Country should ignore GDP estimates and work, says PM [-Dr Hun Xen now admits an economic crisis in Cambodia?]

A farmer plants rice in a paddy field outside of Siem Reap. Prime Minister Hun Sen warned on Tuesday that those laid-off would have to return to their villages to do farming work. (Photo by: BLOOMBERG)

WEDNESDAY, 11 MARCH 2009
Written by Kay Kimsong
The Phnom Penh Post

2%

estimated growth in the agricultural sector last year, according to the IMF

At the end of 2008, it was estimated that the country's largest sector grew 2 percent compared with 8.1 percent growth for the rest of the economy

Hun Sen says the Kingdom's laid off workers should return home to rural areas to contribute to the agricultural sector, which critics say is also in crisis.

PRIME Minister Hun Sen told the country to ignore productivity growth predictions Monday and to instead focus on working in a bid to escape the worst of the economic crisis, as evidence mounted that Cambodia is heading for a recession.

Speaking to farmers in Kampong Speu province, the premier said that laid-off workers should return home to farming jobs in a bid to shore up agriculture as a driver of Cambodia's economic growth.

"We are the ones here [in Cambodia] ... some say 1 percent [GDP growth], some say 2 percent, 3, 4, 5. But these things don't depend on predictions, it all depends on what we do," said Hun Sen. "The agriculture sector is part of our economic growth, we have to try hard nationwide; industry should keep on going, too."

Cambodia was better off than industrialised countries in that their workers had no farming communities to return to in most cases, he added.

The prime minister's comments come after the International Monetary Fund revised down its 4.75 percent growth forecast for 2009 made in December on Friday to minus half a percent. Hun Sen last month estimated 6 percent growth this year.

"Our country is less badly off than others," he said on Monday. "It is not too dangerous."

On Tuesday, however, Minister of Commerce Cham Prasidh said that the garment industry had contracted a huge 72 percent in January compared with the same period in 2008, from about US$70 million to $250 million. More than 20,000 garment factory workers have lost their jobs already this month and 10,000 more jobs are expected to follow, the Free Trade Union of Cambodia said this week.

"We don't want to lose [jobs], but the problem is that the countries that are supposed to buy our products have no money to buy our goods," he said, adding that he hoped the world's main developed economies could recover soon.

Referring to the construction sector, he said it had not been affected severely as no building sites had been abandoned.

"They say the economy is falling, but house prices remain stable," Hun Sen said.

His assessment of the construction sector contrasts sharply with that of the IMF: "Construction activity and foreign investment are ... slowing rapidly as external investors cut back and financing conditions tighten," it said.

Overall, the prime minister said that Cambodia was on the up. "If we compare it to the period we have just lived through during the Pol Pot regime, now it's much better," he said.

Critics question premier

Sam Rainsy Party lawmaker Son Chhay disputed the prime minister's assessment that agriculture could pull the country through the economic downturn, saying that cassava and other crops could not even get to market. A Thai blockade against cassava and other crops have seriously affected cross-border trade in agricultural products this year, causing prices to drop, he said.

"If we compare it to ... the Pol Pot regime, now it's much better."

"We already face an agricultural crisis," he said, adding that the government needed to do more to develop an agricultural industry that would create demand for agricultural raw materials from the Kingdom's farms. He estimated at least 1 million jobs had been lost in the economy as a whole since the economic downturn first hit the country last year.

"Don't expect to see 6 percent [GDP] growth ... I guess it will be no more than 2 percent," he said.

Chan Sophal, president of the Cambodia Economic Association, said that the fast-evolving nature and instability of the world economy made it difficult to make a realistic projection of the performance of Cambodia's economy over the remainder of the year and beyond. "But various predictions from different institutions will make it more accurate," he said.

ADDITIONAL REPORTING BY CHUN SOPHAL AND HOR HAB

As Rice Prices Soar, Asian Governments, Experts Push for Return to Farms

By Heda Bayron
Voice of America
Bangkok
10 April 2008

As rice prices soar toward $1,000 a ton, governments across Asia brace for possible unrest as the region's staple food becomes less affordable and less available. VOA's Heda Bayron examines why prices are soaring and what needs to be done to keep millions from starvation, reporting from the leading rice exporting nation, Thailand.

