Why are Cambodians switching to solar power?

Cambodia is at a crucial juncture in its energy sector, as it shifts its focus toward clean and sustainable power sources. Solar power, in particular, is gaining immense popularity in the Kingdom, driven by a combination of governmental support, technological advances, and the country’s geographical advantages.

This blog post explores in detail why solar power has become so popular in Cambodia, breaking down the reasons with data and highlighting key projects and investments, including recent developments involving Chinese firms in the sector.

The Rising Popularity of Solar Power in Cambodia

As Cambodia continues to industrialize, its energy demand is surging. According to the Ministry of Mines and Energy, Cambodia’s energy consumption grew by approximately 10% annually over the past decade. Solar energy is being viewed as an essential solution to meet this growing demand while aligning with global sustainable development goals (SDGs).

The Cambodian government has also approved several projects aimed at boosting renewable energy, including solar power. The push for solar energy stems from both environmental concerns and the desire for energy independence. By 2023, Cambodia had approved 23 energy projects, with 12 of them centered around solar power, marking a pivotal shift towards renewable energy.

But what exactly makes solar power so popular in Cambodia? Let’s break it down into seven major reasons.

1. Cambodia’s Geographical Advantage

Cambodia’s geographical location is highly conducive to solar power generation. The country receives abundant sunshine throughout the year, with an average solar irradiance of about 5 kWh/m²/day, one of the highest in Southeast Asia. This makes solar power not only viable but also highly efficient in the Cambodian context.

According to a report by the International Renewable Energy Agency (IRENA), Cambodia has significant potential to generate solar energy, especially during its dry season, which spans from November to April. The country’s long exposure to sunlight makes solar power a practical solution to meet its growing energy needs. Additionally, remote and rural areas that are not connected to the national grid can benefit immensely from off-grid solar solutions, allowing for decentralized power generation.

2. Governmental Support and Policy Framework

The Cambodian government is actively encouraging investments in renewable energy, particularly solar power. A key element of this support is the approval of policies that facilitate investment in clean energy. The Cambodia National Energy Policy, for example, aims to promote renewable energy by offering incentives, reducing bureaucratic hurdles, and creating a conducive environment for foreign and domestic investment.

The government’s Cambodia Energy Strategy 2040 also outlines a clear roadmap for integrating more renewable energy into the country’s energy mix. Solar power is expected to play a central role in achieving the government’s goal of increasing the share of renewables in Cambodia’s energy grid to 30% by 2030. This ambitious target demonstrates the government’s commitment to reducing the country’s reliance on imported fossil fuels while promoting green energy solutions.

In addition, Cambodia has benefited from global partnerships and funding aimed at increasing its renewable energy capacity. The Asian Development Bank (ADB), for example, has been instrumental in funding solar projects across Cambodia, further accelerating the transition to clean energy.

3. Chinese Investment in the Solar Sector

Chinese firms have played a critical role in Cambodia’s energy sector, and their recent interest in solar energy investment marks a significant development. In a meeting between the Cambodian government and a delegation of six Chinese companies—including Zhongjian Yongfeng New Energy Resources Technology Co., Ltd and China National Energy Group Longyuan Power Overseas Investment Company—the companies expressed strong interest in co-investing in Cambodia’s solar energy sector.

The Chinese firms sought to sign a memorandum of understanding (MoU) with the Cambodian government to launch joint projects, marking another step forward in the bilateral economic cooperation between the two nations. Chinese investment in Cambodia has surged over the past decade, contributing to the rapid industrialization of the country. With Chinese firms now exploring solar power projects, the future of Cambodia’s renewable energy looks even more promising.

According to the Council for the Development of Cambodia (CDC), China remains the largest foreign investor in the country, accounting for a significant portion of the $5.79 billion in energy investments approved in 2023 and 2024. The inclusion of solar projects in this investment portfolio highlights the growing role of solar power in Cambodia’s energy landscape.

4. Economic Growth and Rising Energy Demand

Cambodia has experienced rapid economic growth, with its GDP increasing by an average of 7% per year over the last decade. This growth has translated into a higher demand for electricity to power new industries, homes, and infrastructure projects. Traditional energy sources, such as hydropower and coal, have long dominated Cambodia’s energy mix, but they come with challenges such as fluctuating water levels and high greenhouse gas emissions.

