Growth in the agricultural sector has been slower than that of the industrial and services sectors during the last decade leading to a growing inequality between the rich and the poor in Cambodia, according to a new book released by the Ministry of Economy and Finance last week.
The book, entitled “Cambodian Economy: Charting a course of a brighter future” and written by Finance Ministry Secretary General Hang Chuon Naron states that private sector investment coupled with high levels of development in urban sectors have led to a “considerable [wealth] gap between urban centers and rural areas” during the last decade.
“The rural poor depend upon access to natural and forest resources to meet their needs. Damage to and privatization of natural resources and land has exacerbated the inequalities,” Mr Naron states.
The book, which was funded by the Asian Development Bank, specifies that 90 percent of the poor live in rural areas.
Mr Naron goes on to explain that in order to have an impact on poverty reduction the agriculture sector should grow by at least five percent each year.
But achieving this level of performance in agriculture is challenging, he points out.
“The potential for growth in agriculture through intensification and expansion of cultivated land has been impeded by the absorptive capacity of the domestic market, the mediocre quality of exported products, and the lack of demand for agricultural products in the region,” he states.
“We have to have more incentive for rural development,” said Neou Seiha, a senior researcher at the Economic Institute of Cambodia, acknowledging that a large proportion of Cambodia’s growth over the past decade has been due to development in urban areas.
“You can see that both [urban and rural areas] increase, but the richer are moving faster than the poor,” he said.
He added that the speed at which the agricultural sector grows would depend heavily on the government’s ability to improve both bureaucratic constraints and reduce corruption.
In his book Mr Naron also underlines that Cambodia still suffers from “chronic capital and technology shortages” in the agricultural sector.
Still, the International Monetary Fund expressed late last year that 2010 would see greater growth in the agricultural sector.
Such predictions were somewhat confirmed earlier this month when ground was broken on a Chinese-funded 332 km irrigation system worth $61 million in Battambang province. A gradually improving road network is also expected to bring down production costs for the industry.
Indeed, the amount of land used for rice is growing – up from 2.3 million hectares in 2000 to 2.6 million hectares in 2008. Yet, 80 percent of the rural poor still depend on rice growing for subsistence. Land disputes on agricultural land are also curbing the potential for sustained growth in the industry, according to Mr Naron.
Mr Naron states that landless agricultural workers comprise of about 15 percent of the total number of farmers. “But this relatively egalitarian situation is rapidly worsening,” he states.
Other issues in need of dire attention include the quality of seeds for rice – a mere two percent of cultivated land uses certified seeds -, storage space for harvested produce and poor irrigation.
By developing these areas Cambodian farmers will be able to eliminate the use of middlemen who distort the market and ignore price signals from fluctuations in supply and demand in urban areas, Mr Naron states.
Of over 30,000 agro-business firms currently in operation, 91 percent employ less than five people and have a capital outlay of less than $1,000.