Across most of the country, thousands of farmers work long days in their rice fields. According to some estimates, rice accounts for 80 percent to 90 percent of all agricultural production.
Though rice is the only crop many households grow, the country still has a long way to go before it turns rice into a viable export.
Farmers and rice millers will have additional market access if a new government forms and approves the country’s accession to the World Trade Organization before March, but they lack the experience and market knowledge to benefit immediately from the new markets.
Precise statistics for the rice trade are hard to come by, since many farmers sell their paddy informally on the border of Thailand and Vietnam. Import and export statistics from the Ministry of Commerce, however, reveal that the country imports about three times more cereals, which include rice paddy, green beans, soybeans, corn and other crops, than it exports.
Most experts agree that selling milled rice increases the profit margins for farmers, because milled rice can be exported at a much higher price than paddy. But the main obstacles to exporting milled rice, they say, are poor quality rice, lack of credit and lack of communication between the government, farmers and rice millers.
Currently, only two companies export milled rice. One company, Angkor Kasekam Roongroeung Co Ltd, was created three years ago by Chieu Hieng. Drawing on his nearly 40 years’ experience in the rice milling industry, including 20 years in Thailand, he now exports 3,000 to 4,000 tons of rice per year to Malaysia, Hong Kong, the European Union, France, Italy, Belgium and Australia, where he has established business ties from his previous work.
Chieu Hieng, who serves as the company’s chief executive officer, says he plans on expanding the output of his Ankgor Rice brand to 30,000 to 40,000 tons in the next few years to meet market demand.
But that won’t happen, he said, if he doesn’t get more rice paddy to mill. He said he wants the government to restrict the informal export of rice paddy across the border so that Cambodian rice millers have enough of the crop to mill and sell.
“The government should ban direct paddy exports because we do not have enough rice to mill,” Chieu Hieng said in an interview. “This must be changed, otherwise Cambodia will not be able to export large amounts of rice in the next 10 years.”
The government did not allow paddy to be exported before 2001. But the farmers often could not find domestic buyers for their paddy, so the government decided to open up the border trade and allow farmers to export paddy without a license.
“The government wants to export milled rice, not paddy,” said Mao Thura, director general of the Commerce Ministry. “But the government allows farmers to export paddy to find a market for their product. Cambodia doesn’t have a large amount of [milled] rice to sell.”
Here lies the crux of the problem.
The government wants to export milled rice. Rice millers need more paddy. Farmers need to sell their paddy. But since market information rarely reaches remote rice farmers, they sell their paddy quickly for low prices.
“It is a bad cycle,” said Sam Bona, a rice specialist with Small and Medium Enterprises Cambodia, an NGO that helps people develop their businesses. “We need paddy to mill. The government needs to solve the problem.”
Mao Thura said rice millers have not told the government that they are having problems. If the government knew about the industry’s concerns, he said, the Commerce Ministry would work to help them.
“There are very large gaps in communication between the farmer, miller and buyer,” said Chan Phaloeun, deputy director of the government-funded Cambodian Agricultural Research and Development Institute.
One of the main goals of CARDI is to improve the quality of rice for the international market. Experts say that quality is improving slowly since a 2001 study on the Commerce Ministry’s Web site about improving rice quality revealed immense problems in the industry.
“There is no quality standard for rice in Cambodia,” according to the study. “Not only farmers but also traders and rice millers will take a passive attitude in the sales of rice. There is a feeling of expectation in the public for change; however, an immature system with false ideas for a market economy precedes it, and people are not sure what to do.”
Chan Phaloeun said she taught farmers to use quality seeds and fertilizer, but they often would continue to mix seeds anyway.
“When we have good quality, we will start to export,” she said. “I cannot say when that will happen.”
A number of rice miller associations have formed in an attempt to improve rice quality and establish credit unions, all aimed at making milled rice a viable export.
The Federation of Cambodian Rice Millers Associations has started to distribute quality seeds to farmers and then set up drying fields, where farmers can dry the paddy according to international standards. They hope to begin exporting next year.
“The Commerce Ministry has assisted in exchanging market information,” said Phou Puy, the federation president. “But the foundation is not ready. We cannot produce the quality to meet market demands.”
Though provincial rice miller associations have made strides in educating millers and farmers about improving quality, internal fighting has lessened their impact. In February, the National Rice Milling Association split over accusations of questionable business practices against Phou Puy. Phou Puy denied the allegations.
Nonetheless, a potentially large international market exists for Cambodian rice, but so far, exporters have not been able to capitalize. Documents at the Commerce Ministry show that in June 2002, Indonesia expressed interest in buying 50,000 tons of milled rice and Malaysia sought to buy 120,000 tons.
The government rejected both deals, however, because they did not involve immediate cash, Mao Thura said. Indonesia offered to give agricultural equipment in exchange for the rice. Malaysia offered cash, but wanted to pay 45 days after the shipment was made.
The rejected Malaysian deal illustrates how the problem of finding credit hampers the export potential of the industry. If the farmers and millers were able to produce the rice on credit, they could reap the profits later on.
Phou Puy’s rice millers association distributed $500,000 in loans from the Rural Development Bank this year, accepting cash or paddy as collateral.
It hopes to distribute $1 million next year, but the Rural Development Bank has yet to approve the funds.
Other rice millers, such as Khieu Chay in Banteay Meanchey province, say that the lack of irrigation is a larger problem than credit. Research done at CARDI underscores his point.
If good irrigation systems were in place, Chan Phaloeun said, farmers could increase the rice yield from 1.9 tons per hectare to 3 tons. With good fertilizer and irrigation, the yield can rise to
6 tons per hectare.
Though farmers have produced rice for centuries, they are just now learning how to produce it for export. And, while answers to many complicated problems need to be found, millers understand the simple market force of supply and demand.
“If we offer them a good price, international buyers will come to us. If not, they will go to someone else,” said Eang Sophalleth, an adviser to Prime Minister Hun Sen and spokesman for Malimex Co Ltd, the other company that exports rice.