Solar energy offers a clean, reliable, and increasingly affordable alternative. The cost of solar photovoltaic (PV) technology has dropped significantly over the past decade, making it a competitive option for Cambodia’s growing energy needs.

The Cambodian government is keen on diversifying its energy sources to reduce dependency on fossil fuels and avoid energy shortages. As Cambodia’s industrial sector expands, solar power provides an efficient and scalable solution to meet rising energy demand without the environmental costs associated with fossil fuels.

5. Sustainability and Environmental Concerns

One of the most compelling reasons for the popularity of solar power in Cambodia is the global and local shift towards sustainability. As part of its commitment to the Paris Agreement and the United Nations Sustainable Development Goals, Cambodia is actively working to reduce its carbon emissions. Solar power is a key component of this strategy, as it allows the country to produce clean energy without relying on polluting sources like coal or oil.

The environmental benefits of solar energy are substantial. Solar power produces zero emissions and requires minimal water for operation, making it a sustainable choice for Cambodia, a country that faces seasonal water shortages. Furthermore, the adoption of solar energy contributes to preserving Cambodia’s rich biodiversity, which is under threat from deforestation and climate change.

The Cambodian government has approved 21 electricity generation projects with a total capacity of 3,950 MW, predominantly from clean energy sources, including solar and wind. These projects represent a significant step toward meeting Cambodia’s renewable energy targets and reducing its carbon footprint.

6. Technological Advancements and Affordability

The rapid advancement of solar technology has made it more affordable and accessible to both consumers and businesses in Cambodia. Solar panels are becoming increasingly efficient at converting sunlight into electricity, and the costs associated with installation and maintenance have decreased considerably.

According to a report by Bloomberg New Energy Finance (BNEF), the cost of solar photovoltaic (PV) modules has dropped by nearly 90% since 2010. This trend has made solar power one of the most cost-effective energy solutions in Cambodia, where high electricity costs have traditionally been a barrier to development.

In addition, innovations in battery storage systems have made it possible to store solar energy for use during the night or cloudy days, further increasing the reliability and attractiveness of solar power. As these technologies continue to improve, solar energy will become an even more viable option for Cambodia’s energy needs.

7. Energy Independence and Security

Cambodia currently imports a significant portion of its energy from neighboring countries such as Vietnam, Laos, and Thailand. This reliance on energy imports makes the country vulnerable to fluctuations in energy prices and supply disruptions. Solar power offers a way to reduce this dependency and increase energy security.

By investing in solar energy infrastructure, Cambodia can produce its own clean electricity, reducing the need for imported energy and enhancing national energy security. Solar power can be generated locally, even in remote areas that are not connected to the national grid, providing a decentralized energy solution that empowers local communities.

This move towards energy independence aligns with the Cambodian government’s long-term vision of achieving energy security while also promoting sustainable development.

Chinese Firms Mulling Solar Power Investment in Cambodia

In recent developments, a group of six Chinese companies has shown strong interest in investing in Cambodia’s solar power sector. These companies are seeking support from the Cambodian government to co-invest in solar energy projects, signaling a growing confidence in Cambodia’s renewable energy potential. The companies involved include Zhongjian Yongfeng New Energy Resources Technology Co., Ltd and China National Energy Group Longyuan Power Overseas Investment Company, both of which have a proven track record in the energy sector.

During a meeting between Chea Vuthy, Secretary General of the Council for the Development of Cambodia (CDC), and a delegation of companies, the Chinese firms expressed their desire to sign a memorandum of understanding (MoU) to formalize their investment in Cambodia’s solar energy projects. The delegation also included representatives from the Xinyang Chamber of Commerce, Henan Province, China, which invests in energy, industry, and international trade.

The proposed investment projects come at a time when Cambodia is actively seeking foreign investment to boost its renewable energy capacity. The involvement of Chinese companies, known for their expertise and technological advancements in solar power, is expected to significantly accelerate Cambodia’s transition to clean energy.

Solar Power as the Future of Cambodia’s Energy

In conclusion, solar power is becoming increasingly popular in Cambodia due to a combination of factors including geographical advantages, governmental support, technological advancements, and foreign investment. Solar energy not only offers an environmentally sustainable solution to Cambodia’s growing energy needs but also provides a pathway to energy independence and economic growth.

