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
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
THE VALUE CHAIN CONCEPT.
THE CONTEXT The Policy paper on the Promotion of Paddy production and Rice Export
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.
Rice - White Gold
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)
Rice Export and Production Target Rice 2009 2010 2011 2012 2013 2014 2015 Export target 0 50 100 200 400 800 1000 % End target 0% 5% 10% 20% 40% 80% 100% Export 15.5 51.2 67.1 - - - - Actual % Implement - 102% 67% - - - - Production 2009 2010 2011 2012 2013 2014 2015 Target 0 7300 7620 8090 8440 8850 9080 % target 0% 80% 84% 89% 93% 97% 100% Actual 7586 8249 8500* - - - - % Implement - 113% - - - - - *forecast by FAO
Target of Excess Paddy/Rice Paddy 2009 2010 2011 2012 2013 2014 2015 Export Target target 0 3320 50 3440 100 3800 200 4060 400 4370 800 1000 4510 % End target 0% 74% 5% 10% 76% 84% 20% 90% 40% 80% 97% 100% Export Actual 3507 15.5 3932 51.2 67.1- - - - - Actual % Implement - 118% - - - - % Implement - 102% 67% - - - - Rice 2009 2010 2011 2012 2013 2014 2015 Target 0 2060 2200 2430 2600 2800 2890 % End target 0% 71% 76% 84% 90% 97% 100% Actual 2245 2517 - - - - - % Implement - 122% - - - -
Milling Capacity Required for Export Rice 2009 2010 2011 2012 2013 2014 2015 Export target 0 50 100 200 400 800 1000 Paddy Required 0 78 156 312 625 1250 1562 Milling Capacity (tons/hour) Actual Capacity (tons/hour) 39 78 156 312 625 781 30 46 135 245 475 675 800 Number 5 8 11 24 55 80 105 -Large ( 20 t/h) 4 4 7 10 15 20 20 -Medium ( 5t/h) 1 4 4 14 40 60 85 Additional 3 3 13 31 25 25 -Large 0 3 3 5 5 0 -Medium 3 0 10 26 20 25
Financing Requirement Rice 2009 2010 2011 2012 2013 2014 2015 Rice Milling Financing - - - 52 80.2 74 30 -Large - - - 30 50 50 0 -Medium - - 0 12 31.2 24 30 Paddy Needed - 78 156 312 625 1250 1562 Working Capital - 19.5 39 78 156.3 312.5 390.5 -Large - - - -Medium - - - Total Finance - - - 150 236.5 386.5 410.5 Credit to Private Sector: US$3000 Million (less than 10%) Estimation by Dr. Naron: 350 million
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.
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
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
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).
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).
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
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
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.
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.
The United Nations Network of Experts for Paperless Trade BUSINESS PROCESS ANALYSIS FOR TRADE FACILITATION
12 9 3 6
Cost involved in exporting
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.
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;
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.)
Lessons Learned on the Rice Export Policy Efficiency Transparency and communication Bringing coherence and harmonization of partners activities
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.
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
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