Your Global Local Partner - Investment Opportunities in Agricultural Projects

Cambodia has quietly started to turn up on the agendas of major agriculture, ethanol, bio-diesel, sugar and other producers and forest plantation growers as an attractive and interesting site to locate projects.

Cambodia has the lowest cost agricultural land in the region with figures that are substantially cheaper than its neighbors Thailand, Vietnam or Malaysia. This has interested many new companies with projects to grow crops like sugarcane, cassava, teak and other timber, palm plantations, etc. who have been approaching Runckel & Associates over the last 6-8 months to perform due diligence on these projects and to help shepherd them through the Cambodian approval process.

Agricultural land in Cambodia is generally provided to qualified projects by the Cambodian government on a lease basis. Leases can be 70 years or in some cases up to 99 years. Payment for approved projects for the land lease is paid to the government in a one-time fee and total costs are not that dissimilar from those being charged in Brazil, which also is seeing a boom in agriculture related projects managed by foreign countries.

In Cambodia, large plots of agricultural land in locations with reasonable access to infrastructure are available but many areas still lack the road structure and access to utilities that are found in more developed countries. Solutions to dealing with these can be developed, however, such as the use of electrical generators, installation of solar panels, wind power generation and other devices. All of these technologies are readily available in the region. Even though these increase costs somewhat, even with these improvements figured in, relative land acquisition costs are still quite competitive and this is what is leading many of the companies to search out the better sites now.

Beyond actual land acquisitions, the Cambodian government has an approval process for the actual project and there are local requirements that must be met. These differ from province to province but they are easily dealt with as long as you select a local advisor with good knowledge of the country and as long as you adequately perform due diligence on all partners and major service providers.

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Your Investments in Agricultural projects

...Cambodia has a geographical advantage and is extremely blessed with good water resources. The people in the countryside still plant their rice seasonally. The most common time they would plant is the wet or monsoon season. In the dry season, the only farmers who can plant their rice paddy fields are those near water. Like almost all other countries in Asia, the Cambodian people’s main food is rice.

Cambodian peasants have planted rice ever since the time of the Angkor Empire. At the present time they still implement their traditional techniques. Research by the IRI (International Rice Institute) claims that the traditional rice that Cambodian people plant every year comprises around 4000 varieties, of which most of the varieties are late rice that take about 9 months from planting to harvesting.

Most of the farmers start planting at the beginning of the monsoon season, when the first or second rain falls on the land. They start by plowing their land with their traditional ploughs pulled by cattle they raised themselves. Most of the cattle they raise are cows and water buffalos; this varies by region. If their land is high land, they would use cows to plow. If the land is flooded, they would use water buffalos, and this technique still works magnificently.

The rice seed that will be used needs to be soaked in water for 24 hours before germination. There are two methods of planting: the first and oldest way is to scatter the seed by hand into the rice field, and the second way is to germinate the seed in a well prepared piece of land. After the seed grows into seedlings, farmers would pull it out and bring it to their field to plant. After planting, the farmers still have many hardships to surmount in order to obtain a good harvest. If the rainfall is good, then their only worries during the growing stage are pests and insects or illnesses. If that season does not have enough rainfall then their biggest worry will arise because the crucial ingredient for successful rice plantation is water: how do they water their field?

When the rice stalks grow into the final stage, the farmer needs to control crabs that cut the rice stalks and at this time they also need to fertilize their rice field. In another week or two, the rice grains will become yellow or even a golden color. It boosts our farmers’ hearts so much when they see this color. They still carefully guard their field against mice and birds. Then on a good sunny day, they will come to the paddy field with their family and friends, each and every one of them having a sickle hanging around their neck, singing a happy song while they work hard to harvest, thinking about the good yield they got this year that will secure their family’s food for the next year.

- Source: World Investment News

...The agricultural sector

including rice farming, livestock, forestry, and cultivation of other crops, provides direct employment to more than 75% of Cambodia's labour force. According to the Ministry of Finance, agriculture accounts for 37% of GDP. Excellent rice harvests in 1999 contributed to Cambodia's better than expected economic growth.

