How Agriculture Contributes in Economic Growth: A Case Study in Cambodia

NORTON UNIVERSITY

Department: Economics, Year: IV

Session: Evening

Group: E2 (Development Economics)

How Agriculture Contributes

In Economic Growth:

A Case Study in Cambodia

Submitted to:

So Sovanarith

Submitted by:

Hing Many

Sieng Mai

Pou Sokvisal

Seng Bunvirak

Academics Year

2011-2012

Contents I. Problem Statement ................................................................................................................................. 1

II. Objectives................................................................................................................................................ 2

III. Main Contents ..................................................................................................................................... 2

A. Study about the agricultural sector to other sectors that can improve the economic growth .......... 2

a. Agricultural Sector .......................................................................................................................... 2

b. Industry ............................................................................................................................................... 6

Tourism Sector ............................................................................................................................................ 7

Hotel & Restaurants ........................................................................................................................ 7

Tourism in Detail ............................................................................................................................. 7

c. Construction Sector ............................................................................................................................ 8

B. Understand how agriculture help the economics growth .................................................................. 9

a. Reduce unemployment rate ........................................................................................................... 9

b. Poverty Reduction ......................................................................................................................... 11

c. Increase export ................................................................................................................................. 13

Rice ........................................................................................................................................................ 13

d. Increase income ............................................................................................................................ 15

C. Analyze by using SWOT analysis ....................................................................................................... 16

a. Strengths and Opportunity ........................................................................................................... 16

b. Constraints and Weakness ............................................................................................................ 17

D. Explore the Government Strategies to Make the Agricultural Sector Increase ............................... 17

a. Generate Income and Employment through Increasing the Agriculture Productivity ................. 17

b. To contribute to sustainable industrial development . ................................................................ 20

c. Strengthening Institutional Capacity ........................................................................................... 22

IV. Conclusion ......................................................................................................................................... 24

Case Study ............................................................................................................................................. 24

V. Recommendation .................................................................................................................................. 26

VI. References ........................................................................................................................................ 26

Norton University Agricultural Economics

College of Social Science 1

How Agriculture Contributes

In Economic Growth:

A Case Study in Cambodia

I. Problem Statement

Cambodia is one of the ten nations of Southeast Asia and part of mainland Southeast

Asia. It is bordered on the north by Laos and Thailand, on the west by Thailand, and on

the east by Vietnam. Its geographic area is 181,035 square kilometers (69,900 square

miles). Its total land boundaries are 2,572 kilometers (1,598 miles), and it has a coastline

on the Gulf of Thailand of 443 kilometers (275 miles). The Mekong River flows directly

through the country from north to south, eventually flowing into the Mekong Delta of

Vietnam. Cambodia's largest city and capital, Phnom Penh, is on the Mekong River. The

other major cities in Cambodia are Battambang, Siem Reap (the gateway to Angkor Wat),

and Kampong Saom (Sihanoukville), Cambodia's major port.

In 2007-2008 Cambodia was influenced by world economic crisis that effected many

sectors: construction, tourism, agriculture, real estate, and garments. A number of people

in Cambodia was jobless due to some garment factories was collapse or fail to run their

business. It was discovered that the crisis was prevented Cambodia from the economic

growth and stuck Cambodian people in lived under the poverty line. And now this is

become the main problem for the Cambodia Government have to be solve and fix the

problem.

Cambodia is one of the world's poorest economies, and, thus, economic development is

its highest priority. Much of its population is involved in subsistence

farming (families producing what is needed for daily living). About 66 percent of the

country is forested or woodlands, with only 13 percent of the land arable.

Most of Cambodian people are farmers, they do farming but in some season beside

raining season they do Chamkar. Most of population living in rural area is depending on

the agricultural products: farming, animal raising, and growing crop. The Agriculture

Sector plays an important role the economic growth in Cambodia. If the government

promote the agriculture sector people in rural area are the most beneficiary. But the

income generated by agriculture is not consistent. So many local people are looking for

alternative jobs or migration to overseas.



Although many parts of Cambodia are suitable for farming or chamkar but the

agricultural input is still in small scale in parts of Cambodia is restricted as a results of

various factors, including the following:

Limited water supply and irrigation system

Shortage of land due to ownership problems or mine/UXO contamination

Ease of earning money in overseas compared to agriculture pursuits

Lack of suitable equipment or seeds

Lack of knowledge about appropriate agricultural process or about markets

and distribution

II. Objectives

In reflect to which the proposed project remedies the problem noted above, it will

be necessary to find out some strategies and solution for this problem. The following are

the project objectives:

To compare the agricultural sector to other sectors that can improve the

economic growth

To understand how agriculture help the economic growth

To analyze by using SWOT

To explore the government strategies to make the agricultural sector increase

III. Main Contents

A. Study about the agricultural sector to other sectors that can

improve the economic growth

a. Agricultural Sector

Cambodia has undergone dramatic political, economic and social changes since 1993, the

year of the first post-conflict national elections leading to the first coalition government.

Cambodia has joined various international and regional organizations and has been a

member of World Trade Organization since October 2004. At the same time, the country

has undertaken crucial institutional and economic reforms, which have led to impressive

growth and development outcomes. The country‟s gross domestic product (GDP) grew by

9.8 percent annually between 2000 and 2008. Such growth exceeds that of the country‟s

neighbors, Thailand and Vietnam and is higher than the East Asian and Pacific region as

a whole (World Bank 2009). GDP per capita, measured in 2000 constant prices, has

grown from $286 in 2000 to $492 in 2009, albeit still about one quarter of the East Asia

and Pacific regional average of $1926. This rapid overall economic growth in Cambodia



has been accompanied by remarkable performance in the agricultural sector, which grew

at 5.6 percent between 2000 and 2008–the highest growth rate in the region in this

period. Nonetheless, Cambodia‟s economy is still highly dependent on agriculture, which

contributed close to one-third of national GDP in recent years (Figure.1).

Agriculture is also the most important sector for employment, employing more than half

of the country‟s total labor force. Agriculture is more important for the rural poor as it

provides their most important source of income (World Bank 2009). According to

Knowles (2006), the poorest 10 percent of the Cambodian population are rural

households, mostly depending on agriculture for their livelihood.

Figure.1 GDP share 2008

Sub-sectors of agricultural sector have four sectors: Forestry and Logging, Livestock,

Fisheries and Crop Production. The sub-sector that is the most important and pushes

agriculture to help Cambodian economy is sector of Crop Production. It is 52.7% of total

composition of agriculture (Figure.3).



