Cambodia is unlikely to meet even half of its 2015 goal to export 1 million tons of milled rice unless export and production costs are greatly reduced and more private investment goes toward the agriculture sector, according to a new World Bank study obtained Monday.
The study, which was completed in July and titled “A More Detailed Road Map for Cambodian Rice Exports,” said Cambodia finds it hard to compete in the world rice market, as milling and transportation costs are double those in Vietnam and Thailand. The end result is that rice-importing countries such as Indonesia and the Philippines are less likely to buy from Cambodian producers.
“In order to have a chance of even reaching 500,000 tons of exports by 2015…the government must not only significantly intensify its near-term efforts to reduce milling costs, simplify export procedures and cut port costs, but it must afford itself of cheaper shipping alternatives,” the study said.
In the first six months of 2011, Cambodia exported 85,000 tons of milled rice, a 370 percent increase compared to the same period last year. Total exports are expected to reach 180,000 tons by the end of the year, Finance Minister Keat Chhon said on Monday at a national forum on rice in Phnom Penh.
The numbers show just how far Cambodia has to go to meet its one million ton target, which was first announced by Prime Minister Hun Sen last year.
According to the study, the cost of milling rice in Cambodia is between $30 to $50 per ton, compared to just $20 to $30 a ton in Vietnam and Thailand.
This is mainly due to the high price of electricity and a heavy reliance on diesel fuel to run generators that power rice-milling machines.
Inefficient equipment and poor farming techniques also affect productivity in Cambodia’s rice sector. The report said that transportation costs to Cambodia’s ports are between $50 and $60 per ton of milled rice compared to half that in Vietnam and Thailand.
“As a result, Cambodian rice is generally unattractive to overseas buyers facing higher prices for a rice with which they are unfamiliar and potentially suppliers of uncertain reliability,” the study said.
Informal payments to officials and high export costs are also marked as hindrances to rice exporters, according to the study.
One way that rice millers can automatically reduce costs would be to install gasifiers that burn rice hulls and produce energy. Such investments can cut down on diesel costs by 75 percent, to $5 for every ton of milled rice produced.
“[B]ut this in itself is not enough in [the] short run to achieve the needed cost reductions to allow Cambodia to successfully compete in the much larger world market,” the study said.
Kith Seng, undersecretary of state at the Ministry of Agriculture, reiterated that the government would reach its target of exporting one million tons by 2015.
“We will improve what we have implemented in the past by figuring out the negative and positive points,” he said. “If we can improve any barring points that investors see at present, we will achieve our goal.”
Mr Chhon said on Monday that the government would invest $220 million in irrigation systems before the end of the year.
Other investments have also been made. The Overseas Cambodia Investment Corporation and a Singaporean-based investment company, Smah Prum Royal International, signed a $1 million deal this week to research a new seed able to produce higher yields.
And in August, China Grain Reserves Corporation, a state-owned enterprise, announced a $20 million investment to purchase 200,000 tons of milled rice from Cambodia starting next year.
Chan Vuthy, general manager of Golden Rice, which both mills and exports rice, said that despite the World Bank report the 2015 goal was still achievable. But to reach it there needs to be much greater levels of investment.
“The government has to facilitate private investors to come and invest in our rice industry,” he said.
Sok Muniroth, who co-authored the study and works as a program manager at Agricultural Development Inc, said that since the report came out, Cambodia had remedied some of the issues preventing it from attaining its target.
Since July, Cambodia has been allowed to ship containerized milled rice along the Mekong River to the deepwater port in Saigon.
