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Logistics Services To Promote Cambodian Exports

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Logistics Services To Promote Cambodian Exports

Country
Sector
Most major industry classification systems use sources of revenue as their basis for classifying companies into specific sectors, subsectors and industries. In order to group like companies based on their sustainability-related risks and opportunities, SASB created the Sustainable Industry Classification System® (SICS®) and the classification of sectors, subsectors and industries in the SDG Investor Platform is based on SICS.
Food and Beverage
Sub Sector
Most major industry classification systems use sources of revenue as their basis for classifying companies into specific sectors, subsectors and industries. In order to group like companies based on their sustainability-related risks and opportunities, SASB created the Sustainable Industry Classification System® (SICS®) and the classification of sectors, subsectors and industries in the SDG Investor Platform is based on SICS.
Food and Beverage Retail
Indicative Return
Describes the rate of growth an investment is expected to generate within the IOA. The indicative return is identified for the IOA by establishing its Internal Rate of Return (IRR), Return of Investment (ROI) or Gross Profit Margin (GPM).
15% - 20% (in IRR)
Investment Timeframe
Describes the time period in which the IOA will pay-back the invested resources. The estimate is based on asset expected lifetime as the IOA will start generating accumulated positive cash-flows.
Medium Term (5–10 years)
Market Size
Describes the value of potential addressable market of the IOA. The market size is identified for the IOA by establishing the value in USD, identifying the Compound Annual Growth Rate (CAGR) or providing a numeric unit critical to the IOA.
USD 100 million - USD 1 billion
Average Ticket Size (USD)
Describes the USD amount for a typical investment required in the IOA.
USD 1 million - USD 10 million
Direct Impact
Describes the primary SDG(s) the IOA addresses.
Zero Hunger (SDG 2)
Indirect Impact
Describes the secondary SDG(s) the IOA addresses.
Good health and well-being (SDG 3) Decent Work and Economic Growth (SDG 8) Sustainable Cities and Communities (SDG 11)

Business Model Description

Invest in B2B businesses or facilities engaged in building efficient logistic services and support infrastructure

Khmer Cold Chain Co. Ltd. (KCC), founded in 2020, is a project company of InfraCo Asia Development Pte Ltd (InfraCo Asia) (primary shareholder). It provides temperature controlled logistics, delivering international quality services to Cambodian and regional farmers, agribusiness, food processers, pharmaceutical companies, food retailers and hotels, restaurants and food-caterers.

In 2021, KCC partnered with Phnom Penh Autonomous Port (PPAP) to build a cross-docking facility with controlled temperature conditions (large-scale cold storage warehouse and distribution center) in eastern Kandal province’s Kien Svay district. (11)

Auskhmer Import Export Co., Ltd. (AIEC), founded in 2001, imports and distributes food products and beverages, and provides import/export brokerage services, which include sourcing/importing, stocking/warehousing, order generation, merchandising and promotion execution, distribution and delivery. In 2016, Worldbridge International (Cambodia) Ltd acquired 55% stake in AIEC. (12)

Expected Impact

Development of logistics to reduce spoilage and enable Cambodia to expand its export income, thereby contributing to growth of economy.

How is this information gathered?

Investment opportunities with potential to contribute to sustainable development are based on country-level SDG Investor Maps.

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Country & Regions

Explore the country and target locations of the investment opportunity.
Country
Region
  • Cambodia: Kandal
  • Cambodia: Kandal
  • Cambodia: Pursat
  • Cambodia: Phnom Penh
Learn more

Sector Classification

Situate the investment opportunity within sustainability focused sector, subsector and industry classifications.
Sector

Food and Beverage

Agriculture sector represented 32% of Cambodia's GDP in 2020.(1) However, it suffers from certain inefficiencies, including a reliance on subsistence agriculture and lack of mechanization, value-addition, standards and logistics. This also impacts Cambodia’s performance on SDG 2, relating to food security in RGC's Sustainable Development Report (ranked 67th). (2)

National Strategic Development Plan, 2019–2023 includes targets for enhancing the infrastructure for agricultural research, supporting strengthening agricultural cooperatives and developing agribusiness networks, as well as pre/postharvest technology development. One goal is to increase export of processed agricultural products from 10% to 12 % of all exports by 2025. (3)

Women now represent 74% of the agricultural workforce [33.25% females (% of female employment) employed in agriculture in 2020 (4)] and produce 80% of Cambodia’s food. Even though, women face numerous challenges, including poor access to land (women own ~15.4% of the recorded agricultural land area) and credit, their participation rate in agriculture is falling more slowly than men’s.