With significant investments from Chinese firms and the Cambodian government’s commitment to renewable energy, the future of solar power in Cambodia looks bright. The transition to solar energy will play a crucial role in shaping the country’s energy landscape in the years to come.

Share Your Thoughts!

What do you think about the rise of solar power in Cambodia? Do you believe it will become the dominant energy source in the country? Share your thoughts in the comments below!

Read less

Why is the Cost of Living Increasing in Cambodia? An In-Depth Analysis!

In recent years, Cambodia has experienced rapid economic growth, but along with this growth has come an undeniable increase in the cost of living. While this trend is not unique to Cambodia, its impact on local families and individuals is deeply felt. The rising costs, from housing to everyday goods, are making it difficult for many to balance their income and expenses.

This blog post will explore the primary reasons behind the increasing cost of living in Cambodia, backed by data and expert insights.

Balancing Income and Expenses in Cambodia

The economic reality in Cambodia today poses a significant challenge for many, as wages fail to keep pace with inflation. Individuals across the country are struggling to balance their income and expenses in an environment where costs continue to rise. The growing divide between what people earn and what they need to spend is forcing many Cambodians to make difficult choices daily.

1. Rising Inflation Rates

Cambodia has seen a consistent rise in inflation, which directly impacts the cost of everyday goods and services. Although the Asian Development Outlook (ADO) report from September 2024 lowered the inflation forecast for 2024 from 2% to 0.5% due to the slow rise in food prices and a drop in fuel prices during the first half of the year, inflation is still a concern. The long-term trend shows that inflation has been pushing the prices of basic necessities, such as food, transportation, and utilities, higher each year.

The effects of inflation are felt most heavily in essential sectors like food and housing, where even small price increases can have a substantial impact on a household’s budget. For instance, the price of rice, a staple in Cambodian diets, has steadily increased over the past few years. Moreover, global economic events, such as supply chain disruptions and fuel price fluctuations, have further contributed to the rising costs in Cambodia.

2. Housing Costs in Urban Areas

The real estate market in Cambodia, particularly in urban centers like Phnom Penh, has seen a significant increase in housing prices. The influx of foreign investment, coupled with rapid urbanization, has driven up the cost of property and rent in cities. For example, Knight Frank’s report showed that the prime residential development land index fell by 1.4% from the first to the second quarter of 2024, which might seem like a decrease, but the long-term trend indicates a continuous rise in property prices over the last decade.

Urbanization has intensified the demand for housing, pushing prices higher as more people migrate to cities in search of better job opportunities. This has left many low-income families in a precarious situation, as they are forced to allocate a larger portion of their income toward rent or mortgage payments. The expansion of Cambodia’s real estate sector has not been accompanied by affordable housing initiatives, leaving a gap between the demand for affordable housing and its availability.

3. Utilities and Energy Prices

Utility costs, such as electricity and water, have also become a significant burden for many households. As Cambodia’s economy grows, the demand for electricity has skyrocketed, pushing prices higher. Despite some government efforts to stabilize electricity costs, many regions, especially rural areas, still face high utility bills. The push toward industrialization and urban expansion has also increased the demand for energy, further straining Cambodia’s infrastructure and leading to increased prices.

In Phnom Penh, the cost of electricity is among the highest in the region, with an average price of $0.18 per kilowatt-hour, according to the Electricity Authority of Cambodia. The cost of water is similarly rising, driven by increased demand and aging infrastructure. These rising utility costs add to the financial pressures on families who are already struggling to make ends meet.

4. Education and Healthcare Expenses

Cambodia’s education and healthcare systems are also contributors to the rising cost of living. Private education has become more common as many parents seek better-quality schooling for their children, but the costs associated with private schools are often out of reach for many families. Even public schools, which are nominally free, can require additional expenses for uniforms, books, and other materials.

Healthcare costs have similarly increased, with many Cambodians opting for private healthcare services due to the limitations of the public healthcare system. Private healthcare offers better service and shorter wait times but comes with higher costs. For families dealing with chronic illnesses or health emergencies, these costs can quickly become overwhelming. According to a 2024 report by the Ministry of Health, healthcare expenses account for a significant portion of household spending, particularly in urban areas where private clinics and hospitals are more prevalent.

