As the government’s latest economic policy is prepared, several experts have described the main challenge facing the agricultural sector as the Kingdom’s export of unprocessed raw materials, which currently make up 75 per cent of the exported produce.

The private sector has urged the government to provide more tax relief in the sector, to provide incentives for more investment.

Speaking at last week’s “Sectoral Policy Dialogue” forum – jointly hosted by the Ministry of Economy and Finance and the Asian Development Bank (ADB) – finance ministry secretary of state Vongsey Visoth said he accepted that the figure of 75 per cent is too high.

He explained that the government’s agriculture policy, which he helped prepare, was designed to support the sector, but needed revision.

“We need to hold more discussion with all relevant stakeholders, especially policy implementers and the private sector. I was involved in preparing the current policy. It aims to help, but it is not enough,” he said.

Due to the far-reaching impact of the Covid-19 pandemic, especially to the service industry – which is a major income source – Visoth said tax policy has changed a lot in the last few years.

He said agriculture accounted for 23 per cent of the Kingdom’s gross domestic product (GDP), with milled rice alone contributing seven per cent.

Visoth praised new agriculture minister Dith Tina, who he said is striving to improve the profitability of the industry.

“The young agriculture minister is very capable; he has good understanding, from policy to technical aspects, though he needs more support,” he said.

Cambodia Chamber of Commerce (CCC) vice-president Lim Heng said investment from the private sector is needed for growth, whether in innovation or through new processing developments.

Heng raised two points for policymakers to consider: increased incentives through tax relief and transparent application of the laws surrounding agricultural contracts.

He encouraged policymakers to annul withholding tax because recent investors in agriculture were yet to see any profits, but were still liable for a one per cent tax.

“There is also a 15 per cent withholding tax for other services in the agriculture sector. Rice is not taxed when it is milled, but 10 per cent is charged when it is sold, excluding export tax.

“I think if we want to attract more foreign investors, the government should consider providing tax incentives,” he said.

He added that transparent law enforcement is another point that must be considered.

“Contracts should be used as insurance on loans from finance sector – this would improve access to capital,” he said.

“The Kingdom’s produce is clearly of high quality, as neighbouring countries buy hundreds of millions of dollars worth each year – we should be processing them, and unlocking new markets,” he added.

An official from the General Department of Taxation who attended the forum said new investment laws provide tax relief on investment in the agriculture sector.

“Small and medium agricultural enterprises in the sector receive tax relief for between three and five years. Taxes on agricultural products have been lifted, although a one per cent withholding tax remains,” he said.