Business Insider: Finding solutions for farmers
Business Insider: Finding solutions for farmers
While agricultural development for Cambodian farmers has largely been led by short-term NGO schemes delivering mixed results, Tommy Christensen, chairman and CEO of Green Country Development, believes that if the proper private sector model were implemented, farming in the Kingdom could be more profitable and sustainable. The Post’s Kali Kotoski sat down with him to discuss some of his ideas.
What is Green Country Development attempting to accomplish?
In the seven years I have been in Cambodia, I have undertaken a number ventures, mainly trying to get my offshore bunker business for the oil and gas sector up and running. I came to the agricultural sector after I was invited to conduct a feasibility study that would increase irrigation and move water from the Tonle Sap river to dry land in Kampong Chhnang.
Working on that project, we saw that one intervention in the agricultural sector would not be enough to make a real impact, because we believe the NGO-led way is not sustainable. Also, a lot of NGO funding will end in the next couple of years. We need to optimise the whole supply chain. While there are a lot of people out there talking about supply chain management, they are not really doing much. We have been looking at specific schemes and have a five-year agreement with an international aid program.
How can the private sector help strengthen the agricultural economy?
The most immediate thing farmers need is mobile banking services. There is absolutely no trust in the supply chain between millers and farmers, and there are valid reasons for this, as some farmers are unable to pay their bills. But to get all the players under one roof, we need to develop a centralised procurement scheme that facilitates orders under a farmer cooperative association.
What is a centralised procurement strategy?
It is an initiative where we negotiate on behalf of farmers with buyers, so that buyers get the right product at the right price and farmers get an affordable interest rate. The National Bank of Cambodia put in an 18 percent annual interest rate cap, but I doubt that will work to lower rates for farmers.
If we have a centralised procurement strategy that acts as a financial clearing house, however, we can handle all transactions which will help lower the risks for financial institutions, farmers and millers. We would pay a deposit on all transactions to lower the interest rates, and would cap the interest rate at 10 percent per year. We would also facilitate farmers by ensuring they receive crop insurance and other mobile banking services.
What is the main problem in the supply chain?
The problem here is that when farmers have high costs, they have to sell their harvests as soon as possible to pay off their debts. That has a lot to do with the lack of warehousing and drying facilities that are owned directly by farmers. Storage and drying are necessary here, but they need to be linked with handling the logistics for rice mills. We have two rice millers on board with us, and we hope to officially close those deals this week in order to push forward the centralised procurement plan.
Overall, the costs in the supply chain are too high today for Cambodia to be competitive, and the entire chain is also inefficient.
Where have you been approved to launch your project?
The government has given us approval to operate in parts of Kampong Chhnang. Our international aid partner started a study there two weeks ago, because we want to be sure we’re operating in places where the success criteria for white rice are at their highest.
I still believe that our greatest challenge to overcome will be increasing the productivity of farmers and negotiating with rice millers. We need to get all parties to work together, and we can do that by encouraging more contract farming. While we have only been operating since May of this year, we have already gotten 1,200 farmers to start using mobile banking to help implement our centralised procurement plan.
