TACR: Regional: the Rice Situation in Cambodia

Technical Assistance Consultant‘s Report Project Number: TA 7495-REG January 2012 Support for the Association of Southeast Asian Nations Plus Three Integrated Food Security Framework (Financed by the Japan Fund for Poverty Reduction) The Rice Situation in Cambodia Prepared by Kean Sophea The author is Deputy Director of the for the Asian Development Bank Department of Horticulture and Subsidiary Crops under the General Directorate of Agriculture, Ministry of Agriculture, Forestry, and Fisheries, Cambodia. This consultant‘s report does not necessarily reflect the views of ADB or the Government concerned, or the institutions at which the consultant works, and ADB and the Government and these institutions cannot be held liable for its contents. ADB does not guarantee the accuracy of data and presentations included in this report and accepts no responsibility for any consequences of their use. By making any designation of or reference to a particular territory or geographic area, or by using the term country in this document, ADB does not intend to make any judgments as to the legal or other status of any territory or area. ABBREVIATIONS ACI Agrifood Consulting International ADB Asian Development Bank AKR Angkor Kasekam Roonroeung Co. Ltd. ASEAN Association of South East Asian Nations Camcontrol Cambodia Import-Export Inspection and Fraud Repression Directorate- General CDRI Cambodia Development Resource Institute CSES Cambodia Socio-Economic Survey EBA Everything But Arms EU European Union FAO Food and Agricultural Organization of the United Nations GDP Gross Domestic Production ha Hectare hp horsepower JICA Japan International Cooperation Agency kg kilogram km kilometer kWh kilowatt hour MAFF Ministry of Agriculture, Forestry, and Fisheries (Cambodia) mt metric tons NGO nongovernment organization NIS National Institute of Statistics (Cambodia) NR National Road SME small and medium enterprises SOE state-owned enterprise t ton US United States WFP World Food Programme Note: In this report, "$" refers to US dollars. ABSTRACT Rice is the main agricultural produce and staple food in Cambodia. It contributed 25% of the agricultural gross domestic product in 2006 and 40.7% of agriculture growth in 2003–2006. After 25 years of civil war, Cambodia is slowly recovering its status as a major rice producer and exporter. However, the country‘s rice yield is currently the lowest in comparison with other major rice-producing countries, even below that of neighboring Laos and war-afflicted Myanmar. The Cambodian government wants to double rice production in the next 5 years and boost international commercial rice exports. These goals, however, will demand improvements in irrigation infrastructures, marketing value chain, postharvest and processing system, etc. This report studies the opportunities and constraints that affect Cambodia‘s objective to once again become a major rice exporting nation while tackling food insecurity and rural poverty. This draft report was prepared for the Asian Development Bank by Kean Sophea, National Rice Economist for Cambodia, under TA 7495-REG: Support for the Association of Southeast Asian Nations Plus Three Integrated Food Security Framework. The draft report is part of the TA‘s diagnostic study on the food security of five ASEAN member countries—Cambodia, Indonesia, the Philippines, Thailand, and Viet Nam—with a special focus on rice. The draft report is an abridged version of a full country research paper on Cambodia, which is available upon request. The draft report is being published to disseminate the findings of work in progress to encourage the exchange of ideas. The emphasis is on getting findings out quickly even if the presentation of the work is less than fully polished. CONTENTS 1. INTRODUCTION…………………………………………………………………………………... 1 2. RICE SITUATION………………………………………………………………………………….. 3 3. MARKETING SYSTEMS………………………………………………………………………….. 6 4. POSTHARVEST AND PROCESSING…………………………………………………………… 11 5. PRODUCERS‘ AND TRADERS‘ MARGIN………………………………………………………. 15 6. FOREIGN TRADE………………………………………………………………………………….. 17 7. CONSUMPTION AND FOOD SECURITY………………………………………………………. 19 8. PUBLIC POLICIES AND KEY PLAYERS ON RICE……………………………………………. 28 The Public Sector…………………………………………………………………………………… 28 The Private Sector………………………………………………………………………………….. 30 9. SUMMARY AND CONCLUSIONS……………………………………………………………….. 