Figure.3 Composition of Sub-Sectors in Agriculture

Cambodia‟s agricultural sector, inclusive of cops, livestock, forestry and fisheries, grew at

an average 3.4 percent annually over the period 1994-2004, although the volatility of that

growth was high,. Since 1999, the sector has gone through three separate years of

negative growth, affected by political unrest, the regional financial crisis in the late 1990s,

severe floods in 2000, and drought in 2004 and 2005. The average annual rate of growth

recorded over this period is significantly less than the industrial and service sectors of the

economy, and agriculture‟s share of GDP fell from 45.9 percent to 30.9 percent. However,

the proportion of the labor force having a primary occupation in agriculture remained at

over 70 percent.

Though there was no significant change in the overall structure of the agricultural sector

over the period, there were differences in sub-sector contributions to agricultural growth.

On average, crops contributed the most (56 percent), while the contributions from

fisheries (30 percent) and livestock (11 percent) were more modest. The contribution

from forestry has been slightly positive over the whole period (just over 2 percent), but

significantly negative since 1999.

Within the crops sub-sector, rice paddy has remained by far the predominant activity;

accounting for about half of gross value-added from crops, with horticultural crops

combined being the next most important category at 10 percent of crop value. No other

crop accounts for more than 4 percent of total crops, despite upswings in maize and

soybean production since the late 1990s, which are responding to the healthy regional

growth of livestock sectors. As analyzed in more detail below, the key binding constraints



to higher yields and diversification of crops are: insecurity of land tenure; poor irrigation

and lack of other critical infrastructure, including all weather roads; weak human capital;

and the lack of access to, or high cost of, capital.

Within the livestock sub-sector, poultry and swine production have each grown at just

over 2 percent per annum, slightly higher than the rate of large ruminant production (1.7

percent). In value terms, poultry is still the smallest of these three livestock activities, and

an outbreak of avian influenza is unlikely to exert a large negative impact on overall

growth of the sub-sector, although a pandemic could exert a very negative impact on

tourism.

Total real value added from fisheries is slightly higher than that from rice production.

Within fisheries, the inland capture component accounts for over three-fourths of the

value of production but is the slowest growing, followed in size by marine capture (13

percent). Most fish catch is consumed domestically and exports-between US$40-50

million per annum from 1999-2003m mostly inland to Thailand-are almost all

unprocessed. Official statistics tend to undercount the total fish catch, and significant

proportion of marine fish catch is sold on the open sea and is therefore not captured in

official statistics. There are indications that the inland capture from the Tonle Sap basin

is reaching the limits of exploitation for certain types of fish, and notwithstanding some

improvements, conflicts over ownership rights also continue to inhabit higher growth.

Though the forestry sector grew at an average rate of 3.9 percent per annum during the

past decade, this performance is heavily skewed by the exceptional growth in 1994 and

1997. Since then, the sub-sector has contracted sharply, by an average of 7 percent ever

year. The main reasons for this contraction include the moratorium on commercial

logging, deforestation, and poor management of concessions.

The other important sub-sectors of agricultural sector is sector of Fisheries, Livestock

and Forestry&Logging that are 25%, 15.5% and 6.9% respectively of total composition of

agriculture.

The gross values added of Crop sector are: Rice, Rubber, Peanut sugarcane sesame,

Tobacco, Vegetable, Soybean, Cassava, Maize and Permanent crops. The most important

crop is Rice that it is 54% 0f total crops (Figure.4); moreover, Rice help to set up

employment for Cambodian people, especially rural people so it is a factor that make

Cambodia develop and reduce poverty rate of country effectively and efficiency.

Figure.4 Gross Value added by Crops



b. Industry

The industrial sector has been the fastest growing sector in Cambodia over the past

decade, at an average of 15;4 percent per year. Its share in the economy has more than

doubled th 28.9 percent in 2004, and the secto contributed over 41 percent of total GDP

growth over the period, and now employed about 8 percent of the labor force. Within the

industrial sector, garment manufacturing and construction were the primary growth

engines, contributing on average, 28.9 percent and 6.4 percent, respectively, to overall

growth,. Before analyzing the underlying factors for the phenomenal growth of the

garments sector, the next section reviews the performance of the agri-business sector,

which has suffered from the inability of the agricultural sector to move up the value chain

into processing activities, even as the production of primary inputs has increased.

Agri-business

Agri-business consists primarily of tens of thousands of micro-enterprises, a few hundred

small and medium enterprises (SMEs), and only a handful of companies with more than

100 employees. Only about one and one-half percent of the labor force is involved in agri-

business, with the average micro-enterprise consisting of 2-3 worker. Among the SMEs,

riche milling is by far the most common activity, while other grain mills such as bean and

potato powders are a distant second. Estimated of value-added per worker vary hugely

between US$300-$3, 000 per year with three provinces accounting for 95 percent of

total output: Kompong Speu (70 percent), Svay Rieng (16 percent), and Battambang (9



percent). All three and located along major international trade routes; a powerful

indication of the impact of trade linkages to output.

Tourism Sector

After the sharp slowdown in 2009 caused by the global financial crisis, service industry,

producing about one third of Cambodia GDP, grew by 4.3% in 2010. The contribution

was mainly from a relatively high growth rates in the local trade and banking sector,

especially from tourism (figure 01).The recovery in tourism means a pickup in hotels and

restaurants, increasing in turn local transportation and trade activities to a certain extent.

The number of visitor arrivals in 2010 ascended by 16% y-0-y to 2.5 million people,

according to Ministry of Tourism (MOT) statistics.

Hotel & Restaurants

Largely dependent on the performance of tourism, the growth of hotels & restaurant

business was modest at a rate of 9.3% in 2010 after the contraction of 0.8% a year earlier.

This is because of the 16% y-o-y rising number of visitor arrival (2.5million) although

their expenditures were slightly increased.

Tourism in Detail

Tourism over the last 16 years has become one of the ley sectors of the Cambodian

economy, representing 15.7% (or US$1.78 billion) of GDP in 2010, up from just 2.9% in

1995 (figure 02). Tourism growth has been reflected in increasing political stability,

improving safety, rising quantity and quality of available room supply, restaurants,

development of tourist attractions, and gradually growing global awareness of the

country as a destination.



