Proceeding Report

National Forum on Cambodia’s Agrarian Structure

in the Context of Trade Integration

Phnom Penh, June 28-29, 2005

A Learning event organized by the Supreme National Economic Council of the Royal Government of Cambodia, with support from the World Bank Group, AusAid and FAO, and in

cooperation with the Technical Working Groups on Land and Agriculture & Water.

ACRONYMS

ADB Asian Development Bank CBO Community Based Organization CDC Cambodian Development Council ILO International Labour Organization IO International Organization MEF Ministry of Economy and Finance MOI Ministry of Interior MLMUPC Ministry of Land Management, Urban Planning and Construction MIME Ministry of Industry, Mines and Energy MOWRAM Ministry of Water Resources and Meteorology MOC Ministry of Commerce MAFF Ministry of Agriculture, Forestry and Fisheries MRD Ministry of Rural Development MWA Ministry of Women’s Affairs NGO Non-governmental Organization RGC Royal Government of Cambodia SNEC Supreme National Economic Council UNDP United Nations Development Programme UNICEF United Nations Children’s Fund UNWFP United Nations World Food Programme WB World Bank WG Working Group

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Executive Summary

National Forum on Agrarian Structure in the Context of Trade Integration

A National Forum on “Cambodia's Agrarian Structure in the Context of Trade Integration" was held in Phnom Penh, June 28-29. This Learning event was organized by the Supreme National Economic Council of the Royal Government of Cambodia, with support from the World Bank Group, AusAid and FAO, and in cooperation with the Technical Working Groups on Land and Agriculture & Water. The Deputy Prime Minister H.E. Lu Lay Sreng opened the forum. H.E. Kong Vibol, Acting Minister of Economy and Finance, H.E. Ing Kantha Phavi, Minister of Women’s Affairs, H.E. Sok Siphana, Ministry of Commerce, H.E. Chieng Am, Provincial Governor of Svay Rieng, and other senior officials made presentations in additional to 5 international experts including Professor Yujiro Hayami and Dr. Gershon Feder, and others. Over 150 high level participants from major ministries, academics, donor agencies and media attended this high profile event. After its World Trade Organization (WTO)-accession and the expiration of the quota system in textile and clothing, Cambodia faces new opportunities and challenges in achieving improved, agriculturally-led rural growth. The national forum aimed at introducing international experiences on the impact of trade integration on agrarian structure and appropriate land and investment policies, and bringing the policy makers, the civil society and other stakeholders together to further debate on the appropriate land and agricultural policies for export competitiveness and rural growth. The event was structured around five major sessions, and two team working sessions: (1) Globalization and agrarian structure. In this session, Prof Hayami pointed out: globalization and competition led to distinct agrarian structure and institutions (large plantations and small family farms) according to specific product characteristics. For products like rice, corn and soy bean that are not perishable, easy to store and transport, family farms proved to be more efficient since they have the advantage of low supervision cost, and they can respond effectively to market demands provided supporting market infrastructure is in place.

Large plantations have advantages in cases where the export of perishable products requires close coordination between production, transport and processing, such as bananas and black teas. The standardization of agricultural products’ quality and quantity is important for export. There is an urgent need to adopt new technology and market institutions that are most appropriate for Cambodia. Government should improve the effectiveness of domestic trade network, encourage competition, strengthen legal system, promote agricultural R&D and improve irrigation system. (2) Agrarian structure: The role of land policies. Providing equitable and secure access to land is crucial for rural growth and poverty reduction. However, this issue of land reform is sensitive due to its links with political and economic vested interests. In this context, the role of government is crucial to prevent land conflicts and reduce transaction costs. Dr. Gershon Feder introduced the experience of land titling in several countries, and pointed out that land reform and distribution should be conducted through a transparent and participatory process, and should come together with complementary measures, such as investment, credit & output market access. (3) Implications of trade integration to agriculture and farmers. This session was focused on contract farming approach that could link low-ability farmers with agri-business. Prof. Hayami stressed the importance of developing trader groups, simplifying contracts, enforcing contracts, and establishing trust between traders and farmers. H.E. Sok Siphana emphasized the

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role of government in building market channels, addressing high transaction costs in value chains, and reforming customs and investing in infrastructure to facilitate trade. Various types of contracts and experiences of contract farming were discussed by a speaker from FAO and others. (4) Challenges of lagging regions and vulnerable households. In this session, Dr. John Farrington presented the coping mechanisms used by the poor and vulnerable groups in the context of global trade integration. Three pervasive concerns, namely productivity, shocks and stresses, and equity were explained. Dr. Farrington pointed out: to effectively support small land holders, roles of private and public sectors have to be clearly defined. Social welfare policies need to be designed to take into account families unable to engage in productive activities. Local researchers presented evidence on landlessness among rural residents in Cambodia, the regional distribution of poverty and malnutrition, and the need for strengthening pro-poor policies and social protection. (5) Role of public and private investment. Dr. Shenggen Fan introduced country cases in India and China on the effectiveness of public investment. Evidence for these countries clearly shows that public investment in agricultural R&D, rural education, and rural infrastructure including irrigation and roads are more effective in promoting growth and poverty reduction. Dr. Naron from MOFE stressed the importance of increasing government investment on rural infrastructure and building market institutions. Governor Chieng Am proposed to accelerate the pace of land registration and titling to avoid land encroachment. Other speakers stressed the need for improving transparency and governance to encourage private investment. During the forum, participants raised the following issues to be discussed further: • Access to land, which is becoming uneven rapidly within the last ten years –with 12 percent

of farmers being landless. Access to agrarian land was the first issue identified by the participants. Cambodia faces important decisions regarding how to influence land allocation through prioritization of use and distribution of state lands. Expedition of land registration and titling to avoid land encroachment was given priority by participants. Social land concession (to farmers) was a favorable option, but the availability of land, the quality of land, and other support and technical services and infrastructure were still a concern.

