Mill capacity key to growing rice exports

[PHNOM PENH POST]

Cambodia's target of 1 million tonnes in rice shipments by 2015 would place the Kingdom behind China, or in seventh position in the world pecking order of rice exporters based on current volumes.

To achieve this goal Cambodia need not drastically raise its level of production. Domestic rice output was expected to outstrip supply by 3.9 million tonnes this year. And export levels are growing at a staggering pace, some 2,356 percent in the first half of last year compared to a year earlier. Which meant Cambodia overtook Burma and Uruguay among mid-level world exporters, according to data from the United States Department of Agriculture.

The problem remains milling because farmers simply cannot get the necessary credit to raise capacity. After milling more than 107,000 tonnes in the first half of last year, Cambodia is already hitting its annual capacity of 200,000 tonnes per year.

To meet its stated goal of 1 million tonnes of rice exports by 2015, Cambodia therefore has to raise milling capacity by five times in four years which according to the Ministry of Economy and Finance will require US$150 million in investment over the same period. If it does not, paddy will continue to spill over the country’s borders to Thailand and Vietnam, the two largest exporters in the world where processing capacity is much greater.

In Channy, general manager of ACLEDA Bank, by far the biggest lender to the agricultural sector in Cambodia, said yesterday credit remained the major problem. “This is the most difficult part for entrepreneurs in Cambodia,” he said.

Medium-sized companies seeking to borrow between $10,000 and $1 million from ACLEDA must supply financial information going back three years, he added. Credit worthiness is determined through interviews with friends and local officials which overall leads to a system which is time-consuming and hugely inefficient. Often, companies simply do not hold the required accounting history, said In Channy.

The Government’s recent promise to guarantee 50 percent of loans by commercial banks to the agricultural sector will surely help raise financing to the sector, but the real key could be the establishment of the country’s first credit bureau either by year’s end or early 2012.

The Association of Banks in Cambodia will set up the new service with the help of Singapore’s Veda Advantage, according to In Channy, which ought to make borrowing much simpler. Banks will be able to share credit information, reducing the work and risk required, which should in turn raise lending appetite.

If Cambodia reaches its target of 1 million tonnes in rice exports by 2015, that would bring in more than $125 million at 2010 prices. The industry won’t compare to the $3-billion garment sector, but with the necessary financing Cambodia would at last have a vital second major export industry.