Officials offered more details on the government’s newly announced rice policy yesterday, saying only half of the policy’s export goal for 2015 was expected to be high quality rice.
Agriculture experts meanwhile, said that although the policy was a welcome boost for the rice sector, the rice milling industry had to overcome major constraints before it could reach the government’s export goal.
Thon Virak, director of state-owned rice exporter Green Trade, explained yesterday that no more than half of the projected 1 million tons of rice export in 2015 would be premium quality rice destined for the EU and US markets.
“Not all this rice is high quality,” he said, adding that the other half would be regular quality rice destined for Africa and the Philippines.
Prime Minister Hun Sen announced Tuesday that under the new policy, “formal rice export” should reach 1 million tons within five years. This requires a hefty increase from the 2009 formal rice export volume of only 14,600 tons of premium quality rice, recorded by Green Trade.
The new government policy to reach this goal includes a raft of measures to improve the whole value chain, from rice farming to processing and export. The government will also cover 50 percent of the risk on loans by commercial banks to rice millers.
Son Koun Thor, chairman of the Rural Development Bank, said the government was studying how it could cover this risk on loans to the rice milling industry, which needs hundreds of millions of dollars in credit annually to buy rice and keep it in Cambodia for processing.
“The government will try to have a guarantee fund. Now we are studying with experts how to provide guarantees to commercial banks,” he said. “By the end of the year we will have a meeting [with rice millers] to find out what the market needs.”
Chan Tong Yves, secretary of state for the Ministry of Agriculture, said a priority within the policy was getting farmers to use a variety of rice seeds that would produce a quality rice harvest fit for export.
“We try to push the farmers to use this rice seed… Using the same rice seed which ensures the quality that the [foreign] market demands,” he said.
Chan Sophal, president of the Cambodian Economic Association, said the main obstacles to reaching the government’s 2015 export goal were a lack of capital and human resources in the milling sector, high export and transport costs, and insufficient standardization of rice seeds.
“There are not enough people who know how to manage a modern rice mill… Currently very few rice mills have adequate [human resources] capacity,” Mr Sophal added.
A recent government study estimated at least $250 million would be needed over the next three years to upgrade rural infrastructure such as irrigation and roads, but Mr Sophal said funding from The Asian Development Bank and China was becoming available for these projects.
“The government just needs to ensure [irrigation] schemes are technically sound,” he added.
Yang Saing Koma, director of the Cambodian Center for Study and Development in Agriculture, said the biggest challenge to achieving the export goals was making Cambodian rice compete with Thai and Vietnamese rice in terms of price and quality.
“We need to increase farmer productivity to get more paddy and bring down prices… [and] we need several hundred million to buy rice and store it,” he said.
Rin Seyha, managing director at SME Renewables, said rice millers were still constrained by energy costs, as mills can spend up to 300 liters per day in diesel to power equipment.
“Energy costs make up to 40 percent of [the mills’] costs,” which makes it difficult to compete with rice mills abroad, which have access to cheaper power, he said.
Despite this constraint, Cambodian rice millers were eager to expand to meet the growing demand from international rice markets, he said, explaining that an increasing number of rice mills have bought his company’s rice husk gasifiers in recent years to reduce energy costs.
“Around 50 percent of the rice mills are expanding and start to upgrade their equipment and use gasifiers,” he said.