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Nation aims for self-reliance in wake of COVID-19 trade clampdowns

Sorn Sarath / Khmer Times Share:
TANG CHHIN Sothy / AFP

Experience with the COVID-19 pandemic, a globally shocking illness both physically and economically, is encouraging Cambodians to focus on the development of self-reliance to mitigate the risks both present and in the future because the country now depends on limited imports to support growth.

Agriculture is the sector with most potential but needs to be strongly developed by an increasing production chain and an appropriate value chain for both exports and local supplies.

The important role of agriculture was raised by Prime Minister Hun Sen, who has urged all stakeholders involved in the agricultural sector in the country to boost and promote vital farming to respond to the pandemic spread because it will provide food for the country’s people as well as enable more exports.

He instructed the Ministry of Agriculture, Forestry, and Fisheries and other stakeholders to pay further and greater attention to farming, livestock, fisheries and other products to boost their growth and help contribute towards the national economy while other traditional economic pillars are in the doldrums because of the current Coronavirus pandemic.

The previously report showed that in 2018, Cambodia consumed 500 tonnes of vegetables per day, at a daily cost of between $200,000 and $300,000. The Kingdom of about 16.5 million people is also estimated to import fruits and vegetables worth more than $300 million annually from its neighbouring country, Thailand.

Lim Heng, vice-president of the Chamber of Commerce of Cambodia (CCC), said that being a developing county, it is important to import some main products to support growth such as products that are used for intensive industries that cannot be produced locally.

“Now we are working to reach Free Trade Agreements (FTAs) and when we have more of them, we will attract more investors to come to invest in the country,” he said. “The government is now working to improve investment law to attract more foreign investors and then we can produce more for local supply and export.”

However, in the panic of the COVID-19 pandemic, Lim said the agriculture sector would provide great opportunities for growth.

“For Agriculture, we are already strong in the rice sector in that we use about $3 billion in total funds for collecting paddy rice every year,” he said. “However, the challenge is about vegetable and fruit production and raising livestock, which we mostly import from Vietnam and Thailand.”

Lim said now with this Coronavirus pandemic those countries have banned exports of agricultural products, including Cambodia so it is a good opportunity to expand production.

Cambodia imported some $22.34 billion of goods last year while it exported only $14.63 billion – causing about a $7.76 billion trade deficit, according to National Bank of Cambodia figures.

The figures showed that the year-on-year growth rate in imports was 18.6 percent last year, while exports lagged behind at 12.7 percent.

Cambodia’s main exports are textiles, shoes, rice and bicycles. They are overshadowed by imports in oil, vehicles, construction materials, food, beverages and raw materials for the manufacturing sector, according to the report.

Cambodian imports were mostly from China, which accounted for 43.1 percent of the total in 2019. Thailand is second at 15.5 percent, Vietnam (13.6 percent), Japan (4.7 percent) and South Korea (3.4 percent).

The Ministry of Economy and Finance in early April officially launched a $100 million government’s small and medium enterprise (SME) co-financing scheme that is now available for all prioritised SMEs sectors.

Te Taing Por, president of the Federation of Association of Small and Medium Enterprises of Cambodia, said SMEs are the country’s main engine for economic growth. The sector could make the country self-reliant.

“When we talk about agriculture development, it is definitely about SMEs,” he said. “As I said before, during this period SMEs need to be boosted and developed, especially agriculture products to the extent we need to stop all exports of raw food and turn towards locally processing it,” he said.

Te said when the country can make more locally finished products, then it would be able to save billions of dollars while helping to reduce the number of migrant workers abroad.

“You see the value in garment exports at about $7billion to $8 billion per year, but the value of SMEs is bigger than this. That is why the government is pushing the sector by attracting more foreign investors come to invest in processing for export and local supplies,” he said.

The government has announced a $2 billon reserve budget to help the Kingdom’s main sectors, including agriculture, to mitigate the economic shock of the Coronavirus pandemic.

While agriculture has more opportunities than other sectors, the pandemic now is badly hitting the Kingdom’s main export products, including garments, footwear and travel goods while much of the tourism sector is facing bankruptcy. The government has announced plans to help defeat unemployment in the garment and tourism sectors and the National Bank of Cambodia, the central bank, has already eased liquidity for the banking sector.

Director-General of the National Bank of Cambodia (NBC), Chea Serey said, referring to the government’s stimulus package, that the agriculture sector, a long overlooked part of the economy, could be a big success during this time.

She said that agriculture could potentially contribute to Cambodia’s economic growth because the workforce in the sector continues to increase while productivity remains high.

“Everyone eats regardless of the economic cycle and thanks to our returning migrant workers who [hopefully] will contribute more to this sector,” she said, adding that the government’s action in balancing public health and the livelihoods of the people, who mostly are in the informal sector, is commendable.

Agriculture Minister Veng Sakhon has ordered all agriculture departments to take immediate measures to ensure the food security of the country in response to the outbreak of COVID-19.

He told the General Directorate of Agriculture to record the stock paddy and rice in rice mills, communities and in each household to get a clear picture of the food situation and identify potential areas to grow vegetables.

The UN’s agency, the International Fund for Agricultural Development (IFAD), and Cambodian’s government are leveraging a programme approach across projects to respond to the COVID pandemic to address both the economic distress and prevent food security stresses.

IFAD and ministry partners see the agriculture sector as the most important immediate economic need of rural communities and has created opportunities for migrant returnees and to expand prospects for smallholder farmers through enhanced production support.

Hiroshi Suzuki, CEO of the Business Research Institute for Cambodia (BRIC), told Khmer Times previously that, for the near future, the labour-intensive export-oriented industries would be important for Cambodia.

The industry with most potential is the manufacturing of parts for automobiles and electronics, he said adding that in the further future, the innovation industry would be an important target.

Mey Kalyan, senior adviser on the Supreme National Economic Council (SNEC) shares his comments on this issue, saying that the COVID-19 pandemic will create a new normal for Cambodia.

“One of the things is we have to strengthen our rural economy, to make our economy more resilient to shock,” he said, adding that, within this context, silk could be one element.

“And we can explore the expansion of others, such as cashew nuts, fruits and vegetables. This is in preparation for the medium- to long-term. Now there are many returnees back in Cambodia too. It is time for us to think innovatively. Agricultural development would not happen easily. We need to plant good seeds,” he said.

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