Cambodia Agriculture in

Transition:

Opportunities and Risks

Stakeholders Consultation

September 18, 2013

Himawari Hotel, Phnom Penh

Outline

1. Background

2. Agricultural Transformation

3. Major Changes in Cambodia Agriculture over the past 10 Years

4. Drivers of Change

5. Opportunities and Risks

6. Diagnostic Study Objectives and Methodology

7. Key Questions for Today’s Consultation

BACKGROUND

-

1,000,000

2,000,000

3,000,000

4,000,000

5,000,000

6,000,000

7,000,000

8,000,000

9,000,000

10,000,000

2003 2004 2005 2006 2007 2008 2009 2010 2011 2012

Rice Production (mt)

0%

5%

10%

15%

20%

25%

30%

35%

40%

45%

50%

1994 1997 2000 2004 2007 2010

Poverty Rate in Cambodia

0

10

20

30

40

50

60

Underweigth Stunted (short) Wasted (thin)

Nutritional Indicators (from CDHS)

2000 2005 2008 2010

Processor35%

Input Suppliers9%

Machinery Sellers6%

Crop Collectors45%

Rice Sellers5%

2011 Share of Turnover by Types of Agribusiness

Processor Input Suppliers Machinery Sellers Crop Collectors Rice Sellers

The Good, ….

An impressive growth of agriculture over the past 10 years

o Agricultural GDP annual growth rate at 4.6% over 2001-2011, one of the

highest in the world

A steep decline in poverty

o More than 1% decline per year in poverty rate

Increasing connectivity

o Cambodia has a population of about 14.6 million, and 19 million mobile

phone subscribers in 2012

Major surpluses in agricultural production

o Rice, Maize, Cassava, Cashews, Rubber

o But deficit in vegetables, pork, oil

The Bad, …

An underdeveloped processing Industry

o Most commodities (paddy, cashews, cassava, maize, cattle, soya beans,

…) are exported in raw form

An agriculture which is mostly rainfed

o Irrigation coverage only 24% of cultivated areas

An agribusiness sector mostly consisting of traders and

informal businesses

o Less than half of the agroenterprises have some degree of

formality (eg registration)

And the Ugly

Still high levels of malnutrition

o Malnutrition of children under 5 still too high

Poor levels of food safety

o Lack of standards and standards enforcement

Unsustainable Practices

o Cassava production and deforestation

o Degrading soil fertility

o Indiscriminate use of plant protection chemicals

Questions

Can past growth be sustained? or even accelerated?

Can poverty be reduced faster?

Can malnutrition be reduced faster?

Can value added in agriculture be increased faster?

AGRICULTURAL

TRANSFORMATION

Agricultural Transformation

1. Agriculture becomes less important

As a share of Labor

As a share of GDP

2. Agriculture becomes more productive

In terms of higher agricultural labor income

In terms of higher GDP

3. Society’s perception of farming changes

From a way of living, unattractive and full of drudgery

To a honorable professional activity

% Agriculture

Labor Force

0%

100%

20%

40%

60%

80%

LOW

HIGH

% Agriculture

in GDP

Poor RichPer Capita Income

Tota

l Valu

e

Value of Agricultural

Output per Worker in

Agriculture

Total Value of

Agricultural

GDP

The Challenges of Agricultural Transformation

Growing rural – urban gaps

Youth exodus from rural areas

Increasingly vocal farmer organizations

Adoption of technology innovations

Land consolidation

Corporate agribusiness sector and SMEs

…

The Link between Rural non-Farm and

Agriculture

Strong Agricultural Growth strong growth of Rural Non

Farm Economy (RNFE).