• Impacts of trade liberalization – which is positive but also uneven: some regions and

households have not been able to benefit from the new opportunities provided by trade integration—the agriculture sector is suffering. Participants identified issues/problems that hinder farmers’ ability to export their products: poor infrastructure, lack of marketing services, lack of information, R&D and extension services, price uncertainties and other risks, inadequate rural financing, and inadequate institutions for contract farming (e.g. transparency and enforcement of contracts and mechanisms to redress concerns through farmer’s associations).

• Public and private investment is required to support agricultural development and export

competitiveness. How to improve investment climate through governance-enhancing measures is a major challenge. Participants stressed the importance of strengthening judicial system, reduction of transaction and transport costs, and protection of property rights and intellectual property rights. To encourage private investment (domestic and foreign) in agriculture’s business, security, rural infrastructure and clearly defined land tenure must be addressed /provided. There is an urgent need to expedite the land registration process, and clarify tenure area zoning to encourage more investment.

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The Forum got uniformly positive feedback from all stakeholders. According to Nisha Agrawal, the Country Manager for the World Bank in Cambodia "the seminar focused on exactly the right issues that the Cambodians are struggling with on a daily basis and brought in world class experts to lead the thinking and discussions on these issues. This is exactly what is needed here.” The Ministry of Economy and Finance and other donors expressed appreciation of this National Forum, stressing the importance of conducting follow-up Analytical and Advisory Activities (AAA) work and continuing to build consensus across ministries and among all stakeholders.

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I. Introduction Cambodia and Nepal are the first least developed country, which recently acceded to the world trade organization. However, the country is facing tough challenges in export markets and needs policy adjustments for competitiveness, growth and poverty reduction. The World Bank has engaged in intensive dialogue with the Cambodian Government, civil society and other donors around land reform issues, which are being debated in the context of Cambodia’s efforts to take advantage of WTO, ASEAN Free Trade and China’s early harvest provisions for Cambodia exports. II. The Organization of the Forum In responding to the above development, and with support from the World Bank, AusAID, FAO and in cooperation with the Technical Working Groups on Agriculture & Water and Land, a high-profile forum on Agrarian Structure in the Context of Trade Integration was organized at Intercontinental Hotel, Phnom Penh, Cambodia from 28 – 29 June 2005. III. Objectives of the Forum After its World Trade Organization (WTO)-accession and the expiration of the quota system in textile and clothing, Cambodia faces new opportunities and challenges in achieving improved, agriculturally-led rural growth , including:

• Access to land, which is becoming increasingly uneven. Cambodia faces important decisions regarding how to influence land allocation through prioritization of use and distribution of state lands.

• Impacts of trade liberalization – which is positive but also uneven: As the first least developed country that recently acceded to the WTO, Cambodia is facing increased competition in export markets. Clearly not all regions and households will be able to benefit equally from the new opportunities provided by trade integration – what needs to be done, and what kinds of policies and programs need to be put in place to ensure that lagging regions and vulnerable households are not left behind.

• Public and private investment will be required to support agricultural development and export competitiveness. Given limitations on domestic revenues and external assistance, Cambodia needs to prioritize its rural investments at the national and local levels.

The National Forum, therefore, intended to introduce international experiences on the impact of trade integration on agricultural and land structure, appropriate land and investment policies for a trade-oriented agriculture, bring the policy makers and civil society and other donors together to further debates on the appropriate land and agrarian policy for export competitiveness and rural growth. The Forum was organized with three main objectives:

• Raise awareness on the opportunities provided by WTO membership, ASEAN Free Trade Agreement and China’s early harvest provisions to Cambodia export and challenges associated, and the need for agrarian reform,

• Introduce international experiences and success stories from other SE Asian countries on trade-oriented agriculture, and the appropriate land and investment policies to support agriculture for rural growth and poverty reduction in globalized setting,

• Debate on issues of small holders Vs large plantations options for reforming land and other support policies for rural growth, in conformity with the WTO rules and principles.

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IV. Expected Outputs of the Forum This high profile forum was structured to exchange experiences and stimulate discussions among policy makers, government’s officials, civil society and private sector’s members, international and national students and academic researchers, and donor’s community on the following themes:

• Opportunities provided by WTO membership, ASEAN Free Trade Agreement and China’s early harvest provisions to Cambodia export and challenges associated, and the need for agrarian reform,

• International experiences and success stories from other SE Asian countries on trade-oriented agriculture, and the appropriate land and investment policies to support agriculture for rural growth and poverty reduction in globalized setting,

• Small holders Vs large plantations options for reforming land and other support policies for rural growth, in conformity with the WTO rules and principles.

V. Participants There were 160 participants registered at the forum. Out of this number, 33 were female. The breakdown summary by origin institution of participants is given in the below table: No Institutions Female Male Total

1 Academic Institution 6

9

15

2 Donor 8

15

23

3 Embassy 1

3

4

4 Royal Government of Cambodia

12

69

81

5 NGO/IOs 4

14

18

6 Private Sector - 10

10

7 UN Organization 2

7

9

Total 33

127

160

It was also observed that a number of college’s students had attended and used the forum as a learning event, although the above figures might not include them all. List of participants is given in Annex 22. VI. Proceedings

DAY ONE, 28 June 2005 (8:35-8:50) The Forum started at 8:35 am with a brief introduction and welcome followed by respect to the Cambodian national anthem.

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Welcoming Speech by HE Kong Vibol, Acting Minister of Ministry of Economy and Finance After greeting all participants and guests, HE Kong Vibol applauded the event “This forum provides us essential benefit and it is organized at critical time as we have gained full membership of WTO. We all know that in the context of trade to the world and in the region, Cambodia is facing some challenges. Those challenges are:

• Irrigation system is limited comparing with the neighboring countries; • The utilization of agrarian land also limited; • Limited human resource; • Low agricultural productions; • Limited support infrastructure; and • Lack of agricultural credit schemes.

