Validation Workshop on Draft Report of the Assessment on Benefits of Rice Contract Farming Report

On 30 March 2021, the NGO Forum on Cambodia (NGOF) co-organized with CDRI to host online meeting on Validation Workshop on Draft Report of the Assessment on Benefits of Rice Contract Farming Report. There were 72 participants from Department of Agro-industry (MAFF), Ministry of Women Affairs (MoWA), PDAFF from Kampong Thom and Preah Vihear, University, Banking, Private sector-Rice Company, Agriculture cooperative, Development Partners and INGOs and Agriculture Working Group members to joined this online meeting.

Keynote Address by Dr. Tek Vannara – Executive Director of The NGO Forum on Cambodia

I am on behalf of the Civil Society Technical Working Group on Agriculture, that has been recently renamed from Civil Society Food Safety and Security Network, facilitated by the NGO Forum on Cambodia. We have collaborated with Cambodia Development Research Institute (CDRI) under the funding from Oxfam, Diakonia and HEKS to design and commission this study as presented today in this validation workshop. The objectives of the workshop today are to 1) share the finding of the study, and 2) to review the final draft of the study by the independent consultant and collect all inputs from all participants for the better report prior to official launching later. He emphasized that there are many other informal contracts which have not been recorded. In order to increase the export of rice, Cambodian government has issued the Sub-Decree no. 36 on Contract Farming in 2011 and will develop and draft law very soon. For instance, MAFF has also issued the Decision No. 130 on Establishing the Preparation Committee to draft the law on agricultural products based on contract farming on 24 March 2020. Within this time, Civil Society, particularly the Civil Society Technical Working Group on Agriculture shall pay more attention and be ready to provide inputs and comments based on the actual experiences. The report today also serves as information gathering for such policy development and further decision-making to assure the sustainability, especially the fair and equitable benefit-sharing for all actors in the contract farming value chain.

Keynote Address by Dr. Lonn Pichdara CDRI Research Fellow and Director of Center for Natural Resource and Environment

He said that CDRI has conducted similar studies with countries in the Mekong Region – China, Thailand and Vietnam under the fund of Mekong-Lancang through Ministry of Foreign Affairs. The findings have proved that contract farming practices in the region have provided tremendous benefits to local communities and agricultural cooperatives (ACs) for instance, definite market and prices, access to more technical training and capacity building and human resources, access to better seeds for ACs, and also access to low-interest financial loans for further investment. As mentioned in the early by Dr. Tek Vannara, the objectives of this validation workshop are to share the findings from the study and to invite comments and feedbacks in order to improve the quality of the report that will serve as an input for relevant ministries to inspire further practices of contract farming in a better and effective manner. I believe that the workshop will provide more comments and recommendations from relevant departments, firms and communities to polish and finalize the report.

Opening Remark, Mr. Sok Khim, Representative from Oxfam

Oxfam has worked on agriculture for nearly 30 years since 1980s. It was when after 79- 80 we responded to humanitarian aids and in rehabilitating agriculture sector for instance the small-scale irrigation. We have worked with MAFF and PDAFF in supporting our farmers to produce food. We still support the agricultural work though Cambodia has better developed. In Cambodia, agriculture remains a core of country economy, and there have been more investments from private sectors. Our agricultural products have been exported and shared locally within Cambodia. We have seen the increases of private investments in financing the agricultural work and contract farming. Oxfam also works together to better agricultural value chain too.

Currently, we have seen many Contract Farming (CF) in Cambodia. We have also seen the best models in Cambodia and there are some studies to understand these practices. Center for Policy Study (CPS) has also reviewed the Contract Farming models too. Oxfam has worked with the partners on CF on rice farming to extend benefits or success to others in the CF chain. Oxfam supports this work and in cooperation with AMRU Rice to have contract with farmers in Preah Vihear. AMRU Rice has exported rice to Europe and Holland. Buyers in Holland contract with AMRU Rice too. So, there is in a line contract from buyers to farmers. The models AMRU RICE and ACS in Preah Vihear have practiced prove to have many successes but still there are some challenges. CF normally sets standard criteria and ACs have to comply with them. CFs have been well practiced and still risks are remaining – for instance climate factor – drought, flood. In CF, there must be some solutions to further succeed the contract implementation. What factors we have to consider to ensure the smooth and effective CF practices. In the CF value chain, it is inter-related from production to packaging, storage, and export. We need to find solutions to these and once we can deal with these, we are able to maximize the CF. For a better CF, there are needs of relevant stakeholders – not only buyers and farmers. CF cannot be fair or cannot address some conflicts. There is a need of other third parties like Civil Society Organization to help review the contract with farmers and also banking sector to help provide loans when firms or farmer need finance.

Oxfam still continues to work with MAFF and Agro-Industrial Department of MAFF to set up mechanism to address conflicts in CF practices. This is not for only rice, but other crops too. This report will help in policy formulation and other principle development for conflict resolution to ensure the better practice of CF. There are more benefits if the CF is well practiced for firm, farmers, and banking sector.

