Peace Building, 23th November 2011
Excellencies, Ladies and Gentlemen!
Today, I am very pleased to once again participate in this “16th Government Private Sector Forum” with
Excellencies, ladies and gentlemen, members of the Royal Government,
and representatives of private sector as well as national and
international guests. Today’s event is another new event to be held in
Peace Building, a meeting place of the Council of Ministers.
Though, as usual, the objective of this open meeting of
the Council of Ministers is to collectively review the progress and
reforms that have taken place since the 15th Government-Private Sector
Forum, examine the challenges brought up at the time and evaluate the
solutions in addressing them, and to assess the difficulties facing
investors in Cambodia, today’s forum only has one agenda, which is “review the implementation progress of the Policy on the Promotion of Paddy Production and Rice Export”.
In fact, we have established various working groups to review and
thoroughly take care of other sectors and have resolved many major
tasks, allowing the operations of many sectoral activities to go
smoothly and effectively. Apparently, we need to continue promoting the
vision and strategy in the promotion of paddy production and rice
export, which aims to make Cambodia become a paddy storage and “ rice or white gold”
exporting country in the international market. In general, for this
task I have instructed the Supreme National Economic Council to prepare
a draft policy document on the Promotion of Paddy Production and Rice
Export in the 15th Government-Private Sector Forum held on 27th April
2010. Indeed, what I brought up at the time is not by chance, the issue
is in parallel with the rising trend of the need of milled rice in the
global market that increases steadily from year to year, the favorable
conditions of natural endowments, and comparative advantage of
Cambodia in agriculture, in particular in paddy-milled rice production.
I think this task is a priority task that needs to be urgently
resolved in order to seize the opportunity to promote the living
standard of our farmers nationwide because this task will provide
quick-win results. In this spirit, we have determined to use 2015 as a
base year in order to promote the paddy production to more than 4
million tons including export of at least 1 million ton of milled rice
and make Cambodia’s milled rice internationally recognized.
Truly, this time is different from other times; we all need to be firmly committed to seizing this “Golden Opportunity” in
order to achieve the ambition of turning Cambodia to be a major milled
rice exporting country among other rice exporting countries. We can
achieve this ambition because we have right policy and collective
efforts of the Royal Government, private sector and relevant
development partners as well as the formers.
So far, we have seen that in our economy faced with the
negative impact of global economic and financial crises; and in that
context agriculture sector remained a pillar of economic growth of
Cambodia as at the time food prices much increased. I still remember
that at the beginning of 2008 while there was a global food crisis, the
price of milled rice skyrocketed, and I emphasized that this is a “Golden Opportunity” for Cambodia. Cambodia possesses “White Gold”,
which is the milled rice. This factor truly has promoted the growth of
agriculture sector and rural economic activities; and we expect that
most Cambodians who rely on agricultural for their living have received
the benefit from this growth, and their living standard has also
improved. In fact, in 2010 Cambodia has a total of 2.79 million
hectares of paddy plantation, in which 2.77 million hectares have
produced 8.25 million tons of paddy yield, an increase of 8.75% compare
with 2009. This is due to the increase in plantation area, with wet
season rice area increased by 56 thousands hectares and dry season rice
area increased by 20 thousands hectares. The growth of this plantation
area is made possible by the increase in plantation seasons with
vigorous investment of the Royal Government on irrigation and the
change in farmers’ attitude in the use of seeds from heavy to medium
and light ones. In term of paddy yield, wet season paddy has increased
by 5.3% compared with 2009, and dry season paddy has increased by 1.7%
compared with 2009 as well. However, recent flooding has been initially
assessed and found that it is more damaging than the flooding in
2000; and it impacted paddy on area of 390,000 hectares and damaged
paddy on area of 190,000 hectares, and could cause a decline in the dry
season paddy production.
In parallel, the use of agricultural vehicles and the use
of inputs for agriculture have increased remarkably. In fact,
agricultural tractors have increased from 8,138 units in 2008 to 9,250
units in 2009 and to 10,135 units in 2010. Power tillers have increased
from 110,000 units in 2008 to 130,000 units in 2009 and to 160,000
units in 2010. Rice threshing machines have increased to 25,243 units
in 2010, from just 23,000 units in 2008. At the same time, so far about
57% of the farmers use fertilizers, and about 30% use pesticides. The
growth in the use of agricultural vehicles and the agricultural inputs
show that the gradual change in thinking of farmers from using
traditional methods in rice farming to using standard methods, and also
show the success of commercialization, namely “Subsistence Farming” to “ Commercial Farming”.
