Could Cambodia's Farmers Be Rich?
Lessons learned from the Northwest Former Khmer Rouge Zones

The agriculture-based Northwest former Khmer Rouge zones have enjoyed relatively high income per capita compared to the rest of the country. But the heyday may not last, as they are facing similar production and trade problems like the others.
 

           Compared with many villages in Cambodia, the former Khmer Rouge (KR) zones in the Northwest are relatively prosperous. A large number of households own their house, plus a television, motorcycles, cars, and tractors. Some villages have more than 30 tractors, while in the rest of the country, most villages have none. An average household in the zones owns about 5 hectares of land. Net income has averaged about US$1,500 per year but is even increasing, up to an average household income during the 2003 harvest season of US$2,180. This is well above the poverty line and much higher than in much of rural Cambodia, where a household may not earn more than US$1,000 per year.
              Living along the Cambodia-Thailand border, the former KR villagers mostly cultivate maize and a few other crops to sell to Thai traders. The soil is highly productive and the market is there, although prices seem to be determined by Thai traders. This agricultural production has been made possible in part from recent clearing of forests which occupied most of the zones.
             The current study looks into how the former KR zones have emerged strongly in economic terms and assesses whether there are any lessons to be learned from this high income growth. A research team from the Economic Institute of Cambodia, and the Finance and Banking Commission of the Senate, conducted fieldwork in five different districts in northwestern Cambodia: Pailin, Kamreang, Phnom Proek, Sampov Loun and Malai. Using questionnaires, the team interviewed district and municipal authorities, commune councils, traders and farmers. The two most important agricultural products, maize and soybeans, were studied in detail both in production and marketing aspects. The findings are compared with those in Kampong Cham province in east-central Cambodia, which is also a significant producer of those crops.

Geographical Background

             Most areas along the Cambodian-Thai border were under full control of the Khmer Rouge between 1975 and 1996. During this time of war and deprivation, people maintained the forests for shelter, and lived mostly on external assistance. By the early 1990s, this assistance was gradually being withdrawn, and substantial logging and mining began in the area, a few years before the re-integration in 1996 of former Khmer Rouge into Cambodian society. A land concession was part of the deal to end the fighting, and households in those areas received on average 5 hectares of land for livelihood pursuit. Driven now by a cash economy, a number of households obtained more land by additional forest clearing. At present, the agricultural land represents about 40 percent of the total area of the zones, which is mountainous. Most of the cultivated areas have rich soil on which maize, bean, cassava, sugar cane and other fruits can grow well. The less fertile soil is used to grow rice.
              The population in the zones is approximately 153,400 people. Most of them are poorly educated owing to a dearth of schooling opportunities during the long civil conflict. About half the population there are former Khmer Rouge soldiers and their relatives. The other half migrated in from other parts of Cambodia following the integration in 1996. They moved from land-scarce provinces to this relatively land-abundant area, advised to do so by the original villagers, most of whom were relatives. The study found that the standard of living of the original villagers remains higher than that of the new settlers because original villagers were given farmland and could clear the forest even further.
              

Even with the significant migration into the former KR zones, there continues to be a labour deficit due to the high land-population ratio. Therefore, a large number of migrant workers from less developed areas such as other districts of Battambang, Prey Veng, Svay Rieng and Takeo province, migrate in seasonally to supply labour for most of the farms.
               Former KR members continue to be decision-makers in the zones, at the consent of the government of Cambodia. After the Khmer Rouge integration, the government of Cambodia granted local administrative power to the former KR authorities, so they could have discretion over their own administration budgets. Laws and regulations for the community are developed at the discretion and decision of the local people, and security in the area also is provided by the local authority.

Agricultural Production

               The former KR zones were the sites of protracted fighting, mining and logging, and the populace depended on humanitarian aid. It is therefore a positive development that the local people have now turned their attention to growing crops, albeit on deforested land. The soil is suitable for many crops, but farmers mainly grow maize, soybean and cassava in order to cater to market demand. Production of these crops has risen remarkably following the integration. Because it is the main reason behind the relatively high income of households in the area, it deserves examination in greater detail.

