The promises of Chinese agro-industrial investment have been recurrent: Hyped up by local officials and media outlets, with photographs of handshakes and earnest negotiation posted across social media, major deals are announced between government ministries and visiting delegations.
In many cases, however, in a sector that industry observers say flounders in red tape and land disputes, those promises have failed to materialise.This month, two significant Chinese-backed projects were proposed for the benefit of Cambodia’s agricultural sector.
The first, led by Hong Kong-based investment holding company Green Leader Holdings Group, involves plans to streamline the processing of raw cassava into ethanol with the construction of five new factories in 2018. The company has promised to open a total of 10 factories in Cambodia by 2020.
The second, funded by Chinese firm Weighai Dragon Union Agriculture Co Ltd, should see up to $50 million go towards the packaging of fruit from Kampong Speu province for export to China and Japan, with the company also proposing plans to establish an agricultural bank to help farmers expand cultivation.
The plans potentially add up to considerable developments in a stagnant sector looking for ways to climb up value chains and secure greater returns. But past examples of companies failing to follow through on their proposed investments have raised some doubts about new offers of financing.
In October last year, Chinese firm Tian Rui (Cambodia) Agricultural Cooperation SEZ Co Ltd announced plans to invest a whopping $2 billion into developing the Kingdom’s first special economic zone (SEZ) geared entirely for agro-processing and storage.
Though it attempted to sign on another Chinese investor for the project in July this year, plans for the massive SEZ have been stalled due to a 100-hectare land dispute, Agriculture Minister Veng Sokhon said yesterday.
“The agro-processing SEZ is on hold for now, because the company needs to make a deal with the owner of the neighbouring land,” he said. “Now we have no idea when the project will start again.”
The Tian Rui-backed SEZ is not the only Chinese agricultural project to have fizzled out after a high-profile launch.
A joint venture between Cambodia’s National Company for Development and an unnamed Chinese partner was announced in late 2011 with the aim of building a cassava plant in Banteay Meanchey province that would process 2 million tonnes of cassava a year in order to boost local production of ethanol. Work on the plant reportedly faltered in April the following year.
Pang Sovanna Seth, director of the Agricultural Department in the province, said it was unlikely that a cassava processing plant could be established there.
“We have never had any factory in our province for processing cassava,” he said. “It’s hard to open a factory here, because all our farmers prefer to sell their crops to Thai brokers.”
The agricultural sector nevertheless has a pressing need for the kind of projects being proposed. Chan Sophal, director of the centre for Policy Studies said the industry would benefit from a range of processing plants instead of just rice.
“Our sector really needs a factory for processing raw material, as there is a shortage of these types of factories in the industry,” he said. “However, it’s hard to find investors, since there is a high cost of production and a lot of competition from neighbouring countries.
“There is a high influx of Chinese investment promised to the sector, but it is hard to say whether [the proposed projects] will happen or not, we can only wait and see,” he added.
Anthony Galliano, CEO of Cambodian Investment Management, said few foreign investors have been able to make significant contributions to the Cambodian agricultural sector due to extensive red tape.
“The agriculture sector has baggage, given the difficulty of navigating approvals and obtaining licences needed,” he said. “There’s also a need to address a lack of advanced agricultural technology in the Kingdom, the investment timeframe until most crops produces and the capital intensive cost to operate the business.”
Despite a track record of stalled Chinese-backed agricultural projects and obstacles standing in the way of foreign investors, however, officials remain hopeful the recent pledges of investment will pan out.
Hean Vanhan, undersecretary of state at the Ministry of Agriculture, said that recent investor Green Leading Holding Group had shown a strong desire to follow through on its proposal to increase the number of cassava processing plants in the Kingdom.
“I believe that the company will come,” he said.