SMEFA C T SN E W S ABOUT WORLD BANK GROUP SMALL AND MEDIUM ENTERPRISE INITIAT I V E S

Vol. 1, No. 9 September 2000

A Rice Industry Revives

The Mi ll e rs ’ Ta l e

SMEFACTS is a publication

of the

World Bank Group

SME Department.

D i r e c t o r :

Harold Rosen

For Information

C o n t a c t :

Rob Wr i g h t

R w r i g h t @ i f c . o r g

Tel. # 202 473 7997

Fax # 202 522 3742

IN BRIEF

NAME: Federation of Rice MillerAssociations

BEGAN: 1998

BUDGET: $140,000 from the IFC-managed Mekong ProjectDevelopment Facility.

ROLE: Helps revive one ofCambodia’s key industries, riceproduction, by supporting millers’associations in eight provinces.

TRACK RECORD: The federation’smember associationshave helped millershandle higher-volume orders,amplified their polit -ical voice, and initi -ated many othercost-reduction and productivity-enhancement benefits.

Cambodia is one of the world’s poorestcountries, with a per capita GNP of only

$260. Three quarters of its people work inagriculture, the majority of them as small-scalerice producers.

Local farmers till fertile soil that, thanks to richlayers of silt deposited by the flood waters of theMekong and Tonle Sap rivers, compares favor-ably to that of neighboring Vietnam andThailand—the world’s number one and two riceexporters. Thirty years ago, before war and theKhmer Rouge devastated Cambodia’s rural land-scape, rice exports accounted for half the coun-try’s foreign exchange earnings. While it isstronger than it was a decade ago, when largequantities of rice had to be imported by the UN,

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Recovery Strategy: Strong in pre-war days, Cambodia’srice industry needs rebuilding.

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today the country’s rice industry still struggles tomeet domestic demand and is dogged by a repu-tation for poor quality on the world market.

The frontline players responsible for bringingCambodian rice from local farms to the globaleconomy are the country’s rice millers. Significantincreases in income for the many thousands ofCambodian families subsisting on rice farmingwill only come when these millers succeed inexpanding into foreign markets, thus creatingnew sources of value up and down the local sup-ply chain. Developing a successful export indus-try, however, will in turn depend on both parties’ability to work together on the cost reductionsand productivity gains needed to compete withthe world’s rice powers—not only nearbyThailand and Vietnam, but also highly efficient pro-ducers farther away such as the United States andAustralia.

Cambodian rice milling firms range in characterfrom hundreds of one-man operations with nostorage capacity to a couple of organizations withconsiderable warehousing capabilities and annualturnover of $200,000. Most are somewhere inbetween, employing an average of about 10workers and generating revenues of $30,000 to$80,000 a year. Given the thousands of strains ofrice grown by Cambodian farmers, the challengethese firms face of producing a quality and uni-form exportable product is formidable. Lack ofinformation, communication, technology andmarketing tools and a history of social distrustmake the task even harder.

In 1997, millers in Battambang p r o v i n c e —C a m b o d i a ’s “rice basket”— came together toform the country’s first professional associationof rice millers as a means for overcoming theseobstacles. Rice millers in the area had been dis-cussing the idea among themselves, but givenCambodia’s lack of a governing legal framework,they were unsure how to proceed until assisted bya private sector development unit under the UN’sCambodia Rehabilitation and RegenerationProject (CARERE). Today, Battambang’s rice

miller association boasts some 120 member firmsand, by demonstrating the benefits of association,has inspired creation of like organizations in theprovinces of Banteay Meanchey, Kandal, PreyVeng, Pursat, Siem Reap, Swey Reng and Takeo.In May 2000, representatives of all eight groupsmet for a national convention and formed anumbrella organization, the Federation of RiceMiller Associations.

IFC has supported Cambodia’s motivated ricemillers in their efforts to create voluntary, mem-ber-run and –financed business associations since1998. The IFC-managed Mekong ProjectDevelopment Facility (MPDF) first began work-ing with the original group of miller associationsset up under guidance of CARERE, providingthem with a business management course special-ly designed for Cambodian rice millers. WhenCARERE’s mandate and funding expired in1999, MPDF helped members of its disbandedprivate sector unit organize as a local NGO,renamed Enterprise Development Cambodia(EDC). MPDF also opted to increase its owndirect involvement with millers, commissioningcreation of a manual outlining the mechanics ofstarting a business association in Cambodia, andteaming up with EDC to provide technical andfinancial backing for the start up of six newassociations throughout the country.

Tangible economic benefits have already begunto emerge. Members are working togethertowards a system whereby they can fill high-

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Rice Millers: Forming business associationsfor the first time.

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volume orders as a group, with some associationslooking to this as a key means for cultivating spe-cific customer relationships. Members are alsolooking to use collective bargaining power to gainbetter terms from suppliers of equipment andfinancial services and to lobby the government.There has even been a move towards coordinationwith a counterpart rice miller association inThailand. A key initiative still in the pipeline is toaddress issues of seed quality and storage prac-tices to enable local farmers to provide higherquality inputs.

Valuable Source of InformationRice mills in Thailand generally produce about95% unbroken rice. In Cambodia, the number isno more than 30%, and in many cases, millers arenot even aware how far behind international stan-dards they actually are. Cambodia’s new businessassociations are changing this and providingmembers with access to the vital information theyneed to make wise investment decisions and pulltheir own operations up to a level where they cancompete successfully in the global arena.

Information being disseminated by the associa-tions includes details about:

• Modern and effective rice milling technologies,methodologies and equipment

• How to access and deal with foreign customers• How to comply with laws governing cross-

border transactions• Global commodity prices and regional supply

and demand• International shipping and insurance costs• Consumer, supplier and regulatory trends

To strengthen the associations’ ability to servetheir membership with the best available informa-tion, MPDF is currently undertaking a pilot inter-net initiative dubbed RICENET in partnershipwith EDC and Khmer Internet DevelopmentServices (KIDS). The latter is a student-runCambodian firm that will provide low-cost webdesign, site management and association staff

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training. RICENET’s Web site will act as a plat-form for more effective dissemination of industryinformation and for communication with cus-tomers and suppliers, both domestically and inter-nationally. Internet access will be available in allprovinces with the completion of a new telephonenetwork by the end of this year. Cambodia’sCommerce Ministry has said the RICENET initia-tive will provide a model from which otherdomestic industries can learn, with the initialenergy shown by the millers indeed offeringencouraging signs.

“We are completely isolated from everyone. Wedon’t receive any information, nothing at all thatcan help us progress towards meeting the needs of the international market,” said Phou Poy,president of the millers’ federation. “RICENET,I hope, will break this isolation and open up away for the rest of the world to obtain Cambodiangoods.” n

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Contact: John McKenzieMekong Project Development Facility63 Ly Thai To St.HanoiVietnamTel.: 84-4-824-7892Fax: 84-4-824-7898E-mail: Jmckenzie@ifc.orgWeb: www.mpdf.org

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