U.S. government holds second annual agriculture trade event in Cambodia
BANGKOK, FEBRUARY 21, 2020 – A two-day agriculture trade event earlier this month in Phnom Penh organized by U.S. government agencies convened more than 250 agriculture producers, investors and buyers―including a delegation of some 20 U.S. companies―for high-level government meetings and industry briefings on climate-smart production, sustainable sourcing, finance, digital innovation and more.
In collaboration with the U.S. Embassy in Cambodia, U.S. Commercial Service, U.S. Department of Agriculture and the local American Chamber of Commerce, the U.S. Agency for International Development (USAID) through its USAID Green Invest Asia project co-hosted the trade event on February 6-7 to broker business relationships that pursue climate-smart ways to increase investment into Cambodian agribusiness.
From 2011 to 2016, approximately 14 percent of approved investment, or $3.7 billion, in Cambodia was for agriculture. Only 11 percent of commercial bank lending went to agriculture in Cambodia in 2017. More is needed, said the CEO of the government’s Rural Development Bank, Kao Thach.
“The main area where we lag is in private investment. Without [these investors] we cannot talk about agriculture sustainability. We cannot [afford to finance] only one player and ignore others [in the value chain] because of the connectivity between farmers, processors and exporters,” said Kao.
Challenges to improving agricultural sustainability in Cambodia include: inadequate infrastructure for storing and processing, lack of farmer education about unsafe pesticide use, lack of access to affordable capital, dwindling cultivable land, costly irrigation systems, lack of access to the global sustainability marketplace, high processing costs, low labor productivity, among other reasons.
Against this landscape, USAID Green Invest Asia has partnered with the Association of Banks in Cambodia to work with its member banks to analyze environmental, social and governance (also known as ESG) risks of their lending portfolios and reward high-performing sustainable business models with more favorable lending terms.
Agriculture is a key pillar of Cambodia’s economy, contributing 24 percent to its GDP and employing 40 percent of the labor force. An estimated 70 percent of the population lives in rural areas and relies, to some degree, on agriculture. Investors, including development finance institutions, increasingly recognize how climate-smart agriculture is a vital and profitable investment that can enhance food security, reduce postharvest losses, and help farmers to better cope with climate change.
But there are risks.
Risk and returns
Nir Atzmon, general manager with CamAgra Investment Group noted land tenure and management remain a “big issue,” as well as a fragmented market that struggles to compete with larger companies in neighboring countries. Despite challenges, Atzmon also sees―and seeks―investment opportunities in Cambodia. Rod Bassett, the agriculture and livestock director for United Green, a private investment group with offices in Dubai and London, said United Green is ready to contribute 30 percent equity on a $200 million ticket size.
Business case to manage carbon
Any strategy to attract more investment in agriculture should be based on improving land use and lowering carbon emissions, said Christy Owen, head of USAID Green Invest Asia, the U.S. government’s flagship climate finance and technical assistance platform serving Southeast Asia, including Cambodia. “Carbon management has become an intrinsic part of doing business. Becoming a better corporate citizen was once regarded as attractive, if not so essential, but is now a business imperative due to cost-savings, new business opportunities, and the competitive advantage of being known for low-carbon products,” said Owen.
Changes in forest land and agriculture are the top two sources of greenhouse gas emissions in Cambodia.
USAID Green Invest Asia works with both companies and financiers to boost investments into low-emission agriculture and forestry business models across the region. Qualified companies can receive investment-readiness support to qualify for green finance (linked to environmental and social performance indicators), or business services, while financial institutions and investors can receive support incorporating environmental, social and governance standards into their investment decisions.