Cambodia’s Underdeveloped Agrifood Processing Industry Holds Key Opportunities For Economic Growth
The European Chamber of Commerce (EuroCham) in Cambodia hosted a Breakfast Talk on ‘Cambodia Agri-Food Processing: Strengthening Competitiveness & Market Access’ on January 24, 2025 at the BRD Auditorium, highlighting the challenges and opportunities that exist in the country’s agri-food processing industry, which remains largely underdeveloped.
Despite agriculture being one of the four key pillars of Cambodia’s economy, very little agricultural outputs are processed within the country.
“Cambodia’s agricultural sector is the cornerstone of the economy, however, only about 10 per cent of Cambodia's total agricultural outputs are processed within the country, whereas processed agricultural exports represent only 8 per cent in value of the total exports of Cambodia,” shared Ingrid van Ginkel, Vice Chair of EuroCham Cambodia’s Agribusiness Committee, in her opening remarks.
Other than rice milling and basic processing of rubber and pepper the agro processing sector is largely underdeveloped. Cambodia needs private investment in post-harvest handling and processing if it is to capture economic opportunities arising from value addition in agricultural products.
She added that post-harvest losses in Cambodia, primarily due to inadequate handling and processing and outdated technologies, continue to pose a significant concern for the agricultural sector, with losses estimated to range from 20 to 50 per cent, depending on the type of produce and stage of the supply chain.
A lack of modern technology and equipment particularly poses a significant challenge to the industry. Smaller companies especially face significant burden as they cannot afford to make continuous investment into research and development and new machinery to align with international processing standards.
Cambodia must be able to overcome these challenges to improve its market competitiveness and keep and keep the value of agricultural producers within the country.
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Cambodian Government Policy Support For Agri-Food Processing
Dr. Chay Chim, Director of the Department of Agro-Industry at the Ministry of Agriculture, Forestry and Fisheries, gave a presentation detailing some of the work the Cambodian government is doing to support the local agriculture industry, as well as increase the country’s agri-food processing capacity.
“What we are doing first is matching producers with private sector [companies] or buyers through contract farming,” shared Chim. “Now we are preparing the Law on Contract Farming to establish trust between the producers and the private sector, this is the first priority for our department.”
He added that the Department of Agro-Industry has experts that provide technical assistance and support to farmers and private companies engaging in agri-food processing, including in preparing documentation and certification, especially for key products like cashew nuts, pepper and mangoes.
He also mentioned that the department has a laboratory that performs quality and safety checks. Many food products being exported from Cambodia, however, still require the use of out-of-country lab testing facilities to meet the food quality and safety standards of overseas markets like Europe, as the facilities available in the country are still quite limited. Nevertheless, it was mentioned at the event that Institute Pasteur du Cambodge (IPC), in partnership with CAPRED, have made strides to establish ISO 17025 accredited testing services for pesticide, antibiotic residues, and heavy metals, to enhance food safety and boost Cambodia’s exports.
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Opportunities And Challenges In Cambodia’s Agri-Food Processing Sector
Many challenges still persist in Cambodia’s agri-food processing sector, which are broader challenges that hold back Cambodia’s agricultural industry from modernising at a faster pace.
Chhorm Sothun, Sales & Service Engineer at Rieckermann Cambodia, a company that provides agricultural machinery and equipment solutions, including in food processing, presented on the main challenges the industry faces as observed through the company’s clients.
First and foremost, the high costs associated with technological adoption appear to be one of the biggest barriers for businesses and agricultural producers. Associated with this is a low technical skill level that prevents new technologies from being adopted due to a lack of knowledge on how to use them properly. As technical training also requires significant investment, the cost barrier prevents many from seeking modernised methods of agricultural production and processing.
High electricity costs also act as another obstructing factor, as more technology requires more electricity usage vs. the traditional analog methods of agricultural production.
Furthermore, Sothun highlighted the lack of reliable connectivity outside of the capital city, concerning both internet connection and physical infrastructure, as a major barrier. Many of the new machinery and technological systems require a stable internet connection, hence, the absence of such prevents widespread technological adoption. Logistically, transport costs also remain high for agricultural producers with farms in far provinces. While massive improvements have been made through the introduction of new expressways, for example, many of the major infrastructure upgrade projects are still ongoing so it will be a while before the direct cost benefits are felt.
Despite these challenges, Sothun stressed that there are many opportunities that the right investors could capitalise on. For instance, as the agri-tech market is still developing, this means there is still space for agricultural machinery and equipment companies to cement themselves as the future market leaders by spearheading investments and building additional skills-training and knowledge production initiatives.
Overall, the agriculture industry’s continued growth also shows its continued viability for investment, having grown by at least 1.1 per cent in 2024, which presents more opportunities for market leaders to emerge as many investors tend to pile into other popular industries like real estate and construction. Cambodia’s several bilateral foreign trade agreements (FTAs) with countries like China, South Korea and the United Arab Emirates (UAE), and being a signatory of the Regional Comprehensive Economic Partnership (RCEP), also means there are favourable conditions in place for agricultural exports into various markets.
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Agri-Processing For The Long-Term Sustainability Of Cambodia’s Agriculture Sector
Most of all, Sothun emphasised that even with big challenges to face, Cambodia must make significant strides towards developing the national agri-food processing capacity in order to ensure the sustainability of the agricultural sector overall and to prevent heavy reliance on certain export markets.
For example, in 2024, Cambodia’s cashew nut exports reached a total value of USD 1.15 billion, representing an increase of more than 26 per cent from 2023. However, these exports were not so diversified, as over 97 per cent of the export volume was purchased by Vietnam, which has the facilities to process and package the products for further export to other markets. It is evident then that Cambodia has many opportunities to diversify its trading partners and reach certain export markets like the United States and Europe through its own in-house processing.
Besides rice and cashew nuts, Sothun also highlighted fruit processing and exports as a viable market for more investment.
“Instead of dry mango fruit, or exporting fresh mango products, there is a big opportunity to export mango puree as well,” Sothun told B2B Cambodia. “Right now, we don't have businesses [addressing this market, we have fresh mango exporters, but none processing mango puree.”
“Right now, why do we export raw materials to other countries? Because we face big challenges… Starting [Agri-food] processing is not, but when we talk about sustainability, we have to have our own processing here, instead of just exporting raw materials,” he concluded.
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