In Vietnam and Thailand, millers pay no more than ten cents per kilowatt of electricity. In Cambodia, it’s roughly twice as much. Transportation is also a headache. Using trucks that navigate potholed roads means that getting a tonne of rice from a Cambodian farm to a mill typically costs about $10. In Vietnam, where infrastructure such as railway lines is in place, it costs about $3.
The end of Cambodia’s rice industry?
| 25 October 2015A combination of erratic weather, poor infrastructure and an inefficient government has experts predicting that Cambodia’s rice industry could collapse within a decade
Rice has been the lifeline of villagers in northern Cambodia for thousands of years and, in all this time, little has changed in the way that the staple is planted. It is arduous, mechanical work for farmers such as Kim Laysim, who lives in Preah Vihear province’s Ta Tong village.
a warehouse in Kandal province on the outskirts of Phnom Penh. Photo: Samrang Pring/Reuters
From the roosters’ early wakeup calls until the sun sets upon their fields, almost everyone in Laysim’s town dibbles seeds into the ground before the monsoon rains flush nutrients into the soil. But not this year. The rains, Laysim says, have come too little, too late.
“I just finished growing rice in late August. There’s no rain this year, so cultivation was very late. Now I’m very worried because we are facing drought, so the yield we’ll be able to get will be low,” she says. Some areas are expected to lose 50% of yield.
If Laysim lived in Thailand or Vietnam, she wouldn’t be as worried. Wide-ranging government subsidies, low-interest government loans and improvements in rice-related infrastructure have created stable rice industries in these neighbouring countries. But not so in Cambodia.
Although the Kingdom is proud of its rice industry and even wins international awards for high-quality grains, the government has done little to help the sector. Song Saran, chairman of Amru Rice, the country’s biggest exporter, says that if this attitude doesn’t change, the outlook is bleak.
“We are in danger. It’s a business with very small margins, and it’s a high-risk commodity,” he says. Most experts are in agreement.
The effects of the government remaining ineffectual would be crushing: about half of the Cambodian population’s livelihoods are said to depend on the rice sector.
Rice is the world’s most important food staple – it accounts for a staggering one-fifth of humanity’s calorie intake – and Cambodia is among the world’s top ten rice exporters. According to the Asian Development Bank’s Chanthou Hem, a senior project officer, this is an astonishing achievement. Cambodia, he says, lacks the “necessary practical production systems, infrastructure and post-harvest mechanism… and [has a] weak link between seed producers, paddy growers and processors [millers] that will promote a secure and profitable system”.
Both the aid industry and the private sector have invested millions of dollars to get the industry up to speed. Kann Kunthy, CEO of Brico, a group of investors trying to improve the rice sector in Battambang province, Cambodia’s main rice-producing region, says that it is the government that has neglected the industry.
“They always say they are working on better infrastructure, but they have said that for five or ten years already. It’s not news that we need better irrigation systems. But what have the ministries done?” he says.
Rice is a high-risk business, even when the weather plays along. Laysim’s story is just one example. Last year her family harvested 15 tonnes of rice but sold only 11. Like most farmers, she grows grains of her own choosing or simply buys the ones she can afford – market demands are widely ignored. Meanwhile, Europe is aiming to import only high-quality rice – an area in which Cambodia could have a natural advantage due to its limited use of fertilisers. Yet Cambodia’s small-scale farmers are unaware of this and frequently bet on the wrong grains.
With sales well below Laysim’s expectations, she had to take on a $3,000 loan to buy enough seeds for this year’s season, despite her gut telling her not to. Laysim has seen farmers struggle to pay back loans after droughts, floods and other all-too-common disasters have ruined their yield.
“It will be difficult to pay back the loan because the interest rate is so high. But what other choices do I have?” Laysim says.
Rather than the government providing loans at low- or zero-interest rates such as those offered in Thailand and Vietnam, a network of loan sharks caters to Cambodia’s small-scale farmers, preying on their dead-end situations following natural disasters. Some loans come with interest rates as high as 100%. If the farmers can’t pay they have one solution: migration. Earlier this year, more than 700,000 Cambodians lived on temporary work visas in Thailand. Hundreds of thousands more are estimated to live there illegally.