Furthermore, the concessionaires who had been granted concession have not implemented their agricultural production projects as required by the contract”. He also suggested that Cambodia needed to develop agriculture sector by starting with the review of its policy to support agriculture sector. More specifically and immediately, Cambodia has to enable investment in agriculture sector. Human resource development, increase of capital investment and building of physical infrastructure will widely influence food security and export sectors. To support the above efforts, agrarian land concession policy, irrigation and modern agricultural equipment and machinery have to be in place. He was optimistic that with the trade reform, Cambodia would overcome those challenges, and that this high-profile forum will bring good experiences on the agrarian policy by national and international experts to enable Cambodia to compete in the market in the context of trade integration. (8:50-9:45) Presentation on Globalization and Agrarian Structure by Prof. Yujiro Hayami, Chairman of FASID, National Graduate Institute for Policy Studies, Japan Prof. Hayami explained about agrarian structure and agrarian institutions in a globalized economy by highlighting the history/episode of agrarian structure in different countries, especially in the Philippines, Thailand and Malaysia. Globalization and competition led to distinct agrarian structure and institutions in these countries (large plantations and small contract farmers) according to specific product characteristics. And there is an urgent need to adopt new technology and market institutions that are most appropriate for Cambodia. He emphasized the flow of agricultural produces produced by small farmers via middle traders versus big agricultural plantations in the respect of export. Small farmers have clear advantage on supervision costs, and if there is market and clearly supportive policy in place, domestic produces can respond effectively to market demands. Some domestic produces should be promoted including rice, corn and soy bean because these crops are not perishable, easy for transport/store and are demanded by the market. Still, standardization of quality and quantity are necessary. To be successful, Prof. Yahami advised that state had some key roles to play:

• The promotion of appropriate technology, market and community’s capacity; • The effectiveness of domestic trade network; • The promotion of irrigation system, agricultural R&D and outreach extension

program as well as other agricultural support services to farmers.

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(His full presentation slides and recommendation are provided in Annex 5a and 5b) Lastly, he reemphasized about the need to standardize quality and quantity of agricultural produces to meet export market. To enable this, he suggested that mechanism to strengthen state and farmer’s link/relationship should be established. Community’s organization and corporation using contract farming approach with focus on modern technology and credit are vital for the success. State needs to encourage competition, but eliminate monopolization, strengthen court system, build capacity for just/fair facilitation, provide market information and protect copy rights. (9:45-10:00) Honorable Opening Remarks by H.E. Lu Lay Sreng, Deputy Prime Minister and Minister of Rural Development HE Lu Lay Sreng raised the importance roles of agricultural sector in improving of rural community development and contributing to Cambodia economic growth as whole. He expressed the importance roles on the Ministry of Rural Development involving in the overall coordination of all rural development activities. He emphasized that:

• Rural development is the key to improve people’s livelihood in line with the millennium development goals (MDG);

• Village Development Committee (VDC) with participation of local citizens made decision in line with the management of commune/Sangkat council on construction of roads, schools and promotion of sanitation and hygiene, food security etc.;

• Trade could contribute to poverty reduction, offer opportunity, and reduce risks. With regarding to the rural development policy, he emphasized that the Royal Government of Cambodia considers three following areas:

• Implementation of decentralization by ensuring the capacity building of all levels. • Continuing encouragement of investments on the physical infrastructures in the rural

areas. • Agricultural area development.

In responding to the policy for agricultural development, he suggested that the following important strategies should be considered:

• Expansion of rural physical infrastructure • Providing micro-finance sources • Promoting study and extension of agricultural techniques • Strengthening the distribution of agriculture tools • Strengthening the processing industry of agriculture products • Strengthening the marketing service for farmers • Land Management • Continuing fishery reform • Sustainable natural resources and forestry management • Promoting the concept “one village one products”

In the context of integration trade, he mentioned that it is an opportunity for Cambodia to develop the country, but the main challenge of Cambodia is to compete with other WTO member countries. For this, Ministry of Rural Development will strengthen capacity of local civil society, that is VDC and build physical infrastructures such as road, bridge, irrigation, wells etc. (The full written speech is provided in Annex 4)

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(10:30 – 12:00) Plenary Session 1 Presentation and Panelist’s Discussion on the Role of Land Policy Keynote speaker: Dr. Gershon Feder, Research Manager, World Bank Panelists: Dr. Ou Vuddy, Deputy Director General of Land Management and Urban

Planning, Ministry of Land Management, Urban Planning and Construction Mr. Okhna Mong Rethy, President of Mong Rethy Group Co. Dr. Yang Saing Koma, Director of Centre d’Etude et de Developpement Agricole Cambodgen (CEDAC)

