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Lack of standards leaves export potential untapped

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Workers packing chips at LyLy Food Industry. Unlike this company, most producers of foods don’t follow basic hygene and production standards in Cambodia. Vireak Mai

Lack of standards leaves export potential untapped

Cambodia’s exports have soared in recent years with the World Bank recording a leap from around $6 billion worth of exported goods and services in 2010 to more than $10 billion in 2013.

Although the increase is laudable, the basket of goods the Kingdom sells to the world remains dominated by garments and footwear, with only a few other products - rubber, timber, tobacco, and fish (to name a few) being exported at any significant scale.

With the ASEAN Economic Community approaching, local producers of a myriad of other goods could potentially target markets in the region and beyond, Minister of Commerce Sun Chanthol has said.

The problem? International markets often demand strict standards and quality controls are sorely lacking in the Kingdom.

Economist Chan Sophal says its a “no-brainer” that the introduction of better standards --such as those provided by the International Organization for Standardization (ISO)--could help boost exports.

“Standards will help ensure the credibility of our products, but it’s important to educate the industries to understand the usefulness of the standards' application,” he said.

“There is potential that we have quality produce or agricultural products that could be exported [in the AEC]…but to realise our potential, there’s a lot to do on the part of the entrepreneurs as well as the regulators or institutions that can issue certificates on standards.

“We have a big issue on whether we can have credible institutions to certify products or if products can meet the standards…it’s not easy.”

Local manufacturers of food products, like fish balls, noodles or banana chips, for instance, could in theory target ASEAN markets if they obtained proper quality and food safety certifications.

But Lars Crone, an investment partner at Meas Development Holding (MDH), an F&B company which counts Blue Pumpkin and Dim Sum Emperors among its stable of brands, says that while the government does have some standards, the convoluted bureaucratic process to obtain them means that few companies do.

He adds: “There are a lot of regulations in Cambodia, but the problem is that very few follow them. 80 per cent of all restaurant companies in Cambodia aren’t following basic tax, hygiene and labour laws.”

“I think it’s still a long way before you could start to export [manufactured] food from Cambodia.”

Sajibumi, one of MDH’s companies, which runs F&B concessions at Phnom Penh International Airport, has received HACCP (food safety) and Halal certifications through a Singapore-based firm.

One of the problems facing companies who do want to be properly certified, Crone says, is that there are no private companies that can certify producers locally.

“We are sending food samples to a lab in Vietnam to have them checked.”

David Van, senior adviser to the Cambodia Rice Federation, said that global rice markets expect HACCP and ISO certifications.

Twelve of the country’s mills have either already or are currently in the process of obtaining them through a program sponsored by the International Finance Corporation, he said.

“It's a matter of time before we have a bigger number of our millers and exporters to secure such certificates including Kosher, Halal and others [in order] to penetrate more markets in developed countries.”

Sanitary and phytosanitary measures are another hurdle for Cambodian exports to clear in order to enter certain markets, Van added, singling out China as an example.

“China requires each Cambodian agricultural commodity to have a SPS certificate cleared and endorsed by the relevant Chinese agencies,” he said.

“Things were slow in the past until the Minister of Commerce took a proactive stance to request assistance from China to help negotiate a ‘package’ of commodities instead of negotiating one commodity and another sequentially.”

Jay Menon, lead economist on trade and regional cooperation at the Asian Development Bank, cautioned, however, that while the adoption and application of SPS measures could improve export prospects for Cambodian agricultural products, “some [SPS] measures do not exist or do not cover the full complement of products in Cambodia today.”

“In this context, any attempt at harmonisation through ASEAN or other avenues could be problematic if it results in selective harmonisation,” he continued.

“For example, if sanitary standards are applied to fish but not meat, this could raise the price of fish and, all other things being equal, shift consumption away from fish toward meat--assuming that there are imperfections in the market’s assessment of food safety, which is not unusual in a transitional economy like Cambodia.

“This not only distorts consumption patterns, but it has the potential of increasing rather than decreasing risk levels associated with food safety.”

As regional integration moves closer, however, Cambodian producers anxious to sell their wares abroad know that the lack of standards in the Kingdom--selectively applied or otherwise --is likely to hold them back.

“It is a good thing that I can export without having to pay tax,” Prak Chantheoun, a noodle producer from Battambang told the Post in March while attending a government-organised conference on the AEC.

“But it will be tough for Cambodian products unless we can produce according to the standard required by the countries we are targeting.”