Prime Minister Hun Sen has ordered that all three agricultural public enterprises

must be privatized by 2006. The move means the government will qualify for a $35

million agricultural sector loan from the Asian Development Bank (ADB). One of the

loan conditions is divestment of the state enterprises.

In a directive issued by the Council of Ministers (CoM) in December 2002, the government

announced it would divest itself of its entire share in both the fish export company

KAMFIMEX and the Agricultural Input Company (AIC), a fertilizer company.

The third enterprise - the seven state-owned rubber plantations - will either be

privatized, dissolved, or run as joint ventures between government and the private

sector.

Chan Tong Yves, secretary of state at the Ministry of Agriculture, Forestry and Fisheries

(MAFF), said the aim of divestment was to "enhance economic growth and governance".

"The conditions set by the ADB are consistent with the government's policy of

reform," he said. He added that an inter-ministerial divestment committee would

be set up in February. The government's first priority is an audit of the rubber

plantations.

"If we want to have the Agricultural Sector Development Program Loan circulate

to the ADB board [in Manila] by June, the government will undertake the audit of

the seven rubber estates by June," he said.

Ly Phalla, head of the General Directorate of Rubber Plantations, said the seven

plantations contributed $1 million in tax revenue last year. Figures from the Department

of Fisheries show that KAMFIMEX contributed around $250,000 in the same period.

Tong Yves said he was unable to say how much tax any of the companies had paid, and

referred questions to the Ministry of Economy and Finance.

And despite the ADB's criticisms of the performances of all three state-owned companies,

Tong Yves claimed all were successful.

"They perform quite well, this is our opinion," he said. "We know

they make a profit - they pay tax according to the rules and regulations."

However that conflicted with comments from the CoM's Dr Touch Seng Tana, who said

the government needed to privatize the rubber, fish and agricultural companies as

they were no longer profitable.

The government, he said, needed to consider the private sector as its partner in

economic growth.

"There is no need to keep these state-owned companies anymore," said Dr

Touch. "It is very small money and not a big profit, and we can see the fisheries

exports year by year deteriorated. That is why the government doesn't want to keep

KAMFIMEX."

Part of the ADB's draft loan report written last September was a review of the feasibility

of the companies' operations. In its analysis of the seven rubber companies, it found

"considerable problems in the management and performance of the companies".

"If Cambodia's rubber industry has to survive and contribute to sustainable

growth and employment, a process of restructuring and eventual privatization is inevitable,"

the ADB stated.

Its examination of AIC, which was formed in 1999, stated: "It is not clear why

the company is not privatized or dissolved ... Dissolution of AIC is not likely to

cause major disruptions in the fertilizer market, since its presence in the market

is already marginal."

KAMFIMEX was also criticized. In the past, the ADB noted, the company was the sole

agency responsible for fish exports, or collecting a fee of 4 percent at fish landings

in each province. In addition a 10 percent tax on all fish exports was also levied.

"This situation was encouraging active fish smuggling and constraining the development

of private sector fish marketing," the ADB noted. "Eventually this public

enterprise will need to be privatized or dissolved."

The head of the fisheries department, Nao Thouk, welcomed the idea that the company

would be privatized.

"For KAMFIMEX we can do it within six months to one year, [certainly] by 2004,"

Nao Thouk said. "When privatized there [will be] no more corruption."

Nao Thouk said a sub-decree issued last September, which turned KAMFIMEX into a public

enterprise with no control over fish exports, was a case in point. That had opened

up the fish export market and reduced corruption and smuggling, he explained, because

exporters no longer had to pay tax to both KAMFIMEX and Customs officials.

"That will facilitate private companies trading their products without paying

another fee to KAMFIMEX. This not only affects private companies, but will also increase

the prices that fishermen get," he said, adding that more than ten companies

had already been issued fish exporting licenses since September.

An ADB spokesman said he expected the five-year Agricultural Sector Development Program

loan would be approved in June this year, but could not say when implementation would

begin. It will be used to promote reforms and investment in the agricultural sector

and encourage farmers to grow a wider variety of crops.