Maize Production and Productivity

              Maize is grown two times a year, with the first harvest in March and the second in July. It takes about three months to harvest either in the wet or dry season. Maize (primarily yellow maize) is the crop grown by most producers because there is a good market for it. It is mostly exported to Thailand, where it is used to supplement agro-processing enterprises there or re-exported elsewhere.
              According to government statistics, which are often grossly underestimated, maize production in the former KR zones in 2002 was around 29,000 tons. This is about 40 percent of the officially-counted total yellow maize production in Cambodia. However, according to our recent interviews with various groups of people in the zones, maize production in 2003 was actually about 150,000 tons. This would be worth US$ 12.3 million at the farmgate price of US$ 82 per ton. However, Thai traders reportedly collude in their efforts to monopolize the market, and farmgate prices are generally stable at about US$75 per ton.
              The average yield of yellow maize in the former KR areas in 2003 was 4.3 tons per hectare, according to our small sample survey. This is a considerable drop from 5 tons per hectare in 2002, but is still higher than that in Kampong Cham, where the good yield is around 4 tons per hectare. The higher yield in the former KR zones is mainly due to the newer and more fertile land. In addition, farmers say the maize seed used in the zones is obtained from Thailand, and generally yields higher production than local seeds used in Kampong Cham.
             For comparative purposes, the unit costs of maize production in the former KR zones are compared with those in Kampong Cham province, where yellow maize has been grown on rich soil as well. The cost of maize production per ton in the former KR zones in 2003 was US$53, compared to about US$40 in Kampong Cham province. The difference can be attributed to a higher land preparation cost, which was US$74 per hectare in the zones as opposed to about US$30 in Kampong Cham. It is more costly to plow relatively new lands which may still be filled with tree roots, large rocks, or other debris. Labour cost in the former KR zones is also higher than that in Kampong Cham, due to a relative labour shortage in the zones and thus a practice of using migrant workers.
           For the former KR zones, not only are costs of production higher, but farm gate prices are lower. There, the price of a ton of yellow maize has been around US$75, compared with US$85-90 in Kampong Cham. This substantial price difference is attributed to the remoteness of the areas from the Phnom Penh marketplace. Granted, the farmers in the zones are very close to an even larger market, Thailand; however, farmers report facing price determination by seemingly coordinated Thai traders, who can thus act as a monopoly.
            Despite all these negative factors, the farmers in the former KR zones have something significant going for them, and they are generally better off than Kampong Cham farmers. This is solely due to the fact that farmers in the former KR zones possess much more land than those in Kampong Cham. A net income for one hectare of land in the former KR zones was around US$140 per hectare, but farmers with the minimum grant of 5 hectares are able to yield US$700 per growing season.
          

            By contrast, a net income for one hectare of land in Kampong Cham was $180. Most households only own about one hectare, making this amount the total income for the farm household per growing season. Land size matters, in the livelihood of farmers.
            This felicity of circumstance for farmers in the former KR zones will not last, however. The rich soil endowment that has led to higher soil productivity in the zones is already becoming depleted and productivity is slowing down. While production varies from year to year depending on weather conditions, the overall trend is a decrease, attributed to the reduction in soil nutrients. The significant drop between 2002 and 2003 yields (from 5 to 4.3 tons per hectare) could be partly attributed to weather factors, but not in total. The decline in soil productivity raises a concern that development in the zones could be short-lived. At the moment, farmers in the zones still enjoy higher productivity granted to them by ecological conditions. However, if the lands are not cultivated in a sustainable manner, this advantage may gradually disappear. Moreover, as time goes by, population keeps growing while land does not. Thus, as the land-population ratio is reduced, total income from primary production may become inadequate, as in the case in many parts of Cambodia.

Soybean Production and Productivity

             The consumption of soybeans and soy-related products has increased exponentially in recent years. This is good news for Cambodia, which grows them. Production of soybeans for a few decades has been concentrated in Kampong Cham province, where there is red soil. Recently, large quantities of soybeans have been produced in northwest Cambodia as well.
             According to government statistics, Battambang province (which includes the former KR zones) produced about 8,000 tons of soybeans in 2003, and Kampong Cham harvested 27,000 tons. Soybean production in the former KR zones has increased for the same reason as maize, that reason being that farmers are finding markets for it. Half of soybeans produced in northwestern Cambodia are exported to Thailand. The rest is exported to Vietnam through Phnom Penh.
            Productivity of soybean growth in the former KR zones is higher than that of Kampong Cham. According to our study, production of soybeans at this border area is approximately 1.6 tons per hectare, compared to 1.45 tons per hectare in Kampong Cham. This higher level of productivity is attributable to the newly-cultivated lands in the former KR zones, which contain better nutrients. However, the trend of productivity is on the decline, as with maize, as nutrients in the soil gradually decrease.
             Production costs of soybeans in the zones are higher than in Kampong Cham, US$208 per hectare in the zones and US$200 in Kampong Cham. But because productivity currently better in the zones, farmers there incur a lower unit cost, US$130 per ton, versus US$138 in Kampong Cham. However, farmers in the zones are not able to sell their product for as good a price as farmers in Kampong Cham. In 2003, the farmgate price for the zones was US$275 per ton, whereas it was US$300 in Kampong Cham. This has led the zones farmers to look for markets in both Thailand and Vietnam, rather than relying primarily on Thailand as they do for their maize crop.

