Bank Says Agriculture Growth Crucial to Poverty Reduction

Cambodia will have to reverse a significant slowdown in its agriculture industry and get back to 5 percent growth in order to keep farm wages ahead of inflation over the next 15 years—or, more alarmingly, prevent poverty rates from rising again—according to a new World Bank report.

“Cambodian Agriculture in Transition: Opportunities and Risks,” commissioned by the government and released by the Bank on Thursday, assesses the country’s all-important agriculture industry from 2004 to 2014 and looks at the sector’s prospects up to 2030.

Soaring global food commodity prices and ample available farmland for expansion helped the agriculture sector grow at an average of 5.3 percent between 2004 and 2012, “among the highest in the world,” the report says, with farm wages rising 206 percent. According to the Bank, agricultural growth accounted for more than half of the country’s gains against poverty over the same period, which—based on government figures—plunged from 53 percent to 19 percent.

But with the fall in prices and new land much harder to come by, the report says, growth in the agriculture sector fell to only 1 percent in 2014, just as Cambodia’s gains against poverty had started to flatline.

“Is the country in transition to a slower agricultural growth?” the report asks. “Cambodia can ill afford it, because agricultural growth will be critical to continued poverty reduction in the country, given its large size in the economy.”

It warns that the recent slowdown in the agriculture sector “may signal a potential long-term decline,” with falling rice prices, little room for expansion, and growing competition from Burma and Thailand.

To keep real annual farm wages rising until 2030, from $1,200 now up to an average of $3,700, the report says the sector needs to get back to at least 5 percent growth. Even if it reaches 3 percent, average farm wages would only reach $2,450, it says.

That would be a major hit to a sector that accounts for more than half of the country’s labor force. And just as the sector has slowed, so have Cambodia’s gains in bringing down poverty.

According to the World Bank’s figures, the national poverty rate sank from 50.1 percent in 2007 to 23.9 percent in 2009, at which point the gains started tapering off. The poverty rate fell to 22.1 percent in 2010, and 20.5 percent in 2011, the last year for which the Bank has released a figure.

“The country needs to find new pathways to ensure at least 5 percent growth over the next 15 years, which is needed to keep farm wages growing and reduce poverty further,” Sergiy Zorya, a senior agricultural economist at the World Bank and a lead author of the report, said in a statement.

The Bank says farmers will now have to rely mostly on raising yields and switching to more lucrative crops, such as vegetables, to make that happen. It offers a number of recommendations for getting there, including better roads and cheaper electricity, stronger land tenure security and more irrigation.

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