ASEAN KEY DESTINATIONS
Costs thwart potential exports
Following Cambodia’s loss of a hefty Filipino rice tender to Vietnam last week, industry insiders say logistics and production costs are hampering the competitiveness of the Kingdom’s rice exports.
Cambodia lost a 100,000-tonne tender for the fourth time running after its final price of $455.50 per tonne came in way higher than the Vietnamese company’s final $416.85 per tonne deal, itself only marginally lower than Thailand’s $417.
The higher prices begin at the local level, said Khan Kunthy, head of BRICO, a rice miller established in 2013.
Gathering the rice still requires manually loading rice bags into trucks, while there often aren’t enough warehouses to store all the rice collected during the peak harvesting season from November to January, he said.
“It’s more labour intensive – we have to pay for the cost of the bag, the labour. So productivity is very low,” he said.
Poor road quality makes transportation to warehouses and eventually to port significantly slower, he added, while high energy costs push prices up further during the initial milling process.
“We don’t have very good infrastructure,” he added.
But the increased costs don’t end there. Corruption and red tape in the process to get exports approved remain a problem, said Nuon Ratana, sales and marketing manager at RDL Logistics.
“Some officials in the government charge under the table to accelerate the process,” said Ratana. “If we don’t pay extra money, the government official will delay the process.”
A lack of logistical inventory also weighs down the supply chain.
Song Saran, president of Amru Rice and board member at the Cambodia Rice Federation, said obtaining empty containers to ship the rice can occasionally be problematic.
When the Sihanoukville Autonomous Port – from where Cambodia’s rice is exported – doesn’t have enough containers, it sometimes brings in some from the Phnom Penh Autonomous Port and charges rice exporters for two containers instead of one, Saran said.
“If it’s only one container, why charge two times?”
Saran said the Sihanoukville port agreed to end the double-charging last week, and that the issue only affected a “small percentage” of containers.
Nevertheless, the container problem added on to a bevy of other costs, such as terminal entrance fees which stand at $130 per container in Cambodia compared to around $80 in Thailand or Vietnam, Saran added.
Mey Kalyan, senior adviser to the Supreme National Economic Council, said the government was working on improving transport and further “rationalising” the rice sector by focusing on higher-margin varieties, such as jasmine rice.
Although agreeing that export costs were high compared to region, Kalyan said the loss of the Filipino rice tender was in large part due to the Phillippine’s traditional reliance on Vietnam for large quantities of cheap rice.
Kalyan added that stubborn global rice prices – which have not budged significantly since the global commodity boom ended in 2008 – further held back profitability.
“The prices are stable, but the cost is higher.”
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