Cambodia exported nearly $5 billion – or some 8.6 million tonnes – of agricultural products to 74 countries in 2022, a 7.8 per cent rise from the 7.9 million tonnes exported the previous year.
Data by the Ministry of Agriculture, Forestry, and Fisheries also showed that milled rice exports in 2022 were up 3.23 per cent year-on-year at 637,000 tonnes compared to 617,000 tonnes.
Additionally, non-rice agricultural products rose 11.6 per cent to 5.78 million tonnes from 5.01 million tonnes a year ago.
To be sure, Vietnam is among Cambodia’s largest export markets for raw agricultural products, such as rice, cashew nuts, rubber, cassava and corn.
Similarly in ASEAN, Vietnam is one of Cambodia’s largest trading partners with bilateral trade accounting for nearly 50 per cent of Cambodia’s overall trade in the region in the first half of 2023.
According to the General Department of Customs and Excise of Cambodia, total trade volume between Cambodia and Vietnam as of June 30, 2023 was worth more than $3.3 billion – a modest year-on-year increase of 1.3 per cent.
Of that, Cambodia exported goods amounting to more than $1.4 billion to Vietnam, marking an increase of nearly 22 per cent, while Cambodia imported goods valued $1.9 billion from Vietnam, which was down about 10 percent compared to the first half of 2022.
Recently, Vietnam said it would be increasing its imports from Cambodia. This brings questions as to the advantages and disadvantages relating to the Kingdom given its role as a large exporter of raw produce to Vietnam.
So should Cambodia consider domestic processing instead of exporting raw materials to Vietnam?
Penn Sovicheat, spokesperson for the Ministry of Commerce, acknowledged Cambodia’s significant export to Vietnam but assured that it did not mean Cambodia is entirely reliant on the Vietnamese market.
“Although we currently export more to the Vietnamese market, it does not mean we have no other markets besides Vietnam.
“Cambodia also sells to China, and ASEAN, RCEP and European markets based on the specific needs of different products,” he said.
He stressed that for neighbouring countries like Vietnam and Thailand, Cambodia cannot cut the traditional market relations that have been established by the people living in border areas.
“So it is important to understand the full dependence or inseparability of cross-border trade ties between the two countries,” he said
Provide more incentives
Cambodian Chamber of Commerce vice president Lim Heng said the trade between neighbouring countries could have positive and negative effects, and at times lead to hostility or resentment.
However, he noted, trade between Cambodia and Vietnam appeared to be accelerating faster than with Thailand because Vietnam and Cambodia have a cross-border trade agreement while there is not yet one with Thailand.
“I think it would be good to have a cross-border trade agreement with Thailand to prevent unilateral border closures that could disrupt economic flows between the two countries.
“Hence, I think it would be good to establish such an agreement with Thailand to mitigate any negative consequences,” he said.
Speaking on behalf of the private sector, Lim Heng recorded his preference to export more processed agricultural products rather than raw materials.
He said the government should provide more incentives for investment in local agricultural processing by developing policies for other agricultural products, similar to the cashew nut policy.
This could include opening up new markets, providing tax incentives to attract foreign investors and encouraging local investors to invest in local processing.
Weighing in on the Cambodia-Vietnam trade relationship, Sin Chanthy, president of the Cambodia Logistics Association, said while both countries shared a transportation relationship of more than 50 years from the port of Phnom Penh to Vietnam, there are still many challenges.
According to Chanthy, Vietnam has allegedly been “causing difficulties” for Cambodia when it comes to transporting goods through Vietnam to other markets, like China.
“Vietnam has a lot of complicated procedures that make it very difficult for us. Sometimes we need the government’s intervention, but even then, they make things difficult for our government as well,” he said.
The alleged difficulties have prompted investors who do not want any complications to instead sell their products to Vietnam.
“However, that does not mean that we prefer to sell our products to Vietnam, whether they are raw or processed,” he said.
When asked, Kong Vimean, spokesperson for the Ministry of Public Works and Transport, said he recognised the challenges investors faced with regards to agricultural products exports through Vietnam to China.
This was because his ministry has received calls for help from investors in the past, Vimean said, adding that they are coordinating efforts in line with investors’ needs to transport agricultural products to China from Cambodia by land via Laos.
The new trading route would start in Phnom Penh and pass through Kampong Cham, Tbong Khmum, Kratie and Stung Treng provinces before entering Laos. From there, the products would be transported by high-speed rail to China.
It is understood that some companies have reported that shipping goods through Thailand and Vietnam are allegedly expensive, with formalities that are cumbersome.
“If they transport their products through Laos, despite the additional distance, the shipping costs and procedures are cheaper and easier.
“So these companies have asked the ministry to facilitate this transport route,” Vimean said.
Ky Sereyvath, an economist with the Royal Academy of Cambodia, said the Vietnamese market is a good market for Cambodia in the short term but it could pose a challenge in the long run.
“A good market in the short term means that when our farmers are not yet able to process them [raw agricultural products], the Vietnamese market could [step in] to absorb our surplus agricultural products.
However, in the long run, this “convenience” can be counterproductive as Vietnamese buyers are fast buyers, making it difficult for local investors to compete with Vietnamese traders.
‘Lower production costs’
Explaining further, Sereyvath said if raw agricultural products are processed in Cambodia, locals would have to buy at a price that is lower than the cost Vietnamese traders purchase at, in order to make a profit.
This is a prerequisite because the production cost in Cambodia is much higher than in Vietnam.
Similarly, Vietnam can buy Cambodian agricultural products at a slightly higher price than local traders, before processing and selling them at a lower price, as their costs of production are lower than Cambodia’s.
“This hinders the growth of the processing industry in our country. Therefore, the government needs to find ways to prevent the outflow of agricultural products and promote processing activities within the country,” he said.
Having said that, Sereyvath suggested that stakeholders carefully examine any plan to establish an agriculture processing plant because it inadvertently makes Cambodia a competitor to Vietnam.
“To compete with Vietnam, we need to have lower production costs, which are dependent on several factors including electricity tariff, technology, minimum wage, fertilisers, pesticides and transportation costs,” he said.
‘Efforts to boost processing’
Responding to questions on ways to enhance local processing, spokesperson Sovicheat of the Ministry of Commerce, said Vietnam had in the past bought goods from Cambodia to process and sell in major markets.
“This does not mean [Cambodia] could not continue processing products and selling them to Vietnam.
“We are trying to process more of our agricultural products, such as cashew nuts, cassava and other crops,” he said.
In the meantime, Sovicheat said, the government is strengthening and expanding Cambodia’s presence in regional and global markets, stressing the country is not only reliant on markets next door.
“While there are efforts to boost processing within the country, businesses and enterprise owners should not merely wait for government assistance.
“But that does not mean the government does not care about farmers or producers,” he said.
He highlighted that various measures have been implemented by the government to support businesses and small and medium enterprises.
These include trade facilitation efforts by his ministry, the provision of grants or loans for capital, expansion or cash flow via the Agricultural and Rural Development Bank and SME Bank, as well as other adjustments, like the lowering of electricity tariffs.
The transformation of family farming business into agribusiness requires large-scale commercialisation, therefore a proper study is pertinent on market demand and direct implementation to reduce costs, such as fertiliser and labour.
“One cannot farm without tending to the soil; one cannot farm without devoting time; one cannot farm without taking care of the crops.
“This is what farmers need to bear in mind,” Sovicheat said.