Insiders upbeat as contract farming bill moves onward

THE Draft Law on Contract Farming is still under review by the Ministry of Justice, and senior officials at the Ministry of Agriculture, Forestry and Fisheries are hopeful that the bill will be adopted soon.

On February 24, 2011, the government had introduced Sub-Decree No 36 ANKr BK on Contract Farming, defining the implementation framework for contract-based agricultural production in the Kingdom.

The new law, whose drafting process was initiated by the agriculture ministry in early 2020, is designed to further develop and generally refine that framework, benefiting the farming community and making transactions between producers and buyers far simpler.

Kong Pheach, permanent deputy chairman of the bill’s drafting committee, told The Post on March 22 that this will be the first full-fledged contract farming law, which he said would specify policies meant to stabilise agricultural prices, attract investors, promote publicprivate partnerships and prop up local producers.

Pheach, who is also agriculture ministry’s director for Agro-Industry, underscored that the contract farming scene has become a significant force, noting that the central Contract Coordinating Committee typically handles issues in the domain, using existing legal channels.

The committee comprises members of “19 ministries and institutions”, including provincial-level governors, he pointed out.

“Of note, we’ve set up subcommittees that are chaired by the governor of each province and have the director of the provincial Department of Agriculture as a member. So, should any problem arise, the sub-committee will help solve it,” he said.

He acknowledged that contract coordination has historically been limited, lacking a comprehensive and unambiguous approach, with informal deals that are struck in private stirring up a variety of problems.

Cambodia Chamber of Commerce vice-president Lim Heng said the effective implementation of the contract farming law and other legal regimes would instil confidence in investors to work with a network of farmers through an “easy investment”, covering large expanses of farmland.

However, he said, the operation of contract farming and similar schemes remains lax and ineffective, undermining the sector’s ability to create economic growth.

“When we invest together, for example, we [the contractors] give them [farmers] seeds to fertilise, but once they’ve harvested them, they’ll sell to others and we can’t do a thing about it. And when commodity prices fall, there’s no solution. This has made investing in agriculture unreliable,” Heng said.

But the market has not been all gloom. Even without the new law, Amru Rice (Cambodia) Co Ltd has written a success story of contract farming with local growers.

Cambodia Rice Federation (CRF) president and Amru Rice CEO Song Saran highlights six factors that led his company’s contracts to success.

“First, mutual agreement between three parties: the government, my company and the farmers. Second, patience and honesty. Third, financing – be it from the ARDB [Agricultural and Rural Development Bank of Cambodia], MFIs [microfinance institutions], or private banks.

“Fourth, joint efforts to ensure appropriate prices of agricultural inputs. Fifth, overseas market connections, and sixth, supporting partners, such as volunteers from the media who study at agriculture-focused universities,” he said.

“These factors have ensured the smooth functioning of contract farming with farmers.”

Saran expects that once in force, the draft law will smooth the process and streamline the work involved.