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