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Kingdom’s unbranded rice industry continues to be pelted by challenges

Content image - Phnom Penh Post
Cambodian rice loses out to cheaper regional competition. Heng Chivoan

Kingdom’s unbranded rice industry continues to be pelted by challenges

Despite having won TRT (The Rice Traders) World’s Best Rice competition in three consecutive years since 2012, Cambodia’s rice industry continues to face challenges when pitted against its regional competitors – namely Thailand and Vietnam, according to rice industry experts.

The Cambodian Rice Federation (CRF), established in May 2014 under the Ministry of Commerce’s initiative, has been the main private organisation responsible for the promotion of the rice industry, according to Vichit Ith, executive director of Apsara Rice (Cambodia) Co. Ltd.

In regards to how successful the government has been with assisting the rice sector, however, he said, an overarching policy to boost productivity and competitiveness is lacking.

“Relevant ministries such as the Ministry of Economy and Finance together with the Ministry of Agriculture and CRF have yet to come up with a thorough strategy design, accompanying policies and policy implementation framework that can be rolled out to enhance the competitiveness of our rice industry in the global market, especially within the context of how to allow Cambodian millers to become a cost leader to compete with the same level playing field than their Thai and Vietnamese counterparts,” he said.

Meanwhile, Chan Sophal – director for the Centre for Policy Studies (CPS), who conducted a “Boosting Food Production Programme” earlier this month – said that the Royal Government of Cambodia has committed to providing funds to improve and expand quality rice seeds for exports.

“The interventions will address the whole value chains, although it may not suffice due to limited financing. With more public sector support in meeting market demand, Cambodia stands a good chance to make our superior, aromatic rice better known in the world,” Sophal said.

Another factor hampering Cambodia’s rice value chain is the inaccessibility to cheap loans, according to Ith. “It is not unusual to see a negative spread between the cost of fund and net profit for millers as the only loans available are from commercial banks,” he said, explaining, however, that these are not viable options because these banks do not have an allocated loan budget to support agricultural-based activities.

“Most developing countries have specialised banks such as development banks or exim (export-import) banks to take care of its most vulnerable industries and players such as agriculture and SMEs, by lending at less than 4 per cent per annum,” he said.

Cambodian millers are also losing out in other aspects such as logistics and energy costs, where the absence of waterways for shipping, puts Cambodia at a real cost disadvantage together with high electricity costs, compared to the country’s competitors, he elaborated.

In a January 2015 report by the International Finance Corporation (IFC) in collaboration with CRF, it stated that “Cambodia should develop a unique fragrant/high-quality rice product name, mark of certification, and consider the creation of a protected geographical indication (PGI) for specific, limited regions in the country.”

Ith seconds this statement, as he believes that the real work to build recognition and acceptance from global rice importers will have to rely on efforts to adequately and professionally brand Cambodia’s rice. There is yet a pragmatic, professional, and thorough marketing strategy with appropriate market positioning and implementation plan, he said.

Yet, there is still hope that Cambodia can hone its rice identity, with an increasingly optimistic percentage of exports in recent years – 540,000 metric tons in 2015, according to Ith, as compared with a paltry 40,000 metric tons in 2010.

Additionally, he added that for Thailand it took nearly 25 years to build their brand image.

This possibility, nevertheless, was in large due to 63 per cent being exported to the EU, said Ith, under the EBA (Everything But Arms) scheme wherein all imports to the EU from the Least Developed Countries are duty-free and quota-free.

A downside to the EBA scheme is that this privileged status enjoyed by Cambodia is now on the line, “as Vietnam had signed a Free Trade Agreement with the EU late last year and rice is part of the deal. Hence, it will not be a surprise that our export figures to the EU may drop,” Ith said.

The IFC report also stated, “[however], the EBA program will end at some point”, providing a suggestion that the Cambodian rice industry should redouble its efforts in building up its international image in the EU while this EBA scheme lasts.

While the report focused considerably on how Cambodia can position itself to be more appealing to main import countries such as France, Singapore, China, and Germany by having a strong branding identity and image, Ith also believes that export figures will drop unless the relevant ministries – Ministry of Commerce, Ministry of Agriculture, Forestry and Fisheries, Ministry of Finance – and the CRF manage to come up with a winning policy and accompanying course of action to salvage and revitalise the rice industry in the very short term.

“Cambodia’s rice industry has a huge potential but unless we manage to solve the cost impediments, this potential may be squandered. It is the survival of the fittest.”

This article has been updated for further clarification on agriculture and the commercial banking sector.


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