Fried or steamed, rice is eaten at almost every meal in Asia.

But there could be less rice on the table now, as prices soar and supply shrinks.

In central Bangkok, a rice trader stacks sacks of rice up to the ceiling of his small shop. He says he has increased his prices every week over the past month.

In the Thai countryside, farmers armed with shotguns guard rice fields against thieves.

These days, every grain counts. Governments of rice-importing countries such as the Philippines are scrambling to get their hands on rice even at inflated prices. Rice-producing countries such as Cambodia, Vietnam, India and China have curbed exports, constricting global supply.

Even here in Thailand, Korbsook Iamsuri, the secretary-general of the country's rice exporters association, says finding rice to sell to clients in Africa is difficult because of hoarding.

"It can't be like this forever. It can't be. Somehow it has to correct itself," he said. "Don't forget that we grow twice as much as we need domestically that's why we have so much to export. And all of a sudden everything's gone, so I do not believe that that is the actual situation we're facing."

There are reports of hoarding on both ends of the supply chain. Consumers are stocking up on rice because they fear prices will rise later. And millers and wholesalers are holding on to supplies, hoping to sell later if prices rise even further.

With rice selling at about $1,000 a ton, many fear the staple soon will be beyond the reach of Asia's poorest people. That could cause widespread hunger, push more into poverty and possibly provoke food riots.

Paul Risley, the United Nations World Food Program's spokesman in Asia, says some of the 28 million "poorest of the poor" it feeds could go hungry because the agency cannot afford to buy grain.

"This is a very immediate crisis," Risley said. "In Cambodia, we have been forced to cut back on school distributions. That means Cambodia would go without WFP-supported feedings."

He says it could spell disaster for aid-dependent countries such as Afghanistan and North Korea.

Although hoarding is part of the problem, rice industry experts say the price surge also is the result of Asia's rapid development, climate change, and the low priority given to agriculture.

In the 1970s, the so-called Green Revolution in Asia increased rice production, and kept prices low. But growing rice became unprofitable as fertilizer, irrigation and labor costs rose.

Production also fell as factories, golf courses and housing developments took over rice paddies. In China, land used for rice cultivation decreased by three million hectares from 1997 to 2006. Recently, the growing biofuels industry has encouraged farmers to plant corn instead. Global rice stocks are at the lowest in two decades.

At the same time, Asia's appetite grew - especially in rapidly developing India and China, where a rising middle class is eating more. On top of that, high oil prices raise the cost of growing rice and shipping it to markets.

And in recent years, pests damaged crops in Vietnam and drought severely reduced rice exports from Australia.

As a result, prices have been gradually rising since 2002. The price of other grains, such as wheat and corn, also rose. But this year, the increase accelerated - rice has doubled in price since January.

Some in the industry say the crisis is waking up Asia to the critical value of agriculture.

Rice exporter Korbsook says it is time for countries to use farmland wisely.

"And I think one way or the other they would have to adjust themselves on self-reliance on food," he said. "So one way or the other they would need to make use of their own land, in order to export the least…. Of course, no one wants to be taken hostage in this kind of thing. Because food you need for everyone in your country, otherwise it would be a big chaos."

The International Rice Research Institute's director-general, Robert Zeigler, calls for a new push to boost crops. The institute is developing high-yield rice varieties and varieties that withstand floods and droughts.

"We need to restart our investment in research and development," he said. "These have lagged for the last 15 years. I think we're paying the price for that neglect."

The institute says high demand will continue as populations rise - Asia will need 38 million tons more rice a year by 2015. Some economists say high prices will, in the end, benefit farmers and encourage others to return to the paddy fields. The Philippines and China are increasing subsidies to rice farmers.

In the next few months, shortages may ease as harvests are completed in the Philippines and Thailand. But it is not clear whether this would be enough to halt skyrocketing prices. Experts warn the era of cheap rice may be over.