Moderator: Dr. Yan Wang, Senior Economist, WB Dr. Yan Wang chaired the session by first expressed appreciation to the Royal Government in jointly organizing this National Forum, introduced the World Bank Institute and its functions; reviewed the objectives of this forum and then introduced the key speaker and four panelists. Dr. Gershon Feder emphasized that the role of land policy is becoming increasingly important when economy and trade are expanded. He verified his statement by bringing experiences in the Philippines and Thailand. Agrarian land policy reform is sensitively impacted with political, social and economical factors. In this context, the role of government is crucial for public law and rule implementation/enforcement to prevent land conflicts and reduce transaction costs. He also compared land safety of with- and without-land tenure/ownership titles, and raised the implications of those. Granting land ownership would eventually raise the price of agrarian land. Nevertheless, it is significant to have (agrarian) land reform, land zoning and land distribution. To ensure smooth process of land reform, the government should set up in advance a clear legislation, efficient administration, area prioritization for registration and regularization and effective land dispute resolution mechanism. To ensure the cost effective of land zoning, the government should justify where externalities can be existed and create predictable and transparent rule and regulation. (His full presentation slides are given in Annex 6) Dr. Ou Vuddy, Deputy Director General, the Ministry of Land Management, Urban Planning and Construction, explained about the key roles of her ministry in formulating sub-decrees, guidelines and other regulations on land management, land registration and title provision. She repeated that the utilization agrarian land had been playing critical role in the country’s development and government’s poverty reduction efforts. Due to land documentation related to titling and possession had been lost through the long civil war, the government faced difficulty in its policy formulation. In response to this problem, the government made policy in 1989 in relation to title’s provision to allow five hectares of land to individual and 15 hectares for concession. She pointed out that many land conflicts arisen nowadays are due to rapid population growth. Land conflicts are usually arisen with lands located near the town, close to the main national roads etc. Usually, there are two types of conflicts: 1) when poor people/families demand for cultivation land; and 2) landless people grabbing (open) land anarchically. To solve the above problem, the ministry got the national assembly’s adoption of the (new) land law in 2001. There are three main sections in the law that needs to detail in many more

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regulations: 1) Land Administration; 2) Land Planning; and 3) Land Provision/Distribution. Land policy has been formulated in line with the national development strategies, and all land related regulations and tools will have to ensure justice in utilizing land. (Her full written note is provided in Annex 7) Okhna Mong Rethy highly appreciated the forum and shared some difficulty about his investment on oil palm plantation. The main obstacle hampered his plantation expansion to accommodate refinery factory has been the land conflict. He expressed his support to the Cambodia’s accession to WTO, but requested that the government make appropriate interventions to prevent anarchic land grabbing and assist investors with real investment interest (His prepared note is in Annex 8). Dr. Yang Saing Koma presented his project findings by focusing on appropriateness of family farming system for the present context of Cambodia. His presentation and observations are summarized as follows:

• Family farming system represents 75-80% of all 2.2 million families because of small land holdings;

• Family farming system absorbs between 60-70% of total labors; • It plays significant role in economic, social and cultural aspects, and especially in

food security sector; • Organic produces should be promoted for global market competition; • Promotion of agricultural R&D and extension services as well as formation of

farmer’s association and community, and provision of agrarian land concession to most needy farmers; and

• Intensive cultivation using less capital with high returns in quantity and quality should be promoted. (His full presentation slides are in Annex 9)

Plenary Q&A Session 1 Participants raised the following questions during the discussion of the Session 1:

• With regard to the land market (raised by Dr. Naron), Dr. Gershon Feder responded that the government should not impose too many restrictions.

• CDRI Researcher asked about the “Economy of Scale” concept and Sida’s finding that is “the bigger the investment, the lower the capital investment/output”. Dr. Koma reemphasized that family farming system does not need big capital investment because no pesticides and chemical fertilizers are needed. Besides, one should not only consider economic benefits, but also social ones. Family farming provides job to most family members, allows rights and freedom to decide etc. Dr. Feder also added China and Vietnam’s experiences using this (family farming) approach, and both countries have gained rapid agricultural growth. Okhna Mong gave example of his oil palm plantation to confirm that family farming uses less capital than his company. He said he spent US$1,800 per hectare of his plantation whereas individual family spent only about US$900/ha.

• Another question was about how many hectares of oil palm plantation would Okhna Mong need before a refinery/end-product processing factory could be built. The answer from Okhna Mong was that his company needed between 8,000-11,000 ha.

• Last question was about whether family farming system promotes child’s nutrition. Dr. Koma commented that family farming cared for family’s consumption more than

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the market. Farmers plant diversified crops, thus children in the family should be benefiting.

Afternoon’s Session (13:30-15:00) Plenary Session 2: Implications of Trade Integration on Agriculture and Farmers Keynote Speaker: Professor Yujiro Hayami, Chairman of FASID, National Graduate

Institute for Policy Studies, Japan Panelists: H.E Sok Siphana, Secretary of State, Ministry of Commerce

Mr. Purushottam K. Mudbhary, Sr. Policy Officer, FAO Regional Office Ms. Mao Samvutheary, President, Cambodian Independent Farmers Association Dr. Vuthy Choun, Leaf Manager, British American Tobacco, Cambodia,

Moderator: Dr. Yan Wang, Senior Economist, the World Bank Institute Dr. Yan Wang reconvened and introduced the session, its key speaker and four panelists: Professor Yujiro Hayami continued his early morning presentation by focusing on contract farming approach that could link low-ability farmers with agri-business. This type of arrangement could solve technology, marketing and processing problems. He stressed the importance of developing trader groups, enforcing contracts, and establishing trust between traders and farmers. He brought the experience from Japan where low-ability farmers work collectively and engage with trader’s groups to sell their products and obtain technical services. Major positive element of contract farming is cost reduction in supervision and maintenance. However, mutual trust between farmers and traders is key for any success, and is difficult to achieve. He also explained that there had been many types of contract farming. One of them would be 10-15 families cultivate a joint farm/plot. For policy purpose, he suggested that the government should be fair mediator, ensure market competition, provide necessary market information and rural physical infrastructure, and protect contracts, property and copy rights. At the end, he brought successful example of sell-buy contract farmers and inter-village collectors/traders engaged in Indonesia. (His presentation slides are found in Annex 5) H.E Sok Siphana pointed out pros and cons of joining WTO. One benefit is that the accession allows Cambodia the opportunity to compete by promoting niche agricultural produces that are produced via natural approaches by family farming. He brought example of “Silk and Cotton” production that could have the world market potential and absorb intensive labor force. To reach this goal, the government has to strengthen pro-farmer and pro-trader policy such as the assurance of market, promotion of processing and packaging facilities, and enabling the transport of agricultural produces. He emphasized that we had to find ways to take advantage from the WTO accession. In materializing the potentials and opportunities, we need appropriate land, credit and trade policies (His presentation slides are in Annex 10). Dr. Purushottam K. Mudbhary provided some considerations in relation with the trade integration. Those considerations include the necessity to open new market and to formulate new necessary laws and regulations. In the globalized trade, farmers and traders will have to

