Foreign Investment in Agriculture in Cambodia CDRI Working Paper ...

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Preliminary Impact Assessment of FDI in Agriculture
During recent years there has been rising interest in investment in land and agriculture
in developing countries, particularly in Cambodia. Concerns about the potential risks of
such investment have been echoed by various interest groups. A study by German Technical
Cooperation (GTZ) in 2009 identifies both opportunities and risks from foreign investment in
land in Cambodia, which are highlighted below.
Socioeconomic aspects: at the macro level there has been evidence of job creation in the
production of bio-fuel, providing average monthly wage of USD100; improvement in local
roads, but also degradation of community roads by heavily loaded trucks of the investment
companies; generation of foreign exchange earnings through export of wood and wood products,
rubber, cotton, essential oils, fish and live animals; and contribution to government budget
through land concession rental payment of between USD0-10 per ha annually. At micro level
certain risks arise. For instance, there is evidence of negative effect on indigenous people’s
access to land; loss of community opportunity to collect non-timber forest products; absence or
lack of transfer of technical skills from foreign firms to farmers, such as breeding, use of new
seed varieties, soil improvement or fertiliser use. Opportunities have also emerged, ranging
from doubled income for unskilled construction and agricultural labourers to the development
of rural schools and healthcare centres.
Food security: community food security could be affected through the loss of community
access to non-timber forest products. Hansen et al. (2006) indicate that non-timber forest
products contribute about 42 percent of poor household income and 30 percent of medium
household income in rural communities in Cambodia. However, this study found that foreign
investment in land is unlikely to have a negative effect on rural community food security in the
short term.
Environment: foreign investment in land creates both environmental gain and risk. A host
country could gain from import of new technology and environmentally friendly agricultural
production methods and reduction of soil erosion through agricultural production on formerly
abandoned land. However, benefits also bring risks in their wake. Environmental concerns
over large-scale foreign investment include climate change and soil erosion, water security and
quality, biodiversity and local ecology.
Given the concerns highlighted above, and with specific focus on foreign investment in
agriculture, but not in land in a broad sense, this study attempts to shed more light on the likely
impacts of foreign investment in agriculture on local community livelihoods, the environment,
food security, and land and water use.
Taking stock of CDC data from 2000 to June 2010, the study found that foreign investors
in agriculture engage mainly in crops and forestry in the form of ELCs, whereas in food
processing they engage mainly in the production of drinking water, soya milk and instant
noodles. This section focuses on crops (sugarcane, rubber, maize) and forestry in order to
examine the likely impacts of such foreign investments.
The following assessment is based on results from focus group discussions (FGDs)
conducted by the study team in December 2010 in Kompong Thom province for the case
study on rubber, consultation with maize plantation and drying company HLH Agriculture,
CDRI Working Paper Series No. 60
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