Thailand-Based Manufacturing Companies Eye Cambodia

As Thailand’s workforce ages and production costs in the country’s manufacturing sector rise, experts and officials see Cambodia as an attractive alternative for companies looking for a younger, cheaper workforce. A lack of skills, however, is standing in the way of any sudden shift.

For decades, Cambodia’s manufacturing sector was composed almost entirely of garment factories, but that is changing as mainly Japanese investors help the sector diversify into bicycles, electronics, automobile parts and even comic book restoration.

At a press conference on Thursday that focused on how to boost Cambodia’s industrial capacity, held ahead of Thailand’s Assembly and Automation Expo in June, Thai trade officials said they would encourage investment in Cambodia by offering data and linking businesses.

Peter Brongers, senior executive vice president of the Royal Group and president of the Cambodia Automotive Industry Federation (CAIF), said that labor trends, along with the political situation in Thailand, have more companies looking at Cambodia.

“There’s quite a lot of industries who put all their eggs in the Thai basket, but with all the political instability, they are considering a move,” Mr. Brongers said.

But before further development in the manufacturing sector, Cambodia must address a gap in specialized skills that has resulted from insufficient education and vocational training since the country opened for investment in the mid-1990s, he said.

Several manufacturers that are currently based in Thailand are looking to establish supply lines across the border in Poipet, where manufacturing costs are cheaper, Mr. Brongers said, adding that current efforts to train more Cambodians in fields like technology and engineering needed to be ramped up.

“I think, first of all, it’s the responsibility of the government to provide sufficient basic education, but it’s also the responsibility of the companies that come,” he said.

Mr. Brongers noted that with hundreds of thousands of Cambodians currently working in Thailand’s manufacturing industry, there was an opportunity to capitalize on years of on-the-job training.

“So it will be a group movement if these people are moving back to Cambodia,” he said. “For this, we have to provide private opportunity. We are pushing more manufacturing to start operating here.”

Gordon Peters, a partner at investment and consultancy firm Mekong Strategic Partners, said that some major companies like Minebea, a producer of machinery components and electronic devices, were already testing the waters in Cambodia and working to narrow the skills gap in-house.

“HR management and retention is already a challenge in the manufacturing sector, and so I think electronic manufacturers will need to invest in proper worker training programs,” he said via email, adding that high electricity costs remained another impediment to investment.

“Other top challenges as noted by the World Bank include corruption, macroeconomic instability, transportation, and the cost of financing,” Mr. Peters added.

Jirawuth Suwanna-arj, minister counselor of commercial affairs at the Thai Embassy in Phnom Penh, said two different bureaus had been set up to increase trade and facilitate investment between Cambodian and Thai businesses. However, he said Thailand had its own reasons for wanting to boost economic cooperation with Cambodia.

“Why we are promoting the collaboration between the two countries is we are seeking some raw materials and products,” Mr. Jirawuth said. “Those can be useful for our own country.”

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