Voluntary Report - public distribution

**Date:** 8/4/2004

**GAIN Report Number:** CB4001

CB4001

**Cambodia**

**Agricultural Situation**

**Constraints and Opportunities for U.S. Agricultural Products**

**2004**

**Approved by:**

![](media/image1.wmf)Russ Nicely, Acting Agricultural Counselor

U.S. Embassy, Bangkok

**Prepared by:**

AgriSource Co., Ltd., Bangkok, Thailand

**Report Highlights:**

Cambodia, located between Thailand, Laos, and Vietnam in Southeast Asia,
is starting to develop after many years of economic and political
turmoil. Tourism is booming, mostly centered around the town of Siep
Reap, the location of the Angor Wat temple complex. Many opportunities
are available for U.S. agricultural products in this small but dynamic
market.

Includes PSD Changes: No

Includes Trade Matrix: No

Unscheduled Report

Bangkok \[TH1\]

\[CB\]

Table of Contents

  -------------------------------------------------------- ------------------
  Section I. Executive Summary                             [3]{.smallcaps}

  **[Section II. Socio-Economic Situation]{.smallcaps}**\  **6\
  Political Background\                                    **6\
  Demographic and Social Overview\                         6\
  Economic Overview\                                       6\
  U.S.-Cambodia Trade\                                     9\
  Government Reforms\                                      9\
  Investment\                                              10\
  Infrastructure\                                          10\
  Outlook                                                  11

  **[Section III. Food & Agricultural                      **12\
  Overview]{.smallcaps}**\                                 **12\
  Regional Perspective\                                    12\
  Agricultural Production Situation\                       22\
  Agricultural Production Inputs\                          24\
  Agricultural and Food Processing\                        24\
  Investment in Food & Agriculture\                        25\
  Commercial Food Distribution & Consumption\              29\
  Food Aid\                                                32\
  Agricultural & Trade Policy\                             35
  U.S.-Cambodia Agricultural Trade                         

  **[Section IV. Best Prospects for U.S. Food &            **38**\
  Agricultural Trade]{.smallcaps}**\                       38\
  Bulk Products\                                           39\
  Intermediate Products\                                   40
  Consumer-Oriented Products                               

  Section V. Key Contacts & Further Information            [41]{.smallcaps}

  Section VI. References                                   [42]{.smallcaps}
  -------------------------------------------------------- ------------------

**[Section I. Executive Summary\
]{.smallcaps}**

Cambodia's 13 million people have an average annual per capita income of
only \$266 and over 30% of the population lives in absolute poverty.
Malnutrition is widespread, particularly among children and women.
Despite these and many other problems, Cambodia's economy and society
has advanced in recent years. With a fast-growing tourism industry, a
small but growing urban consumer base, and more than 50% of the
country's population under 19 years old, new market opportunities are
continuing to emerge.

Cambodia ran a trade deficit of about \$150 million in 2001, a marked
improvement over the \$294 million deficit in 2000. Imports in 2001
totaled \$1.422 billion, while exports totaled \$1.268 billion. Garments
dominate Cambodia's exports, accounting for over \$1.12 billion in 2001,
or 88.3% of total exports. More than 70% of Cambodian garment exports go
to the United States. The industry's 200 factories now employ
approximately 188,000 workers, nearly 90% of whom are young women, and
pays wages of about \$13 million per month. Other important exports
include timber and wood products, latex and rubber, and fishery
products. Cambodia and Thailand are also cooperating to establish three
foreign trade and economic processing zones on the Thai border. These
are projected to create 100,000 jobs in the garment, fisheries, and
agricultural sectors. More than \$60 million in annual wages is
expected, which will directly or indirectly feed at least 500,000
people, about 5% of the country's population.

The Cambodian government is working hard to reform its system and
integrate trade as a key element of its national development, poverty
reduction, and technical assistance policies. Some of these changes have
yet to yield lasting benefit. Foreign direct investment dropped
substantially with the political instability of 1997 and was only \$104
million in 2000, the lowest since statistics began 1994. Poor
infrastructure, inappropriate allocation of garment quotas, "predation"
on projects by government officials, the regional financial crisis, and
other reasons caused the decline.

Cambodia's crop, livestock, and fisheries production ranks fourth or
fifth in total output compared to its ASEAN neighbors. Only in cassava
and ducks does Cambodia hold a third rank position. The country's
agricultural sector employs more than 75% of Cambodia\'s labor force,
yet agriculture's share of GDP decreased to just 32% in 2000. This trend
is a stronger indication of the rising garment and tourist industries
than it is of a decline in the agricultural sector, however.

Although well endowed with large tracts of arable land, ample rainfall,
and close proximity to major markets, Cambodia has failed to realize its
agricultural potential. This is reflected by the fact that much of the
domestic demand for vegetables is currently met by imports, mainly from
Vietnam and Thailand. The high volume of smuggled, unprocessed
agricultural products is also an indication of the country's
agricultural processing potential. The major factors limiting
agricultural production include unclear land ownership, poor irrigation
infrastructure, inadequate transportation, inefficient marketing, poor
farming practices, and inadequate public sector support services.

The country's food supply is still very much based on rice. Total rice
output, at over 4 million tons in 2001, was more than 20 times the
output of vegetables, the second most important food source, and more
than 30 times greater than the 121,000 mt of marine and fresh water fish
caught in 2000. Sugar cane, maize, cassava, soybeans and other oilseeds,
and sweet potatoes are also important cash or food crops.

The livestock system is still undeveloped and geared to local commercial
markets and subsistence, but there are signals that this sector is
starting to develop in certain areas. Increased poultry and swine
production around Phnom Penh is mainly due to CP Feedmill Cambodia, a
Thai investment. This mill's annual production is projected to expand to
40,000 mt in 2003. The operation aims to develop and integrate the local
feed ingredient and livestock industry by offering hybrid corn seed,
livestock breeding stock, animal health supplies, and other production
inputs direct to producers, or via local dealers. A few small millers
existed before CP's arrival, but these firms were unable to compete and
have now shut down. Animal feed from Thailand, estimated at about 400 mt
per month, is being smuggled into Cambodia and competes with CP's local
production. Domestic corn, as well as soybean meal and fish meal (both
imported via Vietnam) are important feed ingredients.

Fisheries are an important primary food resource for Cambodia, providing
about 70% of animal protein intake. Inland fisheries and aquaculture
accounted for over 100,000 mt of total fisheries production in 2000.
Marine fisheries are a lesser but still important resource. The
processed fish and seafood sector is still very much under-exploited,
but is likely to grow as free trade zones come on line in 2004 and
reforms take place in the government marketing system.

Cambodia's forests are some of the country's most abundant resources.
However, over the past 10-15 years, these resources have been exploited
heavily, usually with little or no control. The government has recently
enacted legislation to better manage and control this sector.

The agricultural and food processing sector is exceptionally weak and
lacking investment, so most food commodities are sold raw and
unprocessed. Much of the farm produce is either consumed locally or is
smuggled across the borders to Thailand or Vietnam where more value is
added. The main domestically processed products include milled rice;
smoked, dried, fermented, or salted fish; and fermented and
semi-processed vegetables and fruits. Large processing firms including
the CP animal feed plant, two flourmills, two breweries, and beverage
bottlers.

Wheat imports for flour milling are estimated to total at least 35,000
mt annually. The market for flour is reportedly growing about 10% per
year, mainly due to increased demand for baked goods from tourists and a
shift to more bread and bakery products consumption in urban areas.

The distribution system is surprisingly complex due to the wide range of
domestic and imported products traded, the many market channels, and the
fact that so many products are traded illegally. Traditional wet and dry
markets still play a dominant role in the domestic distribution system.
It is estimated that at least 80 to 90% of the food products traded in
the country are moving through this system.

The supermarket, grocery, and convenience store trade is quickly being
developed in Phnom Penh and other major cities to provide a wide range
of mainly imported products to middle and higher income urban consumers.
This segment of the market includes mainly expatriates and medium/upper
class Cambodian consumers, estimated to number well under 500,000 people
nationwide. In Phnom Penh alone, there are more than 25 grocery stores.
Retailers arrange their own imports and also source from
importer/distributors. Even though many U.S. products are carried, most
imports are from Thailand or Vietnam because they are cheaper and often
more suited to local consumer preferences. Cambodia's tourism industry
is booming. Inbound tourists arrivals are projected to increase to
600,000 in 2003. This is creating a prime, fast-growing market for many
imported food products used by hotels and restaurants. However, some
sources estimate that about 75% of each tourist dollar is currently
returned to Thailand or Vietnam to import fresh vegetables, fruit, meat,
processed foods, flowers, and other products required by hotels and
restaurants serving the tourist trade. About five or six
importers-distributors supply this market, either on a direct sale or
consignment basis. Some imported products, particularly U.S. brands,
also are imported via sea freight from Singapore and Malaysia. There are
good opportunities for U.S. food and agricultural products to capture a
greater share of this market.

There is still a significant need for food aid in Cambodia. The UN World
Food Program (WFP) is the largest organization involved and is the
largest recipient and distributor of U.S. food aid in the country. In
2001, WFP dispersed 51,600 mt of commodities (mainly rice, corn-soy
blend (CSB), sugar, and vegetable oils) worth approximately \$27 million
to over 1.7 million people. Of this amount, about 13,000 mt was rice
that was procured locally. The U.S. supplied nearly 47% of WFP's
products in 2001. At least another 55 NGO's and other organizations are
operating throughout the country on various small-scale food and
nutrition support programs.

USDA has also provided another \$6.4 million in food aid commodities to
Salesian Missions and HOPE Worldwide for use in Cambodia over the next
three years under the Food for Progress and Section 416(b) programs.
Both projects involved monetization of the commodities, either locally
or in Thailand.

The Cambodian government's priorities for agriculture and the rural
sector include:

-   Improving food security

-   Adding value to crop and livestock production

-   Increasing income opportunities for rural households

-   Strengthening participatory processes

-   Ensuring sustainable production, and

-   Increasing the availability of rural financial services

These priorities highlight the biggest challenge facing Cambodian
agriculture, which is to shift from a rice-based economy to one that is
more diversified and producing higher value products. Although
agriculture and rural development is critical to so many Cambodians,
more specific policies on agriculture are not well defined, mainly
because the Ministry of Agriculture is a relatively weak and under
funded agency. Recent ADB funding of \$35 million is intended to improve
this situation.

Cambodia's agricultural tariffs are relatively low. Tariffs now range
from 0 to 35%, as follows:

Luxury goods and finished products: 35%

Machinery and equipment: 15%

Raw materials: 7%

U.S.-Cambodia bilateral agricultural trade is very much in favor of the
U.S.. In 2001, the U.S. sold more than five times as many agricultural
products to Cambodia than were shipped to the U.S.. U.S. agricultural
exports in 2001 to Cambodia totaled over \$9 million. Rice and vegetable
oils dominate this trade, but are mainly for food aid uses. In the
commercial market, cotton, tobacco, and other intermediate products are
popular. Sugars, sweeteners, and beverage bases, snack food, red meats,
poultry, dairy products, and wine and beer are the main consumer
products imported. U.S. cotton, milling wheat, soybean meal and other
feed ingredients, swine breeding stock, and brewing industry ingredients
also have potential in this market.

**\
\
\
\
\
SECTION II. SOCIO-ECONOMIC SITUATION**

**2.1 Political Background**

Cambodia was once one of Southeast Asia's most stable and prosperous
countries, but its social, economic, and political institutions were
essentially destroyed by the Khmer Rouge regime from 1975-79 and
Vietnamese communist central planning that followed. The Cambodian
government officially adopted market economics in 1989, but it was not
until after the re-establishment of the constitutional monarchy in 1993
that the economy finally began to grow again. Today, Cambodia is one of
the world's poorest developing countries, but with a relatively fast
growing market economy.

**2.2 Demographic and Social Overview**

More than 85% of Cambodians live in rural areas and more than 50% of the
population is under 19 years old. The labor pool numbers over 6 million
people and is growing 3.4% annually. The reported unemployment level is
over 7%, but real figures are unknown. Due to this large supply of
labor, increasingly mechanized farming, and poorly developed rural
industry, there are few rural job opportunities for the 200,000 young
people who enter the labor force each year. Thus, urban migration is
becoming a major factor in Cambodia's few large cities.

The daily wage in the garment and footwear industries is currently
around \$2.00 per day, or about \$45 per month. There is no minimum wage
for any other industry, and daily wages for field workers and laborers
is typically \$1.00 per day. As a result of the widespread social
destruction and emigration during the Khmer Rouge period, overall
literacy today is 68% and adult literacy is only about 35%. There are
few well-educated or skilled workers available, and training and
education are in high demand.

These and other economic and demographic factors have made Cambodia's
health and nutrition situation one of the most critical in Asia.
Malnutrition is widespread, particularly among children and women.
International relief agencies estimate that 45% of Cambodian children
are chronically malnourished, 59% suffer from stunting, and 58% are
anemic. In addition, infection with human immunodeficiency virus (HIV),
tuberculosis (TB), and malaria are serious health problems throughout
the population.

