Cambodian pepper farmers set to gain from 'champagne' status

Dec 4, 2009
By Robert Carmichael
DPA

Kampong Trach, Cambodia - On a small plot of earth 10 kilometres outside a dusty provincial town in southern Cambodia, farmer Nuon Yan tends his crop.

Like most farmers in Cambodia, Nuon Yan grows rice. But today he is tending his other crop: Kampot pepper. The final product - spicy black peppercorns that enliven dishes across the world - will soon become the first Cambodian product to benefit from Geographical Indicator (GI) status.

GI is more familiar as a concept than a phrase, and most famously with champagne: Only sparkling wine grown in a certain region of France which conforms to the quality standard set by its members may be called champagne. The advantage for growers is a better price; consumers benefit knowing that they are getting a quality product.

Cambodia's farmers are a key pillar of the country's economy, and widespread rural poverty means better prices for their crops are essential. UN figures show agriculture employs more than half of the 8-million-strong labour force and generates one-third of the kingdom's gross domestic product.

Kampot pepper, which is named after Nuon Yan's home province near the border with Vietnam, has an excellent name regionally and is highly regarded by some chefs in Europe. But a good name is not enough: in a world of imitations, protecting that name is critical.

Var Roth San is director of the intellectual property department at Cambodia's Ministry of Commerce. He says attaining GI status typically boosts the value of a product by at least 20 per cent.

'We want to create jobs, and we want the poor to get more money from their jobs in the rural areas,' he said. 'GI is one thing that will help the poor.'

Nuon Yan is a member of the newly formed Kampot Pepper Producers' Association, which will market and promote his crop.

It is a cooperative of more than 100 farmers, along with a handful of middlemen. It will ensure the Kampot pepper its members grow comes only from certain areas and meets quality standards. By early 2010, only the pepper produced by its members will be able to use the name.

Jean-Marie Brun, an advisor at the French agricultural non-governmental organisation GRET, said members of the World Trade Organisation are obliged to protect GI-status products. Once a product earns the name and is registered, it can easily be protected.

GRET was involved in the establishment of the cooperative, whose members defined the geographical growing area and quality standards.

'The stakeholders decided on the delimitation of the area, how it should be produced, and the quality criteria for Kampot pepper,' Brun said.

Kampot pepper is not the only Cambodian product in the running. Others vying for GI status include regionally produced palm sugar, honey, silk and possibly even durian fruit.

Brun says the main benefit for the small-scale farmers who comprise the bulk of the cooperative is financial. The current gate price for black pepper is 2.5 dollars per kilogram, but that should double once the GI status is confirmed.

By the time Kampot pepper gets to Europe, where it will be sold in packets of 20 to 50 grams, it can retail at an equivalent of 100 euros (150 dollars) per kilogram.

'Importers of Kampot pepper in Europe know it has a name and they are willing to pay a higher price for that,' Brun explained. The extra profit will allow for increased marketing expenditures.

Protection of the brand rests initially with the association, whose simple office is based in a shady grove outside Kampong Trach town in Kampot province. This is picture-postcard Cambodia: green rice fields, sugar palm trees and karst hills, with wooden carts drawn by white oxen along dirt roads.

The vice-president of the association, En Trou, is a farmer with 150 pepper vines, each providing 1 kilogram of peppercorns per year. En Trou said the total output of the members this year will be 14 tons, but he predicts that will double over the next five years.

En Trou said members have in the past encountered difficulties trying to sell their crops for a decent price, but is optimistic that GI status for Kampot pepper will help.

Four kilometres from the association's office along a series of ever-narrowing dirt tracks, Nuon Yan keeps an eye on his 300 pepper vines. He earned 400 dollars from his crop last year, but aims to double that next year. So what will he do with the extra cash?

'I will put some in the bank, and I will use the rest to buy more pepper vines,' he said.

The vines take three years to mature, so it is no short-term measure. But for Nuon Yan the benefits from ensuring his pepper meets the GI requirements make it worthwhile to invest more time and money on growing Kampot pepper for the kitchens of Europe.