Presentation on the Drafted Assessment Study on Benefits of Rice Contract Farming, by Ms. Keang Saren, Research Associate of CDRI

The practices of contract farming have started since 1950 in Cambodia but have not been very formal. In 2011, a contract farming sub-decree was formulated to formalize the contract farming practices. Still there are less or limited studies on the contract farming in Cambodia to date especially on its benefits for women and the indigenous people and about the benefits and gaps of the sub-decree. This research took place to fill that gap.
The objectives of the study:

  • Assess and analyze the contract farming scheme and legal framework in Cambodia, particular in rice contract farming;
  • Identify the benefits and gaps in the practical implementation of the sub-decree on contract farming and explore support needs to maximize the benefits of rice contract farming for smallholder farmers, especially women farmers and groups of indigenous people;
  • Provide policy recommendations for improving the contract farming models and practices

• The government should work on building a decentralized irrigation system such as canals and ponds for farmers to help address the water shortage issue.
• The government should help build/repair roads and bridges reaching the rice fields so that farmers could transport their paddy rice to the company warehouse more easily.
• The government and the financial sector should come up with a financial support system where ACs could be provided with low interest-rate loans so that they could use the loans to support their farmer members for buying farming inputs such as seeds, fertilizer, and fuel at the start of farming.
• The government should consider providing some land (at least half a hectare) to smallholder farmers (those who have a piece of land that is smaller than 1 hectare) for farming in order to help boost their farming income.
• The private sector should bring in modern equipment to help make the production more efficient and to replace heavy work, especially it will help women more since most of them cannot perform heavy work as men. The government should help subsidize the cost of these machines.
• The private sector should consider investing in agriculture insurance companies in Cambodia in order to minimize risks for farmers
• Rice companies should continue to buy more rice (different types) from farmers, pay them on time, and if possible, pay them 50% in advance so that farmers have a budget to invest in farming and production.
• Ministry of Agriculture, Forestry and Fisheries (MAFF), Provincial Department of Agriculture, Forestry and Fisheries (PDAFF), and Civil Society Organizations/NGOs should provide more training on technical skills including how to produce standard rice, how to measure the quality of rice, and how to produce the highest yield possible.
• There seem to be some overlapping roles related to who should handle contract farming issues. MAFF should divide the role clearly between the Agro-industry office and the office of Agricultural Cooperative Development (OACD).
• The government should come up with a law that states clearly what a penalty will be for a party who violates the contract.
• Gender aspects should be included in the law and the national policy related to contract farming. Policymakers should consult with the Ministry of Women’s Affairs (MoWA) on how to include gender aspects in the law and contract farming practices.
• There is a lack of awareness on the contract farming sub-decree and related policies. The government should allocate some budget for PDAFF in all provinces to conduct awareness-raising programs on the contract farming sub-decree and the related law/policies as well as increasing the sub-national budget for PDAFF to implement other programs to support farmers doing contract farming.
• Agricultural and Rural Development Bank (ARDB) should consider lowering the interest rate (lower than 1%) for farmers practicing contract farming especially for women and indigenous people. It would be helpful that ARDB relaxes the collateral policy by taking the farming contract as collateral or not taking collateral at all.
• ACs should build capacity on rice quality checks (quality No.1 or No. 2), learn price negotiation skills so that they can get a higher price of rice for farmers, and learn the skill to build formal contracts with farmers.
• Farmers should abide by the terms and conditions in the contract, produce rice based on the standard, and actively seek for new markets to lower the risk of relying on only one market.
• E-commerce should be introduced to the farmers as it will help them deal with the current Covid-19 pandemic.

• Contract farming practices in Preah Vihear and Kampong Thom are fairly successful
• Farmers including women and indigenous people do benefit from this practice
• Yet, there are a lot of support that the farmers still need especially with relation to the water supply and how to maximize yield
• The sub-decree is beneficial, but a law would be even more helpful
• To maximize the benefits for farmers practicing contract farming, all stakeholders need to take part to support them

Recap and Closing Remark by – Ms. Ros Chorvivorn, Representative from AWG Steering Committee Member

We have accomplished the objectives of the workshop – sharing the study finding and collecting inputs and suggestions from all participants. We have observed that contract farming has been practiced not only between producers and buyers, but also the banks that provide loans and the civil society who helps review the contracts. The experiences in Preah Vihear and Kampong Thom provinces as presented confirm that contract farming provides opportunities and benefits to agricultural cooperatives and farmers. As mentioned by Dr. Tek Vannara, there have been 80 formal contract farming in Cambodia.

After the presentation, there are questions and answers from all participants and the responses through verbal and written comments are very satisfactory for all. We hope that we will incorporate all recommendations and suggestions into the report. After final revision, we will submit the report to relevant ministries for further inspiration. We hope that with this report ministries will see the importance of it and make changes to benefit our farmers. We have a very fruitful outcomes from today workshop with all of your inclusive participation.

I wish you good health and free from COVID-19.