Kheang Kimlean, the owner of a rice mill that supplies the local market in northwestern Cambodia, says that she struggles both to get a sufficient amount of rice to keep her mill running at capacity of 15 tonnes per day, and to sell it after milling.
“Half of my clients have moved to Thailand,” Kimlean says.
As farmers leave their paddy fields to work in Thailand, the total area on which rice is cultivated has dropped dramatically – by more than 12% in less than ten years, according to the World Bank. This is far from what the government has planned. By the end of this year, Cambodia’s Prime Minister Hun Sen has said he hopes to export one million tonnes of rice – a target that was met with ridicule and scepticism when he announced it in 2010.
About 379,000 tonnes were exported in 2013. Last year, this number grew to about 387,000 tonnes, up by only 2.2%. If the government had provided loans and built irrigation systems, Hun Sen’s target wouldn’t have been unrealistic, Saran says.
But these aren’t the sector’s only issues. The whole production chain, Saran says, is simply too expensive. “High production costs are our main issue,” he says.
Saran joined his family’s business in 2010. Back then, Amru exported two shipping containers of rice per week to the EU. Today, the company employs more than 250 people and exports between 1,500 and 2,000 tonnes per week. Amru, like other private companies, has invested millions of dollars in mills and rice-drying equipment. While progress such as this is encouraging, the private sector cannot be solely responsible for carrying the industry.
In Vietnam and Thailand, millers pay no more than ten cents per kilowatt of electricity. In Cambodia, it’s roughly twice as much. Transportation is also a headache. Using trucks that navigate potholed roads means that getting a tonne of rice from a Cambodian farm to a mill typically costs about $10. In Vietnam, where infrastructure such as railway lines is in place, it costs about $3.
To continue the rice’s journey, it costs on average another $25 to get the Cambodian tonne of rice to the port in Sihanoukville, from where it goes on to be shipped to larger ports such as Ho Chi Minh City, before being exported to Europe and beyond.
“Every other country supports their own rice industry and gives incentives. We only have papers; no action,” Saran says.
And then there are the outside pressures. As one of the world’s least-developed countries, Cambodia has been able to export rice tariff-free through the EU’s Everything But Arms (EBA) trade scheme. The EBA allowed Cambodia to access a consumer market of 500 million, lifted exports off the ground and now accounts for the majority of Cambodian rice shipped abroad.
For the EU, that’s no more than 300,000 tonnes, or about 22% of its overall rice imports. Experts, however, fear that this number will drop once a free trade agreement with Vietnam is in place that will see tariff-free imports of 76,000 tonnes of rice per year. Myanmar, now about five years behind the Cambodian rice sector, is also expected to catch up.
New markets such as China and Malaysia could be the solution. Country-to-country deals, however, demand the government’s action. Last year, Cambodian exporters rejoiced when a 100,000-tonne rice export deal was signed with China. Now, however, China is asking to buy rice at lower rates. This again demands that the industry become more competitive.
To some extent, the Cambodian government has acknowledged its shortcomings. In May last year it established the Cambodian Rice Federation (CRF), a group of experts tasked with improving productivity and exports. But experts and the federation’s own members say that the CRF hasn’t had any tangible impact. In January the CRF told theCambodia Daily that the federation was still struggling to overcome “current internal and external challenges”. WhenSoutheast Asia Globe asked what the body had achieved since its inception 17 months ago, acting secretary general Moul Sarith said: “But… but we’ve only been working for a short time,” before declining to answer any further questions.
If things continue at the current pace, Saran says the future of Cambodia’s rice industry looks bleak: “In seven years”, when other countries have amped up production and Vietnam’s agreement with the EU is fully in effect, “the industry will collapse”.
Keep reading:“Divided they fall: Cambodia’s unions” – Last year, trade unionism in Cambodia appeared to have reached its high-water mark. But with minimum wage negotiations taking place this month, there are already concerns it has become a divided and weakened movement
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