Cambodia Organic Rice
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Cambodian Silk Products
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Noting that garment exports to the US and Europe account for 40 percent of the Kingdom’s total exports, the IMF warned of downside risks in the long-term on the back of a frail world economy. But all signs point to steady demand from these primary markets in early 2011 for Cambodia’s garment sector suggesting that revenues, at least, should continue rising.
From January 1, Cambodia will delight in zero tariffs on nearly all garment exports to the European Union following new legislation that reduces the onus on the exporting people to add value. The Garment Manufacturers Association of Cambodia has said the Kingdom will benefit hugely from this rule change given Cambodia’s reliance on imported raw materials, which below the existing rules meant zero-tariff status often did not apply.
That means in any case of the fiscal problems in Greece, Ireland, Spain and Portugal demand for Cambodian garments is probable to rise in these troubled economies as they will cost less and can better compete with other countries that already delight in tax breaks.
Meanwhile, although the US has struggled to reduce unemployment, recent data suggests the all-vital holiday shopping season this year will be better than probable despite the all-function economic malaise which in turn should add momentum going into next year.
The US National Retail Federation has forecast the holiday sales gain for November and December will be the largest since 2006, while November results for major clothing brands and retailers that import from Cambodia were generally solid.
Clothing brands including Abercrombie & Fitch as well as retailers such as Butt, JC Penney Co and Macy’s – all of which import from Cambodia – posted better-than-probable retail figures last month in the US. In theory, this should deplete inventories and in turn make demand for Cambodian garments going into next year.
Though, GMAC Secretary All-function Ken Loo said yesterday that this did not necessarily translate into a complete recovery for the sector or rising profits for garment factories in Cambodia given that this year’s recovery had not yet overtaken last year’s decline, while costs such as fabric were up 60 percent since January. Cotton costs had risen even quicker, he added.
While the rebound in orders at the start of the year was misleading in its scope in that it represented the start of the turnaround in Cambodia’s garment sector, and orders may slow down, the outlook in terms of demand remains honestly robust given opportunities in the US and Europe. So even if market diversification does continue to be a challenge, the critical factor determining the fortunes of Cambodia’s main export industry next year remains costs such as cotton, fabric and electricity.
Demand is of course vital but it won’t necessarily guarantee recovery and growth in real terms. The real test here is profit.
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Rice field in Cambodia
For five years now, Yin Narong has used a new method to plant rice. Instead of planting from the seeds of the previous year’s harvest, he buys new seeds from a local company.
The variation, he said in an interview, has been a boost in yield of 200 kilograms of rice each harvest on one-fifth a hectare.
“Now with pure seeds we get up to 900 kilograms,” the 52-year-ancient farmer in Phnom Penh’s Dangkor district said. He also uses less seeds, about 15 kilograms with the new method compared to 20 kilograms with the ancient.
A moderately low number of farmers like Yin Narong are using the new-seed method. But traditional habits persist, preventing the country from reaching its rice potential, agricultural economists say.
Many farmers still use rice seeds from the previous harvest to replant their paddies, instead of buying prime, new seeds from companies. Agricultural experts say the use of “pure” seeds can boost yields up to 20 percent.
“It is a challenge for Cambodia as the farmers still use their seeds saved for generations,” Nov Seiha, research manager for the Economic Institute of Cambodia, said. “Sometimes, the genes of the seeds have already died out.”
The old practice earnings that Cambodians harvest less rice per hectare than their regional neighbors.
A typical Cambodia harvest yields 2.6 tons per hectares, compared to 2.8 tons in Thailand, 3.5 tons in Laos and 4.9 tons in Vietnam, according to government statistics.
With more than 2.7 million hectares of cultivatable land, agriculture experts hope new methods and seeds can help the country reach a goal of 1 million tons of annual rice export by 2015.
The rice seed industry, but, ruins in a nascent stage. Cambodia has only one seed company. By comparison, Thailand has 85.
Cambodia’s company, Aquip Seed Co., Ltd., sells 2,600 tons or rice seeds annually to about 160,000 households, according to research by the Cambodian Economic Institute. In a report, the institute criticized the domestic seed sector as “backward” and “worried to modernize.”
The Ministry of Agriculture, which is charged in part with improving the sector, owns 49 percent of the company.
But company officials insist they are not interested in a monopoly.
“We need newcomers to boost demand in our country,” said Kong Vitank, chief executive of the company. “Then it also opens equal competition in the seed business.”
Ouk Makara, director of the ministry’s Cambodian Agricultural Research and Development Institute, said the ministry has “no authority” to maintain a monopoly.
“Our farmers have small plots of land, so they are not very interested in the company’s seeds,” he said.
Meanwhile, the government continues its efforts to improve the rice trade. It has introduced 10 varieties of rice paddy for farmers to grow this season, including rice that is well loved in foreign markets.
Yong Saingkoma, resident of the Cambodian Center for Study and Development in Agriculture, said if farmers do not want to buy new seeds each season, they can use their own seeds more effectively by choosing the right ones to plant.
“The starting point is to make sure farmers across the country know how to purify their seeds for the next growing seasons,” he said
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