now come out with a national logistics master plan.
Since then we have held many discussions with the Ministry of Public Works and Transport (MPWT) and we hosted a visit to Singapore for them in mid-2019 to exchange views. We organised many private sector companies to meet with them. Investors and professional business and service firms were invited to encourage interaction and exposure to more diverse ideas on the possibilities out there Infrastructure in every country is different and as such needs and solutions are different. It is through interaction that you are able to discover which solutions or which company is most suitable for what you need. We also organised a discussion between the MPWT and the private sector when we had our Asia Infrastructure forum in 2019 and during that time, one of the companies – YCH Group – expressed an interest in this project.
- KT: Dr Robert, tell us about YCH Group.
Robert Yap: The YCH Group is Singapore’s leading homegrown, end-to-end supply chain solutions partner . It works with some of the world’s largest companies and leading brands across more than 100 cities in the Asia-Pacific region.YCH focuses on boosting productivity and sustainability for its customers with its proprietary best-in-class suite of award-winning solutions for industries including fast-moving consumer goods, electronics, chemicals, healthcare, cold chain logistics and e-commerce.
- KT: What opportunities do you see for the logistics sector in Cambodia? Why did you decide to cooperate with the Cambodian government on this project?
Robert Yap: We are all looking at Cambodia. Cambodia is one of the strongest countries in ASEAN in terms of economic growth and also part of the agenda in ASEAN regarding connectivity. We feel that Cambodia has a lot of potential in connecting to and becoming part of the global value chain. We also look at how to elevate business as we project forward under the assumption that Cambodia’s economic growth will move even faster. The logistics sector can support, sustain and enhance that growth.
We saw that this is both an opportunity and a way of planning our mission to upgrade a very connected mass logistics network in ASEAN. We have noticed that the Cambodia marketplace is very strong at creating [specific] kinds of activities all while being part of the Cambodia, Laos, Myanmar and Vietnam (CLMV) grouping, an integral part of ASEAN as well as being involved in China-ASEAN connectivity.
We see a very big potential for growth here. With the support of Infrastructure Asia (IA), we see a large upside for cooperation, with potential for us to put in advanced supply chain and logistics infrastructure to support growth. That is where we came in. Actively involving ourselves then and ending up signing the framework agreement (FA) for the establishment of the PPLC. The feasibility report of the FA for the PPLC will show the project as a very bankable, long-term infrastructure that will elevate and support growth and raise the level of competency in the supply chain and logistics in Cambodia, which is very important for any country if you want to grow to be a champion.
- KT: Could you elaborate more about how the PPLC project has been designed and the role that YCH has in the project?
Robert Yap: If you look from the PPLC point of view, I think that it is a very good initiative by the Cambodian government to create a logistics hub in Phnom Penh. For us, we do not want just to create a simple logistics infrastructure. We deal with advanced supply chain solutions to create a smart logistics infrastructure so that Cambodia can move up in the value chain and, at the same time, we think about the advantages of related technology.
We can bring in the technology because ours is proven. Physical infrastructure is just part of the issue. We also look at how we can develop the value-chain for those in logistics across the entire ecosystem.
One important thing we rely on is skills How do we actually provide skills to people to take advantage of logistics competency? That is very important. We are not just coming to invest and innovate but we are actually investing in infrastructure for the long haul. We will continue to build skills in the talent pool as we operate, in order to build the business and also bring in our business connections from outside Cambodia to allow growth to take place.
- KT: Can you describe how the PPLC’s development has rolled out since its first planning? How do you see the role of logistics in growth? Does it influence growth or does growth influence logistics?
Robert Yap: I think the plan was hatched a couple of years ago. It took almost nine months to make it feasible. By then we had identified land and other necessities to kick off our projects. Once we actually formalise deverything, we will probably start the project next year. We will set a time limit for a full implementation of three to five years because it is a huge infrastructure, an ambitious project and very important for the future. If you look at the project like that we will be able to follow the economic growth and readiness of Cambodia to be plugged into the global value chain and continue to grow. That is why we use the tag line: Growing without growing pain means you have to prepare everything.
We have recruited a group of Cambodians with logistics talent and trained them in Singapore so they can go back to train their colleagues in the skills necessary to manage operations with the latest technology, automation and inventory.
Many companies and countries are realising that a good logistics supply chain is a very strong foundation for growth otherwise your production costs are not competitive.
At the same time, populations have to buy products to help stimulate the economy but you must have an efficient flow and customer experience. How do you ensure the efficient flow of goods in a congested, polluted city? We are looking to elevate ourselves beyond that and create a future that supports city growth and competitiveness in manufacturing so a company can be globally competitive.
- KT: As you know Cambodia is one of the centres of ASEAN and a member of the Mekong sub-region so some say Cambodia is just a transit country, mostly from Vietnam to Thailand, and not a hub. Do you think that with the PPLC Cambodia will become a main hub for ASEAN or just remain a transit country?
Robert Yap: That is why we are looking at the potential of Cambodia. It will not be just a hub because the vision behind creating the PPLC is its potential. We are working to ensure that we create the kind of competitive advantages in skilling, technology and infrastructure that are most important to the government’s regulatory framework.
- KT: What are the key challenges in terms of building and improving the infrastructure of Cambodia?
Seth Tan: Developing infrastructure is a challenge anywhere so that it is not unique to Cambodia. Before COVID-19, many developing countries were already facing significant infrastructure financing gaps. During COVID-19, this challenge is not going anywhere. I think one of the areas that Cambodia can think of as an opportunity rather than a challengey, is its ability to access international private capital.
Unlike the 2009 global financial crisis, we are facing a health pandemic so people cannot move around as much as they might like. But liquidity remains quite strong and for the right type of sustainable infrastructure, that is important and we are seeing a lot of interest from private capital to deploy towards that.
