The Daun Teuw Jute factory in Battambang, a major employer and contributor to the

local economy, was closed down at the end of February.

The factory, which has had a long history in Cambodia, had been operating intermittently

in recent years and had only been open for two months when it closed again at a cost

of five hundred jobs. Locally produced jute fiber was processed by the factory into

sacks primarily used for rice.

According to Thierry de Roland Peel, Joint Managing director of the Anglo Cambodian

Holdings Ltd., the owner of the factory, they closed down because they could not

compete with smugglers carrying jute to Thailand and Vietnam.

"The local jute farmers are selling their products to Thai and Vietnamese manufacturers

who can offer better prices," he said.

According to Peel the production cost for one ton of jute for Cambodian farmers is

about $49.

He said that, allowing for labor and profit, one ton of jute should not cost more

than $125, but Thai and Vietnamese manufacturers can offer up to $150. "If we

pay more we are operating on the bottom line," he said.

The company is now trying to secure a reliable supply of the raw material so they

can start up operations again.

"We hope to reopen at the end of this year," said de Roland Peel, "but

we also need support from the government like stricter border controls to avoid smuggling."

However, officials at the Ministry of Industry, Mines and Energy said that the reason

for the lack of raw material is that the land was flooded and the farmers could not

grow jute.

"We don't think that there is a smuggling problem for that business," said

one ministry official.

"This factory closed down every now and then and the farmers saw no need to

grow jute because until recently there was no market for it."

The source added the that the jute sacks were too expensive, compared to cheaper

second-hand sacks which are imported from Thailand, or plastic bags.

"It is not our responsibility, but we want to help this factory reopen again

because more than five hundred people can work there," the official said.

He added that the factory owners rented this factory from the government, but had

not paid rent since 1995.

Under Secretary of State for the Ministry of Industry, Mines and Energy, Hul Lim,

said the problem with the factory was mismanagement rather than supply.

"He did not manage his business properly. He should assign people to the jute

growing areas [to work with farmers] but because of his lack of capital he did not.

He compared it to a foundry making knives and axes - when the business fails the

owner blames the iron.

Lim said Anglo-Cambodian had written to him saying they would not pay the wages for

factory workers who lost their jobs.

He said he warned them that if they could not continue to operate the factory they

should return it to the Government.

"This factory, to make it function needs at least $2 million. The problem is

the owner does not have this amount of money."

Chin Thai, a 35-year-old bag seller at Phnom Penh's O'Russei market said: "

We heard that the factory is closed and it is very hard to find new bags now."

She added that during the harvest season her business is very good because the farmers

need good, new bags to transport their rice.

"We will buy bags from the factory as soon as it reopens" she said.

Meanwhile people buy lower-quality plastic bags which are easier to find and cheaper

- 300 riel, instead of 2,000 riel for a jute sack.

In India, Pakistan or Bangladesh, the major jute producing countries with gigantic

mills operating twenty-four hours a day, one mill can produce twenty million jute

sacks per annum.

Anglo Cambodian Holding Ltd. said it had plans in hand to fully refurbish the factory

and install new machinery which should enable production to increase to ten million

sacks per annum.

According to the British Business Association of Cambodia, the jute factory was one

of the two major projects from Anglo Cambodian Holdings Ltd.

The second project, also in Battambang, is the privatization of the local Power Station,

a project which has been stalled for several years.