5. Impact of Global Economic Factors

Cambodia’s economy is closely tied to global markets, and as such, it is vulnerable to international economic trends. The COVID-19 pandemic, for example, had a significant impact on global supply chains, driving up the cost of imported goods. Additionally, the ongoing war in Ukraine and other geopolitical tensions have caused fluctuations in fuel prices, which in turn affect transportation costs and the prices of goods that rely on fuel for production and distribution.

Cambodia is a net importer of oil, meaning that any increases in global oil prices are directly felt by consumers. The increase in fuel prices has led to higher transportation costs, which are passed down to consumers in the form of higher prices for goods and services. This is particularly evident in rural areas, where transportation infrastructure is less developed, and the cost of delivering goods is higher.

6. Wage Growth vs. Living Wage

While Cambodia has seen some wage growth, it has not kept pace with the rising cost of living. The minimum wage for garment workers in 2025 is set at $208 per month, which represents a modest $4 increase from the previous year’s wage of $204. However, this increase does not adequately address the higher costs of living in urban areas. Many workers in other sectors earn even less, making it difficult to cover basic expenses like food, housing, and healthcare.

According to Ngeth Chou, Founder and Chairman of F.I Vision Capital Plc, wages have recently reduced due to the economic slowdown, especially in the informal sector and among self-employed individuals. This reduction in income, coupled with rising expenses, has left many Cambodians in a precarious financial situation.

7. Inequality in Income Distribution

Another factor contributing to the rising cost of living is the growing income inequality in Cambodia. While the country has seen significant economic growth, much of this wealth has been concentrated in the hands of a small elite. This has led to a widening gap between the rich and the poor, with the wealthiest Cambodians enjoying a higher standard of living while many others struggle to afford basic necessities.

As wealth concentrates at the top, the demand for luxury goods and services increases, driving up prices in sectors like real estate, hospitality, and entertainment. This has a ripple effect on the overall cost of living, making it more difficult for low- and middle-income families to keep up.

8. Increased Consumption and Lifestyle Changes

Cambodia’s rising middle class has also contributed to the increasing cost of living. As more Cambodians achieve higher levels of income, they are able to afford more goods and services, which drives up demand and prices. This is particularly evident in urban areas, where lifestyle changes have led to increased consumption of imported goods, luxury items, and services like dining out and entertainment.

Livingcost.org reports that Phnom Penh, with an average monthly cost of living at $802, is becoming one of the “more affordable cities globally,” but the lifestyle there is similar to developed countries, which is expensive to maintain in a developing nation. For locals, especially those earning lower wages, this shift in consumption patterns has made it difficult to sustain a reasonable quality of life.

9. Impact of Foreign Investments

Foreign direct investment (FDI) has played a significant role in Cambodia’s economic development, particularly in sectors like real estate, construction, and manufacturing. While this has brought growth and job creation, it has also contributed to rising costs. In cities like Phnom Penh and Siem Reap, foreign investment has driven up the price of real estate, making it more difficult for locals to afford housing.

Foreign-owned businesses, particularly in the tourism and hospitality sectors, often cater to wealthier expatriates and tourists, creating a dual economy where prices for goods and services are higher in areas frequented by foreigners. This has led to a cost-of-living disparity between locals and expats, with locals struggling to keep up with the higher prices set by businesses targeting a wealthier clientele.

10. Environmental Factors and Climate Change

Climate change is another factor that is driving up the cost of living in Cambodia. The country is highly vulnerable to the effects of climate change, including more frequent and severe floods, droughts, and other extreme weather events. These environmental challenges have a direct impact on agriculture, which is a major part of Cambodia’s economy.

Floods and droughts reduce agricultural yields, driving up the prices of food and other agricultural products. Additionally, the cost of rebuilding infrastructure after natural disasters further strains the government’s budget, which can lead to higher taxes or cuts in public services.

New Income Sources and Strategies to Manage Finances Effectively

As the cost of living continues to rise, many Cambodians are seeking new income sources and adopting strategies to manage their finances more effectively. Wage labor remains a primary source of income, but entrepreneurship and the gig economy are becoming more popular. Platforms like Grab and food delivery services offer opportunities for supplemental income, although these jobs often come with their own set of challenges, including long hours and limited job security.

