ENHANCING TRADE COMPETITIVENESS AND EXPORT DIVERSIFICATION: THE CAMBODIA RICE EXPORT STRATEGY
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1 ENHANCING TRADE COMPETITIVENESS AND EXPORT DIVERSIFICATION: THE CAMBODIA RICE EXPORT STRATEGY Geneva, 19 June 2011 Enhancing the Effectiveness and Development Impact of Aid for Trade A side event in occasion of the Third AfT Global Review By Dr. Sok Siphana Advisor to the Royal Government of Cambodia
2 Supreme National Economic Council A Policy Discussions Series: Operationalizing the Rectangular Strategy II Phnom Penh, 20 November 2009 BREAKING INTO THE WORLD MARKETS FOR CAMBODIAN AGRICULTUR E PRODUCTS BY MR. SOK SIPHANA, J.D. PH.D. ADVISOR TO THE ROYAL GOVERNMENT OF CAMBODIA
3 THE VALUE CHAIN CONCEPT.
4 THE CONTEXT The Policy paper on the Promotion of Paddy production and Rice Export
5 The concept Rice - White Gold Rice is by far the most important agricultural product of Cambodia and the sector employs around 2.9 million people. Rice is the major staple food and is cultivated by the large majority of small farmers. Paddy rice production have reached 8.2 million tons in 2010, after a remarkable rebound over the past decade. Domestic consumption of 3.14 million tons of paddy rice Surplus of 3.32 millions, which can be processed into milled rice for export.
6 Rice - White Gold
7 2009 Rice Exports USD 15,000 Metric Tons 2010 Rice Exports USD 51,000 Metric Tons 2011 Rice Exports (first 5 months) USD 67,000 Metric Tons Expected 175,000 tons (whole 2011)
8 Rice Export and Production Target Rice Export target % End target 0% 5% 10% 20% 40% 80% 100% Export Actual % Implement - 102% 67% Production Target % target 0% 80% 84% 89% 93% 97% 100% Actual * % Implement - 113% *forecast by FAO
9 Target of Excess Paddy/Rice Paddy Export Target target % End target 0% 74% 5% 10% 76% 84% 20% 90% 40% 80% 97% 100% Export Actual Actual % Implement - 118% % Implement - 102% 67% Rice Target % End target 0% 71% 76% 84% 90% 97% 100% Actual % Implement - 122%
10 Milling Capacity Required for Export Rice Export target Paddy Required Milling Capacity (tons/hour) Actual Capacity (tons/hour) Number Large ( 20 t/h) Medium ( 5t/h) Additional Large Medium
11 Financing Requirement Rice Rice Milling Financing Large Medium Paddy Needed Working Capital Large Medium Total Finance Credit to Private Sector: US$3000 Million (less than 10%) Estimation by Dr. Naron: 350 million
12 Market Demand not an Issue China: 400,000 tons (no specify) Bangladesh: 550,000 tons (20%) Russia: 200,000 tons (no specify) Philippine: 1,000,000 tons (20%) U.A.E: 420,000 tons (no specify) Europe: 500,000 (10% actual) Total potential demand : 2,5 Million Target: a Million= 32% of potential importer= 4% of world export.
13 Observations Overall positive effects of the Rice Export Policy: There has been some improvement in the export process after the launching of the new policy of paddy production and rice export.ossthe border), Clear efforts from the various government agencies along the institutional value chain to support the implementation of the rice export policy. The Port Authority of Sihanoukville has made substantial efforts to streamline their port operations procedures and COST reduction (30%) always
14 Observations High confidence building for the private sector: various actors are encouraged and motivated by the high political visibility generated by the launch of the policy and are mobilizing their resources to invest in the rice sector, in term of private infrastructure like modern rice millings, new grain silos and warehouses, and paddy dryers. ays
15 Lessons Learned on the Rice Export Policy Relevancy: The initiative was perceived as in line with the National Strategic Development Plan (NSDP-2006/2010) and the Rectangular Strategy. AfT needs clear and strong policy direction, i.e. Rice sector diversification into new markets The Rice export Policy has forcefully laid down the vision of agriculture development, through a three-pronged strategy productivity enhancement, diversification and agricultural commercialization (from subsistence to commercial agriculture).