Men are usually involved in land preparation and maintenance activities, while women manage pre- and post-harvest activities (prepare and plant seeds, maintain seed beds, harvest and transport crops, and implement low-technology pest control measures by planting repellent grasses).

Women are estimated to receive only ~10% of all agricultural extension services, and female-headed households, on average, have less land and less access to farm equipment, tools, and communications services. (5)

Despite 54% of population engaged in this sector, agriculture represents only 32% of total GDP in 2020 (1) The agriculture sector is dominated by small landholders and MSMEs, that are highly impacted by economic recession, and would take longer to overcome the economic impacts of Covid-19.

Covid-19 has impacted Cambodia’s food security (which showed signs of improvement in recent years with real income growth and volume increases in rice and other crop production), primarily since the consumers are unable to afford sufficient and diverse food. (6)

Diet quality of pregnant women and children under-5 remains inadequate and incidence of obesity, especially among women of child-bearing age, has increased. Stunting is prevalent in households with poor sanitation. Children in rural areas are more likely to be stunted than children in urban areas. (6)

Poorest households, including landless, female-headed, with disabled family members, or households of ethnic minorities and/or living in the most remote and marginalized areas, suffer the most when localized or seasonal food deficits occur. (6)

~77% of rural households rely on agriculture, fisheries, and forestry for their livelihood. (7) In 2020, agriculture sector contributed 32% towards Cambodia's gross domestic product (GDP). (1)

Fragmented smallholders farmers, low productivity and inefficient logistics, are some of the key challenges in Agro-food sector. Infrastructure and services for processing and exporting food products are inadequate, resulting in maximum food-processing outsourced to neighboring countries.

Sub Sector

Food and Beverage Retail

Exports from Cambodia [Agricultural exports were ~USD 1,118 mn in 2019 (8)] slowed down due to their lack of adequacy to international standards, resulting from an inefficient supply chain. Inefficient logistic services (limited cold supply chain solution) leads to agricultural waste at various stages of the supply chain. 51.9% Municipal Solid Waste (MSW) is from food waste.(9)

Rectangular Strategy Phase IV
Recovery plan focuses mainly on boosting agricultural productivity growth, strengthening competitiveness in terms of both costs and quality, modernizing supporting infrastructure in the supply chain of agricultural products, promoting processing of agricultural products, promoting seed industry and maximizing the benefits of free trade agreement. (10)

Food security and agri-food supply chain have been adversely impacted due to border closures and trade restrictions imposed for limiting the spread of Covid-19.

Accessibility to food sources has also been limited due to job losses, income reductions, food price increases and local food availability, rendering the already vulnerable communities (especially low and middles-income households) in a precarious position. (6)

140,000 cbm of capacity must be added to Cambodia’s existing cold storage volume to meet its supply chain needs by 2030. (11)

Agriculture exports are linked to quality of products and compliance to international standards. Very few companies have the capacity to ensure that they meet international standards, while there is a lack of third party actors providing adequate logistics services that could help them to do so.

Industry

Agricultural Products

Pipeline Opportunity

Discover the investment opportunity and its corresponding business model.
Investment Opportunity Area

Logistics Services To Promote Cambodian Exports

Includes Cold Chain, Storage, Transport and other Ancillary Services
Business Model

Invest in B2B businesses or facilities engaged in building efficient logistic services and support infrastructure

Khmer Cold Chain Co. Ltd. (KCC), founded in 2020, is a project company of InfraCo Asia Development Pte Ltd (InfraCo Asia) (primary shareholder). It provides temperature controlled logistics, delivering international quality services to Cambodian and regional farmers, agribusiness, food processers, pharmaceutical companies, food retailers and hotels, restaurants and food-caterers.

