US seeks to produce bicycles in Kingdom, move away from China
Kingdom approves 41 projects worth $1B
CAMBODIAN exports of bicycles to the US are expected to gain from recent tariffs imposed by the US on China, thanks to several bicycle producers who have unveiled plans to move to the Kingdom, a report from a leading industry portal said.
Bicycle Retailer, the website of Kent International Inc – an American importer and distributor of bicycles and bicycle accessories – plans to move a large share of its production from China to Cambodia in the next few months.
As evidence of this, one of Kent’s major Chinese suppliers is building a new 500,000sq ft (46,452sqm) factory in Cambodia.
Kent CEO Arnold Kamler said the factory will begin shipping bicycles in September next year.
“Assuming the 25 per cent tariff takes effect, the idea is to move essentially all of our production from China to Cambodia,” he said.
After imposing a 10 per cent tariff on Chinese bicycles in September, the tariff is set to increase to 25 per cent in January.
To comply with US Customs’ rules of origin, Kamler said Cambodian parts and labour would make up at least 35 per cent of the value of Kent’s Cambodian bicycles, which will have Cambodia-made frames and forks.
The report said the factory that Kent is working with is in the south, near Phnom Penh.
Besides Kent International, Trek Bicycle Corporation – another US-based bicycle and cycling product manufacturer and distributor – is also reported to have plans to move production of at least 200,000 bicycles from China to Cambodia next year.
Cambodia Chamber of Commerce (CCC) vice-president Lim Heng said on Monday that the US’ decision to increase the tariff on Chinese products could lead some types of production in China slow down.
This, he said, will eventually negatively affect the export of some raw materials from Cambodia to China.
However, he said Cambodia should gain more than it loses as many factories in China, including those that produce bicycles, plan to relocate their production to the Kingdom where the cost of doing business is cheaper, and from where products can be exported duty-free to many major markets.
“We [CCC] have received more contact from investors abroad to know about Cambodia’s investment potential as they want to open their factories here. When they seek to expand their production, they should find Cambodia more interesting,” he said.
US trade data show that Cambodian bicycle exports accounted for $24 million last year. This placed the Kingdom third behind China and Taiwan which exported $874 million and $390 million worth respectively.
Besides the US market, Cambodia became the largest bicycle supplier to the EU last year when it exported more than 1.42 million bicycles – an increase of nine per cent from 1.29 million bicycles in 2016.
Cambodian made bicycles can be exported duty-free into the EU under the blocs Everything But Arms (EBA) programme.
Despite the tariff advantage and lower labour costs, there are challenges for manufacturing in Cambodia as the Kingdom lacks an industry cluster, which means many components must be imported, making it time-consuming and affecting costs. DATA f rom t he Counci l for the Development of Cambod i a ( C DC ) s how t h a t i t approved a tota l of 41 investment project s wor t h more than $1 billion from September until mid-November.
T he a ppr ov e d pr oj e c t s include hotels, garment factor ies, elec t r ic a l appl ia nce factor ies, cosmet ics, f ur niture, beverage, pharmaceutica l, ply wood manufacturing pl a nt s, power pla nt s a nd agro-industria l crops.
T he proje c t s a re most l y located in Phnom Penh and Preah Sihanouk, Kandal and Kampong Speu prov inces.
Emerg i ng Markets Cons u lt i ng s en ior c on s u lt a nt Nget h Chou welcomed t he move.
However, he argued that the gover n ment must a lso set r u les rega rd i ng t he use of loc a l re sou rc e s to benef it loca ls.
“It is good that the CDC has approved a lot of investment projects, but the government a lso needs to require some c ond it ions to ma ke t hose investments more beneficia l to Cambodians,” he said.
Chou cited as a n exa mple C h i ne s e - ow n r e a l e s t a t e investment projects in Cambod ia t hat exclu sively use imported raw materials and manpower.
“Using loca l materia l a nd hu ma n r e s ou r c e s i s v er y important because it will help increase income and reduce manpower migration to work abroad,” he said.
According to CDC data, the 41 projects have the potentia l to create 31,255 jobs.
The Post tried to reach Chea Vuthy, deput y secretar y-general of the Cambodian Investment Board for comment, but he was not contactable.
A lt hough t here is no data for c ompa r i son, Supreme Nationa l Economic Council sen ior adv iser Mey Ka lya n b e l i e v e s t he nu mber of projects approved during the period is fa ir.
“What we should pay attention to is what t he pla ns for t he investments are. Diversif ic at ion of i nve st ment i s absolutely essentia l for economic development,” Kalyan said.
Chou said that the government also has to closely monitor t he project s to ensu re t heir progress.
“I worr y that some projects ex ist in name only and never rea l ly physica l ly manifest,” he said.