Cambodia saw international tourist arrivals rose by about 16% to 2.5 million in 2010, and

tourism receipts increased by 14.4% to US$1.78 billion. Arrival growth has averaged

19.3% since 1995, but the 2008-2009 financial crisis pulled arrivals down below this

level, falling to 5.5% and 1.7% in 2008 and 2009 (figure 03), respectively. In 2010, the

average length of stay remains the same at 6.45 days and average expenditures of visitors

increased to US$115.43/day (figure 04&05 after a slum in 2009. However, assuming that

the average run rate on a long term basis is just about 10%, the arrivals will be nearly

triple to reach more than 6 million people by 2020. Thus, this is a bright future of

Cambodia tourism sector compared to the region.

Domestic Tourist: In addition to international arrivals, domestic tourists in 2010 also

showed an overall increase of 7.7% to 7,562,623(figure 08), which mainly contributed

from the increase of number of visitors in Siem Reap and Coastal areas which range from

the provinces of Kampong Soum, Kampot, Kep, and Koh Kong. This significant increase

was in part attributed to new efforts and campaigns of Royal government to attract more

visitors, especially ecotourism to Koh Kong province.

c. Construction Sector

The Cambodian construction industry is forecast to grow by 9.5% (in real terms) in 2010,

pushing the nominal industry value to KHR2.59trn (US$640mn). Over the medium

term, the country‟s construction sector is expected to continue to see robust growth due

to the bullish economic outlook for the country, the renewed interest in investing in

Cambodia‟s infrastructure sector and growing urbanisation levels. New preliminary

estimates from the Cambodia National Institute of Statistics showed that nominal

construction value in 2008 reached KHR2.53trn (US$625mn), higher than the

previously expected KHR2.32trn (US$574mn). However, this does not change the view

that the Cambodian construction industry faced a recession in 2009, and higher base

effects from 2008 means that the industry saw a deeper-than-anticipated decline in value

in 2009. Cambodia‟s construction industry is now estimated to have contracted by 12.8%

in 2009, reaching a nominal value of KHR2.23trn (US$551mn).

An indication of this downturn is the volume of cement and steel imports into Cambodia.

Import volumes of cement and steel declined by 19% and 0.2% respectively in 2008, and

this trend continued into 2009, with cement and steel imports decreasing by 18% during

the first 10 months of 2009. Another indication was the drop in foreign direct investment

in Cambodia, which fell from US$815mn in 2008 to US$533mn in 2009. This very low

base in 2009 is anticipated to have led to significant real growth of 9.5% for the

Cambodian construction sector in 2010. Meanwhile, nominal construction value in

2010 is estimated to have reached KHR2.59trn (US$639mn), returning to 2008 levels.



B. Understand how agriculture help the economics growth

a. Reduce unemployment rate

While its share in the economy fell from 46 to 31 percent between 1994 and 2004,

Cambodia's agricultural sector ( inclusive of crops, livestock, forestry and fishery), the

primary livelihood of the poor, continued to support more than 70 percent of the labor

force in 2004. The growth rate of labor supply in agriculture was 2.7 percent a year.

Without physical assets, the poorest can only rely upon their own labor to get an income.

The development of rice-based farming systems can induce a growth of the rural

economy that results in an increasing demand for labor.

Normally, during peak periods of agricultural crop production (particularly during land

preparation, transplanting, and harvesting) labor shortages often occur. As production

expands, demand for labor increases. Currently, production volumes are limited by

market demand and constraints in technology and access to water during the dry season.

This limited production in turn implies limited and mostly seasonal demand for labor.

When demand for labor increases, this is sometimes accompanied by higher wages.

While in most cases observed in the field agricultural wages range between R 3,000 and

R 5,000 per day, in intensive systems or in higher value production systems like those

related by the agricultural cooperative in Battambang described in Box 4, vegetable

production, and in irrigated systems (like those in Chu Pring commune in Svay Rieng),

agricultural wages range between R 5,000 and R 7,000 and can reach levels of R 14,000

per day.

Labor creation by processing activities and trading activities normally provides lower

wages (around R 4,000 per day), but the labor requirements are for longer periods than

the short terms associated with specific agricultural activities. Activities such as handling,

loading and unloading, grading and sorting are often seasonal activities. However, as the

volume of trade and processing increase, the total labor requirement also increases and

provides employment opportunities to the poorest. An unskilled laborer working 300

days per year at a wage of R 4,000/day could get an income comparable to a low-

productivity farmer with 1 ha of land.

As the demand for labor increases and wage rise, the adoption of mechanization becomes

more widespread. Whether mechanization is labor displacing or not is a complex issue.

While on one hand mechanization reduces the cost of labor, on the other hand there are

effects on demand for skilled labor (for example tractor operators) which is usually paid

higher wages. The higher income associated with mechanization results in more spending

in the rural economy, more demand for services (construction, food, industry, trade), and



higher employment opportunities for rural households. Without a full assessment of the

rural economy-wide effects is difficult to determine the impact on overall employment. At

the macro level however, the multiplier effects from agricultural growth to overall growth

of the rural economy are quite high and agricultural growth is generally considered the

most effective way to reduce poverty in rural areas.

Productivity Increase for Smallholders

The majority of the poor in rice-based farming systems of Cambodia are to be found

among the smallholder farmers who typically own less than 2 ha of rice land. For these

households, increase in productivity at the farm level is perhaps the single most

important determinant of poverty reduction.

Through increases in yield and crop intensity, diversification into higher value

agricultural activities (vegetables, aquaculture, livestock, special rice), and integrated

farming, income could increase well above the self-consumption level. The examples

from the fieldwork of the Consultant‟s Team illustrate the experience of previously poor

farmers who have achieved a status of middle income:

• Integrated Farming

• Intensified Agriculture

• Aquaculture

• Glutinous Rice

• Vegetable Farming

• Enterprise Development

Small and medium enterprises in agroprocessing or trade require more specialized

activities and skills. Section 6 has discussed the various factors of entrepreneurship. Even

though a program cannot “create” entrepreneurs, it could certainly facilitate the

emergence of “latent” entrepreneurs and promote the existing ones through various

interventions including capacity strengthening, training, facilitation of supply chain

linkages, provision of information, and networking.

