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Logo of Phnom Penh Post newspaper Phnom Penh Post - Rice sector seen as more important than garments

Rice sector seen as more important than garments

Cambodians stand to gain a lot more wealth out of the development of efficient rice farming and milling, compared to the garment sector for example, according to one of the organisers of the Cambodia Rice Forum, rice consultant David Van.

Van conceptualised the Cambodia Rice Forum and launched it as a purely private-sector initiative to drive the rice sector further through an organisation called FASMEC
(Federation of Associations of Small and Medium-sized Enterprises of Cambodia).

“Rice is very much the opposite of the garment sector.  The garment sector today is doing most of the exporting, but what’s the real benefit in terms of added value for the Cambodian people?” Van says.

“The major profit is for foreign-owned companies. The Cambodian only makes a salary,” Van says.

“But for rice, it’s different.  The multinational firm that comes in to invest in a rice mill will create jobs for local people in the rice mills, upgrade the people's skills by bringing in modern equipment, and improving the farmers, who will learn how to use more efficient techniques of planting and harvesting.”

Van’s company, Synergy Capital Cambodia Co Ltd (SCC),  is involved in  rice brokerage and building capacity for rice mills through providing financial access and securing joint-venture partners.

“Everything is captured in-country.  When you set up a modern rice mill, you need to contract with the farmers to plant the seeds you want, and teach them how to make use of modern equipment such as tractors and harvesters.

“This improves the skills of the farmers and at the same time improves their living standards.”

Van says Cambodians need to think strategically and plant the varieties of rice the market demands.

“There are so many varieties of rice.  The ministry of agriculture is trying to promote about ten varieties, but you have to first plant what the market requires,”  he says.

Van says the market demand today from international buyers is for three types of rice: premium (fragrant), mid-range and budget varieties.

“Cambodia is trying to promote 10 varieties, which is getting people very confused.  In comparison, Vietnam  has only one fragrant type, and it’s selling like hotcakes.  The internat-onal buyers have told me this.

“If I walk into a restaurant, I’m confused by 10 different kinds of orange juice.”

Van says Cambodia is fast becoming as one of the world’s biggest rice exporters.

“As of October, 2010, Cambodia was number 7 in the world as a rice exporter. By December, 2010, it was fifth in the world.”

Although Cambodia exports an insignificant volume of milled rice, paddy that flowed to Thailand and Vietnam and was re-exported by those countries has been traced back as being “Cambodian” by DNA tests.

One of the big reasons why Cambodia is not exporting more tonnage is because of the informal cross-border trade of unmilled “paddy” rice to neighbouring Thailand and Vietnam.

Van says about a million tonnes was processed in Thailand last year and significant tonnage also to Vietnam. He says it's important to put Cambodians to work and get the value-added income by milling in Cambodia, which means building a lot more rice mills that meet internat-ional norms along with bigger storage facilities.

“From farm-gate price to FOB prices, the difference is huge, from 40 to 60 per cent.  That’s a $140-a-tonne loss of added value,” he says.

Van says most of the rice basket of Cambodia is located in the northwestern part of the country in Batt-ambang, Banteay Meanchey, Siem Reap and Pursat, but other provinces – Kampong Thom, Kampong Cham, Prey Veng, Takeao and Kandal – produce substantial paddy.

If Cambodia is going to become a key player in rice exporting, Van says it will require a big investment in infrastructure in the three ways of transporting goods, the cheapest of which is waterways, followed by railways and trucking.

Van says that next year, when the new Phnom Penh river port opens, it will be able to double the capacity of vessels from 2,000 to 4,000 tonnes.

“Commodities people like to ship in big vessels to get critical mass.  Commodities have to be moved in big quantities because it is low-cost, low-value.  We need to invest in proper commodities port facilities in Cambodia.  That’s a bottleneck and things get stuck there.”

Van adds that the Sihanoukville port needs to focus more on hand-ling commodities, as it was conceptualised only as a container port for the time being.

To improve the entire sector, Van says a whole series of interventions need to take place along the entire “value chain”.

“We need to look at improving fertilising and farming techniques, modern mill equipment, better logistics, transport of goods, and better loading facilities.

“I want the Cambodian rice sector to improve in general, so Cambodia can take its place among the top global players.

“Cambodia used to be one of the leading rice exporters in the1960s.  But, because of the war, we got some setbacks for at least 40 years, from 1970 until today.

“Now is the right time for Cambodia to reclaim a place as one of the key players in global rice exports.

"If you look at Thailand, they have a population of 80 million, and their production has reached the limit.

"Vietnam also has a big populat-ion, but it has less land for rice because it is much more mountainous.  Vietnam has 90 million people that need to be fed.”

With only 15 million people and a lot of under-utilised land, Cambodia is well placed to surge ahead in rice exports, Van says.

“In Cambodia we have a lousy yield: on average, 2.5 tonnes per hectare.  We don't use much fertiliser, nor do we have proper modern farming techniques.  With such a precarious situation we already ended up with a three-million-tonne rice surplus.  Cambodia today can produce eight million tons of paddy, the surplus of which could turn easily into 1.5 million tonesns of milled rice for export.

“Today we have this surplus capacity.  If we can improve commercial farming techniques to increase the yield, we'll definitely be able to increase our market share of global rice trading.

"The farmers have to sell the paddy to foreign collectors because the local millers don’t have enough working capital to go and purchase paddy for their mills.

"Even if they have the money, there are not enough drying and storage facilities in Cambodia to handle a sudden influx of several million tonnes of paddy in such a short period of time during the postharvest months.”

Such “rice bank” storage facilities will enable Cambodia to contribute more to the ASEAN Emergency Rice Reserve, Van says.

"The most critical point is that local millers and exporters need to embrace a paradigm shift and learn to collaborate with each other, as the supply capacity is very fragmented.

“Each mill and even each rice millers' association is working on a solo basis. Worse is that members of the same associations do not even co-operate with one another, hence true competitiveness of the rice sector could only come from a clustering concept as in the form of co-operatives.”

Van has called for the creation of a more professional rice exporters' association.

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