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A sickening tale of Cambodia’s rice exports

China is paying less for rice from Cambodia, compared to Thailand and Vietnam. KT/Chor Sokunthea

In 2015, the Cambodian government’s set target of exporting one million tons of rice fell short the moment it was announced. First, the target was not met in 2015. And then from 2015, it has failed every year to meet the much trumpeted export quota.

The failure to achieve the target is symptomatic of the ills plaguing Cambodia’s rice sector. There are a myriad of factors, the most significant of which are some of the key industry players refusing to have anything to do with the Cambodia Rice Federation (CRF), apathy on the part of the CRF and its members, inability to have collective bargaining or negotiating power with major importers such as China, and self-serving greed and disunity amongst the federation members.

To date, Cambodia has exported approximately 435,000 tons of rice to a number of countries. The major importers being the EU with approximately 213,000 tons, China with 127,000 tons, Asean member states with about 47,000 tons and 48,000 tons to other destinations.

Throughout the years, Cambodia has been announcing ambitious plans of exporting up to a million tons of rice but it cannot even fulfill the export quota of 300,000 tons of rice to China because of infighting amongst members of the CRF and the federation’s seeming inability to have a common unified pricing structure to take on China National Cereals, Oils and Foodstuffs Corporation (COCFO).

COCFO has been able to take advantage of the factionalised CRF and its weakness to exploit prices to the effect that members of CRF now prefer, reportedly, to deal or negotiate directly with the Chinese state-owned enterprise for the best pricing deals.

Compare this with Thailand or Vietnam who export their rice to China through COFCO, which in turn recognizes prevailing market prices – hence receiving more for their rice exports compared to the amounts paid to their Cambodian counterparts. Why the disparity, one might ask. The answer is simple: the Thais and Vietnamese have a united negotiating front while Cambodia does not.

The status of the CRF and certain government agencies in dealing with rice exports to the European Union – a major market for Cambodia – also tells a tale of missed opportunities, arrogance and apathy. The Ministry of Commerce had to be diplomatically, but forcefully, nudged by the Ministry of Foreign Affairs and International Cooperation to attend a hearing in Brussels whereby EU member states will on December 4 vote on the European Commission’s plans to impose tariffs on Cambodian rice exports as from January 1 next year, based on complaints from Italy and Spain – also rice-producing and exporting countries.

This lack of apathy on the part of the Ministry of Commerce and even the CRF shows the ills of the Cambodian rice industry and the opportunities they have lost and will continue to lose over the years to come if their indifference towards the plight of thousands of smallholders who produce paddy, to supply to the rice millers, just continues unabated. Clearly, both the ministry and CRF lack a clear understanding of international commodity markets, let alone the rice markets abroad. To put it bluntly, there is a cartel that exists within the CRF which jeopardises the very existence of the Cambodian rice industry.

On the contrary it is laudable that an ordinary CRF member, Amru Rice, has taken it upon itself to write directly to the EU urging its member states to reconsider imposing tariffs on import of Cambodian rice. Nonetheless, the letter was too emotional and not sufficiently backed with relevant technical details to make the case for advocacy stronger.

Cambodia is facing the real threat of losing its export privileges under the Everything but Arms (EBA) the EU had granted to the Kingdom. Instead of reinvigorating its efforts to stand out and fight for its rightful place as an exporter to the EU, CRF members are on the contrary fighting amongst themselves, and with the federation, to have bigger export quotas for their own self benefit. Such actions tend to strangle other suppliers in terms of price and volume, all because of greed.

In March, the European Commission launched a safeguard investigation to determine whether the volume with or without prices of imports of semi-milled and milled Indica rice, originating in Cambodia and Myanmar, was “causing serious difficulties to European Union producers of like or competing products”.

The EU is currently classifying semi-milled and milled Indica rice, originating in Cambodia and Myanmar, within the following commodity codes: 1006-3027; 1006-3048; 1006-3067; 1006-3098 – which is similar to EU Indica rice. But the fact of the matter is that Cambodian companies export a different variety of rice which does not compete with EU Indica rice. The variety of rice mainly exported from Cambodia is the fragrant rice (Jasmine rice).

To date, the CRF and Ministry of Commerce have adopted a lackadaisical attitude to this urgent matter thinking it will blow away and is just mere political rhetoric from a small segment of the EU.

The apathy and infighting within the CRF and the Ministry of Commerce is so bad that a major rice exporter has now sought to take on the importers, on his own, by entering into bilateral negotiations with buyers such as COCFO to negotiate the best possible price for his rice – something which the CRF should be doing in the first place as representative of the country’s rice industry.

The key words to be asked of the rice exporters are: Does the rice industry have the full support of the prime minister? It’s an unequivocal yes. Does Cambodia have a rice policy? Yes it does. Given the positive answers to this two key factors, what then are the ills plaguing the Cambodian rice industry?

How has COCFO taken Cambodian rice imports for granted and pushed down the price which were often way below the market price while the Thais and the Vietnamese always managed to sell at market prices? Leave aside the EU’s withdrawal of duty free access to its markets under the EBA, Cambodia would still be losing a substantial market share of rice exports to the EU once the EU-Vietnam Free Trade Agreement kicks in on January 1.

Rice insiders who have parted ways with the CRF board say that Cambodia needs to encourage the production of more organic rice which fetches a higher value than conventional long grain white rice and jasmine rice and play up the Fair Trade and other compliance norms to carve a niche for Cambodian rice as we are unable to compete heads on, on volume, with neighboring giants.

As long as individual interests within the CRF and apathy within the Ministry of Commerce reigns, the common good for the rice sector would fall by the wayside opening the floodgates for importers to bully Cambodia over rice imports.

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