South-South Investment and Higher Operational Efficiencies:
- Cambodia: The Project entails the transfer of knowledge and technical expertise as well as foreign direct investment from China to Cambodia, developing a stronger South-South value chain in the forestry and wood products sector. As a supplier to demanding U.S. and Canadian markets with stringent industry standards, Morris is well-placed to disseminate these practices to less developed countries. The adoption of best industry practices is expected to strengthen technological capacity and bring process improvements to the furniture industry in Cambodia, improving competitiveness at a larger scale than what is currently prevalent in the country.
- China: In addition, the China component of the Project will help the Company achieve even greater economies of scale in China, leading to more competitive products for domestic consumption as well as export markets. The planned expansion in China is expected to increase the Company's production by 30%.
Employment Generation and Standards Setting:
- Cambodia: The transfer of export-quality furniture manufacturing knowledge and technology from China to Cambodia will go hand in hand with creating jobs in Cambodia and improving the skill base of the local labor force, thus raising overall productivity in the sector. The Project is expected to help create viable long term skilled and semi-skilled direct labor opportunities for approximately 800 people at the Cambodian operating facility as well as additional employment along the supply chain. The Project is also expected to help the Company pursue an ethical work program and contribute to improved labor conditions in Cambodia though the application of IFC's Performance Standards.
- China: A sizeable number of direct jobs will also be created in China as a result of the Project. The Company's operations are fairly labor-intensive and the new facilities will require about 2,200 new employees. Over the longer term, the number of jobs and their skills level may evolve if the Company undertakes the recommended automatization which would improve resource use efficiencies.
The Project has the potential to generate market level impacts by supporting the development of the nascent furniture industry in Cambodia and helping to integrate the country into more diversified global value chains. In particular:
- Cambodian industrial production is characterized by a narrow base, low level of technological sophistication, low value addition, and high concentration in only a few sectors (notably textiles and footwear, which represent approximately 80% of merchandise exports). Against this backdrop, a Chinese company diversifying its manufacturing base to Cambodia would help a country which is eager to both move up the manufacturing value chain as well as diversify over-reliance on textiles and garments. To help the country's manufacturing sector, Cambodian authorities have established the new Industrial Development Policy (IDP) 2015-2015, which provides a roadmap to boost investment and broaden the manufacturing base.
- The proposed Project would build a new production facility in Sihanoukville Special Economic Zone (SSEZ) in line with IDP's vision. By undertaking a phased approach that starts with textile-based production (sofa covers) the Company is utilizing Cambodia's existing comparative advantages but is planning to invest in training and skill-building necessary to transition to furniture manufacturing and assembly. A successful outcome of the project is expected to demonstrate to international investors that Cambodia is a viable place of origin for high quality furniture and potentially attract new players. Furthermore, the Project is expected to have a positive impact on the local economy by upgrading the domestic manufacturing industry, diversifying exports, and integrating the country into new global value chains, thus strengthening its resilience to economic shocks.