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compete for profit margin. Standardization of both quality and quantity is necessary to meet the export demand. Contract farming approach should be promoted. He defined different types of contract farming, which include centralized, nucleus estate and multipartite models. The centralized model involves sponsor/investor giving quotas to farmers at the beginning of growing season and purchasing crops from farmers for processing and marketing. The nucleus estate model is simply a model that company/sponsor owns and manages a plantation, but technology and plantation/crop management techniques are provided to farmers. The multipartite model involves more parties, usually getting government technical agencies to provide material and management inputs to farmers. Other necessary policy support should be in the fields of better irrigation system, market information, technical services, R&D, certification/provision of licenses, reduction of transaction costs and provision of family credit. In brief, he asked the government to provide all public (nature) goods. (His full presentation is in Annex 11) Dr. Vuthy Choun interacted further on positive and negative points of contract farming approach using his company’s experiences in collecting tobacco leafs from contract farmers in Kampong Cham province. Positive points include better quality, and thus better price, diversified cropping, better procurement and supervision, farmer-experience exchange and the provision of his company’s credit. The only negative experience was the violation of contract. (His full presentation slides are found in Annex 12) Ms. Mao Samvutheary brought to attention of many problems faced by farmer’s families. Those include the lack of agrarian land, quality seeds, market and capital to invest. All these constraints further hurt the agriculture sector. She requested that government considered the points and voices her organization gathered from meetings with farmers. (15:30 – 16:30) Group Discussion and Team Works on the Topics: Agrarian Structure and Trade Integration H.E. Dr. Hang Choun Naron, Secretary General of the Ministry of Economy and Finance instructed the group divisions and tasks. There were four groups:

• Groups 1 & 2 discussed on the topic of “The Role of Land Policy” • Groups 3 & 4 discussed on the topic of “Trade and Agriculture and Farmers”

(Detailed questions and tasks of discussion groups are provided in Annex 3) (16:30 – 17:15) Group Results Presented to the Plenary

Groups 1 and 2: The Role of Land Policy

Constraints to Improve Land Market: • Lack of safety for land rentals, sales and concessions • Inadequate enforcement of Law on Land Use and the Lack of the Master Plan (also

speculation of real estate prevents productive use of land) • Incomplete legal framework • Overlapping responsibilities • Small land holding

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• Lack of technology

Five Priorities to Improve Land Market in Cambodia: 1). Expedition of land titling process and establish conflict resolution mechanisms 2). Improving land valuation 3). Clear land use zoning and encouragement of the effective use of agrarian land 4). Promotion of social land concession with integrated rural development, including low-

interest loans, improved infrastructures and promotion of domestic products 5). Introduction of capital gain tax and enforcement of formal transactions, especially from

the land concessions

Concerned Stakeholders: • Private Sector (real estate companies, insurance companies, banks) • Public Sector (MEF, MOI, MLMUPC, MIME, MOWRAM, MOC, MAFF, MRD etc.)

Groups 3 and 4: Trade and Agriculture and Farmers

Question 1: What are the opportunities and threats faced by Cambodian farmers in developing

agriculture under free trade? Opportunities Constraints Faced By Farmers

The majority are farmer Not enough land for cultivation The majority owns cultivated and marketable land

Natural disasters

Support from the government; infrastructure development

Lack of technology knowledge

WTO Accession Lack investment capital Cross-border trade with neighboring countries Stiff/difficult competition with import

produces limited irrigation system Lack of market information Limited agricultural extension services Lack of formation/animation of farmer’s

association (collectives) Question 2: What are the five most important things Cambodia (public and private sector)

should do to improve its ability to compete in agricultural exports?

1. Quality improvement of agricultural products; 2. Promotion of mutual trust between producers and traders; 3. Provision of incentives to agricultural produces’ exporters 4. Provision of agricultural services and extension (research and development)

and improved technology 5. Improvement of agricultural production process

Question 3: Who has to be involved to do this?

1. Farmers 2. Government 3. NGOs 4. Private Sectors 5. Donors

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(17:15 – 17:30) H.E. Dr. Hang Choun Naron, Secretary General of the Ministry of Economy and Finance, concluded the day by summarizing all activities undertaken during the day. (His summary slides are provided in Annex 13)

DAY TWO, 29 June 2005 (8:30-10:00) Plenary Session 3: Challenges for the lagging regions and households Keynote speaker: Dr. John Farrington, Overseas Development Institute, UK Panelists: H.E. Ms. Ing Kantha Phavi, Minister, MoWA,

Mr. So Sovannarith, Research Fellow, CDRI. Ms. Tep Saravy, Program Officer (VAM) WFP

Moderator: Ms. Fleur Davies, Counsellor, AusAID Ms. Fleur Davies introduced the session keynote speaker and the three panelists and warmed up participants by introducing some essential coping mechanisms and challenges used and faced by poor farmer’s households. She requested the forum to pay special attention to the presentation and panelist’s discussion, and try to identify appropriate strategies to assist the lagging regions and households. Dr. John Farrington presented coping mechanisms used by the poor and vulnerable groups on the context of global trade integration. He pin-pointed and explained three pervasive concerns, namely productivity, shocks and stresses, and equity. China, Vietnam and other country’s experiences were used to demonstrate how those countries had dealt with those pervasive concerns. He suggested that for effective support to the small land holders, roles of private and public sectors have to be clearly defined. Social welfare designs have to take into account families unable and able to engage in productivity economy towards development of long term welfare strategies. To stimulate productivity economy growth, welfare should be in cash form rather than in kind. (His full presentation slides are attached in Annex 14) H.E. Ms. Ing Kantha Phavi started by congratulating Dr. Farrington for his findings about challenges of the poor and vulnerable households, and made a connection to the Cambodia’s context. She asserted that the most poor and vulnerable households in Cambodia are female-headed households because they have less opportunity to the decision making process, culture barriers, limited land, knowledge and labor. To tackle these problems, gender-sensitive strategies to support the poor and vulnerable were presented. She observed that despite family farming plays a significant role in people’s livelihood, the present support policy and mechanism have little impact. Trade integration has contributed to landlessness, therefore, there needs to be clear and appropriate policy and mechanism to support the poor and vulnerable. The government should assist farmers in forming farmer’s association or community, ensuring

