How Cambodia’s farmer-friendly policies revolutionizes agri sector
How Cambodia’s farmer-friendly policies revolutionizes agri sector
Rising from the ranks of one of the poorest nations in the region to becoming a surplus producer of agriculture products, Cambodia’s success story is nothing sort of a miracle. Today, the Kingdom exports rice to more than 63 countries including China, 26 countries in the European Union and others. Much of the credit goes to the policies set by the Royal Government that went unnoticed or at best underrated by critics. Khmer Times talks to experts to dissect not just the government policies but also seek constructive suggestions
An overwhelming 80 percent of Cambodians live in rural areas, of which 65 percent rely on agriculture, fisheries and forestry for their livelihoods. On the face of it, the data mirrors that the Kingdom is intrinsically agri-based, which it is, but a deeper study would also justify why the Royal Government is so focused on modernizing and elevating this sector.
Agriculture is one of the few potent sectors in Cambodia that has the potential to spur economic growth, ensure food security and help graduate the Kingdom from least developed country (LDC) status to a higher-middle income country by 2030.
To become a higher-middle-income country, Cambodia must improve its production and post-harvest infrastructure, streamline the business environment and increase capacity for financial services to reach rural entrepreneurs.
The Royal Government of Cambodia’s (RGC) Pentagonal Strategy Phase I (2023-2028) is aimed towards growth, employment, equity, efficiency and sustainability. It is a long-term socio-economic development strategy to be implemented over the next 25 years. Agriculture among other developments forms the core of the Pentagonal Strategy Phase I.
In fact, the upgradation of the agriculture sector is one of Prime Minister Hun Manet’s priority development programme areas that receives considerable backing from the RGC.
In addition, the National Agricultural Development Policy (2022-2030) compliments the Pentagonal Strategy Phase I by setting out a vision to transform the agri-food sector to be more competitive, inclusive, resilient and sustainable, leading to a further and significant increase in farming family’s incomes, prosperity and well-being.
Speaking at the ‘7th Cambodia Rice Forum 2024’ under the theme ‘Transforming the Cambodia Rice Supply Chain to be Resilient, Inclusive and Sustainable’, on September 10, Prime Minister Hun Manet said that the government has never been uncaring to the agricultural sector because Cambodia has a lot of people engaged in agriculture and the country has better resources, especially on land factors that can provide non-stop agricultural products as food for the people and for other profitable trade.
Mr Hun Manet said that the government will continue to implement preferential agricultural policies to support the sector that still faces challenges.
Preferential policies
Preferential agricultural policies refer to government measures that give specific advantages or support to certain sectors or groups within agriculture. These policies can include subsidies, tax breaks or access to resources aimed at boosting production, enhancing competitiveness or ensuring food security.
For example, a government might consider offering higher subsidies to farmers growing staple crops or providing loans with favourable terms to smallholder farmers. The goal is to promote certain agricultural practices, improve rural livelihoods or protect local farmers from international competition.
The government, Mr Hun Manet emphasised, continues to implement preferential policies in the agricultural sector including tax exemptions or reductions for agricultural workers, annual tax exemptions on farmers’ agricultural land and land concessions related to agriculture and preferential value-added tax (VAT) rates on the import and supply of certain goods such as fertilizers, seeds, crops, and animal feed. Additionally, there are VAT exemptions on the supply of unprocessed agricultural products.
Under the new mandate, the RGC continues to implement preferential policies in the agricultural sector including suspending income tax payments for enterprises engaged in agriculture, particularly those involved in rice production.
Talking to Khmer Times, Chey Tech, a socio-economic researcher, agreed that the continued implementation of preferential policies on the agricultural sector will help the sector to grow and support farmers and entrepreneurs in the production of agricultural products.
However, he said that this policy hardly benefits the small farmers. The government policy largely benefits the rich or the big traders in the agricultural sector because they have the ability to produce products on a large scale on economic land concessions by importing agricultural equipment. Smallholders can buy only small amounts of agricultural inputs, which does not seem to benefit from this policy.
Offering a solution, Tech said, “For the benefit of smallholder farmers, the government should further enhance agricultural production techniques and equipment, including quality varieties and meeting market demand, produce quality and cheap fertilizers to farmers.”
During the 19th National Fisheries Day in July this year, Mr Hun Manet reiterated that the Royal Government will continue to not tax agricultural land.
“Obviously, we have been doing this for a long time, introducing a tax exemption policy for family farmland, and as long as the CPP has the opportunity and the people support voting to lead the country, the tax exemption policy for agricultural land will continue for people, especially farmland,” he said.
The premier also said that the government has introduced tax exemptions, and the import of agricultural equipment, machinery, agricultural equipment, agricultural products, and food items for the daily lives of the people are also tax-exempt until 2028 to ensure reasonable prices for citizens.
“The solution to the agricultural sector is to, on the one hand, ensure prices, take into account farmers incomes, and on the other hand, ensure that commodity prices do not affect buyers’ costs,” the Premier said, adding that to ensure these two things, the state must have a solution to the cost of production for farmers by reducing import duties on agricultural machinery and introducing appropriate solutions.