At the same time, the export of rice has increased
vigorously since 2009 due to the increase in food prices and the open
up of markets in European Union, in particular after the launch of
Policy Document on the Promotion of Paddy and Rice Export of the Royal
Government. In 2009, the export of milled rice increased by 236%
compared with 2008. In 2010, export of rice was 51 thousand tons
compared to 15 thousand tons in 2009, which is 251% increase. As of
June 2011, export of rice has increased to 85 thousand tons, which is
370% increase compared with the same period of 2010. In parallel, the
number of milled rice exporting countries has increased from 9 in 2009
to more than 30 in 2010 and 2011.
In general, the progress of paddy-milled rice sector and
the high acceleration of rice export is not by chance. However, this
progress is the fruit of the implementation of the policy measures
stated in the policy document on the promotion of paddy production and
rice export. Indeed, in the implementation of relevant measures for
paddy production, the Royal Government has reduced import tariffs to
zero and change value added taxes as the government’s responsibility
for equipment and vehicles used in paddy production such as
agricultural tractors, power tillers, water pumping machines, and other
agricultural machines and equipments. In addition, the Royal
Government has decided to change excise tax to zero percent for
supplying paddy rice domestically and allowing excise tax payment on
relevant inputs for rice plantations to be delayed and providing
maximum tax reliefs for profits including key period plus 3-year tax
relief, 3-year priority period as well as minimum tax-relief 1% on
turnovers.
The Royal Government has also invested USD 101.43 million
in 2009 and USD 188.79 million in 2010 in the continued expansion of
irrigation. As of June 2011, the Royal Government has made an
additional investment of USD 220 million. At the same time, the Royal
Government, through the Ministry of Economy and Finance, is planning to
provide financing, in a form of no-interest credits, of about USD 80
million in 3 years (2011-2013) to Electricité du Cambodge for the
investment in the establishment of sub-transmission lines in order to
increase the scope of energy supply for more people to use and connect
with paddy production and milling machines areas.
For the implementation of measures for paddy collection
and processing, the Royal Government has doubled the money of
Agriculture Support and Development Fund from the initial fund of USD 18
million to USD 36 million. This fund is managed by the Rural
Development Bank, and the Bank has provided credits to 251 Rice Millers
Associations in 10 provinces. The Royal Government through the
Ministry of Economy and Finance has established Credit Guarantee Scheme
with an amount of Riel 105 billion, equivalent to USD 25 million, to
encourage commercial banks to provide loans for paddy collection and
processing. Also, the Ministry has also signed agreements on financing
cooperation and on risk sharing in agriculture and agro-industry
management with the World Bank and International Financial Cooperation
(IFC) with an amount of USD 25 million to promote the provision of
loans to agriculture projects such as paddy-milled rice.
Furthermore, procedures related to exports have been
improved and both official and unofficial spending on export has been
reduced and gradually eliminated; this has contributed to the
enhancement of Cambodia’s competitiveness.
Based on this, we necessarily need to continue evaluating
the effectiveness of the implementation of quick-win measures and
understand the weaknesses as well as request for more reform measures
or additional measures to link short-solution with medium and long term
measures in order to ensure the enthusiastic environment in the
implementation of measures toward achieving set objective. Indeed, based
on implementation made so far, we are still facing a number of
problems that need to be improved and resolved. These tasks include:
- Seedling: Some farmers still continue
using their own seeds, grown themselves, from one season to another and
other farmers use importing rice seeds. Although ten types of seed
have already been selected, their usage within the country, in
particular at major paddy production areas, is limited and other seeds
have yet to be considered by farmers. The distribution of recognized
seeds is still limited.
- Plantation Techniques and Yield Collection: In
general, the knowledge of farmers is still limited including the
preparation of soils, seed selection, plantation, water management and
use, the use of fertilizers, pest controls. Also, post-harvest
techniques include: cutting, threshing, transporting, drying, and
maintaining, of famers remain limited, which are impacting the
processing of paddy and quality of rice.