Some of the poor could become entrepreneurs in their own right, rather than been only

providing labor to the agroenterprises. Micro-enterprises directly related to value chain

in rice-based farming systems include retailing of food products, management of food

outlets, transportation services, assembling of raw materials, handicrafts, food

processing.



b. Poverty Reduction

In poverty reduction effort agriculture remains a priority sector for the Royal

Government of Cambodia (RGC), which involves, to some extent, many national

agencies, including Ministry of agriculture, forestry and fisheries (MAFF), Ministry of

water resources and Meteorology, (MOWRAM), Ministry of Rural Development (MRD),

and Ministry of Land Management and Urban Planning and Construction (MLMUPC). In

promoting agricultural development for poverty reduction the RGC faces challenges as

to:

1. How can agricultural productivities be improved at the famers' household level

that would contribute to better food security and living standard of the rural

families.

2. How can natural resources be managed in a sustainable manner when demand

increases.

3. What linkages can be established to deal with agricultural commodities

4. What supports are needed to achieve the three afore-mentioned challenges.

The agriculture sector's goal of the RGC in to NPRS is to maximize food self-sufficiency of

the rural households through improving performance of agriculture and increasing

agricultural productivity, and to ensure sustainable natural resources management and

conservation leading to increased food security and income generation. In order to this

goal and contribute to poverty reduction of the rural households, the strategic objective

for agriculture sector are to:

1. Ensure an adequate legal framework and institutional environment

2. Strengthen capacity and improve knowledge system within the

Government, stakeholders, and especially small-scale famers

3. promote intensification, diversification and security of agricultural

production

4. promote sustainable natural resources management and conservation

5. Promote agricultural product processing and investment in agro-industries

and strengthen agricultural marketing system and market access.

Given the priority to poverty alleviation, food security, environmentally friendly

sustainable growth, and integration in global competiveness the principle of equitable

agricultural development would centre on the following components:

1. Maintenance of an appropriate macro-economic and policy framework, and

a favourable legal, and institutional arrangement

2. Accelerated and sustainable irrigation development



3. Accelerated program for titling and distribution of idle agricultural land

which is under MAFF

4. Development of an export market for rice and other agricultural products,

and processing and product quality control facilities

5. Strengthening essential agricultural support services and functions

including extension, research and development, marketing, credit and

distribution

6. Expansion of livestock production with emphasis on animal health services,

nutrition and management and rang management and establishment of

meat processing plants

7. Improved management and introduction of appropriate technologies for

rice fish farming and aquaculture

8. Promotion of community-based forestry and fisheries management

9. Strengthening the capacities at all of MAFF, MOWRAM, MRD and

MLMUPC.

The RGC will implement pro-poor strategies for the development of the agricultural

sector adopting Special Program for Food Security as a vehicle toward poverty reduction.

The strategies will target those areas with higher incidence of poverty and food

insecurity. The available maps should be used for this purpose. To address the afore-

mentioned strategic objectives following actions will be undertaken:

1. Capacity Building: MAFF will seek to improve knowledge and skills of all

stakeholders.

2. Agricultural Research and Extension: The RGC will ensure that research centers

and extension systems be oriented towards small-scale famers.

3. Access to quality Input: MAFF has put emphasis on researches to produce

quality seeds and on seeds quality control

4. Reduced Dependency on Natural Condition: Largely Cambodia's agriculture

still weather dependent.

5. Strengthening Water Control and management Systems: Agricultural

production has so far depended on rainfall pattern because of lack of irrigation

system.

6. Support for intensification and diversification: Rice production alone will not

realize the objective of poverty reduction.

7. Livestock Development: livestock is another important sub-sector that provides

protein intake and cash income for rural households.

8. Aquaculture Development: Fish supplies from nature are not enough to meet

demands or the people due to population increase.



9. Sustainable Nature Resources Management and Conservation has become an

integral part of RGC's strategy for sustainable economic growth and

development.

10. Fisheries Resource Management and livelihood improvement: fish is diet of

Cambodians, second only to rice in assuring food security.

11. Community Fisheries: The failure of methods based only on legal procedures to

preserve natural resources has led to increased conflicts between subsistence

and small-scale family fishing them.

12. Improved Forestry Management and use: The forestry sector contributes

around 5 percent to GDP, with potential, for expansion.

c. Increase export

In 2009 rice export to overseas by private company is going up ten-time compare to

2008, according to the report by MAFF. In 2008 the Rice Mill Association is going to

export rice up to 2 tons to Germany, Malaysia, Brunei, and Saudi Arabia. The last

harvesting season the Rice Mill Association was harvested 30, 000 tons of rice. This year

we are exported 3.7 million ton of rice, and rich is the unlimited source due to 80 percent

of Cambodian are farmers.

Rice

Currently the world‟s 15th biggest rice producer, Cambodia is targeting annual rice

exports of 1 million tonnes within five years. The country plans to raise rice production to

9 million tonnes of paddy by 2015, up from the current 7 million tonnes.

To achieve this target, Cambodia needs more foreign investment in order to construct

rice mills. At present, most of the Kingdom‟s rice is sent to Vietnam to be milled and re-

exported.

The Royal Government has introduced a number of measures aimed at boosting the

country‟s rice-export capacity. It is urging local banks to provide money for rice-related

business and has pledged to guarantee 50 percent of commercial bank lending to

producers. Capital at the Rural Development Bank has been doubled to $36 million, and

licence requirements for exporters are being scrapped.

Other government plans include strategies to build irrigation systems, provide technical

services, land reform, financing, marketing, developing farming communities and

improving institutions.

According to the Ministry of Commerce, 4,369 tonnes of milled rice was exported from

January to June 2009. But in the first half of 2010, the ministry says 107,291 tonnes of



milled rice was exported – an increase of 2,356 percent. This represents a value of

$13.438 million, up from $2.193 million in 2009.

Prior to the Pol Pot era, Cambodia produced 500,000 imperial tons of rice in excess of

domestic demand. Total paddy production was 2.38 million tons, which represented 1.1

percent of world paddy production. But as a result of the civil war, Cambodia was left

unable to produce enough rice to even feed its own people. Not until 1995 did the country

achieve self-sufficiency once again.

Cotton

From its $2 million cotton plant in Battambang province, Seladamex Co. Ltd exported its

first 100 tonnes of unprocessed cotton and 360 tonnes of cotton seed in May 2010.

The company shipped 50 tonnes of unprocessed cotton to Vietnam, 40 tonnes to China

and 10 tonnes to Japan, while all of the seed went to Vietnam. The raw cotton sold for

$2,200 per tonne, and the seed $250.