Rural non-farm activities improve food security by

diversifying income sources and improving the ability to

cope with shocks

Rural non-farm activities generate employment for the

poor

Employment growth in the rural non-farm sector is

typically faster than in the rural farm sector

CHANGES IN AGRICULTURE

OVER PAST 10 YEARS

Internal and External Changes

Internal

1. Productivity

2. Rice Milling

3. Labor

4. Land

5. Connectivity

External

1. Food prices

2. Cross-border trade

3. New Entries

Internal Changes

1. Productivity improvements

Changes in cropping patterns during the wet season (early, medium, late)

Adoption of new improved varieties and improved seeds

Irrigation investment

Intensification in use of inputs and mechanization

2. Expansion of the rice milling industry

Paddy and Rice Export Policy

Domestic investment and FDI

Federation of Rice Millers and Cambodia Rice Exports Associations

Information about Exports

Programs and projects (EU/IFC, ADB, AusAID, IFAD, AFD, USAID, FAO)

0%

10%

20%

30%

40%

50%

60%

70%

80%

Rice Maize Cassava Sugarcane

Yield Increase (2003-2012)

0

50,000

100,000

150,000

200,000

250,000

2009 2010 2011 2012

Rice Exports (mt)

%

5%

10%

15%

20%

25%

30%

Landless 0.01-0.50ha 0.51-1.00ha 1.01-1.50ha 1.51-2.00ha > 2.00ha

2004

2011

• Less Landless

• More fragmentation at low size

• More consolidation at high size

Internal Changes (continued)

3. Labor

Increasing scarcity of labor due to internal and external migration

Scarcity of skilled labor

Increasing cost of labor in rural areas (twice if compared to 10 year

ago)

Mechanization as a response to scarcity and cost

4. Land

Preliminary data indicate both fragmentation and consolidation

5. Infrastructure and Connectivity

GMS initiatives in regional connectivity (East-West and North-South

corridors)

Railway and port infrastructure improvement

Major dams and hydroelectric plants under construction

100

110

120

130

140

150

160

170

180

2007 2008 2009 2010 2011 2012

CPI and Food Price Index (2006=100)

CPI Food

External Changes

6. Food Prices

Food crisis has been an opportunity for Cambodia’s farmers

Likely to remain high

Emergency Reserves and Disaster Preparation

7. Increasing cross-border trade

Informal exports of paddy, cashew nuts, maize, sesame seeds, soya beans, cassava

Imports of vegetables, livestock, inputs and machinery

Each citizen in CAM exporting 1 ton of agricultural products

8. New entries in the world and regional rice market

Myanmar high potential for food supply and benefits from EBA

India a source of world food markets instability

Vietnam starting fragrant rice

Thailand losing competitiveness

DRIVERS OF CHANGE

Drivers of Change

Policy Investment Technology External

Factors

• Relatively liberal

laissez faire

• Regional

integration and

access to regional

markets

• Rice Policy

• Public

expenditures on

agriculture,

irrigation, R&D,

and rural

development

• Infrastructure

(transport)

• Private sector

• Adoption of improved

technology by

farmers

• Mechanization

• Modern inputs (seed,

chemicals)

• Higher food

prices

OPPORTUNITIES AND RISKS

Opportunities

Cambodia becoming a reliable global supplier of safe and

quality food and products (eg rice, maize, fish, cattle,

pepper, rubber, cashews, cassava, fruit)

A dynamic Cambodian agribusiness sector creating value

added and employment in a growing and well-connected

rural non-farm economy.

A food and nutritionally secure population with access to

a healthy and diversified diet.

Risks

Business environment not conducive to Agrifood investment and to the

emergence of a dynamic formal agribusiness sector

Low volumes and efficiency of public investment in agriculture

Rate of innovation adoption slowing down

Environmental Sustainability at danger (eg. cassava and deforestation, loss of

soil fertility and biodiversity as a result of poorly designed hydro dams)

Vulnerability to highly variable and extreme climatic events

Highly variable global markets (food, feed and biofuels)

Need for New Drivers of Change?

1. More favorable business environment for private sector investment in

agrifood sector

2. Public private partnerships and innovation

3. Improved human resources and capacity of farmers and value chain

actors

4. Service providers to meet the need of commercial farmers

5. Operationalization of inclusive growth and regional development

6. Establish new strategic national programmes (beyond rice)

7. National programs on food safety and nutrition

8. National programs on competitiveness

9. National programs on risk preparation

DIAGNOSTIC STUDY

OBJECTIVES AND

METHODOLOGY

Objectives of the Diagnostic Study

Provide analytical inputs, improved information basis, and evidence-based recommendations for more competitive and sustainable farming systems in Cambodia. Specifically:

(i) Provide inputs for the preparation of the road map for the Ministry of Agriculture, Forestry and Fisheries (MAFF) and Supreme National Economic Council (SNEC) for the implementation of the long-term strategic agriculture sector goals of the Cambodia Vision 2030 and Rectangular Strategy; and

(ii) Provide diagnostics for the preparation of the Government or donor funded investments programs which would support implementation of the above strategies and required institutional development support.