**2.3 Economic Overview**

More than 30 years of conflict have left the government budget heavily
skewed toward defense and security expenditures, which together
accounted for 42.7% of official government spending in 1999. Freeing
budget resources to address poverty reduction is the overriding goal of
the government's reform program, and the government has committed to
significantly increase spending on the priority social sectors of
health, education, agriculture, and rural development. However, actual
budget disbursements in these sectors lag significantly, especially at
the provincial level. The government has also failed to achieve its
objective of allocating 65% of its budget to rural areas. The 2002
budget increases social spending and reduces the security budget; with
defense and security spending dropping to 2.72% of GDP and social
spending reaching 4.07%.

Cambodia's currency has been relatively stable since 1993, with the
exception of a sharp depreciation in 1997-98. The annual average
exchange rate for 2000 was 3,880 riels/US\$1. In 2001, the riel
depreciated approximately one%. The rate during 2002 has continued to
depreciate and is currently close to 4,000 riel/US\$1. Maintaining a
stable exchange rate is a priority of Cambodia's current IMF program.
The economy is heavily dollarized, with the U.S. dollar accounting for
an estimated 70% of the nation's total liquidity, equivalent to 15% of
GDP in 2000. As of November 2001, foreign currency deposits represented
some 95% of the total deposits in Cambodia's commercial banks (excluding
provincial branches of the central bank) and remain the main engine
behind broad money growth.

Cambodia's government revenues in recent years have totaled only about
12% of GDP, which is low even by developing country standards. This
severely limits public spending and investment and requires the
government to rely on foreign assistance for every aspect of national
reconstruction. Currently, this assistance totals over \$600 million per
year.

**2.4 International Trade and Policy**

**2.4.1 International Trade**

According to official figures, Cambodia ran an trade deficit of about
\$150 million in 2001, a marked improvement over the \$294 million
deficit in 2000. Imports in 2001 totaled \$1.422 billion, while exports
totaled \$1.268 billion. Major imports include petroleum products,
cement and other construction materials, vehicles, tobacco, and a broad
range of consumer products. Actual trade figures are unknown, mainly due
to the high levels of smuggling and unofficial trade along the country's
long and porous borders.

Garments dominate Cambodia's exports, accounting for over \$1.12 billion
in 2001, or 88.3%, of total exports. More than 70% of Cambodian garment
exports go to the United States. The garment industry has been
Cambodia's greatest success, growing from seven factories exporting \$4
million in 1994 to over 200 factories in 2002. The industry now employs
approximately 188,000 workers, nearly 90% of whom are young women, and
pays wages of about \$13 million per month. However, the garment
industry is threatened to lose its quotas in the U.S. market unless
Cambodia joins the WTO before December 2004.

Other important exports include timber and wood products, latex and
rubber, and fishery products.

Cambodia and Thailand are cooperating to establish three foreign trade
and economic processing zones on the Thai border. These are projected to
create 100,000 jobs in the garment, fisheries, and agricultural sectors.
More than \$60 million in annual wages is expected, which will directly
or indirectly feed at least 500,000 people, about 5% of the country's
population. Of highest priority is the site at Koh Kong in the south,
which is being established with over \$60 million in private investment
and should be operational in 2004. The second zone is at Poipet in the
northwest, which is expected to cost \$92 million to accommodate 280
factories. The third zone is near Pailin and is expected to require an
\$80 million investment. A previous effort to establish a trade zone at
the Port of Sihanoukville was not successful because of the site\'s poor
infrastructure and high-energy costs.

**2.4.2 Trade Policy**

The Cambodian government is working to integrate trade as a key element
of its national development and initiate "Pro-Poor" poverty reduction
and technical assistance policies. The Ministry of Commerce is
spearheading this "Integrated Framework", with support from the World
Bank, IMF, ITC, UNCTAD, UNDP, and WTO through various forms of technical
assistance. This approach is also intended to develop WTO-consistent
legislation and to ensure that further government reforms are in line
with WTO regulations. The following statement by Mr. Sok Siphana,
Secretary of State for Commerce, best describes the government's new
approach to trade and development policy.

> "We want trade to be a substitute for aid. In the past, Cambodia got
> sandwiched between Thailand and Vietnam. Now, with free trade, we
> could be the meat in the sandwich."

Mr. Sok Siphana, Secretary of State for Commerce

In this regard, is notable that Cambodia is one of only three countries
worldwide that was selected by international donors to implement this
approach to trade and development. This policy approach is supporting
Cambodia's chances of joining the WTO before the end of 2003. This would
make Cambodia the first least-developed country to join the WTO since it
was formed in 1995.

Most of the new policy efforts through the Integrated Framework are
concentrated on six key sectors of the economy: agriculture and
agro-processing, garments, fisheries, tourism, handicrafts, and labor
services.

Cambodia is a member of the Association of Southeast Asian Nations
(ASEAN) and the ASEAN Free Trade Area (AFTA), but it has not yet
completed its program to reduce tariffs as required by AFTA. Cambodia
views its membership and development within ASEAN as a stepping-stone to
freer trade, and particularly its accession to the WTO. The country
should also gain from ASEAN's deepening economic cooperation with its
dialogue partners, particularly Japan and China.

**2.4.3 Tariffs**

Compared with many countries, Cambodia's trade regime is relatively
open. The government eliminated all quantitative restrictions on trade
in 1994. In April 2001, tariffs were greatly simplified, with the number
of different rates falling from 12 to 4, and the top rate reduced from
120% to 35%. At the same time, excise taxes were raised on certain
products. This allowed government revenues to be maintained without
providing high protection to favored products. The widespread use of the
U.S. dollar for both domestic and international transactions also helps
to facilitate trade. This open trade regime has allowed the economy to
respond positively. Recent growth rates of 5% or more are good compared
to previous years.

Recent tariff reform has not, however, been enough to stimulate
widespread growth and reduce the high level of poverty. This is
partially because the current tariffs continue to offer effective
protection for some products and industries, with the highest rates
applying to processed goods and lowest rates to raw materials. As a
result, local producers who rely on some processed or semi-processed
goods must pay relatively higher tariffs on imports. This effectively
limits their ability to be competitive in both the domestic and
international markets. Investment laws allow exporters exemptions when
they import goods for re-export. However, this system is reported to be
unwieldy and involves high official and unofficial costs. Export taxes
also apply to several classes of goods, including live animals, fish,
and raw hides and skins. One intention of these taxes is to encourage
domestic processing, value-addition, and employment. However, in
practice this structure is helping vested interests, encouraging
unofficial trade, reducing returns to producers and domestic traders,
and generally limiting the development of these industries.

Reforms to many of these tariffs will likely come as Cambodia steps
closer to WTO membership, and particularly as it becomes more integrated
into AFTA. When Cambodia became a member of ASEAN in April 1999, it
committed to a gradual reduction in most tariff rates to 0-5% by 2010
for trade with other ASEAN members. Along with Laos, Myanmar, and
Vietnam, Cambodia committed to completely eliminate tariffs for nearly
all products by 2015. The other six ASEAN members will eliminate their
tariffs by 2010. Currently the decision making process with respect to
AFTA mainly hinges on the timing at which different classes of goods
will hit the 0-5% target.

**2.4.4 Customs**

Customs administration is reported to have improved in recent years, but
further training and reforms are badly needed. Setting up a low cost
formal trade facilitation system is difficult, especially given
Cambodia's long and porous borders with three neighbors. New
international trade arrangements, such as rules of origin requirements
and preferential trading arrangements in ASEAN, make the task even more
difficult. Limited resources also constrain the customs department in
carrying out its duties. Civil service salaries are low, physical
support facilities are inadequate, and management information systems
are poor. Thus, there are high levels of bribery and smuggling, port
clearance and processing times are erratic, and tariff collection is
significantly reduced.

**2.5 U.S.-Cambodia Trade**

Cambodia and the U.S. have full and expanding trade relations. The U.S.
lifted the embargo on trade with Cambodia on January 2, 1992 and Normal
Trade Relations (NTR) was established in 1996. The country is also
designated as a Least Developed Beneficiary Developing Country under the
U.S. Generalized System of Preferences (GSP) program.

Cambodia and the U.S. signed a three-year bilateral textile agreement in
1999 that provides export quotas for 12 categories of textile and
apparel products. The agreement allows quota increases based on
Cambodian labor conditions meeting international standards. The
agreement was recently extended for a further three years.

U.S. exports to Cambodia are likely to remain modest for the near term.
The U.S. exported approximately \$37.5 million worth of goods to
Cambodia in 1999, including used vehicles and spare parts, cigarettes,
and used clothing.

**2.6 Government Reforms**

In recent years, the Cambodian government has undertaken a comprehensive
program of economic reforms in addition to the reductions in tariffs
noted above. Key areas include fiscal reform, banking sector
restructuring, civil service reform and improved governance. These
efforts are highly detailed and watched closely by international donors.
Good governance has been a major theme of the process. Issues such as
civil service, judicial and legal reform, improving the quality of
public services, and reducing corruption are part of the process. There
are also calls for better forest management, military demobilization,
and revenue collection. Results have been mixed. Improvements in
governance are slow, but progress has been made in improving control of
the forestry sector.

Cambodia is also still in the process of developing a regulatory
framework that will assure the health and safety of individuals and
companies operating in a new free market economy. In 2000, the
government passed a law on quality of goods and services, comprising
food safety, consumer protection, and product liability. A new Land Law
was passed in 2001 and a new Forestry Law is under review. A Trademark
Law recently was enacted and a Business Organization Law and Copyright
Law is expected by the end of 2002.

Corruption, particularly within the judiciary, has been marked as the
single biggest deterrent to investment in Cambodia. Public sector
salaries range from \$15-30 per month for lower level officials, and
less than \$300 per month for high-ranking officials. As a result,
corruption is widespread and public officials make no effort to disguise
their wealth. Cambodian laws and regulations are not sufficient to
address the problem and are seldom enforced. The government indicated
its intent to pass new anti-corruption legislation by late 2001, but had
made no progress by early 2002.

2.7 Investment

A key objective of government reforms is to improve Cambodia's
attractiveness for foreign direct investment (FDI) and thus enhance
economic growth. Even though current investment laws provide for an open
and liberal foreign investment regime, FDI dropped substantially with
the political instability of 1997 and has yet to recover. Actual
investment was only \$104 million in 2000, which is the lowest since the
government began compiling statistics in 1994. Sources cite poor
infrastructure, inappropriate allocation of garment quotas, "predation"
on projects by government officials, and the regional financial crisis
as reasons for the decline. To make matters worse, international
financial institutions have recommended cuts in the current investment
incentives.

Tourism accounted for 39% of total investment in currently active
projects, followed by industry and garments, which totaled 38% from 1995
to 2001. Agricultural, food processing, and wood processing investments
accounted for only about 11% of all investments. The reliability of
these figures, however, is uncertain because government statistics
account for some projects that have not been started, or never fully
implemented as planned.

There are reportedly over 100 U.S. firms representing U.S. products and
services that are operating in Cambodia, many of them in the garment
industry. However, American investment in the country has been modest.
From 1995 through the first quarter of 2001, U.S. investment was
reported at only about \$37 million, just one% of total investment for
the period. Malaysia, Cambodia, and Taiwan accounted for 42%, 22%, and
8% of the total, respectively. Major non-U.S. foreign investors include
Asia Pacific Breweries (Singapore), Raffles International (Singapore),
Thakral Cambodia Industries (Singapore), Petronas Cambodia (Malaysia),
Charoen Pokphand (Thailand), and YTL (Malaysia).

Trade sources say that investment in 2002 has increased to some extent,
even though the amount of official investment pledged has declined. A
more stable political and economic situation is a key reason for this
reported expansion. However, there is still widespread frustration with
corruption and government predation on projects.

**2.8 Infrastructure\
**

Cambodia\'s infrastructure was almost completely destroyed during more
than 20 years of warfare, civil strife, and neglect, but it is slowly
being restored. Electrical power supply systems are gradually being
built, particularly to serve major cities. Annual electricity demand is
projected to increase more than five fold over the next 15 years. To
meet rising demand, the government plans to develop \$1 billion worth of
hydro, gas, and thermal generating plants in Phnom Penh, Sihanoukville,
Battambang, and other cities from 2000 to 2010, along with a nation-wide
transmission system. How this will be financed is still an open
question. Prices for power remain three to four times higher in rural
areas than in Phnom Penh, even though Phnom Penh rates, at \$.21 a
kilowatt-hour, are high compared to other Asian cities.

There is a huge need to repair the nation's highway system. The
government provides few funds for this, and is relying on foreign
assistance projects and multilateral loans for most of the effort.
Transport costs are extremely high and are a significant barrier to
increased trade, both domestically and internationally.

The Royal Railway of Cambodia is a state-run company. The system has two
lines, one linking Phnom Penh with the port of Sihanoukville, the other
connecting Phnom Penh, Pursat, Battambang, and Sisophon. The narrow-
guage track, engines, and rolling stock are all in poor condition and
the government is seeking aid to rebuild the system.