Seladamex expects to export another 200 tonnes of raw cotton and 400 tonnes of seed to

these countries throughout 2010. The cotton plant is capable of processing 15 tonnes a

day with an overall plant capacity of around 5,475 tonnes per year.

Pepper

In 2009 half of the year‟s total Kampot pepper output of 14 tonnes remained unsold by

year end. But since gaining Geographical Indicator (GI) status early in 2010, stocks sold

out within months of being officially registered.

According to World Trade Organisation guidelines, GI strictly regulates every aspect of a

product‟s properties to assure both its high quality and regional distinctiveness.

Prior to receiving GI status, Kampot pepper sold for around $3 per kilo, but this has now

risen to $5.75 per kilo.

Around 17 tonnes of pepper was produced in the 2010 season on 9.75 hectares of

farmland in Kampot province. Only 10 tonnes met the GI quality standard, of which

around 6 tonnes were exported abroad.

In the 1930s almost all of the pepper consumed in France came from Indochina. Kampot

pepper in particular was of exceptional quality and rapidly became „the spice of choice for

French restaurants‟.

Sugar

In June 2010 Cambodia sent 10,000 tonnes of raw sugar to the United Kingdom ― the



Kingdom‟s first shipment of sugar to an overseas market in over 40 years.

It was exported by Koh Kong Sugar Industry whose plant opened for operation in

January 2010. The company says it expects to harvest between 200,000 and 250,000

tonnes of sugarcane in 2010 and plans to increase its export volume to between 20,000

tonnes and 25,000 tonnes of raw sugar to Europe‟s markets in 2011.

d. Increase income

Agriculture in Cambodia remains relatively inefficient; hence there is considerable

potential for rapid growth in productivity and incomes from effective, well-coordinated

investments. Growth in the agricultural sector will bring considerable benefits to the

large proportion of the poor who are dependent on it, improving food security and

incomes, and reducing the rate of rural-urban migration.

Private sector growth can also be expected to be a driver for governance reform, given the

importance of a transparent rules-based environment for investment.

Australia‟s contribution to increasing the productivity and incomes of the rural poor will

build on our successes in the agriculture sector over the last 15 years. Australia will

continue to assist Cambodia‟s shift from a narrow focus on rice for food security towards

a broader emphasis on development of rice and other products for trade.

The program will support greater agricultural productivity, diversification, and value

adding. In particular, assistance will promote availability of effective extension and

research services and good quality agricultural inputs, making appropriate use of

government institutions and the private sector.

To enhance impact, Australia will develop effective models for agricultural assistance that

can be replicated by other donors. For example, with the CAAEP-II project Australia is

already playing a leading role in efforts to develop standard approaches to supporting

extension services.

Close coordination with key donors will be an important element of the strategy.

Integrated approaches will be explored, including assistance to address all of the barriers

to growth of particular agricultural industries at each stage of the production and

marketing process. NGO-led integrated rural development approaches will target specific

poor districts. AusAID‟s approaches will need to take account of the important role of

women in agriculture and seek to ensure that programs are sensitive to gender issues.

Land access issues will be taken into account in program development, and progressed

through policy dialogue and monitoring/coordination of other donor efforts to promote



effective implementation of the land law. Improving the efficient, equitable and

sustainable use of water resources will be another important objective. Water policy

considerations will be integrated into agricultural research and extension work and

progressed on a regional basis through Australia‟s support for the Mekong River

Commission. Australia will also promote improved irrigation policies through

strengthened government-donor coordination.

Consideration will be given to how Australia can address other constraints to growth and

investment in the agriculture sector, including in areas such as barriers to trade and

foreign investment. Such issues will also be taken up in our policy dialogue with the

Royal Government of Cambodia.

The new Governance Facility will be used as a mechanism to provide flexible technical

assistance in these areas. Support related to accession to the WTO will also be provided

through regional programs. Options for supporting Cambodia‟s decentralized rural

development program (Seila) will be considered, where there are expected to be direct

benefits for rural productivity.

C. Analyze by using SWOT analysis

a. Strengths and Opportunity

Agricultural development policy of the Royal Government of Cambodia (RGC) is

strongly focused on the enhancement of agriculture sector to be as the leading

sector among the main sectors for the growth of the national economy. The

agriculture will be contributing to the reduction of the poverty for the Cambodian

people.

The RGC encourages the participation of private sector in the agriculture

development by providing the land titles, properly distributing the agricultural

land through the social land concession framework.

The RGC promotes the construction and management of irrigation system for

agricultural production and also effectively manage the existing irrigation system.

The RGC takes strongly in consideration in the responsiveness measures for the

natural calamity.

The Ministry of Agriculture, Forestry and Fisheries (MAFF) enhances the

productivity through the attempts made for further provision of supporting

services such as: research and extension service, marketing development,

distribution of seeds as well as other agricultural inputs.

MAFF and concerned institutions, local authorities, national & international

communities and all people, especially farmers fully support the development of

agriculture.



Laws and the regulations had been properly improved and newly formulated to

fulfill and facilitate the implementation in effective manner.

The management of the whole economic development as well as the management

of the agricultural sector has been reformed to be in consistent with the movement

in economic integration and competition in the region as well as in the world.

The physical infrastructures to support the development activities of the Ministry

are improved in better condition.

The human resources have been also enhanced the capacity with better working

condition that these resulted in the effective works.

The natural resource management, forestry, fisheries, wildlife, land resource has

been improved for the sustainability by using the existing laws and regulations,

techniques as well as adequate human resources. The success of the mentioned

management is due to the strong commitments from the Government, full

supports from the concern institutions, local authorities and international

communities.

b. Constraints and Weakness

Relying on natural factors which are irregularly changed and limited capacity in

agricultural irrigation resulted in the imbalance growth of agricultural production

from year to year.

Limited investment capital resulted the country relies on foreign assistance for

development.

Poor Irrigation system

Unskill farmer

Natural disaster

Farmer understanding is limited in the use of fertilizer. It is observed that most of

agricultural inputs supplied are no registration and no instruction for use in

Khmer language recognized by MAFF.

Limited capacity for laboratory to analyze the quality of agri-industry production,

agri-food and there is no training center for agri-food processing.