In 2021, KCC partnered with Phnom Penh Autonomous Port (PPAP) to build a cross-docking facility with controlled temperature conditions (large-scale cold storage warehouse and distribution center) in eastern Kandal province’s Kien Svay district. (11)

Auskhmer Import Export Co., Ltd. (AIEC), founded in 2001, imports and distributes food products and beverages, and provides import/export brokerage services, which include sourcing/importing, stocking/warehousing, order generation, merchandising and promotion execution, distribution and delivery. In 2016, Worldbridge International (Cambodia) Ltd acquired 55% stake in AIEC. (12)

Business Case

Learn about the investment opportunity’s business metrics and market risks.

Market Size and Environment

Market Size (USD)
Describes the value in USD of a potential addressable market of the IOA.

USD 100 million - USD 1 billion

Critical IOA Unit
Describes a complementary market sizing measure exemplifying the opportunities with the IOA.

Additional cold storage capacity required by 2030: 140,000 cbm to cater to growing demand (11)

140,000 cubic meters (cbm) of capacity must be added to Cambodia’s existing cold storage volume to meet its supply chain needs by 2030. KCC's new installations will supply 36,205 cbm, filling >25% of the current gap to meet the increasing market demand. (11)

In the case of fruit exports, minimum ~USD 500 mn are required to reach the quota of mango export to China as part of the Cambodia-China Trade Agreement.

In 2022, United States Agency for International Development (USAID) partnered with KCC and Amru Rice (Cambodia) Co. Ltd., to invest USD 2 mn in cold chain infrastructure and storage capacity for agricultural products and logistics purposes in Cambodia. (13)

Indicative Return

IRR
Describes an expected annual rate of growth of the IOA investment.

15% - 20%

As per expert consultations, capital expenditure (CAPEX) for 1cbm is ~USD 200.

Meat demand is expected to increase to 300,000 tons annually by 2030. However, only ~20% of this national demand is presently met through formal domestic supply chains (i.e., from a slaughterhouse) due to insufficient cold-storage facilities. (5)

Agriculture contributes ~15% to Cambodia's total trade costs (comprising transportation and travel expenses) for efficient good flow. (14)

Investment Timeframe

Timeframe
Describes the time period in which the IOA will pay-back the invested resources. The estimate is based on asset expected lifetime as the IOA will start generating accumulated positive cash-flows.

Medium Term (5–10 years)

Logistic services offers a wide range, but expected investment timeframes are mostly within the 5-10 year range.

Ticket Size

Average Ticket Size (USD)
Describes the USD amount for a typical investment required in the IOA.

USD 1 million - USD 10 million

Market Risks & Scale Obstacles

Business - Supply Chain Constraints

Most agri-commodities are currently exported through informal channels, under few regulations. Formal export channels require a level of sophistication, aligned with international standards, which the Cambodian market lacks primarily as an outcome of an inefficient supply chain.

Capital - Requires Subsidy

This area is capital intensive as substantial amount of investment is required for setting up logistic services (storage, cold chain, transportation). As per experts, a hot water treatment facility can cost ~USD 10 mn. As the products are perishable, cost of spoilage is also borne by the operators.

Most producers store food with traditional methods, leading to food losses. Not only would they require financial assistance to use the services, they may also need capacity building efforts to understand the link between their losses from spoilage and the cost of cold storage.

Impact Case

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Sustainable Development Need

As Cambodia modernizes, it requires an efficient supply chain to set stage for economic growth, allowing the country to respond to potential crises, such as food shortages and to address regional disparities in people's access to goods and services. (11)

Cold storage can help increase operational efficiency for distribution of goods, provide temperature-controlled logistics (TCL) services, and serve Cambodian/regional farmers in reducing early post-harvest losses by ~50% (15).(11)

Efficient supply chain management is required for ensuring that goods flow in a free and timely manner, promoting more vibrant trade interactions. If agriculture value chain lack traceability, it disallows meeting standards and certifications needed for premium local and export markets. (14)

Gender & Marginalisation

Developing a secure, temperature-controlled supply chain (cold storage) and logistics capabilities for agriculture will help address market system barriers to import-export opportunities, focusing on improving market access for smallholder farmers, including women- and youth-owned businesses. (16)

Export of products through informal channels involves a lower cost than through formal channels. Affordable and accessible logistics solutions can potentially help smallholder farmers use such services with significant economic gains for them and their families.

Efficient logistics can contribute to uplifting farmers' livelihood. As most food products are exported raw to countries like Vietnam and Thailand, which in-turn process and further export the products, Cambodian farmers end up earning a much lower income.