31 The Rice Situation in Cambodia 1. INTRODUCTION Cambodia is an agrarian country, with one-third of the total land area allocated to agricultural production. Rice is the main agricultural produce and the country‘s staple food. It contributed 25% of the agricultural gross domestic product (GDP) in 2006 and 40.7% of agriculture growth in 2003–2006. Rice production has increased significantly in the last decades, particularly since the major economic reforms of 1989. The planted areas of rice increased from 1.9 million hectares (ha) in 1990–1991 to about 2.6 million ha in 2009–2010. The increase was the result of mine clearance, improved security, and reclamation of unused or deforested land. The productivity per hectare of rice increased considerably over the same period, from just over 1.4 tons/ha in 1990–1991 to 2.8 tons/ha in 2009–2010. The increase in yield was due to many factors: favorable weather conditions, an increase in the availability of rural credit and private investment, technology improvements, use of chemical fertilizers and other inputs, and new high-yielding rice varieties. The combination of expansion of planted areas and the increase in yields has boosted production to the highest surplus levels since 1995–1996. However, the increase in production urgently demands export markets. To expand into these markets, it is necessary for Cambodia to study the opportunities and constraints that affect this objective in relation to neighboring rice-producing countries (Table 1). Table 1: Rice Yield, Technology Usage, and Infrastructure in Cambodia and Neighboring Countries Year Cambodia PRC Indonesia Laos Malaysia Myanmar Philippines Thailand Vietnam Rice yield (ton/ha) In 2000 2.1 6.3 4.4 3.1 3.3 3.1 3.1 2.6 4.1 In 2008 2.6 6.3 4.7 3.5 3.5 2.5 3.8 2.8 4.9 Average 2.3 6.2 4.6 3.3 3.3 2.7 3.5 2.7 4.6 Growth Rate % 3.6 0.2 0.7 1.9 0.8 - 2.5 2.7 0.8 2.3 Modern technology Tractor (per ha) 0.6 6.5 4.4 1.2 23.9 1.0 2.0 14.2 24.9 Fertilizer (kg/ha) 5 319 145 806 1 150 133 324 Irrigation 7 39 23 19 20 20 27 31 45 (% of arable land) Infrastructure Roads paved 6.3 81.5 55.3 14.4 81.3 11.9 9.9 98.0 25.0 (% total road) Telephone main line 0.2 28.0 6.6 1.3 16.6 1.1 4.2 11.1 19.1 (per 100 people) Electric power con- 15 1781 509 179 3262 82 588 1988 73 sumption (kWh/capita) Source: Yu and Fan 2009, based on calculations from the United States Department of Agriculture, Food and Agriculture Organization (FAOSTAT), and World Development Indicators. ADB Technical Assistance Consultant‘s Report (Draft) The Rice Situation in Cambodia | 2 The yield of rice in Cambodia is the lowest in comparison with other major rice-producing countries, even below that of Laos and war-afflicted Myanmar (Figure 1). This is a significant problem in a country where more than 80% of the population relies on agriculture as their primary source of income and where rice constitutes 90% of total agricultural output. Although large amounts of fertilizer are needed to boost productivity, fertilizer inputs are low compared with similar agro-ecological zones in Thailand and Vietnam. Figure 1: Productivity of Paddy in Cambodia Compared to Other Countries in the Region, 2008 6 5.22 4.89 5 4 3.72 3.77 3.47 3.23 2.97 3 2.75 Tons/ha 2 1 0 Cambodia Thailand Malaysia Laos Myanma Phillipines Indonesia Vietnam Myanmar Philippines Source: Agricultural statistics, FAO 2008. The impact of the global economic downturn on Cambodia‘s economy has led to a reduction of growth in the garment, tourism and construction industries, and an increase in rural poverty. People working in these sectors are vulnerable to poverty, as they are most affected by layoffs, reduced working hours, and pay cuts. Although the Cambodian government has implemented a number of policies to cushion the impact of the global economic downturn, the poor and vulnerable groups in both rural and urban areas have still to feel the effects of these policies. The rise of commodity prices across the world, especially in energy and food, has also affected Cambodia. The country suffers from high inflation as food prices increased by 24.2% between January 2007 and January 2008, which to this day continue to rise and affect everybody but hurt the poorest most. High food prices, however, have provided an opportunity for Cambodia‘s agriculture sector to increase crop production and crop diversification. Although Cambodia harvests rice usually once a year, it exports more than 2 metric tons (mt) of rice per year, and has the potential to produce a rice surplus. The Cambodian government is intent on expanding its production and export capacity and becoming a major rice exporting nation. However, this program may not automatically translate into more income for the poorest who live in the countryside. ADB Technical Assistance Consultant‘s Report (Draft) The Rice Situation in Cambodia | 3 2. RICE SITUATION After the ravages of war, Cambodia is slowly recovering its status as a major rice producer and exporter. In the 1960s, Cambodia was a significant food exporting country, particularly of rice. In the 1970s, there were considerable shortfalls in food availability for the Cambodian population due to the onset of the civil war. Since 1981, however, food has become more available nationwide, and by the late 1980s, the country appears to have approached self-sufficiency. Periodically, severe flooding and droughts have led to shortfalls in national and local food availability (e.g., the two poor harvests of 1993–1994 and 1994–1995).

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