Entrepreneurs in Cambodia are also exploring new business opportunities, particularly in the digital space. The rise of e-commerce and online marketplaces has opened up new avenues for income generation, particularly for small business owners. However, starting a business comes with risks, and many entrepreneurs face challenges such as limited access to capital and regulatory hurdles.

According to financial experts like Ngeth Chou, it’s crucial for Cambodians to budget wisely and seek out investment opportunities that offer long-term financial stability. This could include saving for the future, investing in real estate, or exploring new business ventures that capitalize on Cambodia’s growing economy.

Conclusion

The rising cost of living in Cambodia is a complex issue influenced by a variety of factors, including inflation, housing costs, global economic trends, and income inequality. While the country continues to experience economic growth, many Cambodians are finding it difficult to keep up with the increasing expenses associated with daily life. Addressing these challenges will require a combination of government policy, private sector investment, and individual financial planning to ensure that the benefits of Cambodia’s economic growth are more equitably distributed across the population.

What do you think about Cambodia’s rising cost of living? How are you managing your finances in these challenging times? Share your thoughts in the comments below!

Read less

Despite the humungous damage caused by Covid-19, the pandemic solemnly left few good lessons. While potential sectors such as manufacturing, construction and tourism crumbled; the agricultural sector withstood the shocks and maintained its momentum. In fact, the Kingdom witnessed a surge in agricultural production and export earnings soared during the economic recession. Along with Cambodia’s potential for agribusiness growth, there are concurrent food security issues in major economies in the region, meaning the demand for agricultural production remains strong and is likely to increase in the years to follow. Experts tell Khmer Times that Cambodia is in the right position to become the breadbasket of the region.

Business commentators from a range of industries have suggested that the Kingdom’s raw agricultural production and value-added agro-processing sectors are both likely to witness swift growth in both output and profits in coming periods, thanks to strong fundamentals existing in the market, alongside the nation’s fortitude when it comes to the swift adoption of modern technology, business innovations and targeted state legislative support.

Currently, close to 49 percent of the country’s labour force is currently involved in the agricultural sector, and its overall production accounts for around 22 percent of the country’s total gross domestic product (GDP).

On top of this, almost 65 percent of Cambodians rely on agriculture, fisheries and forestry for their personal livelihoods.

For these reasons, the ongoing development of the Kingdom’s agricultural sector promises broad socioeconomic benefits, as well as a swift boost to export profits.

However, to continue the sector’s strong growth, some additional support may be necessary in terms of capacity building, strategic investments and infrastructural development, economic commentators and public sector policymakers agree.

A resilient sector
While the post-pandemic period proved to be a challenging one for traditionally strong areas of Cambodia’s economy, such as manufacturing, construction and tourism – all of which faced reduced growth in the years 2020 to 2023, as compared to 2019 levels – the agricultural sector momentum during the same period remained strong.

Speaking to the Khmer Times, Sisavuthara Sim, Founder and CEO of Nexus Capital & Investment Advisory, said that agribusiness has shown considerable strength even during the recent economic recession, during which the country still witnessed increases in both agricultural production and export earnings.

Such trends continue this year as 2024’s first half saw a significant increase in agricultural product exports, reaching 6.13 million tonnes.

This represented a 57 percent rise from the 3.9 million tonnes recorded in 2023, according to Ministry of Agriculture, Forestry and Fisheries (MAFF) mid-year reports.

The combined revenue from these exports was valued at $2.85 billion during the January to June period, marking an almost 19 percent increase from $2.4 billion in the same period last year.

In comparison, during the entirety of 2023 the country exported over eight million tonnes of agricultural goods, generating close to $5 billion in revenue for the year.

Key exports included rice, rubber, cassava, mangoes, fresh bananas, pepper, cashew nuts, longan, corn, and palm oil; which were exported to markets including Vietnam, Thailand, China, and South Korea, among other receiving trade partners.

Since the pandemic period, Cambodia has also witnessed increased investment from European, US, Australian and other major economic development agencies and Non-Governmental Organizations (NGO) focused primarily on Cambodian agribusiness development, added Sisavuthara.

This demonstrates their understanding of the dynamic nature of global agribusiness, and Cambodia’s largely untapped potential, he said.