Yang Peou, Secretary-General of the Royal Academy of Cambodia (RAC), described the preferential agricultural policies as an appropriate mechanism in the current context, while the agricultural sector is not yet strong. Cambodia is an agricultural country, but agricultural products, mostly imports, such as fish, meat, and vegetables, are a weakness of local agriculture.
Speaking to Khmer Times, he said the government must have important tips to promote the agricultural sector. “We should also consider that this preferential agricultural policies are to promote the agricultural sector. I see that this mechanism has helped the big companies, while the small farmers have not yet received the preferential or the promotion of the agricultural sector,” he said.
What govt should do?
Tech said that if the Royal Government is willing to help and directly benefit the small farmers from these preferential agricultural policies, then the government should provide additional services related to technical, seeds, and agricultural equipment to the people in production.
The government should provide price guarantee services, contract farming to ensure value for the people when they produce, and reduce the risk related to crop insurance to ensure when people are affected by disasters is able to use this insurance to recover and develop a policy to provide financing or concessional loans with special interest rates for smallholder farmers to produce and engage in agricultural work, he said.
“Additionally, the government should provide financing, loans or capital at low interest rates to farmers, along with agricultural contracts or price guarantees for their crops. This will give them confidence in planting and selling while ensuring a good market and price to motivate continued cultivation.”
Tech went on to add, “Crop insurance is crucial for protecting farmers from risks. In the past, when floods damaged their crops, many farmers couldn’t afford to rehabilitate or replant. Therefore, to mitigate these risks, we propose implementing crop insurance and market assurance, which would greatly benefit smallholder farmers.”
Crop insurance helps stabilize farmers’ incomes and encourages them to invest in their operations, knowing they have a safety net in case of adverse conditions. It can be subsidized by governments in some countries to make it more accessible for farmers.
The Ministry of Agriculture, Forestry and Fisheries (MAFF) is considering the possibility of introducing climate change insurance into modern farming communities to help farmers from the risks caused by climate change.
Khim Finan, Under Secretary of State and Spokesman for the MAFF said climate change is a new concern for Cambodia’s agricultural sector, although it has impacted the sector for a long time.
He said that MAFF is now more concerned about it. Climate change has happened for a long time, but this is the first year that it has started affecting the farming community in a big way including drought, swarms of armyworms, whiteflies and flooding.
Peou said that the Royal Government must provide technical assistance for agriculture and enough infrastructure systems such as technical assistance, water management, electricity and marketing, which are important.
“It is my suggestion that the government should take more specific measures to smallholder farmers so that they can have a culture of raising and replanting to boost the family economy as well as the socio-economic situation.”
Speaking to Khmer Times, Em Phalla, a farmer in Kandaol Kaong village, Samraong commune, Kampong Cham’s Prey Chhor district, said that he has one hectare of land and harvests rice twice a year with more than ten tonnes.
Phalla said that although he supports the preferential policy of the government, however, he has a small hectare of land.
“When the state requires the farmers to pay for land tax, it is for sure that those who have little farmland must be affected, but if the state eases or exempts from paying tax on land, it will definitely help to reduce our expenses,” said Phalla.
Farmers need to pay for fertilizer, oil, etc., and if the land is taxed by the state, it will definitely face problems and affect livelihoods, he added.
“Therefore, the commitment to continue the preferential policies on the agricultural sector will help the farmers. We have the strength to grow on our farm work. We really want the government to continue to favour the agricultural sector to promote and help boost the economy.”
Lim Heng, Vice-President of the Cambodia Chamber of Commerce (CCC), told Khmer Times that to attract more investors to promote the growth and sustainability of the agricultural sector in exports and domestically, increasing and boosting agricultural export markets is essential.
“We need to increase and promote the export market of agricultural products and make the import and export procedures at the One Window Service Office (OWSO) by clearly dividing the production and export management between the relevant institutions,” he said.
During the seventh mandate, Prime Minister Hun Manet outlined the government’s three priorities for the agricultural sector. The first is to promote agricultural production, find markets and balance product prices through farmers’ financing programs.
“Second, deployment of agricultural officers in communes which is an important strategic plan that the Ministry has already organized the recruitment of 250 agricultural officials in 2024,” he said.
“Third, the development of modern farming communities. I have seen a new way of creating and seeing more outreach at the grassroots level to increase efficiency for our farmers,” Mr Hun Manet said.
The Prime Minister also said that all three policy programs have been actively implemented, supported by a $100 million financing program by the government to stabilize agriculture through the Agricultural and Rural Development Bank (ARDB).
For 2025, the MAFF plans to recruit 1,000 more agricultural officials to help farmers in the commune because farmers need technical assistance.
Last week the government decided to reduce electricity fares for rice millers and silos to help them gain competitiveness and boost exports by lowering the cost of products.
Delivering a lecture on ‘Cambodia’s Energy Policy’ hosted by the Royal University of Phnom Penh (RUPP), Keo Rattanak, Minister of Mines and Energy. said, “The Prime Minister has decided to provide additional benefits to rice mills and rice silos and reduce the cost of milling and drying rice in order to help farmers push rice production more widely in exporting rice to the world market… This is to help Khmer farmers. So, there is no reason for increasing power tariffs.”
