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Logo of Phnom Penh Post newspaper Phnom Penh Post - Co-op scheme aims to boost farmers’ profits

Co-op scheme aims to boost farmers’ profits

121219 04
Former US ambassador to the United Nations Sichan Siv (right), who is also a managing director of Akra Group, watches a worker sewing a rice bag at a milling facility in Phnom Penh. Photo Supplied

Former US ambassador to the United Nations Sichan Siv (right), who is also a managing director of Akra Group, watches a worker sewing a rice bag at a milling facility in Phnom Penh. Photo Supplied

An ambitions new agricultural development project backed by a former US diplomat is aiming to dramatically revamp the sector and bring profits back into the hands of farmers.
Sichan Siv, a Cambodian with dual

citizenship who spent five years serving as US ambassador to the UN, and his consultancy, Akra Group, plan to launch in early January a national farmers’ and millers’ co-operative project that will pump millions of dollars into the sector. If successful, says Sichan, Cambodia could be one of, if not the biggest producers of milled rice in the world.

For Sichan the project, called Akra Agriculture Partners, is about breaking cycles of dependency to ensure the rural poor can generate their own wealth as they restore prosperity to a once-mighty agricultural empire.

“Whenever I look at history, that in the 12th century they were able to produce two or three crops a year without all this mechanised equipment – we ought to be able to do better than that 900 years later,” Sichan said.

Sichan and his team, which includes managing directors Thomas Willems, an international trade specialist with numerous successful entrepreneurial ventures behind him, and William Nojay, an agriculture business expert who has worked in more than 30 countries, have a simple plan.

They want to stop the most lucrative stage of Cambodia’s rice production from spilling over to Thailand and Vietnam, something that occurs now because of a lack of domestic milling and storage capacity, and which some fear could continue if a weak Cambodian rice industry is infiltrated by a wave of foreign investors when trade restrictions are lifted under the 2015 Asean economic community.

Tightening the Cambodian command of the market, next year alone, Akra plans to increase milled rice exports by between 100,000 and 300,000 tonnes. Widely varying estimates currently put the figure at about 150,000 to 250,000 tonnes per annum.

Their project fits neatly with planned government policy. By 2015, the Cambodian government aims to export at least 1 million tonnes of rice a year.

Willems said though numbers are poorly recorded, it is clear that vast amounts of Cambodia’s unmilled paddy is sold to neighbouring countries, which make hefty profits simply because of a lack of milling facilities here.

“Our proposition is: let’s keep as much added value as we can in Cambodia, so that they can maximise their value,” he said, adding that this would begin simply with building rice driers and silos.

Lamenting the sad irony that some Cambodian paddy is actually sold back to Cambodians from Thailand and Vietnam as milled rice, Willems said the co-operative scheme would help see the Kingdom’s rice processed all the way to packaging.

“If they [the government] saw ... [the] dollar figure that is slipping over the border to Vietnam and Thailand, they would choke. It’s astronomical,” he said, adding the percentage Cambodian farmers received of final product sale was “minuscule”.

During Akra’s investigations, Willems said they found not a single harvester nor any driers at the mills, which not only resulted in some 10 to 15 per cent of production being lost to spoilage, but left farmers hostage to the immediate market price after harvesting.

The co-ops, modelled on those in the US, EU and Australia, would elect their own board members and pump a share of profits back into infrastructure development with a kickstart of several million dollars from Akra.

As a US-registered company that will be entirely owned by Cambodian farmers and millers, the Akra co-op will be beholden to US laws intended to safeguard it against corruption.

Farmers and millers are invited to buy shares in the company, which then guarantees to buy their rice at world market price, mill the rice, package it and sell into to markets such as the US under the universal branding of Akra rice.

The profits would then be fed back into the co-op, with the member-elected board determining whether this money goes directly back to shareholders or is used to further invest in infrastructure.

Akra will also sell inputs such as seed, fertiliser and heavy machinery at cost, or lend machinery to those who cannot afford it, and pay for inspectors from foreign markets to certify the product.

Cambodia’s current milling capacity is widely perceived as far too low, with only a handful of major facilities operated by the private sector.

On Saturday, Minister of Commerce Cham Prasidh launched a new Federation of Cambodian Rice Exporters aimed at boosting milling and export capacity under the umbrella of one organisation, which would be the only body given a direct voice with the government.

“They have to understand that being part of the one federation will give them the greatest benefit ... [By being part of the federation], we won’t ban them from exporting if they have issues,” he said.

Prasidh did not respond to emailed inquiries from the Post, while Minister of Agriculture Chan Sarun could not be reached. A secretary of state at the Ministry of Agriculture, Chan Tong Yves, said he was unaware of the Akra initiative and declined to comment.

Akra is not the only group seeking to create large-scale farming co-operatives. The Cambodian Center for Study and Development in Agriculture (CEDAC), which currently promotes more than two dozen small-scale co-operatives, is also planning to set up much larger scale farming co-operatives, though President Yang Saing Koma stresses such projects face significant challenges.

“It’s good, [but] it will be very difficult to implement,” he said of the Akra cooperative. “It will take time. Actually, we are working on that – to have a large national co-operative – so it will take time, maybe at least five years but we plan to spend up to 10 years,” he said.

Koma said that the low market price for rice this year saw farmers receiving less than 1,000 riel (25 cents) per kilogram on non-fragrant rice and 1,200 to 1,300 riel for fragrant rice.

CEDAC communications officer Him Khortiet said that because farmers were unable to wait to sell their paddy at the end of the harvesting season when the price rose, middle men reaped profit, while almost nothing trickled down to the producers.

With petrol, seed and fertiliser all highly expensive, farmers are left reliant on micro-financing institutions that charge huge rates of interest.

“They cannot afford to pay back their labour costs or input packs,” he said, an assessment echoed by Koma.

“The profit is in the hand of the rice mill, the profit cannot go back to the farmer.”

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