In the past Cambodia sourced its financing infrastructure via traditional means, with some help from official development assistance, so I think this is a very good time for Cambodia to start thinking about accessing new models of international partnerships, where you bring international investment and financing into your infrastructure to complement the traditional model.
- KT: What is the key alignment in terms of infrastructure in linking relationships between Cambodia and other countries?
Seth Tan: There are some types of infrastructure that are very important and logistics and the supply chain are indeed one of them. If you look at the whole logistics and supply chain, the pandemic has shown that logistics is an important sector to ensure goods continue to flow and to be resilient to the pandemic.
The supply chain moves across not just one nation but between countries so special consideration must be given in many ways in terms of key alignments. For example some products require temperature controls for export or import.
- KT: Compared with other ASEAN countries, what do you think about the state of infrastructure in Cambodia? What needs to be done to boost the competitiveness of the country, given most potential investors note that the cost of logistics is high in Cambodia? How can you alleviate this?
Robert Yap: It is one of our key objectives to make Cambodia competitive as a logistics hub and also to attract new businesses. You have to have an all-to-all strategy – e-commerce, direct channel procurement and the other way round. The PPLC is designed to be future-ready to support things like this. I find that Cambodia is a ready hub for cargo flow. You have to come out with a very competitive regulatory framework to support efficient flows. We are excited because of the pro-activeness and willingness of government officials.
You need to design the competitive regulatory framework in a way that facilitates companies coming in to utilise the hub and maximise its capacity to handle a diversity in cargo. If you do not have more cargo, the logistic complex itself will not be able to generate a sufficient return to encourage investors to put a lot of money into it.
We are taking a risk but, at the same time, we are confident in the proactive and utilitarian nature of the government. As investors, we invest all over the region. Two reasons we want to invest in Cambodia are the government and regulation. I find that Cambodian people have huge potential and the government is collaborative.
- KT: The Cambodian government has set a target to become a fully digital economy over the next three to five years. While a strong infrastructure will not be accomplished overnight and Cambodia’s rail, road and inland waterways are still limited, how will the PPLC help catch up to modern trends?
Robert Yap: We hope we can be a catalyst in helping to make it happen because we are different from many logistics companies. We have a very strong IT [information technology] team – one that studies the latest technology. To build that we are actually involved with Singapore in terms of the transformation of the retail sector. We are very advanced in terms of procurement, capability and the facilitation of the growth of e-commerce.
When we build an infrastructure, such as the PPLC, this capability is definitely brought in. The infrastructure project is very long term. We are not looking at coming here, accelerating our progress and then cashing out to retire. We will be there forever. We will build a symbiotic partnership with the government of the country in order to grow. We build both the physical and data infrastructure, the information highway – which is important. We build the logistics superhighway including its physical, information and financial flow. Some small and medium enterprises [SMEs] can build the neeeded components. But how do we put all that together? That requires an entire supply-chain financing infrastructure.
- KT: The majority of the SME sector in Cambodia consists of family businesses, but some SMEs are transforming from traditional businesses to ones embracing fourth industrial revolution practices. How do you help SMEs that have limited knowledge or ability to catch up with high technology?
Robert Yap: In Singapore we carry out a lot of innovation on how to actually create various smart solutions. We do not focus on just one type of company but share regardless of where a company is in it technological capability. The benefits of technology are for everybody. So we build software solutions that move up the platform level. Everybody can use them, so they provide a free and level playing field for companies. They are not too advanced and are easily plugged into.Our software can be used for world-class solutions to moving up the digital value chain. We hope to bring them to Cambodia as we have done with Vietnam.
- KT: Once the PPPLC starts operations, will it automatically create more job opportunities for Cambodians?
Robert Yap: The benefits will go to many. This includes younger people looking for a job and existing logistic professionals needing re-skilling, and up-skilling. There will be a lot of talent development. Which is one of the major benefits, the raising of standards in terms of competitiveness; globally and regionally.
I think the first benefit is talent development. It is always a benefit to construct competently. We do not build traditional warehousing. Our warehousing is “smart warehousing”. You will see robotics in our warehouses. That may seem expensive for Cambodia. but not truly, as productivity will be higher and trained workers add to and increase tha productivity. They are also paid higher than traditional warehouse operators.
The aim is to not lag behind. That is very important. We are not defensive, but pro-actively progressive. You need to differentiate by being ready for the future.
- KT: What do you think about the Cambodian government’s cooperation with the project as well as the road forward for the modernisation of logistics and supply chains in the Kingdom?
Seth Tan: We have been very impressed with our government counterparts whom we have been meeting with since we first came to Cambodia in 2019. We have seen how they strive to improve the Cambodian economy for the people. They are very pro-active and open to discussing matters in a collaborative way.
Of course, helping Cambodians and finding collaborative ways to ensure the establishment of conditions attractive to international investors, developers, solution providers and financial organisations is a balancng act and no small thing to make happen. We hope the PPLC can contribute to that process. Much will happen as we get there. The industry will be downstream, then an upstream could develop. A cold chain could come in. I think the logistics sector can look forward to bringing in suitable partners. Another area we can help is in waste management. This is an area we are discussing now with the Ministry of Environment and Ministry of Economy and Finance for the urban development sector.
- KT: Any final ideas to share?
Seth Tan: This project shows that there are many ways we can contribute to the Cambodian desire to move on to the next stage by bringing in relevant partners or make existing ones more relevant. We have great hopes that there will be more and more projects together.
Robert Yap: I think the major challenge in becoming a world class logistics hub is being able to work together. That is our commitment. We are not just looking at workers. We are looking at creating a very advanced and future-leading facility.