Cambodian Economy: Charting the Course of a Brighter Future - A Survey of Progress, Problems and Prospects

7. Agricultural Economy

171 Chapter 7 Agricultural Economy Agriculture is fundamental to raising rural incomes, especially among the poor in rural communities. It accounted for 29.6% of the GDP in 2005. Given that 85% of the population is rural, 60% of the people make their living from agriculture and that 75% of the heads of disadvantaged families are farmers, development of this sector is crucial for sustained economic growth, poverty reduction, and development of the rural economy. The chart below compares Cambodia’s productivity in the major crops with neighboring countries. Overall there is scope for improving Cambodia’s productivity in rice and corn. Figure 7.1. Agricultural productivity (T/ha) Source: Ministry of Agriculture, Forestry and Fisheries (MAFF) The development of agriculture is central to RGC’s strategy to reduce poverty in rural communities, guarantee food security, and promote equitable and sustainable economic growth. While total production from the agriculture, fisheries, and forestry sector increased during 1998-2003, the share of the sector in GDP slumped from 43.7% in 1998 to only 29.6% in 2007, mainly due to the rapid growth of the industrial sector during the same period. 172 Figure 7.2. Agricultural growth in % Source: MAFF Growth in the agricultural sector has been slower than in industry and services. Moreover, economic growth during the last decade has been concentrated in only a few key urban based sectors such as garments, tourism, and construction. Trading, investments, and private sector development have also created more opportunities for urban rather than rural communities. As a consequence a considerable gap between urban centers and rural areas has emerged accompanied by differentiated growth performance between rural communities. There is a growing inequality between the rich and poor in Cambodia. Between 1994 and 2004, the per capita GDP of the wealthiest quintile of Cambodians had increased by 45%, compared to 8% for the poorest quintile who live mostly in rural areas and practice agriculture. Moreover, the rural poor depend upon access to natural and forest resources to meet their needs. Damage to and privatization of natural resources and land has exacerbated the inequalities. In order to have an appreciable impact on poverty reduction in the context of strong population growth, the agriculture sector should grow by 5 to 6% each year. Achieving this level of performance in agriculture is challenging. The potential for growth in agriculture through intensification and expansion of cultivated land has been impeded by the 173 absorptive capacity of the domestic market, the mediocre quality of exported products, and the lack of demand for agriculture products in the region. Agricultural products must also face fierce competition from imported goods and protectionist policies of other producing countries. Agriculture is dominated by rice growing and animal husbandry, which together account for approximately one third of agricultural production and nearly 27% of the GDP. Fisheries and forestry operations account for only 5% of the GDP, but the prospects for growth are bright. “The only course available to leaders who are truly concerned about improving the status of the greatest number is to help them increase the productivity of their food and commercial crops and raise the prices that farmers receive for them.” The Socio-economic Development Plan 1996-2000 envisaged the creation of jobs and income through agriculture and sustainable rural development within the framework of a market economy. This plan gave priority to five areas, namely: demining and improvement of farmland; refurbishment and expansion of the irrigation system, and improvement of water management; land use planning; strengthening input supplies; and support services, especially credit, and marketing, along with research and educational outreach. In 1999, the government announced the launch of a triennial plan intended to promote investment in order to increase agricultural production and the added value of this sector. Priorities included transportation and roads to improve access to markets and agro-food industry to increase added value. Over the last few years, Cambodia has also sought to produce and export high value rice to the profitable markets in Thailand and Viet Nam. Rice growing in Cambodia continues to be the determining factor in the growth of the agricultural sector, although often afflicted by floods and/or drought. Rice is the most important agricultural commodity for Cambodia and accounts for about a third of agricultural production. Rubber and other crops (such as jute) accounted for 24% of agricultural production, and livestock, 29%, while fisheries and forestry each accounted for less...