Due to these positive signs, Cambodia’s most time-tested industry, agriculture, appears to offer huge promise for the Cambodian economy for many years to come, he predicted.

During an interaction with Khmer Times, Lawrence Lennon, former Managing Director of CBRE Cambodia, also agreed that despite a slowdown in other key sectors of the economy in the post-pandemic period, in particular the garment and tourism sectors, the agriculture sector has continued to show considerable growth.

Early-stage agro-industry development remains visible across the sector despite some global headwinds, he explained, suggesting that Cambodia should expect to see agriculture become the primary catalyst for economic growth moving forward.

The agricultural sector is an area which still has a lot of room for additional production growth, he explained.

“There is no shortage of arable land, and there is a large human resource available to fuel further GDP growth in agriculture in the coming years,” said Lennon.

Lennon also said that currently, Cambodia remains largely underdeveloped in terms of agricultural capacity, as compared to more industrialized economies.

“Given agriculture practices remain underdeveloped, the economy has the ability to force diversification towards agroindustry,” he explained, adding that “and increase the overall value of the sector, plus reduce the trade deficit at the same time.”

Along with Cambodia’s potential for agribusiness growth, there are concurrently food security issues for most major economies worldwide, meaning demand for agricultural production remains strong and set to increase in the future, he added.

Sisavuthara commented that while tourism represents another potential vehicle of growth for the Cambodian economy alongside agriculture, demand for travel naturally changes based on consumer spending trends and global economic conditions, a trend that Cambodia has experienced in the years following the pandemic.

The agribusiness sector, however, is unlikely to reduce demand in coming years as all economies are reliant on it, he said.

This should provide consistent economic returns for both investors and farmers across the industry for the foreseeable future.

For these reasons, Lennon and Sisavuthara both view the agro-industry as one of the most exciting and resilient areas for foreign and local investors, given its unique growth potential.

What areas of the agricultural sector are expected to evolve, and what factors are necessary to support this evolution?

Despite positive signs, however, experts suggest that some elemental changes will be crucial for the continued improvement of the agricultural industry in the coming years.

“With ongoing innovation and development of agroindustry practices in Cambodia, we might soon see these areas multiplying in production value,” said Lennon.

Agro investment, for these reasons, is being highly pursued by the government through investment policy and action, he noted.

New investment ventures entering the sector are able to offer new technologies, techniques and capital to modernize farms and farming practices.

A good example includes the recent launch of a modern 1,000-hectare corn farming operation in Prasat Bakong district, Siem Reap province, including AG Agribusiness Asia (Cambodia) Co., Ltd.

and ING Holdings Co., Ltd., in which modern farming technology and practices are being implemented by local and international investment partners of the project.

The private sector venture promises extraordinary corn yields as well as a range of sustainable byproducts, such as biochar from corn husks.

The state-of-the-art farm represents a first of its kind and is expected to represent a model for other local agriculture entrepreneurs to follow.

Another initiative supporting improved productivity of local farming practices includes the ‘Fish and Rice Corridor’ cooperation agreement, signed between the Cambodian and Chinese governments in September 2023.

The state-sponsored initiative focuses on enhancing a range of food production sectors within Cambodia, including aquaculture, agro-processing, ecological agriculture, the implementation of new agricultural technology, as well as the development of human resources to drive evolution in the agricultural economy.

In April this year, as part of the initiative, representatives from the Ministry of Agriculture, Forestry and Fisheries (MAFF) hosted a week-long research delegation of Chinese agricultural specialists on a cross-country tour to both promote and initiate rice-fish and rice-shrimp integrated farming systems within Cambodian provinces.

This modern integrated farming technique looks to dramatically increase food production from the Kingdom’s pre-existing rice paddy infrastructure, boosting profits and food security for millions of local rice farmers nationwide.

Agro-processing opportunities
Outside of improving yields, commentators agree that by improving post-harvest processing of the market’s raw produce, agriculturalists and agro-processing companies will be able to export to more markets domestically and globally and fetch higher prices with essentially the same inputs.