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market price and providing appropriate information. She concluded that for the government to make this reform, financial and technical supports from donor’s community are needed. (Her presentation slides are given in Annex 15) Mr. So Sovannarith, Research Fellow from CDRI presented his study research titled “Moving out of Poverty” conducted with 1,010 families in nine villages in seven different provinces. Below are some key findings of his study:

• Small scale farming plays a significant role for Cambodian farmers most of whom cultivate via family farming approach;

• Significant income comes from farming sector; • There have been increases of family’s income from agriculture sector, but also

increase in landlessness, especially in the provinces of Battambang, Prey Veng and Svay Rieng;

• Agricultural capital investment of family farming system has increased due to higher prices of agricultural tools, equipments and materials.

He also observed the lower production quantity and quality resulted from cheaply imported agricultural produces. This has made farmers more difficult to compete. His study set poverty line at daily income per person lower than US$0.5 (or between 1,300 – 1,800 Riels). (The presentation slides are provided in Annex 16). Ms. Tep Saravy, from WFP Poverty and Vulnerability Mapping Unit, presented poverty maps in Cambodia set forth by daily food consumption below 2,100 calories per person. Other poverty indicators/maps include:

• Basic Education Map; • Adult Education Map; • Child’s Underweight Map; • Child’s Stunting Map; • Flood Prone Area Map; • Drought Prone Area Map.

She also explained on the usefulness of those maps when targeting scarce resources to reach the neediest groups. (Her full presentation slides are found in Annex 17). Plenary Q&A Session Mr. Peterson, Consultant, asked about the link of agricultural trade with the farmers and about the different statistics of female-headed households in Cambodia. Dr. John Farrington answered that trade integration impacted both consumers and producers. In this context, if domestic goods could not be reached to other markets as easy as incoming goods, trade integration will benefit consumers more. The government should have equitable policy to ensure mutual benefits for farmers and traders. H.E. Ms. Ing Kantha Phavi elaborated that trade integration bringing more or less benefits depend very much on the readiness of the government and the government’s policy. Three key activities to support poor farmers in the global trade integration are:

• The ministry of agriculture has to have clear policy; • Transparency and mutual trust between farmers and traders must be in place; • The government should ensure market price, and should not allow middle traders to

make too much profits.

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With regard to the female-headed households’ statistics, she acknowledged that there had been different sets of data used. However, 19-25% of the total households in Cambodia are the data currently used by her ministry. Mr. So Sovannarith added that trade integration would bring positive impacts to Cambodia such as in terms of more jobs and available market information. (10:30 – 12:00) Plenary session 4: Role of public and private investment Keynote speaker: Dr. Shenggen Fan, Senior Fellow, IFPRI Panelists: Dr. Hang Chhoun Naron, Secretary General, MEF

H.E. Chieng Am, Provincial Governor, Svay Rieng, Decentralization – role of the province and commune to support investments Mr. Bretton Sciaroni, Partner of Tilleke & Gibbins Associates Ltd.

Moderator: Dr. Gershon Feder, Research Manager, the World Bank Dr. Shenggen Fan started his presentation with a remark on high potentials of Cambodia towards agriculture development, but insisted that the following points are considered:

• The government and donor’s community should increase rural investments; • Privatization is a factor to boost efficiency in agricultural sector development; • Public institutions and human resource need improvement; • Public Private Sectors’ Partnership (PPP) needs improvement.

He brought numerous cases in different countries that had spent public money successfully. Those successes reflected in agricultural R&D, Education and rural road expenditures. He also elaborated that RGC was still spending less in those sectors, especially on agriculture, agricultural R&D and education. He also presented the sectors with potentials for more PPP investment. (The presentation slides are found in Annex 18). Dr. Hang Chhoun Naron presented on the role and relationship between government and private sectors. He raised the following important points:

• Characteristics of agriculture development in Cambodia; • Key roles and responsibilities of the government and citizens; • Present roles and responsibilities of the government and private sectors; • Future improvements of roles and responsibilities of the government and private

sectors; • Constraints and obstacles encountered by the private sector.

His conclusions could be summarized as follows:

• Government has to be strong in service provision and law enforcement with regard to land concession contracts of big investments;

• The government and private sector must undertake win-win strategies; • The government should increase investment in agriculture sector and rural

infrastructure;

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• Domestic trade network needs expansion to provide opportunity to farmers using family farming system the competitive ability;

• One Window Service approach is applied at all commercial cross-border routes; • Full participation from all concerned stakeholders for market information purpose.

(The presentation slides are provided in Annex 19) H.E. Chieng Am, Provincial Governor of Svay Rieng provided overview of overall situation of Svay Rieng province, its challenges in term of agriculture development and the provincial development visions. He emphasized about the recent investment growth resulted from the reconstruction of the national route No. 1. Rapid investments have come following the infrastructure rehabilitation, and consequently skyrocket the price of land near the border. He insisted that infrastructure required high investments, and thus made difficult for the provincial and commune authorities to implement. Current irrigation system improvement has also made agricultural production and yield higher. With regard to human development, the province and individual donors (mainly government officials originally from the province) are presently investing on a 1,000-1,200 student university which includes agriculture faculty. The governor made the following recommendations to the concerned ministries:

• Expedite the land certification to the people; • Register all public land to avoid land encroachment; • Increase irrigation investments; • Establish and promote support mechanisms favorable to farmer’s produces.

