Can Cambodia’s fragmented agriculture sector save the economy?
Ever since the pandemic razed the world, most sectors in the Kingdom were wrecked but there is hope in agriculture, only if the government takes stock of some system failures
REMINISCING the heydays of rice farming is a painful process for 60-yearold Chak En, a paddy farmer in Kampong Trach, Kampot, for most of her life.
“My family used to harvest 40 bags of rice from just 1ha. These days, we cannot even sustain that amount from 3ha,” said En, who despite the setback and her children’s plea to retire, stubbornly carries on in a bid to champion her birthright.
For the mother of eight and grandmother of eleven, farming is rooted in her ancestry, the same as millions of Cambodians whose families own farmlands, big or small, across the Kingdom.
“I cannot give up farming. It has fed my family throughout our lives. This is our lifeline,” she said.
Rice farming and agriculture, on a wider scope, has been the grounding force of Cambodia’s economy for many centuries.
So, when Prime Minister Hun Sen asked Cambodians to return to the humble sector to self-sustain and help the economy, it seemed like a viable solution for hundreds of thousands of workers in the garment, tourism and other service sectors who were made redundant or forced to take lower salaries.
But many went back dispirited, assuring themselves that it is only temporary until the pandemic tapers and industries re-open.
They did so because they know the industry is full of hardship as it is deeply entrenched with problems that stem from structural weaknesses.
They range from water management, lack of measures on climate change, high operating costs such as electricity tariffs, logistics and raw materials, loss of land to corporations, to dubious middlemen and market norms dictated by an oligopolistic market.
These are the very reasons which drove many out to seek alternative jobs that offered a higher and steadier income.
On average, Cambodian households own 0.5ha of paddy land for subsistence farming.
Overall, the sector is spread over four million hectares where three million of that is for rice planting, 170,000ha for multi-crop production and 30,000ha for vegetables.
Nearly three million people are employed in the sector which also acts as a barometer for poverty and economic vulnerability.
Some smallholders cultivate one crop per year on less than 5ha – usually rice for food security and export – based on the availability of water for agriculture.
To date, there is a surplus of about four million tonnes of milled rice a year for domestic consumption, said Council of Ministers spokesman Ek Tha last month.
Rice production grew to 7.9 million tonnes in 2019 from 7.4 million tonnes in 2018 with an average yield of 3.1 tonnes per hectare.
Similarly, exports from January to July 2020 rose 38.3 per cent to 426,073 tonnes, valued at $285 million, from 308,108 tonnes in the corresponding period in 2019 because of Covid-19 food security, lower rice tariff in the EU, and market diversification.
Rice exports are expected to climb to 800,000 tonnes this year, Cambodia Rice Federation (CRF) said.
As for total agricultural exports comprising 61 products to 59 countries, the figure inched up to $1.5 billion last year from $1 billion in 2013.
Buoyant as it may seem, the total agriculture share of the economy has unfortunately decreased over the years. Last year, it fell to 16.7 per cent of gross domestic product (GDP) from 28 per cent in 2009.
This year, the government thinks it will hit 32 per cent of GDP because of the expanded workforce by 40 per cent, underpinned by the loss of jobs due to the pandemic.
And with that, agricultural labour productivity (annual output per agricultural worker) could be on track to meet the target of $4,625 by 2030 from $1,839 in 2019.
All these are yet to be seen.
Overspending or underspending?
The issue remains that this economic pillar does not receive equal attention as the other three pillars (manufacturing, real estate and construction, and tourism), indicated by the paltry three to five per cent allocation from the annual national budget.
This is damning because the sector is susceptible to external factors, such as the imposition of a regressive rice tax by the EU and competitive pricing, which in the past has seen rice farmers dump their harvest out of fury when global prices collapsed.
According to the central bank’s Financial Stability Review 2019, extreme weather – floods and droughts – and the drop in prices of agriculture commodities, moderated its output growth to one per cent between 2014 and 2018 compared to 3.7 per cent (20092013).
Furthermore, the report said that because young people move to work in urban areas, it not only resulted in a labour shortage but also pushed up the average age of farmers to 39 (as of 2016), inevitably lowering productivity.
Compounding this are unclear policies, lack of expertise and bureaucracy, said Cambodian Farmer Federation Association of Agricultural Producers (CFAP) founder and managing director Sok Sotha.
The fact that there is little improvement despite gargantuan investments is another challenge raised by an official review on public investment in the sector.
The report, shared by Ministry of Agriculture, Forestry and Fisheries (MAFF) spokesman Srey Vutha with The Post, revealed puzzlement among policymakers, development partners and other stakeholders on the sector’s declining growth despite increased spending.
Dated April 2020, the review was jointly conducted by the Supreme National Economic Council’s Analytic Unit for Agriculture Sector and MAFF’s Agriculture Services Programme for Innovation, Resilience and Extension (Aspire).
It said public investment excluding wages climbed 1.5 folds, estimated in an aggregated term to be $272.6 million per year, between 2011 and 2017, where 35 per cent of that was funded by the national budget and 65 per cent by development partners in the form of loans and grants.
“[It is] approximately 1.6 per cent of gross domestic product [GDP] where MAFF and Ministry of Water Resources and
Meteorology (MWRM)’s public spending accounted for 0.43 per cent and 1.17 per cent of GDP, respectively,” it added.
Unable to decide if it was overspending or underspending that resulted in low improvement, the review found, inter alia, that the level of expenditure was not low compared to other Southeast Asian countries.
The spending focussed on large-scale irrigation schemes that were financed by several development partners’ concessional loans and grants.
“While the increased investment in irrigation over the last decade has been strategic and instrumental to the growth of a specific commodity, predominantly rice, it might not have been wellbalanced and sufficiently diverse,” the report said.
And because the efforts were not comprehensively harmonised and inter-connected, the report urged the government to re-prioritise and rationalise the irrigation schemes in relation to the expenditure on other economic compositions.
“[They include] research and development [R&D], extensions and other non-irrigation infrastructure which have yet to receive sufficient share of the total spending,” it said.
The thing about the report is not so much the novelty of its revelation as the weaknesses have been repeatedly highlighted in the past by various bodies such as the National Bank of Cambodia (NBC), Asian Development Bank, World Bank and UN agencies. Rather, it is whether any change will come of it.
Smuggling rice to Vietnam
For farmers like En, funds and policies mean nothing.
“I have never received any help from the government. We don’t even have an irrigation canal. We depend on the rain.
“The farmers in my village carry on with what we have. We buy seed from Vietnam and chemical fertilisers on loan from sellers who charge us interest. Each bag costs $30. We pay them back after the harvest,” said the widow.
At the end of the season, she barely breaks even after paying debts and rent for ploughing and harvesting machinery.
On top of that, farmers have to contend with low yields, market prices, and land degradation due to prolonged usage of chemical fertilisers.
They are ultimately compelled to sell the harvest regardless of the cost to middlemen who dictate the terms.
“What choice do we have? We can’t keep the paddy until prices increase. The stock won’t last because not everyone has storage facilities,” En said.
Due to this, many farmers located along the Thailand and Vietnam borders resort to selling their harvest via informal means to foreign millers who offer slightly better rates.
An MAFF report last year said some 1.6 million tonnes of rice was sold illicitly to Vietnam in the first eight months, which was substantially higher than the 342,000 tonnes of milled rice exported overseas