The river port of Phnom Penh has been upgraded, and Japan has provided
assistance to improve the cargo terminal at the deepwater port of
Sihanoukville. The upgrade will include a new pier designed for oil
tankers of up to 30,000 tons. Negotiations between the Cambodian and
Vietnamese governments to facilitate use of the Mekong River as a
shipping route to Phnom Penh, as was the case pre-1960, are underway.
Shipping charges in Cambodia are the highest in the region and four
times the cost for shipments of comparable size in Thailand.

Reliable fixed line and mobile telephone services are available in Phnom
Penh and most provincial cities, but are expensive compared to other
countries in the region. The Ministry of Posts and Telecommunications
(MPTC) provide fixed line service. Four systems compete for mobile
service. MPTC also controls Internet service in Cambodia.

**2.9 Outlook**

Cambodia's economy is growing and the government is working with
international donors to develop the economic, legal, and government
institutions to support an investment-friendly, open market economy.
This transformation should continue as long as political stability is
maintained and the government remains willing to implement reforms. In
spite of these positive steps, Cambodia will continue to face huge
challenges in providing basic products and social services to its
people.

**[Section III. Food & Agricultural Overview]{.smallcaps}**

**3.1 Regional Perspective**

Table 3 compares Cambodia's crop, livestock, and fisheries production
with its Indochina neighbors. For most of these products, the country
ranks fourth or fifth in total output. Only in cassava and ducks does
Cambodia hold a third rank position.

#  Table 3. Agricultural and Fisheries Production in Indochina

![](media/image7.wmf)

[\
]{.smallcaps}

**3.2 Agricultural Production Situation**

Cambodia's agricultural sector, which includes production of rice,
livestock, forestry, fisheries, and other crops, employs more than 75%
of Cambodia's labor force. According to Cambodian government statistics,
agriculture's share of GDP decreased from some 42% in 1996 to 32% in
2000. This trend is a stronger indication of the rising garment and
tourist industries than it is of a decline in the agricultural sector.

Cambodia has strong potential to grow as an agricultural supplier. The
country is endowed with large tracts of arable land and ample rainfall,
and is in close proximity to major ASEAN markets, particularly Thailand
and Vietnam. Up to now, however, Cambodia has failed to realize its
agricultural potential. This is reflected by the fact that much of the
domestic demand for vegetables is currently met by imports, mainly from
Vietnam and Thailand. The high volumes of smuggled, unprocessed
agricultural raw materials are also a strong indication of the potential
for greater agricultural processing within the country.

The major factors limiting agricultural production include unclear land
ownership, poor irrigation infrastructure, inadequate transportation,
inefficient marketing, poor farming practices, and inadequate public
sector support services. The Cambodian government, international donors,
and NGOs are well aware of these limitations, as well as agriculture's
growth potential and its important role in reducing rural poverty. As a
result, the sector is receiving high priority for support at many
levels. At the government level, the Ministry of Agriculture, Forestry,
and Fisheries has been designated as one of four priority ministries to
receive expanded budgets.

Cambodia's domestic crop production highlights the fact that the
country's food supply is still very much based on rice. In fact, total
rice output, at over 4 million tons in 2001, was more than 20 times the
output of vegetables, the second most important food source, and more
than 30 times greater than the 121,000 mt of marine and fresh water fish
caught in 2000. Sugar cane, maize, cassava, and sweet potatoes are also
important cash or food crops.

**3.2.1 Rice**

Rice is, by far, Cambodia's most important crop. For centuries, it has
been the mainstay of Cambodia's economy. Often supplemented with fish
and vegetables, rice is still the staple food source for most of the
population. Rice area, yields, and production from 1996-97 through
2000-01 - annual production has averaged 3.62 million tons. It is
notable that this is less than 15% of Thailand's total rice output and
about half of that country's annual export volume. A similar comparison
can be made with Vietnam.

Cambodia's harvested rice area has varied considerably from 1.86 million
hectares in 1996-97 to 2.08 million hectares in 1999-2000. With yields
generally stable at about 4.7 mt/hectare, it is this variation in
harvested area that has most affected output. Much of this variation is
due to severe flooding in some years. Economic simulations also indicate
that improving two key factors in rice production would have the
greatest impact on reducing poverty and cutting transaction costs. These
include a) improving paddy-to-milled rice yield and b) cutting
post-harvest losses.

Despite problems and inefficiencies in the industry, since 1995,
Cambodia has been technically self-sufficient in rice. Its annual output
of between 3.5 and 4 million MT of paddy over that period has been
adequate to meet local demand and still leave some rice available for
export. However, the factors noted above, plus poor distribution
facilities and illegal exports, have created pockets of short supply.

Due to the heavy flooding last year, the country had a deficit of about
45,000 mt of rice, all of which was supplied by foreign assistance. UN
World Food Program estimates average consumption of rice at 157
kg/capita per year in 2001.

Although rice is an important source of food for most of Cambodia's
households, an evolution is taking place in the industry. Rice is
gradually changing from a source of food security to a product for trade
and income. Producers and processors are increasingly focusing on
commercial opportunities, as well as diversifying rice production into
other crops and products.

Part of the reason for this is that Cambodia's rice industry is still
quite fragmented and the entire production, milling, and marketing
system has yet to recover from its destruction during the Khmer Rouge
period. At the local level, there is very little official control over
the trade. An indication of this is the fact that only in the past two
years has a Cambodian Rice Millers Association been formed, and this
group is still grappling with group-oriented issues. There are eight
provincial rice associations and a national federation. Similar efforts
are underway to develop greater organization in the rural electricity
and fisheries sectors.

The relative immaturity of Cambodia's rice industry allows much of the
crop to be exported unofficially, particularly from certain regions. For
this reason, most official trade figures are considered to be
inaccurate. The majority of rice exports are reported to be moving to
Thailand via Battambang and Poipet. Much of the rice moving into
Thailand is then re-exported. The majority of the product moving to
Vietnam is said to pass through Vietnam's Tay Ninh province and then
consumed domestically. Much of this export trade is of higher value
rice, such as fragrant varieties that are in high demand in other Asian
markets.

Rice trade, both for domestic and export markets, is mainly constrained
by poor transport infrastructure, which reflects road funding policies
and checkpoint charges. Export procedures also pose a significant tax on
rice trade. "Facilitation fees" must be paid to obtain export licenses
and these costs are reported be as much as \$14/ton. According to some
estimates, these and other unofficial costs are nearly double the
official costs of exporting.

**3.2.2 Vegetables and Sweet Potatoes**

In terms of total output, vegetables and sweet potatoes are Cambodia's
second and sixth ranked crops. Both are important local food crops for
much of the population, but domestic production is inadequate to meet
demand.

**Vegetables**

Annual cultivated area has averaged slightly less than 35,000 hectares
from 1995-2001. Total production during the period averaged 186,000 mt,
but ranged from only 128,000 mt in 1998 to 250,000 mt in 1996. Area and
production have stagnated since 1999, at only about 32,000 hectares and
185,000 mt.

Compared to other crops in Cambodia, vegetables are fairly widely grown
and at least some production is recorded in every province. The highest
production areas in 2001 were Kampong Cham (38,900 mt), Kandal (26,600
mt), Ta Keo (22,683 mt), Kampong Chhnang (18,000 mt), Kam Pot (18,000
mt), and Siem Reap (14,500 mt). Roughly 60% of vegetable production is
during the rainy season and spread across all provinces. Dry season
production is mainly concentrated in the largest producing provinces
noted above.

The main vegetable crops and their estimated percentage of total
production include cucumbers (12%), cabbage (9%), cauliflower (8%),
eggplant (7%), yardlong bean (6%), tomato (6%), Chinese cabbage (4%),
and mustard (4%).

Despite their widespread cultivation, vegetables produced in Cambodia
are still inadequate to meet demand. Trade sources estimate that 25-50%
of total vegetable sales are supplied by imports from Vietnam and
Thailand. The major imported vegetables imported include cabbage,
Chinese cabbage, cauliflower, beans, potatoes, capsicum, onion, shallots
and carrots. Most of these imports occur during the off-season when
Cambodian production is limited. Imports are projected to continue to
grow along with rising population and tourism.

Several production problems, including poor seed quality, limited pest
management, inadequate water resources, high local labor costs, the low
technical skills of farmers, and the high costs of fertilizer,
pesticides, and seed, are the main causes of this situation.

Studies by UNICEF and other researchers also indicate that vegetables
account for only 7 to 8% of farm income in just six key provinces. In
other provinces, vegetables provide less than 2% of farm income. On the
consumption side, only about 4 to 6% of household income is spent on
vegetables in Cambodia, as compared to 9% in Sri Lanka, 11% in China,
and over 22% in Taiwan.

In spite of these limitations, there are anecdotal reports of exports of
dried chilies to Thailand and processed tamarind and lemon grass to
Europe. In addition, small quantities of specialty products are being
supplied to the hotel trade, mainly in Siem Reap and Phnom Penh. These
ventures are indicators of future opportunities, but more effort must be
made at the production level, as well as on post-harvest factors such as
phyto-sanitary procedures, pesticide residues, improving processing and
distribution infrastructure, and marketing and promotion.

**Sweet Potato**

Sweet potato output totaled just over 28,000 mt in 2001. Nearly 40% of
the production was concentrated in Kampong Cham and Kam Pot provinces.
Svary Rieng, Siem Reap, and Kampong Chhnang are also relatively large
producing provinces. The rest of the production was distributed across
the other 19 provinces. Production is fairly even between the wet and
dry seasons, with about 60% produced during the rainy period. However,
roughly half of the 11,000 mt produced during the dry season came from
Kampong Cham.

Sweet potato is commercially traded in local and provincial markets
throughout the country, but virtually all the production is used in
homes for food. There are no known processing markets for this crop
other than backyard producers.

**3.2.3 Sugar Cane**

Sugar cane is Cambodia's third largest crop in terms of total tonnage.
Production in 2001 was over 164,000 tons from 7,700 hectares in all of
the rural provinces of the country. More than 70% of the output is from
the rainy season crop. Just three provinces, Kandal, Koh Kong, and
Kampong Cham, account for over 56% of total production. Pursat and Siem
Reap also produce sizable quantities. The remaining production is spread
across the country. Kandal and Kampong Cham provinces account for over
two-thirds of the dry season output, primarily due to the better water
resources in those provinces.

**3.2.4 Corn**

Cambodia's corn (maize) area and production has been generally
increasing since 1998. Annual cultivated area was steady at about
40-50,000 hectares from 1995-1998. Total production during the period
ranged from 42,000 to 65,000 mt. In 1999, area climbed to 60,000
hectares and production jumped to more than 95,000 tons. Area and
production continued to climb in 2000, with cultivated area pegged at
57,000 hectares and production at 156,000 tons. This represents an
increase of 26% in planted area and a 218% increase in production since
1998. Total maize production reported in 2001 was nearly 185,000 tons.

Most of Cambodia's corn production is feed-grade yellow corn grown in
the northwestern provinces, particularly Battambang. About 95% of the
total annual production is grown during the rainy season (May-October),
but about 5,000 mt is produced during the dry season, mainly in Kandal
and Siem Reap provinces.

Much of this corn is used in the Thai feed milling industry, which
currently requires about 4 million metric tons of corn annually to meet
demand in the livestock sector. Sources report that Thai companies that
provide improved seed and production financing to Cambodian dealers
essentially control a sizable share of Cambodia's corn production. These
dealers, in turn, provide support to the Cambodian corn producers. When
supplies of corn in Thailand are drawn down and prices advance (usually
during the second and third quarters of the calendar year), the Thai
companies then exert influence on border officials to allow the
Cambodian corn to enter Thailand. Most of this trade is unofficial, so
it is difficult to obtain accurate information about volume, values, and
prices.

**3.2.5 Cassava (Tapioca)**

Cassava is Cambodia's fifth largest crop in terms of total output.
Production in 2001 was reported by the Ministry of Agriculture at
148,000 tons from over 16,000 hectares in 24 provinces. Nearly 90% of
total production is from the rainy season crop. Kampong Cham province
accounts for over 28% of the total output. Battambang, Kampong Thom, Kam
Pot, and Kompong Speu combined to produce another 31% of the 2001 crop.
The remaining production is spread in relatively smaller volumes across
the country. Siem Reap, Kampong Thom, Pursat, and Take provinces account
for over 72% of the dry season output.

There is no sizable cassava processing industry in the country,
particularly for native or modified starch, so most of the production is
used for various foods domestically. Some sources report that Cambodian
starch is sometimes sold to buyers in Thailand for further processing.

**3.2.6 Soybeans and Other Oilseeds**

**Soybeans**

Cambodia's soybean production has averaged about 30,000 mt annually
since 1995. Planted area has ranged from 17,000 hectares in 1995 to a
high of 35,000 hectares in 1999, while production has varied from 17,000
mt in 1995 to 56,000 mt in 1997. Production in 2001-totaled 28,111 mt,
of which about 94% was grown in Kampong Cham province. Battambang
province in the northwest also produced about 1,500 mt.

Most of the country's soybean production is used domestically for food
consumption (sprouts, soybean drinks, and vegetable oil), but an
increasing amount is being used by the livestock feed industry,
particularly by CP Group in their feed mill near Phnom Penh. At this
point, no local crushers of any significance exist in the country, so
domestic production of soybean meal and oil is very small.

