Thai rice exporters eye investments in Cambodia

[Source]

BANGKOK, April 12 (Reuters) - Thai exporters plan to invest in Cambodia's fledgling rice sector, lured by low production costs and tariff-free exports to the European Union, an industry official said on Tuesday.

Cambodia, the world's 15th-largest rice producer caught the attention of Thai exporters because of its growth potential and access to special EU privileges for poor countries, Korbsook Iamsuree, president of the Thai Rice Exporters Association, told Reuters.

"Cambodia is an interesting country to invest in. The rice quality is OK and there is plenty of land to grow more rice at cheaper costs," she said.

Thailand, the world's biggest rice exporter, is facing higher production costs and uncompetitive export prices. The country has shipped less rice because Vietnam, the second-largest exporter, is boosting its market share with cheaper rice.

Korbsook said Thailand needed to find ways to cut production costs by looking for cheaper rice from neighbouring countries.

Thai exporters met last week with Cambodia's Commerce Minister Cham Prasidh, who is keen to attract foreign investment in the country's rice industry and boost exports this year.

Korbsook said Thai exporters would be interested in milling rice and exporting them via a Cambodian port in a bid to get tax privileges from the EU rather than investing in rice planting. But the actual value of investments would depend on the development of Cambodia's logistical infrastructure.

Thai exporters had also sought to invest in Myanmar, but abandoned the idea due to the political uncertainty and unconducive investment climate in the neighbouring country.

Cambodia is targeting annual rice exports of 1 million tonnes of milled rice this year, dramatically up from the current volume of about 20,000 tonnes.

However, the goal was still small compared to Thailand, which ships around 10 million tonnes and Vietnam, which exports about 6 million tonnes.

INVESTMENTS SOUGHT

To achieve the 1 million-tonne mark, Cambodia needed foreign investment in milling technology and government support by providing soft loan.

After years of political turbulence, including civil war and the deadly Khmer Rouge era, Cambodia's economy was in tatters by the end of the 1980s, when it produced around 7 million tonnes of rice, most of which was milled and re-exported by Vietnam.

Korbsook said producing and exporting rice from Cambodia would help expand sales in the Euro zone, with firms capitalising on the EU's zero-tariff "Everything but Arms" privileges, which it offers to less developed nations.

Cambodia is looking for foreign investors to boost its milling sector and it has allocated a budget of $23 million to the Ministry of Agriculture this year, up from $3 million in 2010.

However, Korbsook said investment in Cambodia by Thai exporters is not expected to be substantial over the next couple of years, as there were still some obstacles that could push up costs.

"The logistics system is still not ready for exports and that would result in higher costs," she said.

"We expect the Cambodian government to overcome this problem very soon and by that time, investing in Cambodia would be more interesting."