Challenges For Rice Industry

Fears have been raised over the future of Cambodia’s rice export industry as the Government ups the country’s export quota for 2015.

In 2013, Cambodia produced almost 400,000 metric tonnes of rice for export – a figure the Government wants to see rise to more than one million by next year. Currently Cambodia has an export advantage over rice rivals and neighbours Vietnam and Thailand as the Kingdom enjoys a tax-free relationship with the EU and America.

However, Kann Kunthy, CEO of Battambang Rice Investment Co, fears this luxury will not last forever and when added to other challenges, he claims there is tough times ahead for Cambodia’s rice export industry.

“Cambodia exports a lot to countries in Europe, such as Poland and France, and the US because there are no import taxes but this isn't permanent and soon it will stop,” he warns. Add to this high costs involved in the transport of the rice via the roads to the port, higher yields in neighbouring countries, better irrigation systems and more advanced technology, and Kann believes the rice export industry in Cambodia will suffer.

“Vietnam use the water system to transport their rice, which is the cheapest form of transport” he says. “The second is rail and then road. Rice is being sold at a reasonable price but the transport makes the operational costs very high, especially when Cambodia’s yield is low in comparison to Thailand’s.”

Another blow is Thailand scrapping its rice sale policy, which was introduced by the government in a bid to boost the industry. Under the scheme, the government bought rice at high prices to support farmers but it failed, leaving the government in millions of dollars of debt and with a rice stock of more than 15 million metric tonnes to shift.

“They have so much rice that they’re flooding the market,” Kunn says. “This means that the price of rice across the board has been lowered and it’s having a major impact on other countries, such as Cambodia because we have to sell at lower prices to compete.”

Competing in growing specialist rice such as long grain is also difficult as Cambodia only has one growing season, compared with Vietnam where rice can be cultivated in up to three cycles a year. It can also be sold at lower prices because of its lower transport and energy costs.

However, Kann says there are long-term solutions to the majority of the challenges the industry faces. Utilising the Tonle Sap and Mekong rivers to transport rice would cut costs, he adds. And improving and completing the rail system would be a major benefit.

“Currently, there is a rail track that runs from Phnom Penh to Sihanoukville, which we were expecting to cut costs,” he explains, adding that the predicted 680km an hour train actually runs at a maximum speed of 25km.

“This actually costs more because the train doesn’t run to the port in Phnom Penh or Sihanoukville so you still have to pay to transport goods from or to the port by lorry and hire a crane and then the same at the other side. This needs to be changed.

“There are going to be many challenges ahead but we believe we can overcome them.”

For more information on Battambang Rice Investment Co, visitwww.battambangrice.com 
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