D. Explore the Government Strategies to Make the Agricultural

Sector Increase

a. Generate Income and Employment through Increasing the

Agriculture Productivity

The government sets up and implements some strategies under Agricultural Sector

Development Program (ASDP) to improve farmers‟ ability to raise productivity and



diversify toward high-value products by providing farmers with better access to

productive resources such as land and water, improved seeds, and high-quality inputs.

Improved Access to Land

Land and water are the two fundamental natural resources, which are the basis for

economic development and poverty reduction, especially in the rural areas where people

rely on them for agriculture. Due to Khmer Rouge, collective system of agriculture and

protracted civil war combined with land grabbing, and disputes access to land for

particularly most poor Cambodians become a major issue. Up to 15 percent of farm

household do not have agricultural land. Many of which are headed by women. As such

secure access to land for the poor in Cambodia‟s countryside will greatly contribute to

reducing poverty and ensuring economic growth with equity. To deal with issues of land

use and management, the Ministry of Land Management, Urban Planning and

Construction (MLMUPC) was created.

Providing Better Access to Productive Land

The revised Land Law was formulated with assistance from ADB, and passed in August

2001. But the Government required a wide range of support to implement the revised law

so that the Cambodian people could benefit from access to available land and secure

individual land rights. Through ASDP, the Government hoped to facilitate the

implementation of the revised Land Law by transferring state land to the landless poor

for social purposes and giving farmers secure right to their land, thereby increasing their

incentives and ability to raise productivity through better farming and land management.

To achieve this objective, the Government undertook to formulate, through an

interministerial working group under the Council for Land Policy, a sub-decree reducing

economic land concessions.

In March 2003, the Government issued a sub-decree stating the procedures for the

distribution of unused state land to eligible poor households for productive purposes. The

Government also agreed to establish a mechanism for implementing this sub-decree and

to provide the beneficiaries with adequate agricultural extension services to support their

productive and income-generating activities. On 12 December 2006 Ministry of

Agriculture, Forestry and Fishery (MAFF) and the Ministry of Land Management,

Urban Planning, and Construction (MLMUPC) was also prepared for interministerial

collaboration to implement the measures provided in the manual, and signed by MAFF

on 26 December 2006.

To complement the social land concessions, the Government on 27 December 2005

approved a sub-decree reducing unused or excessive economic land concessions

according to the Land Law of 2001. In collaboration with MLMUPC, MAFF set up a



technical unit to draft the necessary circulars and decisions implementing the

sub0decree. On 27 November 2006, the Government approval a sub-decree specifying

the responsibility and procedures for state land management.

Improving the Legal and Policy Framework for Better Access to

Irrigation Water

The Government had submitted a draft Water Law to the National Assembly for

approval, and drafted a National Water Policy in line with the draft Water Law. This legal

and administrative framework, once in place, would improve water resource planning

and management. In parallel, the Government looked forward to promoting the

formulation of FWUCs in priority irrigation schemes during the ASDP period. It was

agreed that the Ministry of Water Resources and Meteorology (MOWRAM) would form

FWUCs in 11 pilot irrigation schemes included in the MAFF work program. The

Government finally passed the Water Law in June 2007 and id preparing a sub-decree to

formalize the creation of the FWUCs. With this legislative framework in place,

MOWRAM plans to further expand the irrigated areas under FWUC management

through ongoing and future development projects with external assistance.

Establishing the Legal and Institutional Framework for Better

Access to Improved Seeds

Despite growth in production of higher-value crops, farmers still had limited access to

better seeds. An appropriate legal and institutional framework for the seed sector was

needed to increase the delivery of certified-quality seeds to farmers. The Law on

Managing Seed and Hybrid Plant Authorization was submitted to the National Assembly

in February 2008, during the ASDP period, and approved on 8 April 2008.

Improving the Regulatory System to Ensure the Quality of

Agrochemicals Traded in the Market

Together with improvements in the availability of seeds, the Government also wanted to

improve the regulatory system to ensure the quality of agrochemicals traded in the

market by training provincial staff and private traders, and strengthening the quality

inspection system in the country. In October 1998, the Government issued sub-decree

No. 69 on Standards Management of Agricultural Materials, the first legal instrument in

Cambodia that specifically mentioned agrochemicals and provided the regulatory

framework for sale and use of agricultural and agrochemical materials. Then it issued

implementing guidelines specifying administrative procedures for the registration, sale,

import, labeling, packaging, storage, disposal, etc.. Of such materials. To strengthen the

inspection and control of agrochemical, MAFF‟s Bureau of Agricultural Materials did a

study on the agrochemical inspection system, which was approved by MAFF on 20



December 2006. On the basic of this study, the bureau drafted a government circular

establishing and implementing specific measures to improve coordination between key

government agencies in monitoring and control of agricultural materials, and

strengthening the inspection system for those materials; The circular was approved on 15

January 2007. The bureau also developed a database of agrochemicals traded in

Cambodia, with fields for the trade name, active product name, manufacturing company,

country origin, provinces and districts where inspectors have found the materials for sale,

etc. To raise awareness nationwide, the bureau produced the first set of media packages

in December 2006.

b. To contribute to sustainable industrial development by

providing locally produced agro-based raw materials.

The main objective‟s Government was to improve the market environment for private,

agro-based enterprise growth and thereby promote private investment in agriculture. The

Government had begun divesting state-owned enterprise in agriculture under ASP by

making the enterprises financially autonomous, and wished to continue this process. It

was committed to divestment to promote the development of market-based agriculture

and the participation of the private sector in the agricultural input and output markets.

Completing the Divestment of the State-Owned Rubber Estates

(SOREs)

Over the last decade, the Government has sought to modernize Cambodia‟s rubber

industry, which is dominated by the SOREs, to improve the market environment for

private, agro-based enterprise growth and to promote private investment in agriculture.

The SOREs were converted into autonomous public enterprise in March 1999. In parallel,

the government has been promoting smallholder rubber plantation with financing from

the Government of France. But the rubber sector in Cambodia has significantly

underperformed despite these actions and sector‟s high potential for contributing to the

national economy. Although a rapid increase in the price of natural rubber (by about 22%

from 2005 to 2006) has recently pushed up revenue from the sale rubber, industry

productivity needs to be improved through structural reform and market improvements.

The SOREs‟ inefficient management and weak marketing have conspired to prevent

international recognition and keep the prices of Cambodian rubber products low. The

Government wishes to complete the divestment to benefit the entire rubber sector,

including stallholders, and to increase the sector‟s overall value added.