**Sesame**

According to the Ministry of Agriculture, sesame production in 2001
reached nearly 10,000 tons. Planted area was over 19,000 hectares. Over
98% of the production was during the rainy season (May-October). Kampong
Cham province produced over two-thirds of the output, but other central
region provinces are also significant producers of this crop.

Sesame is primarily used in local foods as whole seed, but a small
quantity is reportedly extracted for human consumption. No trade figures
are available for this crop, but some sources report that Cambodian
sesame is sometimes exported unofficially to Thailand and Vietnam.

**Castor Oil**

Castor seed is a relatively minor oilseed crop in Cambodia, with only
204,000 hectares cultivated in 2001. About 80% of the annual output is
produced during the rainy season, with most of the production
concentrated in Battambang province in the northwest. Dry season
production accounted for only about 20% of total output in 2001. Kandal
and Kampong Chhnang provinces accounted for this portion of the crop.

Castor is mainly an industrial oil crop and there are no reports of this
oil being used for human consumption in Cambodia. No trade figures are
available for this crop either, but sources suggest that the majority of
the production is exported unofficially to Thailand where there is a
sizable castor oil processing industry.

**Peanut**

Peanut production in 2001 was only about 7,500 mt from 10,400 hectares.
Although this crop can technically be considered an oilseed in most
countries, in Cambodia it is primarily traded in local markets and
consumed as a food crop in a wide variety of local dishes. Production in
2001 was concentrated in just four main agricultural provinces: Kampong
Cham (2,948 mt), Battambang (1,130 mt), Kandal (865 mt), and Prey Veng
(432 mt). Nearly three-quarters of the annual production occurs during
the rainy season, with only the provinces of Kandal, Kampong Cham, and
Prey Veng producing nearly 60% of the 2,700 mt produced during the dry
season.

**3.2.7 Mung Beans**

Mung bean is an important tropical pulse crop that is grown in lowlands
in rotation with rice, or in uplands in rotation with corn and other
grain crops. It is used in a wide range of local foods. Although there
is excellent market potential for this crop in many Asian regional
markets, Cambodia has yet to fully exploit these opportunities.
Production has been stagnant for several years and has averaged only
about 14,000 mt annually since 1996. According to the Ministry of
Agriculture, production in 2001 was about 15,000 tons from nearly 25,000
hectares. Nearly 75% of total production is during the rainy season.
Kampong Cham province accounts for about a quarter of total production.
Banteay Meanchey, Kampong Chhnang, and Battambang provinces are also
significant producers. The rest of the production is spread out across
the country. Kampong Cham, Battambang, and Banteay Meanchey account for
nearly all of the dry season output.

There are no confirmed reports of Cambodian mung beans being exported,
but the high levels of production in Battambang and Banteay Meanchey in
the northwest suggests that at least some of this crop is being shipped
across the border into Thailand, where market demand is quite high.

**3.2.8 Tobacco**

Tobacco ranks tenth in total crop production, but this crop is an
important revenue earner in certain provinces. Production in 2001 was
about 7,600 mt from a total harvested area of about 9,700 hectares.
Kampong Cham province produces almost 90% of the annual crop, with
Kratie, Kandal, Kampong Chhnang, and Prey Veng producing only small
amounts. Both domestic and foreign tobacco companies process Cambodia's
tobacco crop locally.

3.2.9 Fruit and Plantation Crops

Table 8 shows total area of local fruits and permanent crops in 2001
according to Ministry of Agriculture statistics. As in many of the other
Southeast Asian countries, coconut, bananas, jackfruit, longan, and
mango are the dominant tree fruits grown. Most of these crops are grown
throughout the country, but several key provinces dominate production.
These include Kandal, Kampong Cham, Siem Reap, and Kam Pot.

**Table 8. Fruit and Permanent Crops in 2001**

![](media/image9.wmf)\
During some seasons of the year, even these domestically grown fruits
are inadequate to meet local demand. Traders report that imported fruits
include oranges, apples, longan, lychee and durian. Many of these
imported fruits are brought in to supply the growing tourist trade, as
well as demand in Phnom Penh.

A number of plantation agriculture projects have also been started in
recent years to produce palm oil, rubber, cashew nuts, coffee, and tea.
Many of these projects have been started by foreign investors, or done
in partnership with well-connected Cambodians that are able to access
large tracts of land. For example, one local investor with apparent
political connections has recently invested in palm, cassava, and cattle
production on more than 11,000 hectares.

Sources noted that some of these recent investment projects,
particularly in palm and rubber, were really nothing more than schemes
to remove valuable timber before the rubber and palm were planted. The
ventures have also shown that Cambodia does not have the best
environment for palm, with yields only at only about 5 mt per hectare,
as compared to 15 mt per hectare in Malaysia.

Much of the rubber production was formerly done on state-owned
plantations, but this has now shifted to state-owned or private
companies. There are apparently moves to privatize these state-owned
plantations.

**3.2.10 Livestock**

Much like the rest of Cambodia's agricultural base, the country's
livestock system is still quite undeveloped and geared mainly to local
commercial markets, or subsistence. However, there are signals that this
sector is starting to develop, at least in certain key market areas.

Table 9 shows total estimated population of the four key livestock
species in Cambodia (cows, buffalos, pigs, and poultry) for 2000. (These
figures differ slightly from those shown in Table 2 due different data
sources used.) Three provinces, Kompong Cham, Prey Veng, and Takeo,
dominate production of these species. Svey Rieng, Kampot, and Kompong
Speu are also large production areas.

**\
Table 9.** ![](media/image10.wmf){width="4.291666666666667in"
height="1.238888888888889in"}**Livestock and Poultry in 2000**

**Poultry**

Poultry of course comprises the highest total number of livestock
animals, but most of this production is of local breeds that are used
for both meat and eggs. The local broiler and layer industry is still
quite small and concentrated nearby the main urban centers, so there are
few improved poultry breeds used in the commercial poultry business at
this time. However, several sources noted that the layer business in
particular has been expanding in recent years and that new opportunities
are emerging to supply that industry. Poultry production is common in
every province, but in 2000, it was most heavily concentrated in Prey
Veng (2.7 million head), Pursat (1.5 million), Svay Rieng (1.5 million),
Takeo (1.3 million), and Kompong Cham (1.2 million), Kampot (1.2
million), and Preah Vihar (1.1 million).

**Cattle and Buffalos**

Cattle and buffalo rank second in total numbers at nearly 3.7 million
head and are most heavily concentrated in Kompong Cham (434,000 head in
2000), Prey Veng (412,000), Kampot (375,000), Kompong Speu (317,000),
and Takeo (315,000). The beef and dairy industry is even less developed
than the poultry business, with virtually all of the national bovine
population being used for either draft purposes, home milk consumption,
or local meat supplies. Some sources noted that beef cattle ranches had
recently been developed by Cambodian and foreign investors. However,
these investments were set up mainly to provide 4 to 8 weeks of finish
feeding to local unimproved livestock breeds and then supply the low-end
beef market in Malaysia and other countries. The sources also reported
that these investments were not going very well due to a wide range of
problems. There is great potential and a huge need for dairy
development, but several local experts noted that this business would be
difficult under current conditions due to diseases, inadequate feed
supplies, and other problems noted above that plague most capital
investments.

**Pigs**

Pork is favored meat throughout the country and pigs are produced in
every province. Despite the widespread demand, pig production is still
relatively small, but this sector appears to be in the early stages of
taking off into a more intensive commercial business, particularly near
larger urban centers where purchasing power is expanding. According to
Ministry of Agriculture statistics, production is most heavily
concentrated in four key provinces near Phnom Penh, including Svay Rieng
(210,000 head in 2000), Takeo (208,000), Kompong Cham (206,000 head),
and Prey Veng (141,000). There is also significant production of pigs in
provinces with larger urban centers.

**3.2.11 Feed Milling and Livestock Production Inputs**

Much of the increased poultry and swine concentration around Phnom Penh
is surely due to Thailand's CP Group and their recent investments in CP
Feedmill Cambodia. This is a significant agribusiness investment project
for the country and is located just outside Phnom Penh. It includes a
large feedmill producing feed for fish, pigs, poultry, as well as
shrimp. The mill's production capacity is 60,000 mt per year. Current
production is only about 20,000 mt per year, but this is projected to
expand to 40,000 mt in 2003.

The operation aims to develop and integrate the local feed ingredient
and livestock industry by offering CP's hybrid corn seed, livestock
breeding stock, animal health supplies, and other production inputs
direct to producers, or via local dealers. CP has also undertaken a
large extension program aimed at supporting livestock production by
local small and medium scale pig and poultry farmers. Company staff,
comprised of both Thais and locally-trained Cambodians, are
concentrating heavily on the local swine industry and providing higher
quality feed supplies, genetics, and other inputs for this segment. Many
of these farms have only 20 or 30 sows. CP also expects to supply about
13,000 piglets and 2,000 gilts to local contract producers around Phnom
Penh and nearby provinces in 2002. Total gilt sales are projected to
expand to 5,000 in 2003. In mid-2002, CP had about 600 grandparent stock
gilts on their own local production and contract farms. These farms are
also used for training and extension. Based on this growing supply of
local improved stock, the company expects to sell 200,000 piglets within
two years. The company also has some contracting operations underway for
poultry and is looking to develop shrimp production opportunities at Koh
Kong and other coastal areas.

There are virtually no other local feed millers besides CP Group.
According to some sources, a few small millers did exist before CP's
arrival, but these firms were unable to compete and were soon forced to
shut down. There is also some animal feed from Thailand, totaling about
400 mt per month, that is being smuggled into Cambodia to compete with
CP's local production. Provincial or local dealers in eastern Thailand
who work with local dealers in Cambodia are reportedly arranging this.
Most of this product is coming into the country via Battambang and Siem
Reap. Overall, however, there is still very little competition in the
feedmilling industry and the market needs to grow more before it can
support further investments.

> **\
> **

**Feed milling Ingredients**

The bulk of CP Cambodia's rations are comprised of about 45-50% corn,
much of this is repurchased from farmers and dealers to whom CP supplies
hybrid corn seed. Corn seed sales have grown from only 14 mt in 1998 to
200 mt in 2002. Most of the corn is grown in Battambang and Banteay
Meanchay provinces near the Thai border in northwestern Cambodia and
then trucked to Phnom Penh. CP officials estimate that total corn volume
produced in the country for 2002 was about 250,000 mt, which is
significantly above the 185,000 mt reported by the Ministry of
Agriculture for 2001. As noted above, much of this corn is marketed in
Thailand rather than consumed in Cambodia. Another 20,000 mt of corn is
produced along the Cambodia-Vietnam border, but most of this moves to
Vietnam feed mills. CP Feedmill Cambodia uses a strong pricing strategy
to source their grain requirement, but inadequate drying and storage at
the farmer and local dealer level limits the quality and quantity that
can be purchased.

Soybean meal and fishmeal are also important ingredients in commercial
livestock feed. Although many farmers in central Cambodia are shifting
production to soybean, most of this local whole bean production appears
to be used for small-scale local market applications, or unofficially
exported. There is no local crusher to process the beans into meal.
Thus, only small volumes of whole beans are currently being used by the
local feed industry. There is some local production of fishmeal in
Kompong Som province on the coast, this meal is only about 55% protein
and quality is inconsistent.

Due to quality and supply constraints for local protein meals, CP
imports soybean meal and fishmeal from Vietnam. Their buyers report that
trucking time to their plant in Phnom Penh from loading points in
Vietnam is only about six hours, as compared to two days transit time
from Thailand. They project that in perhaps two or three years when the
volume of soybean and fishmeal demand grows large enough, CP can then
justify direct bulk shipments into Cambodia ports. Currently, however,
it is more convenient and less expensive to source these protein meals
from Vietnam.

High transportation costs are a critical constraint to Cambodia's
feedmilling and livestock industry. Traders report that the cost of
trucking corn from northwest Cambodia (Battambang area) to Phnom Penh is
about 700 baht per mt (\$16.28 per mt at 43 baht per 1 US dollar). This
is at least 2 or 3 times the cost to move corn the same distance in
Thailand, and roughly equivalent to the per ton cost of shipping bulk
grain from the U.S. to many Asian ports. Much of this high cost is due
to the two days transit time involved in shipping from Thailand or the
northwestern provinces. Traders report that the biggest problem is that
truck drivers don't want to drive at night on the road from the Thai
border to Phnom Penh due to bandits and often-poor road conditions.

The still-immature local dealer and production input distribution system
is also limiting the livestock sector and related industries. Several
sources noted that the dealer network is much smaller and less developed
than in Thailand. Sales to dealers are generally on a cash-only basis
and high levels of marketing and extension support are needed to train
both dealers and farmers.

