Rice sector wary of EU-Vietnam deal

Mon, 27 July 2015 ppp

May Kunmakara

A man unloads a bag of rice at an export warehouse in Phnom Penh earlier this month.Vireak Mai

As Vietnam and the European Union reach the final stages of negotiating a bilateral trade agreement, giving Cambodia’s neighbour zero-duty exports to the economic bloc, local rice millers and exporters have expressed concerns that the deal could hurt the Kingdom’s rice exports.

Under the proposed EU-Vietnam Bilateral Free Trade Agreement (EU-V BFTA), the EU may import around 76,000 tonnes of rice, mostly husked and milled, from Vietnam at zero per cent duty, according to Oryza, an industry publication.

Song Saran, president of Amru Rice (Cambodia), said he was concerned if the EU-V BFTA went ahead, as it would be a big crisis for the country’s rice industry.

“If it is materialises, Cambodia would face a big challenge to compete with Vietnam and it will lose certain market share,” Saran said.

“In the short-term, it will limit growth in rice production and exports, as well as the investment needed to improve the sector,” he added.

Currently, the European Union (EU) imports rice and other products duty-free from least developed countries under the Everything But Arms policy.

Of the rice exports to the EU under this policy, Cambodia accounts for 22 per cent and Myanmar three per cent.

If Cambodia needs to maintain or increase the 250,000 tonnes its exports to the EU, Saran said it will have to improve its production capacity and logistical services to remain competitive.

“To get more volume, we need better expanding our dryer, warehouse, and reserve funds to purchase the rice paddy during the harvest, “he said, “Farmers should improve paddy production yield and quality.”

To do so, Saran said, it require the government should provide financing to boost stocks of paddy for export with low interest, building the warehouse and dryer machines, reducing cost for farmers in rice farming, accessing the direct market among farmers and rice millers, and coordinating the cost reduction on transportation among trucking companies and exporters to explore the cost effective and reduce transportation fee.

According to David Vann, former senior advisor to Cambodia Rice Federation, starting this October the EU will import 10,000 tonnes of rice duty-free from Vietnam.

“That is just the start and once the 10,000 tonnes quota is achieved, they would renew and would add more tonnage subsequently.”

Given the size of Cambodia’s exports to the EU – which is 60 per cent or 172,000 tonnes according to the Ministry of Agriculture – Vann said that it would be advisable to expedite diversification to other markets.

Independent economist Srey Chanthy said that despite tough competition from Vietnam, Cambodia could increase focus on the niche market of fragrant rice – a variety that is not grown in Vietnam currently.

“Cambodia should also double efforts to diversify to other Asian markets, like China and Malaysia, and Africa, which remains a much untapped destination,” he said. “That would drive us to be less dependent on the EU market.”