Expected Development Outcome

Advance the country's economic competitiveness and inclusiveness by addressing gaps in the agricultural sector's supply chain (16) and tackle market system barriers that hamper import and export opportunities. (13)

Increase the traceability of agriculture value chains, and ensure efficient market linkages and organised distribution channels, to help reduce risk of mismatch between demand and supply, especially for fresh food, decrease post-harvest losses and support smallholder farmers raise their income levels.

Support local food systems with shorter, fairer and cleaner supply chains to address local priorities. (17)

Gender & Marginalisation

Provide equal opportunity to marginalized, smallholder farmers to obtain access to national and international markets, and operate with improved productivity and profitability.

Ensure improved job opportunities for all, without any gender disparities. Construction of cold-storage facilities aligned with this investment opportunity area have created ~150 local jobs, and ~100 more long-term positions when the facility becomes operational. (12)

Expand Cambodia's economic development to allow rural households that suffer food insecurity to easily access formal markets within Cambodia and beyond. (16)

Primary SDGs addressed

Zero Hunger (SDG 2)
2 - Zero Hunger

2.3.2 Average income of small-scale food producers, by sex and indigenous status

2.4.1 Proportion of agricultural area under productive and sustainable agriculture

Current Value

The value of agricultural production per unit of labor engaged in agriculture (farming, animal husbandry and fisheries) is USD 1,555 in 2015. (18) The baseline sustainable agricultural land productivity is USD 1,548/ha in 2016. (18)

Target Value

The target value of agricultural production per unit of labor engaged in agriculture (farming, animal husbandry and fisheries) is USD 3,755 by 2030. (18) The target sustainable agricultural land productivity is USD 2,645/ha by 2030. (18)

Secondary SDGs addressed

Good health and well-being (SDG 3)
3 - Good Health and Well-Being
Decent Work and Economic Growth (SDG 8)
8 - Decent Work and Economic Growth
Sustainable Cities and Communities (SDG 11)
11 - Sustainable Cities and Communities

Directly impacted stakeholders

People

Small and mid-scale fruit and vegetable producers, cooperatives and storage facility operators benefit with lesser losses due to spoilage.

Gender inequality and/or marginalization

Smallholder farmers benefit from access to international markets including for farms that are operated by women.

Planet

Lower loss of food products owing to spoilage will generate lesser food waste, thereby reducing pollution caused by burning of such waste.

Corporates

Traders, exporters and supermarkets will benefit from improved supply of agricultural produce (fruits, vegetables, cereals) of consistent quality.

Public sector

Enable Cambodia to retain the goods that it needs, and export profit-making merchandise, thereby contributing to growth in national income. (11)

Indirectly impacted stakeholders

People

Population benefits from high quality and affordable agricultural products, and generally from increased economic activities with strengthened supply chains.

Gender inequality and/or marginalization

Rural population benefits increased job opportunities. Construction of similar facilities have been able to create ~150 local jobs, and 100 more long-term positions as the facility becomes operational. (11)

Planet

In the long-run, efficient supply chains help to conserve biodiversity resources, as well as reduce methane/CO2-based waste emissions.

Corporates

Complete spectrum of cold-chain needs of local businesses can be addressed through cold-storage facilities, and inspire others to undertake the development of cold-chain businesses across the country. (11)

Public sector

RGC recognizes logistics services as a key priority for agriculture development, as well as a way for overcoming food shortage. Agriculture sector is also one of the three sectors in the framework of economic recovery plan 2021-2023. (19)

Outcome Risks

In need of higher profits, producers may choose to export their products, then sell it domestically, thereby resulting in a potential reduction of food products in local markets.

Transport of agri-commodities over longer distances (farm to ports or places of consumption) will result in an increase in GHG emissions.

Smallholder farmers may be unable to afford the facilities without added financial support. Unless such support is philanthropic in nature, it may add to their financial burdens.

Farmers in some regions may concentrate their production on one crop, resulting in mono cropping patterns with negative impact on environment including reduced availability of other essential agricultural products.

Gender inequality and/or marginalization risk: Inability of smallholder farmers to afford logistics services may exclude them from the market, thus making the business model exclusive to only large farmers.

