Cambodia moves to increase exports of its "white gold" (rice)

To a tourist visiting Cambodia, or to a French consumer living in Cambodia (whose food habits require a complement of pasta and potatoes), rice will mainly mean the stunning landscapes of rice fields, yellow at harvest time, bright and liquid during the rainy season, with shades of green meanwhile. But to a Cambodian consumer and to a Cambodian farmer, as well as to their Government (and to the French economist), rice is the staple crop, a possible “white gold” as the Prime Minister once put it, and a major part of a poverty reduction strategy.

On August 17, 2010, the Prime Minister launched a “policy paper on the promotion of paddy production and rice exports” (see announcement). This is a good and promising example of a cluster approach to Cambodia's growth strategy.

Cambodia is an important but still small rice exporter. Cambodia has been an exporter of rice since 2004, but a large part of the exports was unprocessed (paddy) or even smuggled through the border. Yet Cambodia has abundant land and sits in a region that is both fertile for and in high demand of rice (see Chapter 1 of our report on growth).

So far the potential comparative advantage for rice was diluted by various costs, official (e.g. electricity) or unofficial (e.g. illegal check points). Poor coordination of public and private actors was also undermining the potential. For instance weak land titling systems and weak sanitary controls were a constraint that led to limited access to finance, itself contributing to limited value addition. However the significant increase in price in 2008 - and again a rebound in the past few weeks - has drastically changed the economics of the sector.

The new policy recognizes this new environment and promotes:

• coordination of various actors along the value chain, from the rice fields to the export market;
• shift from production increase to commercial agriculture; and
• recognition of the leading role of the private sector and the critical facilitating role of the State.

The policy includes a range of actions, from helping farmers to organize in associations and use better seeds, to improving irrigation systems, developing certification systems, strengthening logistics, and facilitating access to finance. Although I did not get a chance to consult Paul the Octopus as my colleague in Thailand did, the policy makes a strong case for the rapid development of rice exports in Cambodia.