Heavy disease pressure also limits livestock production in Cambodia. The
World Bank has reportedly been providing funding to some government
animal health labs. The EU is planning significant support to the
livestock sector through its aid program starting in 2003.\
\
**3.2.12 Fisheries and Aquaculture**

Fisheries are an important primary food resource for Cambodia, providing
about 70% of animal protein intake. Table 8 gives an overview of the
country's fisheries and aquaculture industry for 1999-2000. These
figures from the Ministry of Agriculture show that catches from inland
fisheries, in combination with aquaculture, accounted for over 100,000
mt of total fisheries production. Marine fisheries are also an important
resource, with 36,000 mt reported for the year.

As with rice, the fisheries industry is generally small-scale and not
well developed, mainly due to inadequate infrastructure and lack of
capital. There are also many limitations associated with marketing and
distribution of fishery products, as discussed further below.

The country's abundant capacity in inland fisheries is directly related
to Ton Le Sap Lake, the Ton Le Sap River, and the Mekong River.
Traditionally, seasonal changes between these vast water resources have
assured an abundant supply of fish, but those resources are now
threatened. Greater demands on the Mekong by other countries are the
primary threat, but pollution from agriculture, forest logging, and
greater population are also serious factors.

Cambodia's marine fisheries and processed seafood sector is very much
under-exploited at this stage, but this is likely to change quickly as
the free trade zone at Koh Kong in the south becomes operational in
2004. Along with this will come a new road link to Thailand, plus other
infrastructure and investment that will support the development of the
industry. Indeed, there are reports of many Thai and other investors who
are already positioning themselves to capitalize on the growth of
fisheries and aquaculture in this area.

Reports on the industry suggest that about 25% of the total fish catch
is exported, with around half of that shipped through illegal channels.
About 75% of fishery exports are reportedly delivered to Thailand as
fresh fish and seafood. There is a tax of 10% on all fishery exports; so
much of the trade is unofficial and sold at very low prices. Some of
this trade with Thailand is done between fishing vessels at sea, but a
large share is fresh water fish that is sold or smuggled across land
borders.

Heavy government involvement in almost every aspect of the market is
considered by many to be the major limitation to the industry's
development. A state-owned company, Kampuchea Fish Import and Export
Company (KAMFIMEX), has the sole authority to control fish exports, but
its primary activity is to provide and monitor fee-based licenses to
five traders who purchase fish locally and transport it across the
border to Thailand's Arranyaphatet fish market. Cambodian trucks are not
allowed into Thailand; so all of the product must be off-loaded,
re-iced, and then sent across the border in pushcarts. The reported
price for these exports is about 35 cents per kilo, about 20% of the
market price in Phnom Penh. There is also a reported "fee" to KAMFIMEX
of \$1.00 per kilo, plus other unofficial fees at the border.

Establishing a competitive and more market-based fisheries sector in
Cambodia will almost certainly require a fundamental change in the
current marketing and distribution system. More controls on fisheries
management are also needed to control over-fishing. Most of all, a
long-term strategic plan is needed for this fundamental sector of
Cambodia's economy.

**3.2.13 Forestry and Forest Products**

Cambodia's forests are some of the country's most abundant resources.
However, over the past 10-15 years, these resources have been exploited
heavily, usually with little or no control. In recent years, mainly due
to pressure from international donor agencies and NGO's, the Cambodian
government has enacted legislation to better manage and control this
sector. It remains to be seen whether or not these regulations have a
positive long-term effect in sustaining forest resources.

There are few reliable government statistics available on the forestry
or forest products industry, mainly due to the high levels of illegal
logging and trade that takes place along the borders with Thailand and
Vietnam. Ministry of Agriculture data shows that there were 11 companies
officially registered to exploit forest concessions in 2000. The
combined total of planned exploitation was about 270,000 cubic meters.
Of this, only about 78,000 cubic meters had been implemented in 2000. Of
this amount, over 74,000 cubic meters was listed as exported. Most of
these exports were in the form of veneer, as well as some plywood.

Local sawn wood usage for 2000 was stated at about 14,800 mt. Eight
companies, all of them included in the list of forest concessionaires,
were listed as suppliers of these local supplies. The biggest of these,
by far, was COLEXIM with nearly 10,400 cubic meters, or about 70% of the
total.

**3.3 Agricultural Production Inputs**

Due to the many years of economic decline under the Khmer Rouge and the
remaining high levels of poverty throughout rural areas, there is
enormous need for many types of equipment, such as water pumps and other
irrigation equipment; tractors and tilling equipment; rice milling,
drying, and packaging equipment. More and better fertilizers,
insecticides, seed, and other inputs are also needed. More effective
financial credit systems are also badly needed.

Transforming these needs into effective market demand and a more viable
agricultural system is a much more difficult problem, however. Low
spending power, poor transport infrastructure, high energy costs, weak
information systems, lingering distrust, particularly among buyers and
sellers, "less than 0" trust toward the government, and limited business
development skills are all key factors limiting the development of the
input supply system.

Despite these limitations, there several positive developments taking
place. First, NGOs and private agribusiness supply shops centered in
major cities and towns are already supplying many of the most important
inputs. This network is gradually growing into less populated areas.

Greater investment and cross-border trade (both official and unofficial)
by Thais, Vietnamese, and other nationalities is also serving to develop
the local dealer and supplier network. Although most of the existing
dealers are far less developed than in neighboring countries, they are
an important element in providing the marketing and information links
between input producers and farmers. These dealers also play an
important role in providing credit and local markets for produce.

Significant efforts are also being made to provide better seed to
producers, which has proven to be a key step in the economic development
of many other Asian countries. Section 4.2.11 above highlighted the fast
growth in demand for hybrid corn seed that is taking place. In addition,
the Australian-financed Agricultural Quality Improvement Project (AQIP)
is working on providing better quality rice and vegetable seed, as well
as extension support to farmers groups. Other work on rice is underway
at the Cambodia Agricultural Research and Development Institute in
cooperation with IRRI. AQIP staff report rice yield increases are
doubling in areas where better seed and management practices are being
established. The project distributed over 400 mt of seed in 2001 and has
a target to produce 600 mt soon. An important problem in distributing
better seed is the purchasing power of farmers to pay for it. For
example, high quality rice seed is priced at 1300 Riels per kg, while
lower quality commodity seed is only 300-400 Riels per kg. There is a
draft national seed strategy, but this has not yet been endorsed or made
into policy.

Almost all fertilizer is reportedly imported from Thailand or Vietnam,
so there are significant opportunities for bulk imports and local
blending and distribution. Here again, the problem is mainly in the
distribution, which is very difficult due to the poor infrastructure.
Another problem is the lack of good soil testing facilities to determine
fertilizer needs.

As noted above, the availability of affordable agricultural credit is a
critical limiting factor in Cambodian agriculture. Currently, less than
five% of commercial bank loans are for agricultural purposes. ACLEDA
Bank and the Rural Development Bank are reportedly the only financial
institutions lending to agriculture in a sizable way. ACLEDA bank began
in 1995 with \$150,000 as a micro-credit institution and is now a \$30
million bank. "Informal" lending is typically done at an interest rate
of 4% per month with no collateral. Most banks require at least three
times the loan amount for collateral, and few will lend to projects
based outside the three major cities.

**3.4 Agricultural and Food Processing**

Cambodia's agricultural and food-processing sector is exceptionally
weak, with most food commodities sold raw and unprocessed. Overall,
investment in processing industries has been meager. Much of the farm
produce is either consumed locally or is smuggled across the borders to
Thailand or Vietnam where value is added and it is sold at much higher
prices. Due to its limited ability to add value to agricultural
products, Cambodia is forced to import nearly all of its consumer goods,
and even key intermediate products, such as processed soybean meal and
fishmeal for the livestock feed industry.

The main domestically processed products include milled rice; smoked,
dried, fermented, or salted fish; and fermented and semi-processed
vegetables and fruits. Most of these products are processed in
small-scale businesses and sold in local markets. However, there are a
few large processing firms, including the CP animal feed plant discussed
above, as well as two flourmills.

Wheat imports for flour milling are estimated to total at least 35,000
mt annually. Asia Flour, the largest of the two flour mills based in
Phnom Penh, controls most of the market and currently imports two
shipments of 12-14,000 mt each year. The other mill uses about 40 mt per
day, so total annual demand is estimated at about 10,000 mt. Asia Flour
currently uses 100% Australian wheat. Shipments arrive at the mill by
Mekong river barge via Vietnam. The cost of this freight is about \$20
per mt. This is quite high, but the relatively small volumes on each
shipment do not justify direct imports. The market for flour is
reportedly growing about 10% per year, mainly due to increased demand
for baked goods from tourists and a shift to more bread and bakery
products consumption in urban areas.

With the exception of a few beverage bottlers, such as Angkor Brewery
(Angkor beer and Pepsi Cola) and Cambodia Brewery (Tiger beer), there
are no glass or tin canning factories in the country. This severely
limits the development of other smaller canners and bottlers.

Nestle recently mothballed a dairy products processing facility in Phnom
Penh, reportedly because it could not compete with the high volumes of
imported (usually smuggled) dairy products. Sources say that it was
difficult for Nestle to compete, even against its own products that were
coming into Cambodia from Thailand and Vietnam. This situation is a good
indicator of the myriad of difficulties facing food processors in
Cambodia.

Overall, poor infrastructure, a lack of adequate social and
institutional systems, and limited incomes and access to credit are the
main constraints to further development of the agricultural and food
processing industry. Cooperatives, trade associations, and other key
elements of the supply chain are also not well developed in Cambodia,
but the government is supporting activities to rebuild them.

**3.5 Investment in Food and Agriculture**

With the exception of a few notable examples discussed in the previous
section, investment in Cambodia's agricultural and food processing
sector has been extremely small in comparison to other ASEAN countries.

A total of 79 projects were approved, covering agriculture (24
projects), agro-industry (25), cattle (2), and plantations (28). No
breakdown or total investment value is provided from August 1, 1994
through January 1, 2001.

Persons interviewed for this assessment say that many of the 79 projects
were never implemented, mainly due to political, social, and economic
uncertainty prior to 1999. Other projects that did get implemented were
eventually stopped. The fact that only 17 of the 79 projects were
initiated in 1999 or later is an indicator of the lingering uncertainty
in Cambodia. Only 6 of the 17 recent projects involve agro-processing
and 11 are targeted toward basic agriculture or plantations. This is
another indication that investors are still reluctant to risk the
relatively larger investments required in plant and equipment for
agricultural and food processing.

**3.6 Commercial Food Distribution and Consumption**

**3.6.1 Distribution System**

Even though Cambodia's food and agricultural system is still quite
under-developed, the commercial distribution system is rather complex.
This is mainly due to the surprisingly wide range of domestic and
imported products being traded, as well as the many market channels in
which these products are moving. This complexity is compounded by the
fact that so many products are traded illegally via coastal ports and
along the land borders, particularly with Thailand and Vietnam.

Mass Market Distribution

Chart 7 provides an overall picture of the movement of most domestic
food and agricultural products, as well as some imported products, for
the main consumer market. Further details are provided below about the
import and distribution system for imported higher value food products.

For the mass market, there are essentially three widely used
distribution channels. Wholesalers import products and then sell the
goods to retailers. In some cases, the wholesalers provide delivery
service, credit, and other support to small shops or stands in the local
markets. Some sellers reach consumers through their own retail shops or
via vans traveling throughout the country. Other sellers who have no
retail shops sell directly to customers by advertising in newspapers,
and on radio and television.

![](media/image11.png){width="4.75in"
height="3.5069444444444446in"}Chart 7. Distribution System for Mass
Market Food and Agricultural Products

> **\
> **

**Traditional Markets**

Traditional wet and dry markets still play a dominant role in the
distribution of most food products that Cambodians use on a daily basis.
Consumers in Phnom Penh support at least five large markets of this
type, as well as dozens of other smaller neighborhood markets. Virtually
every other city and town throughout the country has a similar
traditional market system. It is estimated that at least 80 to 90% of
the food products traded in the country are moving through this system.

**Supermarkets, Grocery, and Convenience Stores**

The supermarket, grocery, and convenience store trade is quickly being
developed in Phnom Penh and other major cities to provide a wide range
of mainly imported products to middle and higher income urban consumers.
This segment of the market includes mainly expatriates and medium/upper
class Cambodian consumers, estimated to number well under 500,000 people
nationwide. Some of the leading supermarket groups in Phnom Penh say
that their total customer base is around 10,000, so the market is still
rather small in relation to the total population.

Despite the limited market base, this retail trade is diverse and
growing rather quickly. In Phnom Penh alone, there are more than 25
different stores, and more are opening every year. The most popular of
these are the Bayon Market group and the Lucky Market Group. The U.S.
oil company, Caltex, also operates at least six convenience store
outlets at its retail gas stations around Phnom Penh. Similar outlets
are opening in other cities.

Most of these retailers arrange their own imports for many of the
products they deal in, but some of the smaller stores also source
products from importer/distributors. Many U.S. brands are carried in
these stores, including Sunmaid and Ligo raisins, Ocean Spray, Del
Monte, Log Cabin, Hersheys, Post and Kellog cereals, Best Foods, etc.