(His Khmer speech and an unofficial translation are in Annex 20). Mr. Bretton Sciaroni raised the importance of correlations between political stability and incentives for private sector, and asked the government to pay high attention. He said the government needed to eliminate political risks, maintain peace, promote democracy and freedom, and enforce laws to resolving trade conflicts according to trade principles. Peace and political stability strengthening and improvement of all above factors are necessary to encourage private investment climates. He also pin-pointed some obstacles that downed slow the agriculture development such as high cost of agricultural produces’ transportation, unstable labor costs, lack of skills, high price of land etc. Other prioritized means for agriculture productivity support include irrigation system, land concession law for foreign investors, and they should be given favorable support policy such as clear contracting incentives for them to own concession land etc. (His written speech is available in English and found in annex 21). (13:30 – 14:30) Participants were divided into three groups:

• Groups 1 & 2 discussed session 3: lagging regions and households • Group 3 discussed session 4: role of public and private investors

Detailed questions and tasks of each group are mentioned in Annex 3. (14:30 – 15:15) Group Results Presented to the Plenary

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Groups 1 and 2: Lagging Region and Households

Question 1: Where and who are the households in Cambodia which are least able to participate

in commercial agricultural development?

• Female-headed households; • Families with many small children; • Demobilized and handicapped solder’s families; • Families with chronic diseases and limited labor force; • Farmers with small or no land holdings; • Families with less education; • Families with little agricultural means (e.g. capitals, tools, market information...); • Families without land titling; • Families practicing swidden agriculture.

The above families could be settling in remote, underdeveloped urban and suburb-town areas. Question 2: What are the main constraints they face?

• Lack of assets (e.g. land, finance); • Lack of technology; • Lack of market information; • Lack of physical infrastructure; • Lack of human resource; • Limited veterinarian services; • Limited participation in decision making process.

Question 3: What are the five most important ways government and the poor themselves can

improve their ability to participate in agricultural growth?

• Learn from the farmers; • Promote more participation from the farmers; • Vocational skills training; • Job creations in rural areas; • Formation of farmer’s and credit associations; • Encourage land registration; • Promote agricultural R&D and extension services as well as provision of market

information; • Construct and rehabilitate rural infrastructure; • Promote partnership with private sector.

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Group 3 and 4: Role of Public and Private Investors

Question 1: What is the role of the government (national and local) and the private sector in

providing investment?

a). For the National Government • Enforce and improve laws and regulations and disseminate them; • Increase fund allocation to agriculture sector; • Ensure investors’ complying with laws and contracts; • Ensure land safety/security

b). Local Governments

• Improve rural infrastructure; • Assist domestic investors to encourage farmers to produce; • Ensure local security; • Identify markets; • Undertake land use planning.

c). Private Sector

• Commit to help farmers; • Provide low interest credits; • Comply with buy-sale contracts; • Provide modern technology.

Question 2: What are the top five priorities for public investment to support pro-poor

agricultural growth?

• Grant land concession to farmers; • Increase fund allocation to agriculture sector; • Improve rural infrastructure; • Promote agricultural R&D; • Promote marketing services.

In addition, Group 3 discussed and learned about overseas’ experiences through numerous presentations at this forum:

• Give priority to agriculture sector; • Comply with buy-sale contracts; • Form and animate farmer’s association; • Formulate clear policy on land tenure and ownership; • Diversify agricultural farming; • Promote transportation network for agriculture’s produces.

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(15:15 – 16:30) Plenary and closing session: Panelists: Professor Yujiro Hayami, Chairman of FASID, National Graduate

Institute for Policy Studies, Japan Dr. Gershon Feder, Research Manager, The World Bank Dr. John Farrington, Overseas Development Institute, UK Dr. Shenggen Fan, Senior Fellow, IFPRI

Moderator: H.E. Dr. Hang Chuon Naron, Secretary General, MEF H.E. Dr. Hang Choun Naron summarized the results of the groups one more time for the presiding guests and asked the forum panelists to provide their final remarks. Dr. Gershon Feder focused his comments on three main areas: 1) Land tenure security; 2) Economic and social concessions; and 3) Irrigation. With regard to the land tenure security, Dr. Feder asked to clarify areas with tenure types (also zoning). The government has to acquire for social and environmental impact assessments as well as real commitment of the investors before granting economic concession. Social concession is complex as it needs considerations on land/soil types, services and infrastructure. Farmers need to know how to improve their livelihood (with this concession option), therefore, in-depth analysis is needed. He raised the question “how many people could be accommodated with this concession option”. In respect of irrigation, he insisted for more engineering study before one can be assured on its impact. Dr. John Farrington raised the importance of preventing the outflow of resources and asked to create rural welfare schemes to prevent people from falling in deeper poverty traps. Micro credits (including micro insurance) would also help improving the quality of small family farming produces. He advised that the government should go through prioritization process and link the most remote and needy areas to the mainstream. He said urban and rural investments could be promoted at the same time due to occupational mobility, and this case had been proved successful in the garment sector in Cambodia. Dr. Shenggen Fan reemphasized the following three points:

• Cambodia’s accession to WTO will bring foreign direct investment (FDI), but could eventually widen rich-poor gaps. Therefore, it is necessary to make analysis on who, which sector will benefit/gain and who and which sector will suffer from the rapid growth in the city.

• Land distribution/division and land tenure security could contribute to agriculture sector growth, and this case has been proved in China.