16 Lessons Learned on the Rice Export Policy Political attention facilitates constructive AfT dialogue: The Rice Export Policy highlights the relevance of AfT in building or strengthening linkages and complementarities with other sectors: Agro-industries in rural areas. Foreign investors Market linkages for rice milling byproducts (i.e. rice bran for animal feed, husk for energy generation) Public private sector partnership (i.e. processing and packaging technology and investment, and the ability to secure independent accreditation for SPS and TBT requirements).
17 Lessons Learned on the Rice Export Policy The clear country ownership, led by the Supreme National Economic Council, has paved the way for additional AfT support
18 Lessons Learned on the Rice Export Policy Efficiency The early days - a habitually aid dependent path: In the past, the Government was criticized for its soft tendency to accept aid uncritically. tolerated technical cooperation. In the end, these lingering habits reflect a real limit on ownership, and a certain abdication of responsibility for Cambodia s development to non-cambodians. Initial superficial coordination and harmonization of donors activities
19 Lessons Learned on the Rice Export Policy Efficiency On the Government level: local and international media (TV and press) to promote the awareness and challenges MAFF took the initiative to work with the rice millers to identify 10 specific types of rice for promoting as Cambodian rice The Autonomous Port of Sihanoukville has unilaterally reduced by 30 percent their port charges for rice export Commissioned a small team to look into the establishment of a risk sharing facility of 25 million USD which is to matched by four local commercial banks for the same amount.
20 Lessons Learned on the Rice Export Policy Efficiency On the Development Partners side: UNDP has supported the mobilization of a big trade mission of Cambodian rice traders to tour Europe and secure new contracts; The IFC undertook to support the rice association to build network and promote Cambodian rice at the International Rice Conference; The AFD has commissioned an indepth value chain of the rice sector; ESCAP contributed in the conduct of a Business Process Analysis to streamline procedures for the rice and its outputs were used for building capacity of the rice millers and exporters; Major DPs programs lke USAID s HARVEST programme, AusAID s CAVAC has accelerated their programming missions and finetune their interventions to support the rice sector.
21 The United Nations Network of Experts for Paperless Trade BUSINESS PROCESS ANALYSIS FOR TRADE FACILITATION
22
23
24 Cost involved in exporting
25 ACTIONS AND SPECIFIC TRADE FACILITATION MEASURES Capacity building for exporting firms on export procedures Capacity building for exporting firms on market access conditions Capacity building for selected SNEC researchers on the methodology for the preparation of other product strategies.
26 Lessons Learned on the Rice Export Policy Efficiency On the Private Sector side: Numerous rice millers have gathered to organize into associations and federation around their own geographical areas (i.e. in the North East, in the South West, etc); Rice export consortiums were formed, with clear division of labor among the actors (financiers, export quality control, milling facilities, etc); A flurry of foreign direct investors from neigbouring Thailand, Malaysia and Vietnam have entered into joint ventures with local Cambodian companies to develop large tract of rice farming. Some delocalization of excess milling plant capacity has also taken place;
27 Lessons Learned on the Rice Export Policy Commercial banks have witnessed a surge of request for loans reanging from half a million to some 2 millions for rice facilities upgrade. This has given a big confidence boosting to the banking industry, which is now considering opening new facilities to serve the rice industry; Technical equipment sales and related service providers (i.e. milling equipments, drying, silos for storage, color rice spotting machines, etc) from major brand names have made their appearance in the local market; A major national fair was recently organized by the Federation of SMEs Associations (FASMEC) to promote the rice industry and preparation is under way to organize an International Rice Forum Conference, which will attract all the rice actors as well as development partners to share technical capacity building on the rice industry (export procedures, packaging, SPS, rule of origin, etc.)
28 Lessons Learned on the Rice Export Policy Efficiency Transparency and communication Bringing coherence and harmonization of partners activities
29 Lessons Learned on the Rice Export Policy Effectiveness Maximizing each respective donors and actors comparative advantages. Self-discipline in division of labor Scaling up in areas where they have a strong comparative advantage.
30 Lessons Learned on the Rice Export Policy Sustainability Irreversible point of no return Annual Strategic Review of the Rice Export Policy Additional Research and policy development
31 THANK YOU
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