- Farmers’ Organization Structure: in
particular small farmers are fragmented and not formed into a group or
co-operative, this factor makes it for farmers in getting techniques,
credit, and bargaining power.
- Paddy Collection and Processing: in
general, there are many investments related to paddy processing but the
size and the speed do not respond to what the Royal Government wants
yet. For example, though the financing for paddy collection has been
gradually resolved and improved remarkably, but the shortage of
financing remains a major challenge. This issue makes milling machines
and rice exporting companies unable to sufficiently in the collection
of paddy that farmers produce and paddy is still exported to neighboring
countries. Besides, though the Royal Government has launched a number
of new mechanisms, they are not enough. Finding solution for this issue
is complicated, and it requires relevant institutions to take part in
particular the involvement of commercial banks, finding more investment
from both domestic and foreign investors and finding new source of
finance, which is the concern of the banks.
- Electricity: the price of electricity remains a major challenge causing high processing and making Cambodia’s rice remains uncompetitive.
- Paddy Processing Association Network: due
to the isolation and independence among milling machine owners,
milling machine association has not been well established; and it is
the cause for not achieving the economy of scale in the paddy
processing. This factor has impacted the capability of rice export of
Cambodia; in general, it has limited large purchases of milled rice from
Cambodia. Processing capability for exports is still limited though at
present investments in major rice milling machines are ongoing that
can process of up to more 1 million tons of milled rice, some of these
investment projects are yet to be completed while others have
insufficient equipments/technology.
- Paddy/Rice Standard and Sanitary Standard:
the establishment of national paddy/rice standard which complies with
the market can be used as a yardstick for producers, processing units,
exporters and consumers.
- Market Access: in spite of the effort
of concerned ministries/institutions in seeking the market for
Cambodian rice, it is still a big challenge that must be immediately
addressed, for instance, bilateral trade agreements. In particular,
majority of Cambodian rice has been exported to the European Union
which is an existing opened market. Overreliance on the EU market is a
big risk. Therefore, the good coordination between exporters, rice
millers and farmers is the way forward. The establishment of the “Association of Cambodian Rice Exporters”,
which has its own and independent management structure, is necessary
for addressing some common issues such as lack of trust and leadership,
promoting participation in the improvement of policies and timely
addressing any problem. Access to market intelligence and international
competition situation remain a big challenge as the Paddy/Rice
Information Unit has not been established yet.
We are well aware that the laid out measures are vital,
but more need to be done, therefore, in order to implement these
measures effectively and to grab this rare opportunity, we must review
and re-evaluate them. In this spirit, I would like to request the
concerned ministries/institutions, the private sector and development
agencies to continue pushing for the implementation of the existing
measures and address challenges within the production line, processing
and export with greater ownership. Those include:
- Paddy Production: Quick-win measures:
The Ministry of Agriculture, Forestry and Fisheries must prepare
programs and outline financing requirement to boost the production and
dissemination of foundation rice seeds and certified rice seeds that
will return high yield and respond to the market demand. Along with
this, we must push for the issuance of directives on the production and
purification of seeds, prepare programs/projects and outline financing
requirement in order to promote the production of high-yielding and
in-demand seeds and work with the Ministry of Information to
disseminate cultivation techniques to all parts of the country through
existing institutional mechanisms and information channels by producing
TV or radio spots. On the other hand, the Ministry of Economy and
Finance must consider the possibility of providing additional incentives
to the seed production projects by the end of 2011. For the
medium-term and long-term measures, the MAFF must accelerate the
establishment of farmer organizations, strengthen the capacity of
existing cooperative farming and link to the value chain and export
through the implementation of “contract farming”, and
strengthen the statistical work by utilizing highly accurate methods.
The Ministry of Water Resources and Meteorology must promote the
establishment of and strengthening of existing water-utilizing farmer
communities along all irrigation system development zones. Also, the
Ministry of Water Resources and Meteorology must collaborate with the
Ministry of Agriculture, Forestry and Fisheries to transform
water-utilizing farmer community into farmer organizations and improve
the statistical data of irrigation systems. On the other hand, the
Ministry of Planning must cooperate with concerned ministries to
complete the agriculture survey in 2013.
