CAMBODIA ON FOOD STAPLE EXPORT RESTRICTIONS,

UNCLAS SECTION 01 OF 02 PHNOM PENH 000418

SENSITIVE
SIPDIS

STATE FOR EEB/TPP/MTA- C. VOLTMER, EEB/TPP/ABT - G. CLEMENTS
STATE ALSO FOR EEB/TPP - M. LURIE

E.O. 12958: N/A
TAGS: EAGR EAID ECON ETRD TBIO
SUBJECT: CAMBODIA ON FOOD STAPLE EXPORT RESTRICTIONS,
PRESIDENT'S GLOBAL FOOD SECURITY INITIATIVE

REF: A. STATE 53353

B. STATE 53346

C. STATE 52628


1. (SBU) SUMMARY: Pol/Ec Chief May 21 delivered food
security initiative demarche (Ref C) to Secretary of State
H.R.H. Sisowath Chivannariddh in the Ministry of Foreign
Affairs and International Cooperation, and relayed points on
food staple export restrictions and agricultural
biotechnology (Refs A, B) to the Ministry of Economy and
Finance (MOEF). Prince Sisowath stated that the U.S.
initiative was very welcome news to the Royal Government of
Cambodia (RGC),especially considering that Cambodians have
been hard hit by the dramatic increases in food prices,
notably for rice, a traditional staple in the Cambodian diet.
The MOEF outlined plans to soon end the partial ban on rice
exports, while bolstering some rice export monitoring and
regulation. At present, Cambodia has no significant
restrictions on agricultural biotechnology. END SUMMARY.

MFA: Capacity to Store Commodities a Problem
--------------


2. (SBU) Noting that Cambodia did not have the capacity to
store large rice stockpiles, combined with farmers' eagerness
to sell their crops soon after harvest, Prince Sisowath said
the situation had reached a stage where temporary shortages
could occur. He noted large quantities of rice were sold
across the border because the farmers did not have the
capacity to store their yields. The government now had as
its top priority a policy to increase technical capacity to
store rice and monitor sales for export. This would help
prevent domestic shortages in the future, he noted. Other
agricultural capacity-building initiatives were underway, he
said.


3. (SBU) Prince Sisowath noted that bringing the Doha trade
round to a close this year with a reduction in farm subsidies
would be a welcome development.

MOEF: Regulation Better than Temporary Rice Export Ban
-------------- --------------


4. (SBU) Vongsey Vissoth, Deputy Secretary General in the
Ministry of Economy and Finance, agreed with our points (Refs
A, B) in support of open markets that support farmers'
ability to have the means and incentives to increase
production. That is the Cambodian policy, he noted,
supported by Prime Minister Hun Sen. However, in the wake of
a brief rice shortage due to unbridled export activity, the
RGC imposed a temporary, partial ban on rice exports which
would end in the next few weeks, he said. (The Ministry of
Commerce confirms that it is set to lift the ban on May 26.)
Cambodia's bottom line was to encourage agricultural exports
in multiple sectors while assuring self-sufficiency.
Cambodia wants to encourage farmers to produce more and
higher-yeilding harvests through market-led mechanisms, he
noted, citing the work of the Supreme National Economic
Council (SNEC),of which he is a member.


5. (SBU) Going forward, Cambodia was examining a mechanism
to more closely monitor the flow of key agricultural
commodity exports and regulate that flow when it went above a
defined limit, he said. Vissoth suggested the RGC would
support an export tax on rice if the outward flow exceeded an
amount deemed harmful to the nation's food security (he did
not say how the export tax would be structured).


6. (SBU) At the same time, Vissoth said the SNEC was
tackling a comprehensive agricultural development policy in
seven areas: infrastructure, technology (including
agricultural extension services),finance, land, marketing,
institution building, and policy. The goal was to support
market-driven mechanisms, he emphasized.

COMMENT
--------------


7. (SBU) While the RGC finance and commerce ministries agree
in principle with (and often support) basic market
mechanisms, on the sensitive issue of rice exports the proof
will be in the pudding. As so often happens with a
cash-strapped developing country, adding a tariff is a
tempting possibility, especially when it shows the government
is meeting a short-term objective to store for the country a
sufficient stock of rice. Discounting possible
election-season posturing through the summer (with statements
supporting a flat export tax on all rice exports),we expect

PHNOM PENH 00000418 002 OF 002


that in the mid term the government will get it right in
continuing to aggressively join open, world agricultural
produce markets and thereby help to increase food production.
That market-led economic growth strategy has been the strong
and incontrovertible trend in Cambodia over the last decade.
CAMPBELL