Impact Risks

Farmers often borrow money from local middlemen to expand their business and increase yields, which burdens them to sell their harvest at very low prices, resulting in losses.

Export market for agricultural products is potentially large, but is still limited due to limited capacity of companies to access and engage with international markets, in line with expected quality parameters.

Without adequate checks and balances in place, operational efficiency of such business models would be impacted in case of a conflict or unchecked fraudulent activities by existing players (middlemen) in the market.

If the benefits of the model do not expand across Cambodia, it will deepen regional and income disparities in the country.

Gender inequality and/or marginalization risk: If the business models do not evaluate their impact on all actors of the value chain, most of the economic benefits might be reaped by companies themselves, without such benefits passing on to smallholder farmers, including women.

Impact Classification

B—Benefit Stakeholders

What

Improving logistic services to reduce post-harvest losses and ensure a higher rate of food processing, as well as promoting exports.

Who

Various; Small-holder farmers benefit from gaining access to international markets.

Risk

In the absence of regulations and a stakeholder approach for promoting investments, value addition from reduced post-harvest losses and increased export opportunities would fail to benefit farmers.

Contribution

KCC's new installations will supply 36,205 cbm, filling >25% of the current gap in cold storage facilities to meet the increasing market demand. (11)

How Much

KCC's new installations will supply 36,205 cbm, filling >25% of the current gap in cold storage facilities to meet the increasing market demand. (11)

Impact Thesis

Development of logistics to reduce spoilage and enable Cambodia to expand its export income, thereby contributing to growth of economy.

Enabling Environment

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Policy Environment

Industrial Development Policy 2015-2025: Develop and implement a master plan for transport and logistic system development with the aim of creating integrated and highly effective multimodal transport and logistics system to become key national economic corridors. (20)

Master Plan of ASEAN Connectivity (MPAC) 2025. strengthen AESAN competitiveness through enhanced trade routes and logistics and enhance supply chain efficiency through addressing key chokepoints.(21)

Financial Environment

Investment Law: industries supporting agriculture, manufacturing, environmental management and protection, and biodiversity conservation and the circular economy are eligible to get QIP. (23)

Investment Law: Under article 24, this sector is entitled to investment incentives described under article 26 such as income tax exemption for 3 to 9 years, prepayment tax exemption and minimum tax exemption. (23)

Investment Law: Under article 27, besides the basic incentives above, QIP will receive additional incentives such as VAT exemption for the purchase of locally made inputs, deduction of 150 % from tax base for activities such as research development and innovation. (23)

Regulatory Environment

Royal decree on the establishment of Logistics National Council in 2017 is designed to tackle the high costs of the Kingdom’s logistics sector to promote the efficient flow of exports (22)

Marketplace Participants

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Private Sector

Corporates: Khmer Cold Chain Co Ltd (KCC) Investors: InfraCo Asia Development Pte. Ltd. (InfraCo Asia)

Government

Ministry of Health, the Ministry of Commerce, the Ministry of Agriculture, Forestry, and Fisheries and the Ministry of Economy and Finance

Multilaterals

World Bank, United Nations Development Programme (UNDP), Food and Agriculture Organization of the United Nations (FAO), ARISE+

Non-Profit

Energy Lab, Cambodian Farmer Federation Association of Agricultural Producers, Global Cold Chain, World Vision

Public-Private Partnership

United States Agency for International Development through partnership with Khmer Cold Chain Company and Amru Rice, Kandal Cold Storage project

Target Locations

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country static map

Cambodia: Kandal

Kandal is one of the provinces with the most crops, including rice, maize, sugarcane, soybean, and many varieties of vegetables and fruits. The province has 140,797 hectares devoted to agricultural production. ~101,500 hectares of this is rice production, with yields above the national average. (24)

Cambodia: Kandal

In 2021, KCC partnered with Phnom Penh Autonomous Port (PPAP) to build a cross-docking facility with controlled temperature conditions in eastern Kandal province’s Kien Svay district.(11)

Cambodia: Pursat

Pursat accounts for >4% of Cambodia’s rice crop and is famous for its sweet oranges, apart from grow sugar palm, sweet potato, sesame, beans, mixed vegetables, corn and cassava. (25)

Cambodia: Phnom Penh

Phnom Penh is the best location for Cold storage

References

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