Lucky Market Group is probably the leading supermarket group in the
country and is an interesting example of how the modern retail trade is
being developed in Cambodia. A Cambodian family, now with U.S.
citizenship, which returned to the country in 1993, manages the group.
They currently have two supermarkets in Phnom Penh. Other businesses in
the group include a bakery, a hamburger restaurant chain with six
outlets, a department store, and a purchasing center/warehouse. The
company also wholesales some products to hotels and restaurants, but
companies specializing in importation and distribution do most of that
business. The group currently imports several containers of food
products each month, including flour, French fries, meat, and a wide
range of high-value packaged food products. They purchase many of these
products directly from various U.S. food processors, and also work with
a consolidator on the U.S. west coast who supplies many of the high
value packaged products.

Even though many U.S. products are present in the market, most imports
sold in the retail food market are from Thailand or Vietnam because they
are cheaper and more suited to local consumer preferences. U.S. brands
often command a premium due to their higher perceived quality, but U.S.
products also are counterfeited more often than regional imports.

**Hotels and Restaurants**

The Cambodian tourism industry is considered to be one of the most
promising sectors of the economy, with great potential to generate both
foreign exchange and income. Trade contacts and media report that
business is booming. Hotels, restaurants, and other food outlets are
going up by the day in Siem Reap as the tourism industry around Angkhor
Wat races to meet growing demand. The Ministry of Tourism reported that
tourist arrivals in 2000 increased 26% over 1999. Actual arrivals in
2001 ended 16% higher than in 2000, despite the impact of September 11.
The number of inbound tourists is currently projected to increase to
600,000 in 2003. With Thailand's tourist arrivals now at about 10
million per year, Cambodia's tourism trade should continue to grow,
particularly as the regional travel industry becomes more integrated.

This development is creating a prime, fast-growing market for many
imported food products used by hotels and restaurants. Some sources
estimate that about 75% of each tourist dollar is currently returned to
Thailand or Vietnam to import fresh vegetables, fruit, meat, processed
foods, flowers, and other products required by hotels and restaurants
serving the tourist trade. About 90% of the tourists go directly to
visit Angkhor Wat in Siem Reap, so most of this trade is concentrated in
that city. Tourists also often visit Phnom Penh, so the combination of
expatriate and tourist trade creates significant hotel and restaurant
demand there as well. There are efforts to expand Cambodia's tourism
sector to other regions and sites, but it will be some time before any
significant change occurs.

In Siem Reap, there are presently seven upscale and luxury class hotels,
plus another two under construction. There are 25 to 30 mid-range
hotels, with another 20 currently under construction. At least 40 to 50
guesthouses (many still under construction or expanding) and at least 50
restaurants also serve foreigners visiting Siem Reap. The area is
estimated to have only half of the guest rooms needed to serve the
600,000 tourists expected to visit Angkhor in 2003. Visitors in 2002 are
expected to total 480,000, with only 3,000 rooms of all types available.
Officials project that at least 3,000 new hotel rooms will need to be
added to meet the growing demand, but the current rate of rooms being
added is only 600 per year.

In Phnom Penh, the tourism boom is not as strong, but there is some
spillover. Seven hotels and service apartments can be considered upscale
and deluxe class. Mid-range hotels and guesthouses number about 25 and
20, respectively. At least 70 restaurants also serve the expatriate and
tourist trade in Phnom Penh.

All of these businesses use imported products, but the primary market
for higher value imported foods and other products is among the 14 or
more upscale and luxury class hotels, as well as the more exclusive
restaurants.

About five or six importers-distributors supply this market, either on a
direct sale or consignment basis. Most of these importers are bringing
the products into Phnom Penh via road from Aranyaprathet-Poipet and
Battambang. Goods are sometimes distributed directly to Siem Reap, but
are usually sent there from Phnom Penh. When the new free trade zone
facilities open at Koh Kong near Thailand's Trat province, there will
likely be a shift of products coming to Phnom Penh from that direction.
This development is also expected to open up the market for both
smuggled and legal goods, so competition in the hotel and restaurant
supply business is likely to become even more intense. Some imported
products, particularly U.S. brands, are entering Cambodia via sea
freight from Singapore and Malaysia.

A survey of hotel purchasing managers and the importers-distributors
suggests that the trade is highly competitive and often difficult due to
problems with transportation, infrastructure, and Customs and Health
officials. Buyers in Siem Reap are supplied the same products as Phnom
Penh, but the competition tends to be more intense in Siem Reap due the
easier access to this market by importers and distributors based in
Thailand. Similarly, some distributors in southern Vietnam are also
supplying the Phnom Penh market. Generally, higher quality finished
goods are imported from Thailand, while raw materials and less valuable
goods come from Vietnam.

Importers and hotel purchasing managers report that most of the cheese
sold in this trade is from France, the Netherlands, and Australia.
Butter and other dairy products are usually sourced from New Zealand and
Australia. Thai dairy products are usually not competitive in this
market, but hydroponic and conventional vegetables from both Thailand
and Vietnam are popular and of high quality. Thai beer is also very
competitive. Fish is usually bought from local sources, although some of
the hotels say there is good demand for imported salmon and other
seafood from Norway.

Hotel buyers noted that good hygiene and top quality are the most
important factors in their meat buying decisions. For vegetables, the
most important factors are standard size, color, and taste. Price is
usually the key factor influencing purchases of fish and seafood. The
buyers report that most tourists prefer European-style and brands of
dairy products, particularly from France, but price considerations
usually force them to buy from Australia and New Zealand.

There are good opportunities for U.S. food and agricultural products to
capture a greater share of this market. For example, U.S. beef is highly
regarded, but it is not widely marketed due to strong competition from
Australian beef and lamb. U.S. French fries and potato products are also
in demand, but not widely distributed. These products deserve higher
levels of marketing and promotions in order to compete with similar
products from Australia and other origins. Similar opportunities exist
for U.S. wines. There is not a well-organized hotel and restaurant trade
association in Cambodia yet; so increased promotional efforts will need
to be done directly with the individual businesses.

The survey of this market also revealed that hotels would like to have
more seminars and training sessions to educate local staff about various
products and how to use them. With the hotel trade growing so quickly,
many of these local staff have only limited experience, so promotional
events tied with educational seminars may be well accepted.

**3.6.2 Consumer Profile**

With annual per capita GDP at only about \$266, the purchasing power of
the vast majority of Cambodians is still very low. Informal estimates of
annual per capita GDP in terms of purchasing power in the United States
is equivalent to around \$1,500. Thus, the vast majority of Cambodia's
12 million consumers exist on a traditional diet based on rice,
sometimes supplemented by fish, vegetables, and some meat. Basic
appliances, such as refrigerators and microwaves, which are taken for
granted in most other countries, still are out of reach for most
Cambodians, mainly because there is still no electricity in vast areas
of the countryside. Thus, it will be many years before most Cambodian
consumers have the purchasing power to afford high volumes of imported
products.

Despite this low purchasing power and population base, there is healthy
and growing demand for higher value imported food products in Cambodia.
Tourists, who are expected to number about 600,000 in 2002 and a similar
number consume the biggest volume of these products in 2003. Expatriates
living in the country, as well as middle and upper income consumers
serve as an important and growing base of demand. These consumers are
concentrated in the major cities and their number is estimated at not
more than 500,000 nationwide.

Interviews with hotel, restaurant, and supermarket purchasing managers
reveal that these tourists and higher end consumers have generally the
same basic preferences, in terms of diet, taste, products, brands,
seasonality, etc, as their counterparts in Thailand, and to some extent,
Vietnam. These consumers do not tend to be leaders in demanding or
creating new preferences, but instead usually react to changes in the
market environment as products, the overall economy, prices, market
access, and other factors dictate. Much of this situation is due to the
high levels of cross border trade, both legal and illegal, between
Cambodia and its neighbors, particularly with Thailand.

Higher end Cambodian and foreign consumers have shown their preference
for high value, good quality, and reasonably priced Western consumer
goods. As noted above, many U.S. products are now available in
supermarkets, convenience stores, and other retail outlets that are
emerging. Several of these U.S. brands are produced in the region by
Asian subsidiaries of U.S. companies, but a surprising number of
products is being imported directly from the U.S., or via Singapore,
Malaysia, Thailand, or other third countries. Direct imports to Cambodia
will surely rise in tandem with growth in market demand, particularly as
the spending power of local consumers increases.

There is also an increasing preference for Western-style fast food
restaurants in Phnom Penh and Siem Reap. These businesses currently are
copying fast food brands popular in other countries, mainly for
hamburgers, sandwiches, and chicken. The number of outlets is still low,
but the stores are popular, particularly among young Cambodians, as well
as foreigners.

**3.7 Food Aid**

Due to Cambodia's high numbers of impoverished people, poor rural
infrastructure, and flooding that occurs annually in many areas, there
is still a significant need for food aid. Poor nutrition is a "silent
emergency", with over 50% of the population having symptoms of stunted
growth due to poor nutrition.

The UN World Food Program is the largest organization involved in
meeting these food aid needs, and is by far the largest recipient and
distributor of U.S. food aid in the country. In addition to WFP, at
least 55 NGO's and other organizations are operating throughout the
country on various small-scale food and nutrition support programs.
These organizations range from large multi-national programs, such as
CARE and World Vision, to small local NGO's that operate only in certain
areas. Several of these organizations act as distributors for WFP food
aid. However, most concentrate their efforts on support to local food
and livestock production, nutrition education and training, and other
village-based programs.

**3.7.1 World Food Program**

During the 1980's and 90's when Cambodia was plagued with many more
political and economic problems than it has today, WFP was distributing
up to 100,000 mt of food aid annually. Current distribution is about
50,000 mt per year. During 2001, WFP dispersed a total of 51,600 mt of
commodities (mainly rice, corn-soy blend (CSB), sugar, and vegetable
oils) worth approximately \$27 million to over 1.7 million people. Of
this amount, about 13,000 mt was rice that was procured locally. The
volume of aid was up about 30% over the year before due to the heavy
need for aid following severe flooding in many areas of the country
during 2000. The U.S. supplied nearly 47% of WFP's products in 2001.
Other leading donors were Japan (34%) and the Netherlands (6%).

In 2002, the U.S. donated to WFP Cambodia another 26,700 mt of food aid
valued at \$17.5 million. Other key donations included Japan's
contribution of 20,000 mt of rice valued at \$7.6 million and 2,500 mt
of food aid from Australia valued at \$1.2 million.

WFP Cambodia officials say that they are trying to wean the people and
the government from food aid. They are targeting only areas where needs
are greatest, and eventually plan to close down their program in the
country. WFP officials also stated that certain branches of the
Cambodian government are trying to force more imports to commercial use
in order to generate more Customs revenue and other income. This is
quite a different situation from Laos, where the government is often
unwilling to even admit that they have a need for food aid. However,
international donors don't want WFP to leave Cambodia until at least
2005, mainly because of the large need that still exists, but also
because many bilateral aid programs and budgets are set up on multi-year
cycles.

WFP distributes food aid through three main programs:

1\. Protracted Relief and Recovery Operations, which provides support to
food insecure rural people through food-for-work programs, as well as to
various social institutions, such as orphanages, schools, and health
centers.

2\. Development Assistance, which provides supplemental feeding to
expecting and nursing mothers, as well as children under age five.

3\. Emergency Feeding in hard hit flood areas.

WFP Food Aid Distribution is as follows: FFW (71%), social sector (16%),
emergency (10%) and MCH (3%). WFP monitors food production and reserves,
particularly for rice, across the country. Floods are a big and growing
problem, mainly due to deforestation and changing weather patterns.

Currently, about 350 of Cambodia's 1,620 communes are considered
impoverished. (Administration in Cambodia is organized by province,
district, commune, and village. There are 13,000 villages, 1,620
communes and 181 districts nationwide.) Programs are oriented to work
with local rural development efforts, mainly to address the 2-3 months
of hunger gap each year (July-September). These programs are also
targeted at minimizing land sales, prostitution, child trafficking, and
other social problems. Increasingly, WFP is targeting more food-for-work
programs, especially on provincial and rural roads. Some of these
efforts are in conjunction with Asian Development Bank funding.

WFP has eight field offices, three sub-offices, and one main office in
Phnom Penh. Its warehouse capacity totals 30,000 mt of bagged grain
equivalent. About 200-250 trucks are used for distribution. All of these
are now privately contracted. In addition to its local staff, 80
Ministry of Rural Development staff also work with WFP on various food
aid efforts. The Ministry of Foreign Affairs is the primary Cambodian
government agency that WFP coordinates with, but the ministries of
Agriculture, Health, Education, and others are also important in program
coordination.

Rice is the most desired commodity by recipients of food aid.
Introduction of corn-soy blend (CSB) several years ago required a lot of
nutritional education and other support, but WFP says that people now
like this product and ask for it. However, these and other blended or
more perishable products require more care in storage, packaging, and
handling. For example, CSB is repacked after arrival from 25 kg bags to
3 kg bags for distribution. Oil, salt, and sugar are also repacked in a
similar manner. WFP must do most of this repacking operation itself
because the local packaging industry is not well developed.

