The millers' tale : a rice industry revives

a_ _ *1 2 1005 NEWS ABOUT WORLD BANK GROUP SMALL AND MEDIUM ENTERPRISE INITIATIVES Vol. 1, No. 9 September 2000 A Rice Industry Revives The Millers' Tale C ambodia is one of the world's poorest IN BRIEF Fcountries, with a per capita GNP of only $260. Three quarters of its people work in NAME: Federation of Rice Miller agriculture, the majority of them as small-scale Associations rice producers. BEGAN: 1998 Local farmers till fertile soil that, thanks to rich layers of silt deposited by the flood waters of the BUDGET: $140,000 from the Mekong and Tonle Sap rivers, compares favorably IFC-managed Mekong Project to that of neighboring Vietnam and Thailand-the Development Facility. world's number one and two rice exporters. Thirty years ago, before war and the Khmer Rouge dev- ROLE: Helps revive one of astated Camnbodia's rural landscape, rice exports Cambodia s key industries, rice accounted for half the country's foreign exchange production, by supporting millers' earnings. While it is stronger than it was a decade associations in eight provinces. ago, when large quantities of rice had to be imported by the UN, today the country's rice TRACK RECORD: The federation s member associations have helped millers handle higher- - volume orders, -. amplified their polit- * SMEFACTS ical voice, and initi- is a publication ated many other N t 'XL of the . 4. cost-reduction World Bank Group i and productivity- SME Department. enhancement benefits. . Director. Harold Rosen ; . For Information (' Contact: Recovery Strategy: Strong in pre-war days, Cambodia's Rob Wrnght .rice industry needs rebuilding. Rwright@ifc.org Tel. # 202 473 7997 Fax# 202 522 3742 F COPY  industry still struggles to meet domestic demand and, by demonstrating the benefits of association, and is dogged by a reputation for poor quality on has inspired creation of like organizations in the the world market. provinces of Banteay Meanchey, Kandal, Prey Veng, Pursat, Siem Reap. Swey Reng and Takeo. The frontline players responsible for bringing In May 2000, representatives of all eight groups Cambodian rice from local farms to the global met for a national convention and formed an economy are the country's rice millers. Significant umbrella organization, the Federation of Rice increases in income for the many thousands of Miller Associations. Cambodian families subsisting on rice farming will only come when these millers succeed in IFC has supported Cambodia's motivated rice expanding into foreign markets, thus creating new millers in their efforts to create voluntary, mem- sources of value up and down the local supply ber-run and -financed business associations since chain. Developing a successful export industry, 1998. The IFC-managed Mekong Project however, will in turn depend on both parties' abil- Development Facility (MPDF) first began work- ity to work together on thc cost reductions and ing with the original group of miller associations productivity gains needed to compete with the set up under guidance of CARERE, providing world's rice powers-not only nearby Thailand them with a business management course special- and Vietnam, but also highly efficient producers far- ly designed for Cambodian rice millers. When ther away such as the United States and Australia. CARERE's mandate and funding expired in 1999, MPDF helped members of its disbanded private Cambodian rice milling firms range in character sector unit organize as a local NGO, renamed from hundreds of one-man operations with no Enterprise Development Cambodia (EDC). storage capacity to a couple of organizations with MPDF also opted to increase its own direct considerable warehousing capabilities and annual involvement with millers, commissioning creation turnover of $200,000. Most are somewhere in of a manual outlining the mechanics of starting a between, employing an average of about 10 work- business association in Cambodia, and teaming ers and generating revenues of $30,000 to up with EDC to provide technical and financial $80,000 a year. Given the thousands of strains of backing for the start up of six new associations rice grown by Cambodian farmers, the challenge throughout the country. these firms face of producing a quality and uni- Tangiblc economic benefits have already begun to form exportable product is formidable. Lack of emerge. Members are working together towards a information, communication, technology and system whereby they can fill high-volume orders marketing tools and a history of social distrust as a group, with some associations looking to this make the task even harder. as a key means for cultivating specific customer In 1997, millers in Battambang province- Cambodia's "rice basket"- came together to form the country's first professional association of rice millers as a means for overcoming these obstacles. Rice millers in the area had been dis- cussing the idea among themselves, but given Cambodia's lack of a governing legal framework, they were unsure how to proceed until assisted by a private sector development unit under the UN's Cambodia Rehabilitation and Regeneration Project (CARERE). Today, Battambang's rice Rice Millers: Forming business associations miller association boasts some 120 member firms for the first time. 2  relationships. Members are also looking to use provinces with the completion of a new telephone collective bargaining power to gain better terms network by the end of this year. Cambodia's from suppliers of equipment and financial servic- Commerce Ministry has said the RICENET initia- es and to lobby the government. There has even tive will provide a model from which other been a move towards coordination with a counter- domestic industries can learn, with the initial part rice miller association in Thailand. A key ini- energy shown by the millers indeed offering tiative still in the pipeline is to address issues of encouraging signs. seed quality and storage practices to enable local farmers to provide higher quality inputs. "We are completely isolated from everyone. We don't receive any information, nothing at all that Valuable Source of Information can help us progress towards meeting the needs Rice mills in Thailand generally produce about of the international market," said Phou Poy, 95% unbroken rice. In Cambodia, the number is president of the millers' federation. "RICENET, no more than 30%, and in many cases, millers are I hope, will break this isolation and open up a not even aware how far behind international stan- way for the rest of the world to obtain Cambodian dards they actually are. Cambodia's new business goods." 1 associations are changing this and providing members with access to the vital information they need to make wise investment decisions and pull their own operations up to a level where they can Contact: John McKenzie compete successfully in the global arena. Mekong Project Development Facility Information being disseminated by the associa- 63 Ly Thai To St. tions includes details about: Hanoi Vietnam * Modern and effective rice milling technologies, Tel.: 84-4-824-7892 methodologies and equipment Fax: 84-4-7898 * How to access and deal with foreign customers E-mail: Jmckenzie@ifc.org * How to comply with laws governing cross- Web: wm-ipdforg border transactions www.mpd.org * Global commodity prices and regional supply and demand * International shipping and insurance costs * Consumer, supplier and regulatory trends To strengthen the associations' ability to serve their membership with the best available informa- tion, MPDF is currently undertaking a pilot inter- net initiative dubbed RICENET in partnership with EDC and Khmer Internet Development Services (KIDS). The latter is a student-run Cambodian firm that will provide low-cost web design, site management and association staff training. RICENET's Web site will act as a plat- form for more effective dissemination of industry information and for communication with cus- tomers and suppliers, both domestically and inter- nationally. Internet access will be available in all 3