Transportation and Other Costs

              Unfortunately for farmers in the zone, their ability to produce is not matched by a vibrant transportation system to get their goods to market. That contributes to the sale of most of their products to the Thai market. Transportation from the farm to a stock point costs $US6 per ton, and it costs about the same amount again for transportation from the stock point to the Thai marketplace.
              Strict administration by local officials in the former Khmer zones allows fees collected for trade activities to be used to cover local administration expenses. This bulk of this money is used locally, rather than going on to the government in Phnom Penh. This leads to great incentive on the part of the local officials to have a predictable system of border fees. There is no unofficial payment (i.e., bribes) in the villages. Thus, the institutional structure and administration in the zones can be pointed to as a factor in the smooth flow of goods to the Thai market.

               Obviously, it is cheaper to transport goods to close-by Thailand, rather than south to Phnom Penh (and often on to Vietnam). However, some goods, particularly soybeans, do flow Vietnam. Trade costs, including transportation and other costs associated with the flow of goods from the zones to Phnom Penh are about US$20 per ton to Phnom Penh. That figure is only US$5 for the transport of products from Kampong Cham to Phnom Penh. Transportation costs are the bulk of this higher figure, reflecting the longer distance to cover and the poor quality of the roads between northwest Cambodia and Phnom Penh.
              Agricultural products, especially maize, account for most of the trade at the Cambodia-Thailand border. Most of the maize is exported to Thailand through Khmer middlemen. The soybean harvest is split between Thailand and Phnom Penh (and on to Vietnam). The cost structure of this trade must take into account, first of all, the farmer's cost. Then merchants, or middlemen (other villagers in the zones) buy the crop and transport it either to a wholesaler in Phnom Penh or to traders at the Thai border. In order to be competitive with the Kampong Cham crop of soybeans, the crop grown by farmers in the zones must be sold for a lower farm gate price. High soil productivity is the main reason why it is possible for farmers to absorb this deflated price and remain competitive with Kampong Cham

Household Incomes in Zones

                Our study has found that household incomes in the zones - income which is based primarily on agricultural revenues - are relatively high as compared to the national average. The total income per household in 2003 was about US$2,180 per year (Figure 3). National average household income has been roughly US$1,500 (per capita GDP of US$280 x 5.3 people). Other agriculturally-important areas are not enjoying such income; for instance, the average income per household in Kampong Cham province was reportedly around US$910 per year. Residents there, however, obtained only 45 percent of their total income from agriculture, while 88 percent of total income in the zones came from agriculture.
                This income advantage in the zones may not last, just as the soil productivity may not last. The relatively high incomes in the former KR zones are derived from those households owning five hectares of land or more. The land-population ratio is still low. But because both local population and migration levels are growing rapidly, this advantage of land abundance may gradually disappear. And the zones will come like other parts of Cambodia, where the average household owns about one hectare of land and much depend on additional sources of income for their livelihood.

Conclusion

                 Households in the former KR zones are enjoying something of a heyday, but these favorable conditions may not last, and the zones may at some point have the same agricultural problems that other areas of Cambodia now face. Right now, farmers in the zones generally generate higher incomes than in many other rural areas in Cambodia. Our research has found that these higher incomes are largely due to the larger and fertile farms made possible by deforestation and lower population density. Growth has been based mainly on primary extraction of the rich abundant land, which can be short-lived unless the exploitation of the soil is managed in a sustainable manner.
               Although additional land has been cleared of forest, the initial forest clearance allowed for a more-or-less even distribution of five hectares to each household. This has allowed the generation of broad-based growth from agriculture. The high income growth from agriculture would not have been achieved without the forests being cleared to a large extent over the past few years. In many parts of Cambodia, where there were/are forests, people living around them are generally poor, while the rich environment has been maintained or the resources extraction has apparently benefited only a handful in the city or overseas.
                Both the soil and climate are rich and suitable for growing major cash crops, mainly maize and soybean, which can easily find markets. However, comparatively speaking, soil productivity alone would not be sufficient in securing adequate household income. As a matter of fact, maize is produced at a higher cost in the former KR zones than in Kampong Cham, where the soil is almost as fertile. In addition, farmgate prices of the crops are lower in the former KR zones than in Kampong Cham. Thus, in terms of unit profit, farmers in Kampong Cham are better off. But in terms of total income, farmers in the former KR zones are better off. The larger farm size is a major factor in overcoming the problems of higher production costs and lower farm gate prices in the former KR zones.        

               Given the experience in other parts of rural Cambodia, it is unlikely that the current level of productivity in the zones will sustain in the future. The land-people ratio will be reduced over time by high population growth and in-migration. This will erode the competitive edge of the zones. It is important that vertical value addition, such as agro-processing and better marketing chains, be introduced to compensate for the inevitable declining horizontal expansion of crop production.
                It is also important to note that border trade with Thailand has played a critical role in the development of the former KR zones. Being isolated from Phnom Penh by long distance and expensive transport costs, the areas have relied on Thai traders to purchase their products, although those traders may not necessarily offer fair prices. Without border trade, cash crop production would not have reached the current level.

Finance and Banking Commission of
the Senate and Economic Institute of
Cambodia Research Team