Capital concerns for rice exports

Photo by: Sovan Philong
Lim Bun Heng, president of rice processor and exporter Loran Import-Export Co Ltd, speaks to The Post in his office last week.

via CAAI

Tuesday, 21 December 2010 20:20 Chun Sophal

Lim Bun Heng, president of rice processor and exporter Loran Import-Export Co, talks to Chun Sophal about the future of Cambodia’s rice exports.

What are the major constraints for Cambodia in exporting rice to international markets?

Processing the rice produced here for international export is very important for Cambodia as a major agricultural country.

However, we have seen that local rice growers and millers are likely to not have enough capital to buy the remaining rice during harvest season because most of them have insufficent capital.

Given this lack of capital, we are able to buy only a small quantity of [unhusked] rice compared with outside merchants from neighboring countries like Thailand and Vietnam.

I think that we would increase rice exports if we had more capital available to stock and process rice.

How much capital do you think rice exporters need in order to buy rice for processing and export?

I think that in order to export rice smoothly, we should have at least have US$10 million. Currently my company has assets such as land, buildings and rice mills worth about US$8 million and we have only US$3 million of cash capital to buy rice.

If we cannot increase our capital in the future, we will face a big problem to compete in exporting with our neighboring countries. I would like to see more intervention from the government in financing soft loans to all rice exporters so that we will be able to improve our rice business.

How many years do you think it will take before Cambodia can become one of the big rice exporters like Thailand and Vietnam?

I think it will take at least five more years to become as big as Vietnam and Thailand because now we are enhancing rice productivity and equipping ourselves with the most advanced rice processing machines.

I also want to highlight that we only do dry-season farming on 20 percent of total available farm land. But between 2011 and 2015, if we can do dry-season farming on even 50 to 60 percent of farm land, we would produce additional rice output of about 2 million tonnes.

What other strategies could we use to boost rice exports?

As a company, we are collaborating with farming communities and rice producers in major rice production provinces, forming them into groups to produce rice for us by lending them capital and rice seeds at a low interest rate.

We will further help provide our farmers with employment opportunities in the Kingdom and stop migration for risky jobs outside the country.

Also we know that rice farming is mostly done during the rainy season and we do the least farming during the dry season due to a lack of water. So if we can build more irrigation systems in the country, our farmers will be able to do farming many times per year instead of only once a year.

Therefore, if we can build more water supply resources in the future, we would be able to do farming for two or three times a year and we would get more rice yields compared with today’s output.

With a large quantity of rice production combined with our tax waiver opportunities, I think that Cambodian rice would be able to compete with rice from other countries because we can sell our rice at a lower price.

What do you see as the major markets for rice exports in the future?

Our firm has exported rice for nearly one year. During this year, we have mostly exported to the European market. Our smallest market is in Asia. We plan to export more into American markets next year, specifically, we hope to sell up to 4,000 tonnes per month because we have found a reliable business partner there.

The Cambodian government introduced a policy to promote rice productivity and exports in August. How has your company benefited from this policy?

We are motivated by the government’s policy, particularly its credit and business interventions. Last year we were granted credit worth US$200,000 from the government to buy rice and to process it for export. Even though it was a small amount, we appreciated receiving it.

Recently there has been criticism that Cambodia's difficulties in exporting more rice are because of the lack of irrigation systems. What do you think?

I agree with there being a lack of irrigation for the agricultural sector in Cambodia. But I think that it is not the major constraint, and the government has taken action towards constructing more irrigation in some major rice producing provinces.

What I think is a more important concern is that rice millers don’t have enough capital to stock and process rice, so they allow our rice to be exported to other countries without processing. This means we lose that raw material and additional income for Cambodia's economy.