WFP is interested to work with USDA and other organizations to develop
new programs, particularly school feeding and other activities that
complement their existing programs. One of the senior local officials
stated that, "If USDA or the U.S. government would guarantee the food
donation is available on a bilateral basis, then WFP would tailor-make a
project." It is important that the planning process be synchronized with
WFP's annual demand projections, which are usually set in October for
the following year.

**3.7.2 USDA Food Aid Programs**

In addition to U.S. government support to WFP, USDA Washington recently
provided food aid commodities to support two unique programs in
Cambodia.

**Salesian Missions**

The first of these was in May 2002 when 2,860 tons of agricultural
commodities valued at \$1.4 million were donated to Salesian Missions
for use in Cambodia under the Food for Progress program. Salesian
Missions is a private voluntary organization that will use the
commodities for direct feeding and local sales in Cambodia. The
agreement provides for approximately 1,720 metric tons of soybean oil,
230 tons soybeans and 910 tons of rice. Salesian Missions will arrange
for its counterpart local organization, the Don Bosco Foundation of
Cambodia, to distribute 910 tons of rice, 230 tons of soybeans and 120
tons of soybean oil over the course of one school year to 40 rural
elementary schools in the Poipet area. Approximately 22,000 students
will receive a lunch ration, which will provide 45% of their daily
requirements. Salesian Missions will also sell 1,600 tons of soybean oil
to fund activities to increase the sustainability and quality of
education and health in the school environment.

**HOPE Worldwide**

**\
**The second program was announced August 26, 2002, and provides for the
donation of 5,000 metric tons of U.S. nonfat dry milk valued at \$5
million to HOPE Worldwide, Ltd., for use in Cambodia under the Section
416(b) program. HOPE is a private voluntary organization that will
monetize the milk in Thailand and use the proceeds to support the
Sihanouk Hospital Center, a charitable hospital in Phnom Penh. The
proceeds will support training and health care services. Training will
be provided to 100 medical and hospital professionals in modern
treatment techniques. Proceeds will also fund health care services for
over 100,000 emergency and outpatient treatments, 425 land mine and war
victims, and 75,000 HIV/AIDS patients.

Monetization of the commodities donated for these projects was still
ongoing at the time of this report, but both projects are expected to
have a three-year duration. Although it is too early to judge the
success of these efforts, these projects are excellent examples of
creating new programs and uses for U.S. food aid that closely fits local
needs. USDA Bangkok could do much more to expand these kinds of efforts
that create jobs and reduce poverty. Future projects should also target
development of private sector food and agribusinesses and building
long-term commercial market demand, both for domestic and imported
products.\
\
\
**3.7.3 Monetization**

In order to expand the scope of food aid and other development programs
in Cambodia, particularly in a way that will reduce poverty and create
jobs in private sector food and agribusiness organizations, there is a
greater need for cash funding than for physical commodities.
Monetization, or selling, of donated commodities is a commonly accepted
means of generating these cash needs. However, the relatively small size
of the Cambodia's local market, or the desire to not disrupt domestic or
regional markets, often makes monetization a rather tricky process in
practice.

The two USDA programs cited above both involve monetization of U.S.
commodities. However, the nonfat dry milk powder program by HOPE
International, which involves selling the commodity in Thailand, has
reportedly generated complaints from Australia and New Zealand because
companies in both of these countries are leading commercial milk powder
suppliers to the Thai market. As a result, there are already signs that
future USDA programs for Cambodia may not allow the monetization of
nonfat dry milk in Thailand.

Domestic monetization also has its problems. Officers at one NGO
interviewed for this assessment said that they had recently tried to
monetize wheat flour donated from Canada. Their surveys indicated that
wheat flour had high acceptability and demand was strong, particularly
in urban areas. However, when the NGO attempted to sell the flour, local
millers and distributors colluded to limit the bid prices to only about
75% of the normal market level. The NGO then switched to canola oil,
which was sold in Vietnam at about 97% of its market value.

These examples show that commodities selected for monetization must be
carefully selected based on detailed studies of local and regional
market conditions, in combination with the demands of specific projects
the monetization is supporting. Based on this general assessment,
vegetable oils, wheat flour, and milk powder still appear to be
acceptable products for monetization, either directly in Cambodia on a
relatively small scale, or in third countries in bigger volumes.

Soybean meal also appears to have potential for monetization. Demand
within Cambodia is probably not more than 20,000 mt annually (based on
CP Cambodia's projected 2003 feed output of 40,000 mt x 50% ration
inclusion), and there may be logistical problems with this. However,
there may be opportunities for third country monetization in Thailand,
the Philippines, and Indonesia, where demand currently exceeds 3 million
tons annually. Much of this demand is filled by the U.S., so there is
less risk of disrupting markets for third country suppliers. Similar
third country monetization opportunities may exist in these countries
for whole soybeans.

Other U.S. bulk and intermediate commodities, such as rice, cotton, and
pulses, may also be suitable for monetization, but the markets and other
considerations must be studied more carefully.

**3.8 Agricultural and Trade Policy**

**3.8.1 Agricultural Policy**

As noted earlier, more than 80% of Cambodia's population lives in rural
areas and at least 35% of its people are living in poverty. Studies have
shown that the poor mainly reside in rural areas, and live in households
headed by farmers, or where the head was illiterate and had few years of
schooling. Therefore, policies that affect agriculture and prices,
especially for rice, have wide-reaching implications for the welfare of
millions of Cambodians.

The Cambodian government's priorities for agriculture and the rural
sector, as described in its most recent social and economic development
plan, include:

-   Improving food security

-   Adding value to crop and livestock production

-   Increasing income opportunities for rural households

-   Strengthening participatory processes

-   Ensuring sustainable production, and

-   Increasing the availability of rural financial services

The priorities highlight the biggest challenge facing Cambodian
agriculture, which is to shift from a rice-based economy to one that is
more diversified and producing higher value products. There is already
some shift in the direction of agribusiness and trade, particularly
along the border areas with Thailand and Vietnam, and with certain
investment projects.

Even though agriculture and rural development is so critical to so many
Cambodians, specific policies on agriculture are not well defined,
mainly because the Ministry of Agriculture is a relatively weak and
underfunded agency. However, sources interviewed for this assessment
report that ADB aims to provide \$35 million in funding for agricultural
policy development and reforms, particularly regarding fisheries,
marketing, privatization, agricultural research, and other areas. This
will be implemented through the Agricultural Sector Development Program
within the Ministry of Agriculture, but this work is not yet complete.
The initial phases of this work have already begun though.

ADB is also considering providing funds for investment, especially to
promote Small and Medium Size Enterprises and farmer groups that are
producing higher value products. This would be targeted mainly at
livestock, as well as crops other than rice. The livestock support
targets mainly cattle, hogs, and poultry, and possibly cattle for
export.

Recently, a Department of Agro-Business was created within the Ministry
of Agriculture. A relatively small department, with a director and less
then five staff, and specific activities of the department are still
unclear. Apparently, the intent is to set up offices at the provincial
level to develop and promote agribusiness systems.

Other bilateral programs aim to support development of agricultural
policies and programs. The EU aid program is reportedly considering
giving greater support to the livestock sector as part of its new 68
million Euro aid program that was recently announced. This will be over
three years and 30 million Euros will be targeted at rural development.
The EU's "Everything But Arms" trade policy, which was enacted in March
2002 and covers 47 countries, also allows Cambodian exports to enter the
EU tax-free.

**3.8.2 Agricultural Trade Policy and Market Access\
\
Trade Policy**

As noted in section 3.4 above, the Cambodian government has an extensive
program underway to integrate trade as a key element of its national
poverty reduction and technical assistance policies. The Ministry of
Commerce is spearheading this "Integrated Framework" approach, with
support from both multi-lateral and bilateral aid programs. The policy
is to be implemented throughout all government agencies, including the
Ministry of Agriculture. The approach is intended to develop
WTO-consistent policies and legislation and to ensure that further
government reforms are in line with WTO regulations. Agriculture and
agro-processing, fisheries, tourism, handicrafts, and labor services are
the six key sectors that are targeted in these new policy efforts.

The German Technical Cooperation agency (GTZ) is also supporting
agricultural trade policy development. Its objective is to elaborate a
national foreign trade strategy for selected countries. Projects include
the promotion of bio-pesticides and agricultural quality improvement.
The Japan aid agency, JICA, is providing support for human resource
development by trying identifying and forming industries with
comparative advantage.

UN ESCAP has also undertaken valuable support in trade facilitation at
the regional level. The Australian government also recently announced a
\$3.5 million sanitary and phytosanitary capacity building program for
ASEAN countries. This is intended to build the capacities of regional
countries to manage animal and plant pests and diseases within their own
borders, and to operate effective quarantine services at their own
borders.

**\
**

**Tariffs**

Cambodia's agricultural tariffs are relatively low. The entire tariff
structure was most recently reformed in 2001. High rates were reduced
from 120 per cent to 35 per cent and the system was simplified with the
number of tariff bands reduced from 12 down to 4. At the same time,
excise taxes were raised on certain products to maintain maintain
revenues. Tariffs now range from 0 to 35%, as follows:

> Luxury goods and finished products: 35%

Machinery and equipment: 15%

Raw materials 7%

Wine, cigarettes, and many high-valued packaged food items are
considered luxury goods and are taxed at the 35% rate, while meats,
fruits, tea, vegetable oil, sugar, and many other consumer goods are
assessed a tariff of 7%. Rather surprisingly, wheat flour is assessed at
the 35% rate. This duty protects local flour millers and causes bakers
and small food processors to pay more and pass the costs on to
consumers. Imports of some goods, including pork are banned.

Agricultural equipment and inputs are exempt from tariffs, but importers
must pay value-added tax (VAT) of 10%.

**\
Regulations and Other Market Access Issues**

Cambodia signed an agreement in 2000 with the Societe Generale de
Surveillance (SGS) to resume pre-shipment inspection under a
Comprehensive Import Supervision Scheme (CISS) program. Any imported
goods shipped in a container and which cost over US\$4,000 must undergo
pre-shipment inspection. Only cigarettes are exempt from inspection.

The actual amount of duty paid by importers is also affected by
valuation procedures. For many goods, the pre-shipment inspection
company proposes a value for duty based on fair market value. In other
cases, the Ministry of Economy and Finance sets minimum or fixed values
for duties and other taxes in order to reduce under-invoicing and
support the weak customs system. However, this system can be used to
provide high protection to local businesses and it is often leads to
increased corruption by government officials.

Cambodia is still in the process of developing a health and safety
regulatory framework, but in May 2000, the National Assembly passed a
law on quality of goods and services. This comprised food safety,
consumer protection, and product liability.

Import licenses for food and agricultural products have been abolished.

Grocery store buyers report that packaged food products must have
expiration dates printed on the packages. Printed product codes, which
are often used in place of specific expiration dates by U.S.
manufacturers, create problems for importers. If packages don't have
clear expiration dates on them, then importers must get pre-shipment
clearance from local officials, which is a difficult process.

Most importers say that corrupt and predatory government officials are
the main scourges they have to deal with in the business. Some sources
in the grocery trade said that they currently have to pay at least \$500
in extra fees for each container of product they import. These fees used
to be \$200 per container, but new requirements on bar codes and
expiration dates have pushed up the cost of doing business with
government officials. Similar problems exist for more basic agricultural
inputs and products. The livestock department within the Ministry of
Agriculture reportedly sets quotas for livestock imports, but this quota
system is said to be really nothing more than a means to collect
additional fees from importers.

Cambodia's Customs Department requires importers and exporters to
provide a bill of lading, packing list and invoice for all shipments.
Goods shipped through Vietnam via the Mekong River must also have a
transit license.

Cambodia Import Export Inspection and Fraud Repression Direction
(Camcontrol), a division within the Ministry of Commerce, is tasked with
standards setting. This agency does not currently have a mechanism to
involve industry participation in this process and there are currently
no industry standards-setting organizations operating in Cambodia. After
a law on product quality went into effect in May 2000, the Ministry now
requires foodstuffs to have a label including the following information:

-   Name of goods

-   Producer name and address

-   Source

-   Quantity

-   Batch number and production date

-   Expiration date

-   Ingredients

-   Directions for use (if necessary)

-   The license provided by any authorizing institution (if required for
    local products).

Camcontrol has confiscated some shipments it deemed not to be in
compliance, and is involved in programs to educate consumers about
hazardous products.

In February 2002, the Cambodian government passed a trademark law that
complies with the Agreement on Trade-Related Aspects of Intellectual
Property Rights (TRIPS). The law outlines penalties for trademark
violations and procedures for registering trademarks. Before this law
was in force, owners of trademarks were unable to seek relief in court.
The Ministry of Commerce took effective action in several cases since
1998, including infringements against well-known U.S. marks, including
Pizza Hut, Nike, Scotties, Marlboro, and Pringles. The Ministry has also
maintained an effective trademark registration system, registering more
than 10,000 trademarks (over 2,900 for U.S. companies) and has been
cooperative in preventing unauthorized individuals from registering U.S.
trademarks in Cambodia.

Cambodia currently has no anti-monopoly or anti-trust statutes.