Phasing of the Diagnostic Study

Phase I – Structural Changes in Agriculture over past 10

years

Financial and economic analysis of farming systems

Interpret the broader economic context and provide deeper

assessment of current policy environment.

Phase II - Forward looking scenarios for future agriculture

growth pathways

Based on expected changes in consumer demand, trade patterns and

implications of climate change, and deeper analysis of dynamics

between agriculture and non-agriculture sectors.

Methodology of the Diagnostic Study

Farm Enterprise

Models

Policy

Simulations

Sector

Performance ROADMAP

Survey

Three Types of Respondents

1. Key Informants (at Provincial, District, and Commune Level)

2. Focus Groups at the Commune Level

3. Individual Farmers

Three Types of Survey Tools

1. Key informant checklist

2. Focus Group Discussion checklist

3. Individual Questionnaire

Four Commodities

1. Rice

2. Maize

3. Cassava

4. Vegetable

Commodities

Commodity Growth

(2003-2012)

Key Changes Rationale

Rice • Production

(7.8%)

• Yield (4.5%)

• Adoption new varieties

• Mechanization

• Rice Milling Industry

growing

• Higher prices

internationally

• Food security

• Large income and employment

impact

• High export potential

• High impact on processing industry

Maize • Production

(13.1%)

• Yield (3.0%)

• Adoption of hybrids • Integration with feed industry

• Potential for export

Cassava • Production

(41.7%)

• Yield (6.4%)

• Use of upland and

forestland

• Integration with starch and feed

industry

• Integration with biofuel

• High export potential

Vegetables • Production

(12.8%)

• Yield (7.8%)

• Rapidly increasing

demand and imports

• Nutrition and food safety

• Import substitution

Zones, Provinces, Districts, Communes

3 Zones

6 Provinces

12 Districts

12 Communes

Chosen among the ones we visited 10

years ago for the Agrarian Structure Study

Locations of the SurveyZone (3) Province (6) District (12) Crop (4) Commune (12)

Mekong Kampong Cham Memot Maize / Cassava Dar / Memot

Srey Snathor Rice Prey Poh / Prek Damboke

Kandal Sa Ang Vegetable / Maize / Rice Prek Ambel

Kandal Stoeng Rice / Vegetable Siem Reap

Takeo Batti Rice / Vegetable Champei

Tram Kok Rice / Vegetable Tram Kak

Coastal Kampot Chhouk Rice / Vegetable Meanchey / Trapeang

Phleang

Kampong Bay Rice / Vegetable Traey Koh / Andong Khmer

Tonle Sap Battambang Ek Phnom Rice / Vegetable Prek Khpop / Prek Norin

Banan Rice / Cassava / Maize Kanty 2 / Chheuteal

Bantey Meanchey Malai Maize / Cassava Ou Sampou

Mongkol Borei Rice Rohat Touk

KEY QUESTIONS FOR TODAY

Key Questions

1. What are the most significant changes in Cambodia

agriculture over the past 5-10 years?

2. What have been the driving forces beyond these

changes?

3. What do we need to sustain or even increase past

growth?

4. What suggestions do we have for the study team

proposed methodology?

Notes for the Discussion

Changes Drivers of

Change

Sustaining the

Change

Methodology

Internal1.Productivity

2.Rice Milling

3.Labor

4.Land

5.Connectivity

External

1.Food prices

2.Cross-border trade

3.New Entries

1. Policy

2. Investment

3. Technology

4. External Factors

1.More favorable

business environment

2. PPP and innovation

3.Improved HR and

capacity of farmers and

value chain actors

4.Service providers to

meet the need of

commercial farmers

5.Operationalization of

inclusive growth and

regional development

6.New strategic national

programmes

1. Four commodities

(rice, cassava, maize,

vegetables)

2. Three types of

respondents (experts,

fgd, farmers)

3. Three regions

4. Six Provinces

5. Compare with study

conducted in the

same communes 10

years ago