Battambang, the city at the epicentre of Cambodia’s agricultural heartland, has long struggled to reward its farmers with profits and compete in global markets. However, new logistics and economic development projects are driving a positive transformation that could see the city develop into a regional agro-industrial hub.

Phou Puy, president of the Battambang Chamber of Commerce, said logistics challenges have weighed heavily on local production costs and sapped the competitiveness of agricultural exports, including rice, cassava and maize.

“With limited transportation capacity, we are unable to develop our agricultural production and cannot compete with international markets because our transport fees greatly increase the cost of production,” he said.

Puy said despite the potential improvements they would offer, the province’s river and rail transport networks remain virtually inoperable. Currently the only means to get agricultural products from the province’s fields to local processing facilities and on to international border crossings and ports is through a network of poorly maintained roads – and with no direct access to the coast.

Nhiev Kol, general manager of logistics firm CMA CGM Cambodia, said that despite low farm-gate prices, transport costs add a heavy burden to the export competitiveness of Battambang’s agricultural products.

“Logistics costs are still high, and this prevents our agricultural products from competing in international markets,” he said, adding that due to better logistics infrastructure exporters in Thailand and Vietnam can offer cassava for $200 less per container than Cambodian producers.

“If cassava cannot be delivered to international ports cheaply it opens the door to cross-border smuggling, which reduces the value of our products,” he said.

According to Puy, recent investments in transportation infrastructure, such as Japanese government-funded upgrades to National Road 5, are helping to lower transport times and costs. They should also attract much-needed investment into agricultural processing facilities.

“An improved agricultural industry will guarantee better market access and value to the region’s farmers and, most importantly, will add value to our products by processing them here,” he said.

However, he said the government needs to sweeten the investment climate by offering potential investors tax exemptions or special concessions for large-scale agro-industrial projects.

“The government should promote the region to investors with tax exemptions and economic land concessions (ELCs) in order to accelerate economic growth in this remote region,” he said.

Ngoun Ratanak, deputy governor of Battambang province, said the government is implementing a 20-year master plan aimed at improving logistics and agricultural industry.

The 2010-2030 economic development plan aims at transforming Battambang into a regional hub for agro-industry, with products processed and given added value locally before being shipped to international markets.

“Battambang province will become a centre for commercial trade and agro-industry, according to the goals of the government’s master plan,” he said.

Ratanak said transportation improvements were crucial to the plan’s success.

As such, the government has commenced rehabilitation of the northern railway line, which connects Phnom Penh to Poipet via Battambang, after the project was abandoned by the Asian Development Bank.

It has also signed off on a project to build a direct road link from National Road 5 in neighbouring Pursat province to the coast, obviating the need for trucks leaving Battambang to travel to Phnom Penh on their way to Sihanoukville’s deepsea port.

“We are currently developing the infrastructure to create a shorter route that will reduce transportation costs,” Ratanak said.