1 Agrarian Structure In the context of Trade Integration Role of public and Private Investment Hang Chuon Naron, Secretary-General, Ministry of Economy and Finance, Kingdom of Cambodia 28 June 2005

2 Outline Brief overview; Characteristics of agricultural development The current role of public & private sectors Toward a new role of public & private sectors A case study on contract farming by SNEC and ADBi; Conclusion

3 Brief overview 60.2% employed in Agriculture (SES ) compare to about 70% in previous estimation. “New Labour Division”. Slow growth, due to weak investment, on average 3% for the last ten years: No significant technological transfer No significant investment Weak market linkages

4 Characteristics of Agricultural Development Cambodia experiences with (5 issues): Poor crop yields and productivity Inadequately funded and poorly managed support services and institutions Serious water resource management issues Long standing land-tenure problem Weak Market linkages to the production

5 The Responsibilities of public, corporate sectors and citizen The public sector services are responsible for: Collecting revenue, 12% of GDP; Allocating expenditure (10% of GDP in current, 3% of GDP in capital expenditure and 4-5% of GDP in external assistance); Ensuring high, pro-poor, gender-responsive growth with equity; The private sector: Social responsibility; Citizen:

6 The current role of public & private sectors The public sector services are not supportive: High investment in roads, education and health; But public services are poor to boost exports; Trade facilitation is a governance problem; Low level of extension services; The private sector is not supportive: Market failure; Contracts review show tax avoidance, high costs; Concessions leading to land grabbing and land speculation; land swaps benefiting private sector.

7 Toward a new role of public & private investments The public sector services to be improved: Sanitary and phyto-sanitary standards; Quality control, laboratory and certification; More investments in irrigation facilities; Single service window at border checkpoints. The vibrant private sector: Privatization of rubber plantations; Enforcement of concession contracts; Reduction of electricity fees.

8 Case Study “Rice Contract Farming in Cambodia” Supreme National Economic Council and the Asian Development Bank Institute. 2005

9 The Role of Private Sector in contract farming in Cambodia Private sector can: Improve crop yields and productivity Strongly link market to the production Improve farm management and technology Farmer’s income will increase e.g. (‘000 Riels) Contracted Farmers (CFs) Former CFsNever CFs Rice income per H.a Source: SNEC and ADBi, “Rice Contract Farming in Cambodia”

10 Issues of Private Sector The Same study found out that: The extends of coverage of private sector is limited due to weak contract enforcement and low investment Private sector is “Profit Maximizer”, thus excluding the smaller size farmers (poor) Challenges for both farmers and firms High transaction cost (transportation cost and informal fee) For firm: “unfair” competition (smugglers and traders create short term pressure)

11 Conclusion Cambodia needs a strong government to negotiate better terms of concession contracts and service delivery; A golden means to find a win-win situation for both public and private sectors; Government should increase more investments to support agricultural sector; Government to sustain infrastructures that enable orderly market development as well as strengthen institutions.

12 Conclusion (cont.) Ensure expansion of small-holder farming, but allow agri-business for social harmony; Improve local trade network to allow small holders to link up with global market; Make plantations work for agriculture; Requires full participation of all economic agents under a specific RULE OF LAW to make sure that market is available for all.

13 THANK YOU !!!