Cambonomics: Rethinking Large-Scale Land Concession Policies

By Heng Dyna

The majority of Cambodia’s poor lives in rural areas, is engaged in agriculture, and can save little.  How can Cambodia turn its agriculture sector into a driver of economic growth and spread development to these people?

In an attempt to promote agricultural development, Cambodia has adopted land concession policies. Large-scale land concessions to foreign and local companies in recent years are for big agricultural projects such as big farms and agro-industrial plantations. The concessions, many of which last almost a century, are aimed to attract foreign direct investment and to promote big farm-led agricultural growth, which is claimed by investors to create jobs and thus alleviate poverty. 

However, the argument can be delusional. The concern is that large-scale land concessions and plantation will not help alleviate poverty much given Cambodia’s current stage of development and labour condition. First, big farm size does not necessarily increase land productivity. Second, hired workers usually farm less intensively and produce less per hectare. Third, although output from foreign-owned plantation is counted in Cambodia’s GDP, the income is likely to be transferred abroad. Therefore, big farms and plantations provide less income for the poor and would create uneven development, and worse, could mimic a form of slavery in plantations as in previous centuries.

Small-medium farms, instead, can play important role in the agricultural development and poverty reduction in low-income Cambodia. Smallholders are usually more efficient producers in labour-intensive economy like Cambodia because family workers are less costly and more motivated than hired workers. Also, small-medium sized farm tends to use labour rather than capital-intensive technology. Furthermore, small-medium farms help ensure a degree of food security in countryside where high transport and marketing costs can drive up food prices. Their higher land productivity has the potential to help Cambodia attain greater self-sufficiency in staple at the national level.

Lessons of agricultural development led by small-medium farms in many countries tell that small-medium farmers in developing area produce more per hectare than big farmers. The land distribution of 1950 in Japan, South Korea, and Taiwan were followed by rapid growth in agricultural output. So were land reforms in China which in 1977-84 shifted to highly equal tiny family farm after the terrible collectivization in agriculture. This, accompanied by market liberalization and technical improvement, boosted fast growth in agriculture productivity. The land reforms in Vietnam followed a similar path. These countries’ household farming spearheaded rapid smallholders-based agricultural growth and widespread employment-based poverty reduction.

Agricultural growth needs to be broad based so that it is economically efficient and puts increased purchasing power into the hands of the rural masses, and not just a privileged few. Big farms and plantation should be carefully allowed, but not to dominate the agricultural development in Cambodia at the current stage of development. Instead, small-medium farm should be focused as it would boost self-employment income, reduce migration to the cities, and thus relieve urban as well as rural poverty.

The public and private sectors, in this regards, have important roles to promote rural infrastructure, modern farm inputs and technology, credit, markets; and to facilitate the supply of raw material from small-medium holders to processing facilities. Large-scale farms shall later evolve gradually once new sectors such as manufacturing and industry start absorbing labour force from agriculture.

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