This document summarizes strategic challenges in Cambodia's agriculture sector. It notes that while poverty has declined significantly since 2004 due to agricultural growth and higher rice prices, agricultural growth is now slowing down. It finds that most agricultural growth has come from expanding land area rather than increasing yields. The document recommends maintaining an open trade policy, improving environmental sustainability, increasing public spending on quality agricultural programs, and developing agroprocessing industries to support continued poverty reduction and agricultural development.

1. Strategic Challenges in the
Agriculture Sector
COSOP MID-TERM REVIEW WORKSHOP
21st APRIL 2016

2. Cambodia has made great
progress since 2007. Strong
economic growth has
benefited not only the
urban areas but also the
rural poor.
2011 poverty line is
$1.15 per person per day
2004 poverty line is
$0.63 per person per day
2012 poverty line is
$1.17 per person per day
53.2%
24%
18.6%
410
554
655
0
200
400
600
800
0%
10%
20%
30%
40%
50%
60%
2004 2007 2008 2009 2010 2011 2012
PercapitaGDP(constantUS$2005)
Povertyrate
Source: World Bank, Poverty Assessment.

3. Agriculture, mainly Rice Sector, has Driven the
Poverty Reduction
Increased rice prices & rice
production account for 47% of the
poverty reduction
Related increases in farm wages
account for another 16% of the
poverty reduction.
3
Key drivers of poverty reduction 2004-
2011
Source: World Bank, Poverty Assessment.

4. The Story of Agricultural Growth
• Growth of agricultural production: 8.7% annually – world
record!
• Growth of agricultural value added (GDP): 5.3% (also not bad)
• Significant improvements in adoption of modern technologies,
increased commercialization and diversification, higher exports
• Farm technologies become less labor and more capital
intensive
4

5. However, Ag. Growth is slowing down!
5

6. GPD per capita
(PPP current $),
2012
Labor Use for Rice
Production (man-day/ha)
1990s
Labor Use for Rice
Production (man-day/ha)
2010s
Thailand 13,983 35 5-10
Philippines 6,133 85 (wet season)
89 (dry season)
71
57
Vietnam 5,001 88-96 23 (dry season)
Cambodia 2,841 85 (wet season)
89 (dry season)
48
28
6

7. Cross-Border Paddy Exports is 4-5 times Larger than Formal Rice
Exports
7
2008 2009 2010 2011 2012 2013
Total rice production, in paddy 7,175 7,586 8,250 8,779 9,291 9,389
Total rice production, in milled equivalent 4,305 4,552 4,950 5,267 5,575 5,633
Domestic utilization 2,862 2,937 3,039 3,126 3,212 3,256
Total rice surplus 1,443 1,614 1,911 2,142 2,368 2,378
Total formal export of milled rice 2 13 106 202 206 379
Estimated informal paddy export in milled
equivalent
100 200 350 1,472 1,600 1,536
Source: World Bank estimates.

8. • Small increase in farm profitability/ha
• Proof from the national accounts (2004-2012):
• Growth of agricultural GDP: ~5.3%
• Land expansion: ~ 4.7%
• Growth of agricultural GDP/ha: ~0.6%
• Although increased, rice yields are still low
• Increase in yields was often achieved by higher use of inputs, not more
efficient use of inputs
• Divergence in farm performance: traditional and smaller farms
increasingly lag behind
• Weak agri-processing industry limits farmers’ options but export raw
commodities [share of agribusiness in GDP is 9%, no change from 2004
to 2012] 8

9. Past Future
• High agricultural prices
• Available land for expansion, esp.
upland crops (maize and cassava)
• Private sector performance, due to
open trade and private-sector friendly
agricultural policy
• Stronger trade integration (EBA, cross-
border trade)
• Private sector investments, esp. in rice
mills
• Economic growth (~ more domestic
consumption)
• Improved connectivity to markets,
technology, and finance
• What is unlikely to continue:
• Increase of farm prices
• Farmland expansion
• Unlimited rice export to the EU
• What is likely to continue:
• Economic growth
• Accelerated urbanization
• Rising regional and global demand for food
• Outmigration of farm labor
• Premium on farmer skills and knowledge
• This demands more attention to farm
intensification, commercialization,
diversification, quality improvements,
value addition, and mostly important high-
quality agricultural public programs to
achieve all the above
9

10. Policy Recommendations
10

11. Broad Recommendations
1. Maintain a private sector friendly agricultural and trade policies
2. Strengthen the environmental sustainability of farm production
3. Spend more on agriculture and improve the quality of agricultural
public programs
4. Help develop the agroprocessing and agribusiness industry
11
Shift from “production” to “productivity and farm incomes” objectives

12. 1. Agricultural Policy
• Maintain open trade and non-distortive
agricultural policy: this is very valuable asset
• Reduce costs of imports of fertilizers through
regulatory improvements
• Fix problems in seeds sector [only 22% of farm
demand for seeds is met]:
• Open up the state monopoly
• Reduce costs of doing business for importers and
seeds firms
12

13. 2. Environmental Sustainability
• Reach the 60% target for forest land (from current
56%):
• No further rapid farmland expansion possible
• Improve land use planning and its enforcement
• Strengthen land tenure security (30% of farmers
operate land without titles)
• Promote sustainable land management practices,
especially for cassava production
• Increase the safety of use of chemicals in vegetable
production
13

14. 3. Spend More but also Improve the Quality of
Agricultural Programs
• Research and extension
• Integration of smaller farms into food value
chains
• Food safety and SPS
• Seeds
• Soil nutrient management
• Information
• Irrigation
14

15. 4. Help Develop the Agroprocessing and Agribusiness
Industry
• Reduce infra and other logistics costs
• Invest in electricity generation and improved access
• Improve access to finance (warehouse receipts)
• Invest in education and skills/vocational training
15

16. Thanks!