Hun Sen Announces Ambitious Plan to Boost Rice Exports

Prime Minister Hun Sen yesterday unveiled a new policy that the government hopes will boost formal rice exports to one million tons by 2015, a hefty increase from the 14,000 tons of formally exported rice recorded in all of 2009.

Mr Hun Sen said boosting rice production, processing and export was a top priority under the government’s economic development strategy and he called for the development of a rice export industry on par with the garment sector, currently Cambodia’s largest export industry.

“If we can do rice exports just like we do in the garment sector, maintaining a lot of [added] value locally, this value will contribute to the national economic development by increasing jobs in rural areas by almost 80 percent, increasing income for people, cutting down poverty,” the prime minister said during the policy’s launch at Government Palace

Citing the new policy, Mr Hun Sen said that by 2015 the paddy surplus should top 4 million tons, adding that rice could be kept in Cambodia for processing so that milled rice for export could reach 1 million tons in five years.

“We have to…improve rice export by stopping informal paddy export in favor of formal rice export,” he said.

More than half of Cambodia’s current rice surplus of about 3.5 million tons of paddy is exported as unprocessed paddy to neighboring countries, where it is milled and brought to market.

Until recently most Cambodian rice millers were unable to meet export quality standards and according to figures from state-owned agricultural exporter Green Trade from last month, Cambodia formally exported 14,600 tons of milled rice in 2009 and 10,600 tons in the first half of 2010.

However, since the 2008 rice price crisis, when rice prices suddenly doubled, investment in the Cambodian milling industry has steadily increased and millers say modern mills are expanding the country’s export capacity.

Mr Hun Sen said global rice market conditions offered great potential to develop the Cambodian rice export industry.

“There is still a huge market for rice export,” he said. “The export of paddy and rice will become a key point for economic development as garment and other sectors are facing a difficult challenge.”

The prime minister highlighted some points of the new government policy, which included smoothing out transport and export hurdles, setting up a public-private working group to ensure private businesses would be assisted in the export process and providing guarantees to the commercial banks that offer credit to the rice sector.

“The state will ensure 50 percent of any risk [on loans] to enable all the banks to give loans for rice production,” he said. Mr Hun Sen also pointed to the need to provide irrigation for the sector rice sector, which is currently largely rain-fed and produces only one harvest per year.

Mr Hun Sen made no mention a government budget to reach policy goals and a paper on the new policy also did not include a cost estimation for the policy’s implementation.

Son Koun Thor, chairman of the Rural Development Bank, which is charged with providing credit to the rice sector, said buying up enough paddy in Cambodia to process it into rice for export alone would require a huge amount of money.

“A lot of money is needed,” he said, calculating that, at current paddy prices, between $200 million to $300 million would be needed annually to buy up 1 million ton of paddy before it can be processed into roughly 600 tons of rice.

According to last December’s National Budget, the government allocated $39 million for the Agriculture Ministry and agricultural investment.

Mr Soun Thor said his bank was currently raising an additional $33 million in loans from commercial for the next harvest.

Phou Phuy, president of the Cambodian Rice Millers Association, the country’s largest rice millers’ organization, however, maintained the policy goal of 1 million ton of rice export was very feasible due to improved government credit for the millers.

“I think it won’t take until 2015. The government will reach this amount [of rice export] in 2012 or 2013,” he said.

Olivier Gilard of the French development agency AFD said he welcomed the growing government support for the rice sector but he questioned how realistic the policy’s export goals were.

“There is a real willingness to keep the added value of the market chain in Cambodia and the diagnosis is accurate,” Mr Gilard said. “I am afraid it will be difficult to reach these goals in such a short term.”

“It’s not yet an applicable policy because there is no real budget, no real mechanism to support parts of the market chain, or what part of the market chain will get most support,” he said.


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