As a first step, the Government wished to remove the regulatory constraints on the

marketing of unprocessed and processed rubber products. In tandem with its effort to

divest to SOREs, the Government began assessing the rules and regulations for the



marketing of rubber products. In June 2005, MAFF announced its new rubber marketing

policy giving rubber smallholders better access to private collection site for their

unprocessed latex rubber. A rubber certification project financed by the Government of

France also helped improve the marketing of Cambodian rubber. Reports prepared by

MAFF‟s working liberalization, identifying the regulatory constraints were not binding

constraints on rubber marketing in Cambodia.

A key condition of ASDP was the divestment of the seven SOREs. Despite initial delays in

the valuation of the estates and acceptance of the auditors‟ reports, the divestment

started in earnest in May 2007 when the three estates (Chamkar Andong, Boeung ket,

and Memot). All seven were offered for sale through international bidding managed by

NDC, and sold to domestic investors between 28 September 2007 and 12 February 2009.

The Government considered various options for the divestment of the estates, such as

joint ventures, but eventually sold all the estate (Chamkar Andong), and government

elections in mid-2008 led deferral of key decisions of the final three estates until the new

government took office.

As part of divestment, the Government has paid compensation to laid-off workers of the

SOREs from the proceeds of the sales, and has prepared resettlement plans to provide

compensation to affected persons according to the resettlement framework agreed on

under the ASDP. An external monitor has been appointing has been appointed to

monitor the progress of the divestment, and to report regularly on the resettlement to

NDC and ADB.

Keeping the State Out of the Agricultural Input and Output Markets

Although the Government had begun divesting the state-owned enterprises in agriculture

by making them financially autonomous, two enterprises-AIC and KAMFIMEX- could

not adapt to the market conditions, generating uncertainty in the agricultural input and

output markets, and requiring the use of scarce public resources for redundant activities.

In this context, the government decided to complete the divestment of these enterprises.

Despite delays, KAMFIMEX was liquidated through a sub-decree that was issued on 25

July 2007 and took effect on 1 August 2007. The Government first sought a joint-venture

operation for AIC but, for lack of any response, the Government issued on 29 June 2007

a sub-decree liquidating AIC effective 2 January 2008. Some workers were reabsorbed

into MAFF, and those laid off were paid compensation. All assets have been disposed of

according to government procedures.



c. Strengthening Institutional Capacity for Competitive

Agricultural Commercialization

The Government strengthens the capacity of public institutions for competitive

agricultural commercialization. The Government define five activities in this regard such

as : (i) rationalizing the roles and responsibilities of MAFF departments; (ii) formulating

an operating strategy for gender mainstreaming in agriculture; (iii) improving MAFF‟s

agricultural market information service; (iv) ensuring proper coordination of national

agricultural research activities; and (v) improving the quality and coverage of the

agricultural extension services of the Government.

Rationalizing the Roles and Responsibilities of MAFF Departments

The Government saw the need to strengthen the department functions of MAFF by

rationalizing the roles and responsibilities and the organizational setup of the

departments, particularly in agricultural policy planning, monitoring, and marketing

information services. The Government agreed to implement a new sub-decree for this

purpose, and to have MAFF institute a programming and budget planning mechanism

for the use of the MTEF for the sector.

With the help of TA 4228-CAM (footnote 5), the MAFF working group on organizational

restructuring finalized in January 2007 its report on the strengthening of MAFF‟s

planning functions. Two options were proposed: (i) creating a new general directorate of

administration with planning functions, or (ii) setting up a permanent planning and

budget formulation until in the existing general directorate. The Government decided to

go with option (ii), and MAFF issued a ministerial declaration (prakas) on 8 January

2008 creating the new planning and budget formulation until in the general directorate

of administration, even as it considered further restructuring. In June 2007, MAFF was

further restructured and streamlined in November 2008, with the creation of a

department of administration, planning, finance, and international cooperation, and

within the general directorates of forestry and rubber, and fisheries administration.

In 2000, the Government decided to introduce the MTEF approach to fiscal planning and

management, but progress was slow. MAFF was one of ministries four ministries that

piloted the adoption of the MTEF, to increase the effectiveness of public expenditure in

the pursuit of development objectives in agriculture. MAFF‟s working group on program

budgeting, with support from TA 4428-CAM, prepared manuals on (i) accounting and

financial management; (ii) monitoring and evaluation; and (iii) training in accounting,

finance, planning, and monitoring and evaluation. The final TA report was submitted on

30 September 2006. For a sustainable program budgeting system, MAFF needs future

support in (i) strengthening planning and budgeting capacity, particularly in the

provinces: (ii) streamlining accounting and finance procedures; and (iii) implementing a



computerized accounting system. ADB approved in November 2008 grants for the rollout

of the MTEF program in MAFF, MOWRAM, and the Ministry of Rural Development, and

assistance to the Government in the aforementioned areas.

Formulating an Operating Strategy for Gender Mainstreaming in

Agriculture

The Government recognized that gender issues had to be incorporated into the

agricultural support services more effective. But here, too, progress was slow, and efforts

were made project by project and not well coordinated. MAFF, which had started

promoting gender mainstreaming in collaboration with the Ministry of Women‟s and

Veterans „Affairs, sought support to establish a sector-wide gender policy and strategy

with specific action plans. To address this issue, MAFF drafted a policy and strategy

document, which was approved on 28 March 2006. Implementation took place with

funding support from ADB and was completed on 31 March 2007.

Improving the MAFF’s Agricultural Market Information Services

MAFF wanted to strengthen the capacity of its agricultural marketing office in market

analysis, surveys, and data and information management. To do this, MAFF agreed to

implement an effective strategy for its agricultural market information services. MAFF‟s

working group on agricultural market information services drafted a strategy for

improving the system through consistent and uniform data collection, management, and

dissemination, and staff capacity strengthening. The strategy document was approved by

MAFF on 26 September 2006, and is being implemented partly with support from the

Government of Canada. This condition for the release of the second tranche has thus

been met.