- Paddy Rice Collection and Processing:
Quick-win measures: the Ministry of Economy and Finance must accelerate
the implementation of risk-sharing finance facility project and put
the credit-guarantee scheme to operation by the upcoming dried rice
field harvest season and urgently open discussion on the establishment
of regional rice banks. Along with this, the Ministry must consider
providing additional incentives to export-oriented large rice milling
factories by the end of 2011. The rural development bank must fully
utilize its existing capital and mobilize additional resources from
external partners. The Ministry of Industry Mine and Energy,
Electricity Authority of Cambodia and the Electricity of Cambodia must
accelerate electricity connection to rice milling zones and consider
reducing connection fee and electricity tariff for rice millers. On the
other hand, the Steering Committee on Private Sector Development must
consider transforming the sub-working group on agriculture and
agro-industry of the G-PSF into the working group on paddy-rice
development to elevate the rice-paddy dialogue between the Royal
Government and the private sector and reflect the Royal Government’s
firm support. For the medium-term and long-term measures, concerned
ministries/institutions must prepare coordination measures to encourage
the cooperation among rice millers to move toward the establishment of
the association of rice millers, which is as bold as the garment
manufacturers association in Cambodia, to improve domestic competition
environment, the capacity to enter into large contracts and enhance
competitiveness of Cambodian rice. The Ministry of Economy and Finance
must mobilize resources for investing on the construction of sub
electricity transmission line to major rice production and milling
zones.
- Export Facilitation: Quick-Win
Measures: the Ministry of Public Work and Transport must accelerate the
construction of railways and makes the Phnom Penh autonomous port a
main gate of rice export. Along with this, the Ministry must cooperate
with the Ministry of Economy and Finance and related institutions to
dispatch a group of delegates to Vietnam to negotiate agreement on
transiting Cambodian exports along the Mekong River or through
Vietnam’s ports, without having to pay taxes to Vietnamese authority.
The Ministry of Industry Mine and Energy, through the National
Institute of Standard, must work with the Ministry of Agriculture,
Forestry and Fisheries, the Ministry of Commerce and rice millers to
create Cambodian rice standard or at least temporary standard in 2012.
For the medium-term and long-term measures: The Ministry of
Agriculture, Forestry and Fisheries must implement measures to reduce
certification fees and SPS certificate fees by the end of 2011. Along
with this, all concerned ministries/institutions must work together to
create a single window and disclose administrative procedures regarding
issuance of permission, license and certificates for rice export by
giving details of fees and duration of each procedure by the end of 1st
quarter of 2012. The Ministry of Public Work and Transport and the
Ministry of Economy and Finance must promote investment on the
transport infrastructure such as ports, rice warehouses and transport
and so forth.
- Market Access: Quick-win measures: the
Ministry of Commerce and the Ministry of Foreign Affair and
International Cooperation, with participation from concerned
ministries/institutions must engage in bilateral negotiation with
foreign governments to open market access in the Philippines, Indonesia,
Malaysia, Africa as well as coordinating the effort of the private
sector to sell rice in these markets. Along with this, embassies of the
Kingdom of Cambodia in rice-import countries must coordinate rice
trade, by considering this as a priority. For the medium-term and
long-term measures, the Ministry of Commerce and concerned institutions
must promote good cooperation among rice exporters by establishing the
Association of Cambodian Rice Exporters to coordinate
large exports, especially through the existing chamber of commerce.
The Ministry of Commerce, the Ministry of Agriculture, Forestry and
Fisheries and the Ministry of Industry Mine and Energy must jointly
examine the laws and regulations, especially those related to rice
trade, and patent requirements.
The implementation of the Policy on the Promotion of Paddy
Production and Rice Exports is a major and deepened reform site and a
test for Cambodia in expanding the growth base and strengthen its
competitiveness. The success of this implementation not only reflect
the attainment of target, but also what Cambodia can do in improving
the investment and business environment through reform, which is an
important message to our partners, especially investors and
businesspeople. Moreover, the successful implementation of this policy
will have deep implications for other reform programs as well as other
sub-sectoral and sectoral development. In this sense, active
contribution from all stakeholders is needed.
Thank you for your attention!
EndItem.