• With regard to irrigation system, both engineering and economic in-depth analysis is needed. We need to be clear on the scope of economic returns when investing on irrigation schemes.

He again pin-pointed from his research that investments on agriculture R&D, extension services and rural education had been giving high returns. To take advantage from the WTO’s accession, the government will have to be strong and determine which sectors need to be prioritized given that it has scarce resources.

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Professor Yujiro Hayami raised the importance in strengthening public private sector’s partnership (PPP). This can be successful if mutual trust could be created, and not only for the parties in the contract, but also for people observing. One critical factor for the respect of contract is transparency. Contract conditions must be simple and clear. The government should also be cautious about economic concessions, and not grating economic concession first until fertile soil is gone, then converting the land pieces to social concession. The government needs to increase investment on agriculture’s sector. (16:30 – 17:00) Closing remarks of H.E. Chan Tong Yves, Secretary of State, Ministry of Agriculture, Forestry and Fisheries H.E. Chan Tong Yves highly appreciated the comments and groups’ discussion results. He applauded the insights provided by the four panelists and confirmed that their final comments were in line with the rectangular strategies of RGC as well as his ministry’s strategies. The ministry’s main strategy is to develop the country’s agriculture sector from subsistence to pro-export. He also emphasized about the necessity of land tenure security and other support services to stimulate agriculture’s sector growth. With regard to market competition, Cambodia needs to standardize both quality and quantity. In respect of productivity regimes, he supported both, the family farming system and the cooperation with investment companies. The latter would help resolve the aspects of technology, production’s quality and quantity. Contract farming system will also boost quantity of products. Lastly, he valued the 2-day forum highly and thanked the World Bank, FAO, AusAID, the Ministry of Economy and Finance and other development agencies for their support in this forum. He fully supported the results and concerns raised in this forum by national and international presenters/speakers in improving of Cambodia’s agriculture sector toward global market competition. He suggested that a task force to be established to put the results of this forum into good strategies in order to absorb the benefits of trade integration. The forum was concluded after his closing address. VII. Moving Forward Development of agricultural sector by taking advantages from the recent WTO’s accession, ASEAN Free Trade Agreement (AFTA) and China’s early harvest provisions for Cambodia Exports has been the main theme of most discussions. Globalization has led to opportunities as well as challenges, especially in Cambodia’s rural sector. Participants were also in agreements about the need to actively engage private sector for improved technology & access to credits toward standardization of produces’ quality and quantity, but as well raised the importance in further developing family farming system. Agrarian land was the first issue identified by the participants. Farmers must have access to enough productive land if growth is to have an impact on poverty. Expedition of land titling and distribution process was come first in all discussion. Social land concession (to farmers) was favorable option, but the availability of high quality land for social concession, other support & technical services and infrastructure were still a concern. These are areas needing considerable efforts and investments from the government, private sector and donor’s community.

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In line with the above, participants were concerned about the currently low (public) investment in agriculture’s sector, especially on R&D and technical extension services. During the forum, there were some discussion on successful examples on intensive cultivation approaches practiced by selected farmers, but the scope of activity had been small or narrowly expanded. This area was suggested for greater effort from the ministry of agriculture. Marketing services were essential element in agricultural trade. Participants were concerned about the farmer’s produces which would not respond to market demands. This will eventually discourage farmers; despite they have limited options/alternatives. Information on quality and quantity was not given effectively. This area requires closer cooperation among and more effort from concerned agencies, especially the ministries of commerce and agriculture. In most cases, poor rural infrastructure networks limited market and other necessary services further. This includes the lack of farmer/producer’s association to facilitate production and information flows. Once some sort of farmer’s collectives is in place, contract farming approach can eventually be facilitated. To undertake the above recommendations forward, public policies will have to be supportive and favorable to both producers and traders. With regard to producers, policies will also have to be equitable, and take into account the lagging and vulnerable households. Creating more jobs will for instance not guarantee that female-headed households with small children or without sufficient labor will benefit. There is also a need for micro-credit and rural insurance schemes to prevent vulnerable groups to fall deeper in poverty and engage them in productivity economy. As for the latter (traders and also investors), strengthening judicial system, reduction of transaction & transport costs, protection of property and copy rights will be an incentive. However, for investors & traders in agriculture’s business, security, rural infrastructure and clear land tenure policy are a must. The government will have to expedite and clarify tenure area zoning and registration to smoothen/encourage more investment in this sector.

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ANNEXES

1. Forum Programme Schedule

2. Group Discussion Lists

3. Guiding Questions of Group Discussion and Team Works

4. Opening Address of H.E. Lu Lay Sreng

5. Presentation Slides of Prof. Hayami and his recommendation on a Conceptual Framework for the Reform of Rural Cambodia

6. Presentation Slides of Dr. Gershon Feder

7. Commentary Remark of Dr. Ou Vaddy

8. Commentary Remark of Okhna Mong Reththy

9. Presentation Slides of Dr. Yang Saing Koma

10. Presentation Slides of H.E. Sok Siphana

11. Presentation Slides of Dr. Purushottam K. Mudbhary

12. Presentation Slides of Dr. Vuthy Choun, BAT (not available)

13. Day I Summary Slides of Dr. Hang Choun Naron

14. Presentation Slides of Dr. John Farrington

15. Presentation Slides of H.E. Ms. Ing Kantha Phavi

16. Presentation Slides of Mr. So Sovannarith, CDRI

17. Presentation Slides of Ms. Tep Saravy, Program Officer (VAM) WFP

18. Presentation Slides of Dr. Shenggen Fan, IFPRI

19. Presentation Slides of Dr. Hang Chhoun Naron, MEF

20. Commentary Speech of H.E. Chieng Am, Svay Rieng’s Provincial Governor

21. Commentary Speech of Mr. Bretton Sciaroni, Partner of Sciaroni and Assoiciates

22. Participant Lists