Ensuring Proper Coordination of National Agricultural Research

Activities

The Government also hoped to strengthen the coordination of national agricultural

research, with the help of a master plan to be drafted and initially implemented during

the ASDP period. The national agricultural research strategy drafted in October 1998

with assistance from the Government of Australia is now being implemented. The

Cambodia Agricultural Research and Development Institute (CARDI) has been

established, and appropriate operating procedures have been introduced to improve the

local service delivery. It was agreed that MAFF would approve and start implementing a

master plan for agricultural research satisfactory to ADB. The master plan that was first

drafted under ADB was further developed approved by MAFF on 22 May 2006. CARDI

and other agencies are implementing many research projects in the priority areas

identified in the master plan. In particular, the Australia Centre for International



Agricultural Research (ACIAR) has implemented 80 Cambodian Agricultural Research

Fund (CARF) projects since 2002. A workshop hosted by ACIAR and AusAID in Phnom

Penh on 5-6 February 2008 gave an overview of agricultural research programs now

being undertaken by CARDI and MAFF‟s department of agronomy and agricultural land

improvement and proposed new research in priority areas identified in the master plan.

Improving the Quality and Coverage of the Agricultural Extension

Services of the Government

Given the limited coverage of extension services offered by private and civil society

organizations, MAFF has made substantial efforts over the years to strengthen and

expand public agricultural extension services, necessitating higher budgetary allocations

in the MTEF. It agreed to institutionalize agricultural technology broadcasting programs

to disseminate the information cost-effectively by improving the weekly information

services, which started in 1997, MAFF‟s working group at the agricultural extension

education office proposed an improved framework for the preparation of broadcasting

programs through institutional changes and revisions in extension materials. The

proposals of working group have subsequently been implemented by MAFF‟s agricultural

extension education office. The report of the working group was approved by MAFF on

22 February 2007, and official copies were disseminated on 11 April 2007.

IV. Conclusion

Cambodia is the developing country, so the economic growth is very slow. The economic

growth of Cambodian people is mainly depending on agriculture, agriculture is the

primary occupation of people live the rural area it include Rice, Fisheries, Forestry, and

Rubber. Livestock also one of the most important source of income generated for people

in the rural area: swine and poultry. Through the finding another source of economic

growth which help Cambodia to get rid of the poverty trip are tourism and construction.

Although Cambodia is depending on Agriculture but the agriculture infrastructure is not

yet improve at all, we have poor irrigation system and knowledge of Cambodian farmers

are limit, land, tool, and fertilizer are still the problem. Another problem is the natural

disaster like foods and insect.

Case Study

Mr Khut Khoeun

Mr Khut Khoeun lives with his wife Sam Thoun, their four daughters, two sons and two

granddaughters in Krosachet Village, Romchek Commune, Prey Veng Province. Twenty

years ago, they moved from the house of Khouen‟s parents and began to establish their

own farm. Khoeun, who is an experienced carpenter, built the family home, which they



still live in today. For many years the family grew only rice on their farm and they

struggled to get enough food to eat each year. Khoeun worked as a carpenter and chef to

earn extra money for the family. On the farm they had no water source for irrigation and

had to walk to the neighbour‟s well to get their drinking water. Over the years the number

of family members grew but the size of the farm stayed the same and Khoeun knew that

they had to improve their farming system if they were going to be able to feed everyone,

pay for education and healthcare and improve the family assets.

In 2001, a non-government organization that was working in Prey Veng Province helped

the family to drill a pump well near their house. The family had saved up enough money

to buy a second hand pump and this new water source enabled them to start growing

some vegetables and fruit trees on their Chamcar land during the dry season. In 2002,

started to work in Romchek Commune and began to train farmers on new crop and

livestock production techniques, compost making and the benefits of ecological

agriculture. This inspired Khoeun to try some of these techniques on his farm and he

hasn‟t stopped experimenting and improving his farming system. Khoeun and his family

have reshaped their farm into a series of canals, ponds, rice fields and banks for growing

a great diversity of fruit, vegetables and herbs. They also raise cattle, ducks and fish on

their farm, mostly for subsistence purposes. All of the rice produced on their 2.1 hectares

of rice land is needed to feed the 10 members of their family so they concentrate their

income generation activities on their 0.35 hectares of Chamcar land by growing a

locally adapted herb, called eryngo (Eryngium foetidum) and a number of other crops

such as cassava (Manihot esculenta), gourds (Cucurbita sp.), chilli (Capsicum annum)

and lemongrass (Cymbopogon citratus), which they sell in the Neak Leung market. In

2004, Khoeun attended the International Farmer‟s Dialogue in Chiang Mai, Thailand,

where farmers from around the world met to share their experiences on ecological

farming. At this event Khoeun learnt many new techniques such as mulching, making

liquid fertilisers and biological extracts (BE) and improved pig feed from banana trunks,

salt and palm sugar.

He has since applied these techniques on his farm and trained many other farmers in his

village, commune and even from other provinces. Through a combination of hard work,

experimentation and good design, Khoeun and his family have managed to improve their

food security and standard of living without needing to buy more land. They use no

pesticides on their farm and by learning and applying various organic soil improvement

techniques they have managed to eliminate the use of chemical fertilisers. Khoeun wants

Cambodian farmers to work together to escape poverty and he continues to share his

farming experience widely.



V. Recommendation

Government and stakeholders should improve farmer knowledge relate to

skills, using fertilizer

Government should provide more and improve irrigation system.

Government and key stakeholder should find market accessibility for

farmer and eradication monopoly market

VI. References

Economic Institute of Cambodia, Cambodia Agriculture Development Report (2006)

International Food Policy Research Institute (IFPRI), Rice Production Responses in

Cambodia

Agrifood Consulting International, Cambodia Agriculture Sector, Diagnostic Report

(2006)



Partnership for Development in Kampuchea (2005), A Case Study of sustainable

Agriculture Farmers in Cambodia

http://www.investincambodia.com/agriculture.htm

Ministry of Agriculture, Forestry and Fishery (MAFF), www.maff.gov.kh/en/policy-a-

planning/39-strategies/58-asdp2010.html

National Institute of Statistics (NIS), www.nis.gov.kh/index.php/statistics

Cambodia‟s leading Independent Development Policy Research Institute (CDRI),

www.cdri.org.kh

Asia Development Bank (ADB): www.adb.org/cambodia

http://www.investincambodia.com/agriculture.htm

http://www.maff.gov.kh/en/policy-a-planning/39-strategies/58-asdp2010.html

http://www.maff.gov.kh/en/policy-a-planning/39-strategies/58-asdp2010.html

http://www.nis.gov.kh/index.php/statistics

http://www.cdri.org.kh/

http://www.adb.org/cambodia

How Agriculture Contributes in Economic Growth: A Case Study in Cambodia

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