Cambodia eyes Filipino market

On the sidelines of the recent Asean Summit in Indonesia, Prime Minister Hun Sen offered to sell rice at lower prices than competitors in a meeting with Filipino President Benigno Aquino, according to a Cambodian government aide. The offer was made in return for investment in Cambodia's under-developed agricultural sector, said Srey Thamrong, an adviser to Hun Sen, who was present during the talks in Jakarta on May 7.

''They expressed their desire to import rice,'' he said, adding that President Aquino told Hun Sen he would appoint a team of government officials to negotiate the arrangement.

The meeting followed a fact-finding mission by the Philippines National Food Authority to Phnom Penh early last month as part of the Aquino government's plans to diversify and reduce spending on rice imports that hit 2.25 million tonnes last year, the highest in the world.

''We are studying the possibility of Cambodia as an alternate source [of imports],'' NFA chief of staff Gilbert Lauengco told the Phnom Penh Post in April. Shipments would start ''at the very latest next year'', he added, although the exact amount and price the Philippines would pay Cambodia is yet to be agreed.

NFA Administrator Angelito Banayo told the Philippines' annual Rice Congress earlier this year the country paid an average US$630 per tonne for rice imports in 2010, or $1.42 billion overall, which represented more than 44% of the Philippines $3.47 billion trade deficit for the year.

This figure is set to fall dramatically in 2011 amid rising rice stocks and improved domestic production in the Philippines, according to government projections, providing tropical storms do not damage crops as has happened in the past in the typhoon-prone country. A Department of Agriculture report showed Philippines rice stocks reached a record 3.08 million tonnes by April 1, up 8% on the same period last year, while rice production climbed an annualised 16% in the first quarter to just over 4 million tonnes.

In response, the NFA has announced plans to slash rice imports to just 860,000 tonnes this year after the new Aquino government accused its predecessors of over stockpiling rice, a move likely to further diminish opportunities for the country's two main suppliers Vietnam and Thailand as Manila also looks to add Cambodia as a lower-cost alternative.

Reports in the Philippines said the government has agreed to purchase 200,000 tonnes from Vietnam this year as part of a rice-supply deal with Hanoi, while Thailand is set to be the main supplier of the country's reduced-tariffs programme with an agreement to ship 98,000 tonnes.

In recent years Thailand, the world's largest rice exporter, has struggled to compete with Vietnam to supply the grain to the Philippines after shipments of 500,000 tonnes in 2008 dwindled to 80,000 tonnes in 2009 before climbing again to more than 200,000 tonnes last year. In the past Thailand has said it hopes to ship half a million tonnes of rice per year to the Philippines.

Meanwhile, Vietnam is also set to lose out if the Philippines imports rice from Cambodia, say analysts. The Thai Rice Exporters Association estimates Cambodia supplies up to 1.5 million tonnes of paddy to Vietnam every year, which is then processed and shipped on as official export produce to markets including the Philippines. But during the talks in Jakarta, Mr Aquino reportedly told Hun Sen that Manila was ready to ''remove the middleman'' _ Vietnam _ resulting in lower import prices for the Philippines should Cambodia become equipped to process and ship the necessary quantities of rice, which is not yet the case.

''Cambodia's rice exports are mainly to Thailand and Vietnam at the moment and that is Cambodia's best option while the necessary downstream structures and logistics are not yet in place,'' said Korbsook Iamsuri, president of the Thai Rice Exporters Association.

It remains unclear whether the Philippines will meet Hun Sen's request for the necessary investment in Cambodia's underdeveloped agricultural industry, subject to a formal agreement.

Although Cambodia is currently the world's seventh-largest exporter, it still has a long way to go before it can turn a paddy surplus estimated at just under 4 million tonnes this year into processed rice of a quality ready for shipment given inadequate infrastructure, high electricity prices and a lack of financing options in the industry.

''Hence Cambodian rice is not yet a threat to [the] export markets of both Thailand and Vietnam,'' said Ms Korbsook.

Bangkok Post