If you’ve been to Cambodia, a mere glimpse of the countryside would tell you that agriculture is a major occupation for much of the population. This has spelled positive transformation for the Kingdom. From 2004 to 2012, Cambodia underwent a poverty headcount decline that lifted four million people out of poverty—more than 60% of this poverty reduction directly resulted from agriculture developments.
Within this sector alone, manufacturing sub-sectors had supplied over 50,000 jobs for Cambodians in 2016. Agricultural land, manufacturing facilities, and other assets occupy a vital role in the country’s economic growth, especially towards food security and better standards of living in an increasingly competitive global economy.
There remains not just massive, but growing investment potential in this sector, especially with the government and private sector together coming up with more assistance programs for investors and entrepreneurs. In a nutshell, the Kingdom offers the following to would-be investors:
- Young and dynamic workforce. Cambodia boasts the highest labor force participation rate in Southeast Asia. “Labor force participation rate” implies the percentage of the total number of persons in the labor force to the population aged 15 years and older. This is a demographic advantage, as businesses can leverage this massive workforce for upscaling growth.
- Strategic location. As the Kingdom is at the heart of Southeast Asia, it is an ideal gateway to other countries. It directly borders Vietnam, Thailand, and Laos, and maintains good relations with major markets such as China.
- Investor-friendly policies. Corporate tax holidays of up to eight (8) years, duty-free import of capital goods, 100% foreign ownership of companies, and the establishment of 23 Special Economic Zones (SEZs) are among the policies in place that make Cambodia extremely investor-friendly.
The International Monetary Fund (IMF) also forecasted a 6.2% growth rate for Cambodia’s economy for 2023. It’s a given that Cambodia presents favorable business environment for investors seeking new opportunities in global real estate.
An Overview of Cambodia’s Agriculture Sector
The Kingdom is home to an array of agricultural products, but rice continues to be the nation’s major crop. It accounts for over 70% of agricultural areas and 50% of total sector output. A significant surplus is exported mainly to Europe.
Even in recent years, milestones like increased paddy production from 8 million tons to 10.9 million tons have been reached. Rice exports to ASEAN countries also increased by 9% between 2021 and 2022 with 103,058 tons shipped within the first two months of 2022 alone.
In early 2022, Prime Minister Hun Sen declared that the Royal Government would continue formulating and implementing strategies to modernize the agriculture sector. With the sector’s direct impact on food security and nutrition, he stressed the need for investment in supportive physical infrastructure, irrigation systems, transport, research and development, and information dissemination.
According to the Cambodia Chamber of Commerce, this prioritization poses an opportunity for local and foreign investors. The Kingdom has already been doing well in terms of maintaining a private sector-friendly policy environment and creating public assistance programs. Nevertheless, would-be investors would be wise to take note of the following challenges and reframe these very same things as opportunities:
- Limited access to technology: There still exists a difference in opportunity and access to resources among large- and small-farm owners. Bridging this existing gap would be a relevant action step for agricultural tech and research companies, enabling more farmers to achieve resilient food production.
- Climate change and sustainability: With global warming significantly impacting agriculture in Cambodia and all over the world, it’s adamant for all companies, whether directly involved in agriculture or not, to develop more eco-friendly and resilient strategies and technologies that will last through even dramatic shifts in climate and weather patterns. This would include proper use of pesticides and other chemicals which may lead to health risks and environmental degradation.
- Lack of rural infrastructure: Especially among far-flung provinces which ironically also hold a big percentage of agricultural product and potential in Cambodia, there is a lack of storage facilities and markets which affect farmers’ ability to sell their produce and access input. This leads to low productivity and limited expansion due to lack of facilities.
Addressing these challenges would be surefire ways of upgrading Cambodia’s global competitiveness, requiring a comprehensive approach encompassing research and development (R&D), financing, more policies to support small farmers, environmental safeguards, and investments in infrastructure.
How to Invest in Cambodian Agriculture
There has never been a better time to invest in Cambodian agriculture than in these years immediately following the pandemic, particularly for updated equipment, technical expertise, and reliable irrigation. Cambodia Investment Review tells of a rice plantation and milling company director who began renting out his farm properties to local farmers and giving them company shares. In turn, this resulted in stronger motivation to increase production and profits.
While rice largely comprises the Kingdom’s agricultural output, Cambodia also produces maize, peanuts, sesame, cassava, mung bean, soya bean, and sweet potato to both supplement rice consumption as well as supply foreign markets. The country is also a large producer of freshwater fish due to the Tonle Sap Lake and Mekong River. Livestock and poultry production also remains fairly stable.
Keeping these in mind, investors especially from overseas would arrive at the next question of whether it is possible to invest in agricultural land. Fortunately, the government allows this through concessions, or allowing a person or legal entity to occupy, utilize, and have rights over land property.
The International Institute of Sustainable Development (IISD) reports three types of land concessions in Cambodia: social, economic land, and use, development or exploitation concessions. It is Economic Land Concessions (ELCs) that permit beneficiaries to clear land for industrial or agricultural exploitation, given the following objectives:
- To develop intensive agricultural and industrial-agricultural activities requiring a high rate of initial capital investment;
- To achieve a specific set of agreements from the investor for developing land in an appropriate and ongoing manner based on a land use plan;
- To increase employment in rural areas within a framework of intensification and diversification of livelihood opportunities, and of natural resource management based on an ecologically appropriate system;
- To generate state, provincial, and communal revenue through economic land use with taxation and related service charges.
In order to be granted an ELC, the property must obtain or undergo:
- Classification and registration as state private land;
- A land use plan approved by the Provincial-Municipal State Land Management Committee;
- Environmental and social impact assessments;
- Solutions for resettlement issues (the contracting authority must ensure that there will be no involuntary resettlement by lawful landholders, and that access to private land will be respected);
- Consultations with local residents and authorities.
Given that there are plenty of opportunities and positive pricing trends when it comes to land in Cambodia, especially areas ripe for agricultural development, IPS Cambodia is confident of a healthy real estate sector and thus, a conducive setting for foreign investment.
Investing in agricultural land doubles as an investment in the nation’s food security and the well-being of its people. Foreign direct investment (FDI) has already been booming in the Kingdom, and agriculture in Cambodia has already proven itself as one of the best sectors for the country for real estate projects to promote economic development, maximize and protect the environment, and contribute to the well-being of local communities.
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