**3.9 U.S.-Cambodia Agricultural Trade**

Due to the high level of smuggling and other unofficial trade, there is
little reliable data showing Cambodia's international agricultural
trade. U.S. trade figures provide some insights into agricultural trade
between the two countries, however.

Table 11 and Table 12 summarize U.S. exports and import trade of
agricultural, fish, and forestry products with Cambodia for 1997 through
August 2002. U.S. exports include a rather wide range of products, while
imports from Cambodia is much smaller than U.S. exports and is dominated
by rubber, value-added wood products, and various types of fish and
seafood.

**Table 11. U.S. Exports of Agricultural, Fish & Forestry Products to
Cambodia\
('000 US dollars)**

> ![](media/image13.wmf)

![](media/image15.wmf)Table 12. U.S. Imports of Agricultural, Fish &
Forestry Products to Cambodia ('000 US dollars)

Analysis of this data shows that bilateral agricultural trade between
the two countries is very much in favor of the U.S., with a positive and
strongly increasing net agricultural trade balance each year since 1999.
In 2001, the U.S. sold more than five times as many agricultural
products to Cambodia than were shipped to the U.S.

U.S. agricultural exports in 2001 to Cambodia totaled over \$9 million,
a sharp increase from 1998 when exports were less than \$1 million. Bulk
and intermediate products were the primary reason for the sharp increase
in 2000 and 2001. These products included mainly rice and various
vegetable oils, primarily for food aid use. In fact, if these two key
food aid commodities are excluded, U.S. exports for the period would
have been fairly stagnant at about \$2.5 million per year. The value of
bulk, intermediate, and consumer foods exports would have been more
balanced, however. Exports through August of 2002 were down 27% from the
previous year and did not include rice or oils. This provides further
evidence of the importance of U.S. food aid to total exports.

Table 13 shows the top 12 export commodities from the U.S. to Cambodia
for 1997-2001. As noted above, rice and vegetable oils dominate this
trade, mainly due to the high demand for these products for food aid
uses. In the commercial market, cotton, tobacco, and other intermediate
products showed the largest average value for the period. Sugars,
sweeteners, and beverage bases, snack food, red meats, poultry, dairy
products, and wine and beer also had fairly high and consistent values.

# 

# ![](media/image16.wmf){width="5.416666666666667in" height="2.525in"}Table 13. Top Export Commodities from U.S. to Cambodia, 1997-2001

**[Section IV. Best Prospects for U.S. Food and Agricultural
Trade]{.smallcaps}**

**4.1 Bulk Products**

As noted in the previous section, bulk products have shown the strongest
growth in U.S. exports to Cambodia in recent years. This trade has been
dominated by rice for food aid programs. Given Cambodia's continuing
need for food aid and the fact that the U.S. has been the largest donor
of that aid, it's likely that bulk product exports, particularly rice,
will remain strong. There are commercial opportunities for other bulk
products as well.

**4.1.1 Cotton\
**

Cotton exports are showing excellent growth, with total value climbing
from \$302 million in 2000 to over \$541 million in the first eight
months of 2002. Much of this growth is in tandem with the continued
strength of Cambodia's textile industry. As the country achieves WTO
status, and assuming that its quotas for the U.S. market are maintained,
there should be good opportunities for U.S. cotton as raw material.

Experts in this business say that, at present, only one weaving mill in
Cambodia is likely to be using U.S. cotton, probably to mix with China
and Pakitsan cotton to improve yarn quality. Most of the fabric used for
Cambodia garments is imported directly from China and Hong Kong. There
is little fabric production in Cambodia because the investment needed
for spinning and weaving is just too great and there is excess capacity
throughout China.

These experts also suggest that plans to support further U.S. cotton
exports to Cambodia should include promoting yarn made from U.S. cotton.
These promotions should be targeted at knit garment makers who are
vertically integrated to do both knitting and dyeing the fabric needed
for garment production. Most of these manufacturers tend to not spin
their own yarn, but instead buy the yarn from a spinner.

**\
4.1.2 Milling Wheat**

Wheat imports for flour milling are estimated to total at least 35,000
mt annually. Asia Flour, the largest of the two flour mills based in
Phnom Penh, controls most of the market and currently imports two
shipments of 12-14,000 mt each year. The other mill uses about 40 mt per
day, so total annual demand is estimated at about 10,000 mt. This trade
is currently dominated by Australian wheat that is imported into Vietnam
in large bulk shipments and then sent in smaller parcels of 12-14,000 mt
by Mekong river barge to Phnom Penh. Vietnam is now importing some U.S.
wheat, so this bodes well for U.S. wheat to enter Cambodia.

The leading flour miller, Asia Flour, reports that the market for flour
is growing about 10% per year, mainly due to increased demand for baked
goods from tourists and a shift to more bread and bakery products
consumption in urban areas. However, more marketing effort is needed to
convince the two flour millers to shift to U.S. wheat. Much more
promotion is also needed among the bakeries and other end users to
highlight the advantages of U.S. wheat in Cambodian foods.

**4.2 Intermediate Products**

**4.2.1 Vegetable Oils**

Various types of vegetable oils showed strong growth in U.S. exports in
2001, with over \$1.7 million shipped that year. The majority of this
was likely used in food aid programs. Although exports to date in 2002
are neglible, buyers report that the demand for oil in both the food aid
and commercial markets is sure to remain strong. They point to the fact
that Cambodia currently has no domestic oil crushing or refining
industry, as well as rising consumption among the general population and
in the hotel and restaurant trade. Some sources estimate total demand at
100,000 mt per year.

**4.2.2 Soybean Meal and Other Feed Ingredients**

Cambodia's feed milling industry is still small and dominated by only
one key player, CP Feedmill Cambodia. The mill's production capacity is
60,000 mt per year. Total output in 2002 was 20,000 mt and is projected
to double to 40,000 mt in 2003, with similar strong growth projected for
2004. Assuming 40% average inclusion of soybean meal in rations, current
demand is estimated at about 16,000 mt annually. This is very small in
relation to imports by Thailand and other regional countries, but still
reasonable given the early stage of the Cambodian market. CP currently
imports its soybean meal requirements from Vietnam, so some of its usage
may already be U.S. meal. The strong growth in feed demand presents new
opportunities for U.S. meal suppliers, as well as other U.S. feed
ingredient exporters, to differentiate their products and support the
development of Cambodia's livestock industry.

**4.2.3 Swine Breeding Stock\
**

CP Group is concentrating heavily on developing Cambodia's swine
industry and providing higher quality genetics to local producers. CP
currently has about 600 grandparent stock gilts on their own local
production and contract farms and expects to supply at least 13,000
piglets and 2,000-bred gilts to contract producers in 2002. Gilt sales
are projected to expand to 5,000 in 2003. Based on this growing supply
of local improved stock, the company expects to sell 200,000 piglets
within two years. Many of the business opportunities in this trade will
likely need to be channeled through CP, but other sales potential is
likely to emerge as the swine industry develops.

**4.2.4 Sugars, Sweeteners, and Beverage Bases**

These products have shown irregular but continued growth since 1997.
U.S. exports for the first eight months of 2002 were \$423,000 and
appear to be on track to exceed the \$502 million peak in 1999. Much of
this growth is attributed to rising demand for soft drinks, particularly
Pepsi and Coke, which are bottled locally. The rising tourist trade is
certainly a key driver of this rising demand.

**4.2.5 Hops, Malt, and Other Beer Industry Ingredients**

**\
**Suppliers of products to the two major breweries in Cambodia, Angkor
Brewery and Cambodia Brewery (Tiger beer), say that demand for beer is
strong and increasing 10% per year. The high volumes of smuggled
products from Thailand and Vietnam, as well as U.S. trade data, support
this view. Sources say that virtually 100% of the hops, malt, and other
ingredients used in beer production are currently imported in container
load quantities from Europe. Although details of this trade are not
clear, there appear to be opportunities for U.S. suppliers to capture a
share of this growing market.

**4.3 Consumer-Oriented Products**

Exports of U.S. consumer products to Cambodia, as a group, have not been
as large as bulk and intermediate products in recent years. However,
total demand has climbed steadily and official exports now total about
\$1 million per year. Total imports are significantly more due to the
high levels of smuggling of these products and the high values involved.
Moreover, this sector represents solid commercial business, as few of
these products are destined for food aid.

**4.3.1 Fresh Fruits**\
\
U.S. fresh fruit exports averaged over \$450,000 in 2000 and 2001, and
shipments in 2002 appear to be on track to exceed this level. Apples
comprise the bulk of these exports, but the booming tourism industry and
rising hotel and restaurant trade bodes well for other products as well.

**4.3.2 Wine & Beer**

The comments above concerning demand for beer industry ingredients
allude to the fast-growing market for imported wines and beer. There are
high volumes of smuggling in this trade as well, so total imports are
impossible to estimate. Hotel and restaurant buyers say that most of
their customers prefer European (mainly French) and Australian wines,
but there is potential for U.S. wines to capture a bigger share of the
market. U.S. exports of wine and beer to Cambodia have averaged over
\$115,000 annually since 2000 and shipments in 2002 appear likely to
exceed \$150,000. Although still small in total, there is healthy growth
in this market.

**4.3.3 Meats and Poultry**

Total official red meat and poultry exports to Cambodia from the U.S.
have totaled well under \$100,000 annually. The actual trade in products
from the U.S. and other origins is significantly more due to
transshipments from Thailand and smuggling. Several hotel buyers
interviewed for this assessment said that they would like to use more
U.S. beef if it is competitively priced with Australian beef.

**4.3.4 Other Consumer Products**

There is rising demand for a full range of high-value consumer food
products in the supermarket and food service trade. At least five
importer-distributors and two supermarket groups in Phnom Penh are
importing these products directly, with at least some of them sourcing
from the U.S., either directly or via Singapore and Malaysia. Cheeses,
snack foods, canned fruits and vegetables, and pet foods appear to be
fast moving items in the supermarket trade. There is also rising demand
for French fries and other potatoes used in the fast food business.

**[\
Section V.]{.smallcaps} [Key Contacts & Further
Information]{.smallcaps}**

The USDA Foreign Agricultural Service in Bangkok, Thailand maintains
up-to-date information covering food and agricultural import
opportunities in Thailand and would be pleased to assist in facilitating
U.S. exports and entry to the Thai market. Questions or comments
regarding this report should be directed to the Foreign Agricultural
Service in Bangkok at the following local or U.S. mailing address:

  ----------------------------------- -----------------------------------
  **Local:**\                         **U.S. Mail:**\
  Office of Agricultural Affairs\     Office of Agricultural Affairs\
  U.S. Embassy\                       U.S. Embassy\
  120-122 Wireless Road\              Box 41\
  Bangkok 10330\                      APO, AP 96546
  Tel. +662-205-5106\                 
  Fax. +662-255-2907\                 
  Email: <Agbangkok@fas.usda.gov>\    
  Home page: http://www.fas.usda.gov  

  ----------------------------------- -----------------------------------

# [VI. References]{.smallcaps}

ACIL Australia. Discussion paper, "Overview on AQIP (Agriculture Quality
Improvement Project) Intervention in Cambodia Agriculture, in Relation
to Possible Investment Opportunities for U.S. Entrepreneurs".

Cambodia Investment Board, Investment Projects by Sector Approved from
01-Aug-1994 through 01-Jan-2001.

Cambodia Daily newspaper, "Explosive Growth in Siem Reap Not Enough",
May 22, 2002.

CARE International, Cambodia 2002.

Council for the Development of Cambodia, Ministry of Commerce and
Ministry of Economy, Cambodia Investment and Trade 2002. Conference
paper, May 15-16, 2002, Phnom Penh.

FAO (Food and Agriculture Organization of the United Nations) and World
Food Programme, Crop and Food Supply Assessment Mission to Cambodia.
Special Report, December 2000.

Helen Keller International, An Overview of Nutrition Sector Activities
in Cambodia (Special Report), Cambodia.

Ministry of Agriculture, Foresry and Fisheries, Agricultural Statistics
2000-2001, Cambodia.

Ministry of Commerce, Implementing the Integrated Framework \"IF\" in
Cambodia, Phnom Penh.

Royal Government of Cambodia (2002), Cambodia: Integration and
Competiveness Study; A Pilot Study prepared under the Intergrated
Framework for Trade-Related Technical Assistance to Least-Developed
Countries (\"IF\"), Phnom Penh.

Srun Sokhom, Ministry of Agriculture, "Fruit and Vegetable Production in
Cambodia". Presentation provided by Agriculture Quality Improvement
Project, 2002.

U.S. Department of Agriculture, Washington, DC press release, USDA to
Donate Agricultural Commodities to Cambodia, May 2002.

U.S. Department of Agriculture, Washington, DC press release, USDA to
Donate Nonfat Dry Milk For Cambodia, Aug. 26, 2002.

U.S. Embassy, Phnom Penh, Economic/Commercial Section, 2002 Country
Commercial Guide Cambodia.

WFP Cambodia (UN World Food Programme), Newsletter; Edition I, Jan-Mar
2002, Phnom Penh, Cambodia.

Woranuj Maneerungsee, "Cambodia Enters Last Lap Toward Joining WTO",
Bangkok Post, November 18, 2002.

End of Report.