Christoph Janensch, a German business scout to Cambodia recently provided a detailed analysis of the Cambodian food and beverage procurement market for the benefit of potential European investors during an event organized by the German Society for International Cooperation (GIZ), the German Agency for Economy and Development and local business chamber, German Business Cambodia (GBC), said that too much of Cambodia’s agricultural production is currently processed out of country, leaving a wide window of opportunity for incoming investors with technology and capital to help internalize the gains.

Janensch stated that while Cambodia is characterized by a variety of beautiful, high-quality products, these raw products from the agricultural sector are hardly ever processed in the country itself.
Instead, processing often takes place in neighbouring countries.

“For example,” he explained, “Vietnam processes around 85 percent of Cambodian cashew nuts.”

He suggested that most Europeans have likely already eaten cashew nuts from Cambodia without realizing it because they came to the European market via Vietnam.

State initiatives are already underway to lock down the value of the Cashew industry in the country, as opposed to the current majority of raw exports to Vietnamese processing facilities.

The National Cashew Policy 2022-2027, formulated by the MAFF and Ministry of Commerce (MoC), is currently implementing measures to ensure that the Kingdom improves its cashew nut processing capacity to increase from the current 5 percent to 25 percent by 2027, and around 50 percent by 2032.

While cashews are just one example, post-harvest processing remains an underdeveloped sector industry-wide, ripe with opportunities for investors, Janensch said.

To encourage investment from EU-based agro-processing and procurement firms, Janensch said, “There is [currently] no competition at all for processing,” citing that only 10 percent of agricultural products are processed within the country, which means that there is great potential for increased food processing industries from foreign investors.

However, food processing companies may need to overcome some current obstacles, he said. The main obstacle is access to finance to grow.

“We have high electricity and logistics costs, and customs clearance in Cambodia is still relatively slow,” he explained.

There are also high post-harvest losses in Cambodia due to a lack of refrigeration and proper cold chain storage, he said.

For this reason, cold chain storage investments are also in demand and offer vast opportunities for investors, he stressed.

Offering a nearby comparison, Janensch noted that Cambodia’s neighbour, Thailand, now processes 80 percent of its own raw agricultural products in-country.

In light of such factors, Sisavuthara stressed the need for the country to improve value-added industries within the agricultural sector, to boost returns for producers and exporters.

“Now we have a low-value and high-volume agricultural model. We can create a lot more wealth for all parts of the supply chain if we can transfer to a high value-added agricultural model,” he said.

“Cambodia must not only export raw agricultural products to be processed and sold overseas. Instead, we need to add value to raw materials and achieve higher yields for the same products after secondary processing,” he suggested.

To do so, investments and innovation are crucial factors, he explained, in order to create the correct conditions for adding value to raw products.

Yet in turn, these investments will create more job opportunities in the agribusiness sector, allowing increased consumer spending.

Alongside export growth, socioeconomic development can be supported by an evolution within the sector, given the significant share of the population reliant on agriculture for their income and well-being, Lennon added.

Aiding socioeconomic development, innovation in agriculture and food processing offers more quality and sustainable employment opportunities for the people, he said.

Organic production potential
The Cambodian agricultural sector also demonstrates the potential to become a strong player in the organic foodstuffs market internationally, fetching high prices in markets such as the EU and US.

Janensch, in his market analysis, noted that many fruit products from Cambodia are potentially suitable for organic certification, increasing their value in international markets.

For example, he noted some mango and cashew nut exports have already gained such certification.

In recent months, the Kingdom’s rice producers have also secured substantial organic rice export deals with US suppliers, who consider Cambodia’s rice stocks as world-class commodities.

Janensch further detailed that Cambodia has a low pesticide load in the soil and traditionally land tends to be used extensively with little fertilizer, meaning the soil is hardly contaminated.

“This makes the country very suitable for organic products,” he said.

Lennon agreed that a key benefit of the Cambodian agriculture sector, despite its current limited outputs, is that more farmers still use sustainable practices in producing food of very high quality.

This is not the case in some more industrialized countries regionally and internationally, which have grown dependent on chemical inputs to maintain yields.

Therefore, Lennon believes, “Cambodia has the environmental potential to become the breadbasket of the region, given it can improve its agricultural productivity.”

Through such nurturing of the organic qualities of the sector, Cambodia also has a unique opportunity to provide its own people and trade partners with higher quality Cambodian-grown food, improving both trade and health.

Source: Khmer Times

Read less