With its large amount of arable land, ample rainfall, and close proximity to the major ASEAN markets of Thailand and Vietnam, Cambodia has strong growth potential in the agriculture sector. A number of plantation agriculture projects are already underway in the areas of palm oil, cashew, coffee, tea, and vegetable production.

...The Cambodian government has taken note of the growth potential of the sector as well as the important role increased agricultural production can play in reducing rural poverty in Cambodia. The Ministry of Agriculture, Forestry and Fisheries (www.maff.gov.kh) has also been designated as one of four priority ministries to receive expanded budgets.

The main attraction in the sector and appeal to foreign investors, from the government to develop the sector, is the privatising of public rubber plantations. In words of H.E. Ly Phalla, Director General of the General Directorate of Rubber Plantations: "Our main priority is to create jobs and provide a reliable source of income to the farmers (…) we know that we need foreign investors to develop the industrial exploitation, they have to meet our expectations and we have to fulfil their needs too". In addition, close to 280.000 hectares of land are estimated to be available and readily accessible for rubber production.

Since this is a labor-intensive industry, Cambodia's relatively cheap labour would be an advantage and the plantation directors are eager to receive new partners: "In Cambodia we have about 280.000 Hectars of suitable red land (…) for the rubber plantations, as you can imagine there is plenty of room for new investors (…) and we are actually carrying on a policy of partnership research. We want to develop, during the coming years, processing industries of the rubber in order to be able to export products which have an higher added value." said Mr. Mak Kim Hong, Chairman and Managing Director of the biggest rubber plantation in Cambodia, Chup Rubber Plantation.

...fisheries

The fisheries sub-sector accounts for approximately 5% of Cambodia's GDP relative to livestock and has a potential to increase its contribution to economic growth. The government's goal is to increase production while preserving environmental integrity and maintain per capita consumption. One of the priorities is to increase incomes through greater value added activities, such as commercial shrimp fanning for export.

Since domestic capacity for offshore fishing is currently limited, the government will continue to allow foreign access to Cambodia's fishing grounds. The management of inland fisheries is in fact, dominated by a system of lots or concessions, auctioned out by the government to private business. However, fishing lot boundaries are often not clearly defined or communicated to local communities. In order to protect people's live hood and natural resources, various institutions have been piloting another approach, namely community fisheries. It has helped reduce illegal fishing by up to 60%.

...forestries

Close to 60% of Cambodia's land area is forested and constitutes a major national asset. Nowadays Cambodia produces honey, wood spirit, resin, rattan, bamboo, cardamom, bark and medicinal plants from its forested lands. Wood is also still the primary source of fuel in Cambodia.

The government is in the process of developing sustainable forestry management plans that will both contribute to Cambodia's economic output and be environmentally sound. To this end, the Royal Government adopted a forestry sector strategy which is based on three pillars: sustainable forest concession management policy, where timber exploitation is strictly controlled according to international forestry standards; a system of protected areas to preserve the country's unique biodiversity and endangered species; and a substantially stronger community forestry development program.

To establish a comprehensive legal framework for forest management, the RGC issued a governmental Decree on Forest Concession Management in February 2000. This decree has also been reinforced with a Forestry Law, drafted with technical assistance from the ADB, and a government Decree on Community Forestry to be submitted to the Council of Ministers in the near future.

Despite the great improvements, there are still factors limiting agricultural production including unclear land ownership, a lack of irrigation infrastructure, inadequate transportation infrastructure. Nevertheless, the country's infrastructure improved gradually in the 1990s, largely due to massive infusions of foreign assistance. Nowadays agricultural products are massively produced in Cambodia and many international companies have taken this opportunity.

...Why Investors Interested in Agriculture Projects in Cambodia

All Solutions Cambodia is a leader in improving your business processes. Our teams are universally recognized for delivering outstanding results to your successful investment in Cambodia. We provide the legal, professional and up to date comprehensive view advice about the society/market and also all the relevant laws of Kingdom of Cambodia to the investors helping them to make the right choices in investment into Cambodia.