Industry Urges Trade Benefits for Cambodia

Tuesday December 01, 2009
By Liza Casabona with contributions from Kristi Ellis
WWD Business

WASHINGTON — Apparel brands, retailers and Cambodian officials are urging duty free benefits for Cambodia, the eighth-largest apparel supplier to the U.S., arguing the move would help the country stay competitive at a crucial time.

During a program last month marking the 10th anniversary of the Better Factories Cambodia project, an initiative to improve labor compliance in the Cambodian garment industry, speakers said the competitiveness of the country’s apparel industry is threatened by the economic environment as well as the lifting of quotas last year on garment imports from China and the conclusion of the Vietnam monitoring program, also last year.

The quotas and the monitoring program “gave Cambodia room to breathe” as the country built its garment sector, said Cham Prasidh, senior minister and minister of commerce. However, the end of those programs “started an onslaught.” Dozens of factories have closed and more than 50,000 jobs have been lost as a result of production shifts to other countries, Prasidh said.

Apparel imports from Cambodia dropped 23 percent to $1.41 billion this year, according to the most recent statistics from the U.S. Commerce Department.

A significant portion of the volume lost by Cambodia has shifted to other countries, including many that “do not share Cambodia’s commitment to improving respect for workers’ rights,” said Michael Kobori, vice president of supply chain social and environmental sustainability for Levi Strauss & Co.

Kobori urged apparel buyers to reward responsible sourcing behavior by supporting “trade preference legislation that provides further incentive to countries like Cambodia that are committed to improving workers’ rights.”

A group of apparel brands, retailers and an entertainment conglomerate called on congressional leaders last month to treat Cambodia as a “special case” and grant it duty free status immediately.

Gap Inc., J.C. Penney Co. Inc., Jones Apparel Group Inc., Levi Strauss & Co., Nike Inc., American Eagle Outfitters Inc., Columbia Sportswear Co., Phillips-Van Heusen Corp. and The Walt Disney Co., which all have significant investments in production in Cambodia, urged U.S. lawmakers to help the country halt the decline in imports and reverse the loss of tens of thousands of jobs in the apparel sector.

Congress is unlikely to grant Cambodia duty free status this year, but could do so next year in the context of a broader reform and expansion of trade preference programs.

Cambodia Warming to Idea of Foreign Ownership

November 26, 2009
By SIMON MARKS
The New York Times

Canadia Tower in Phnom Penh is Cambodia’s tallest building. (Simon Marks)


Just three decades after the downfall of the Khmer Rouge, a deadly regime that left behind little notion of private property, a law that would allow foreigners to buy some kinds of real estate here appears to be nearing approval.

And while the proposed law is focused on the property market, experts agree it also would be a general boost for the country, which has been struggling through its own version of the global economic downturn.

“The law, in essence, will not help the whole economy recover. But it’s part of a wider picture,” said Daniel Parkes, country manager for the CB Richard Ellis real estate company. “What it is doing is making investment in Cambodia more transparent and easier.”

The law, which is expected to go to the National Assembly for a vote in the coming months, would allow foreigners to own apartments and condominiums on buildings’ upper floors. Now they are limited to 99-year leaseholds on any property.

Ground-level residences, which include ownership of the land that the units stand on, would continue to be reserved for Cambodians.

There are some controversial details in the draft. But over all, Mr. Parkes said, the proposed law would improve confidence in the market — especially in comparison with neighboring countries like Thailand, where foreigners are limited to 30-year leases on homes or land, and Singapore, where they are barred from owning property below the sixth floor.

Mr. Parkes’s own presence in Cambodia is due to great expectations for its real estate sector. The 27-year-old arrived here four months ago from Britain; his assignment was to open the first office of CB Richard Ellis in the capital to meet a growing demand for professional real estate services.

“Working in the U.K., it has become obvious over the last two years or so that it is a mature market,” Mr. Parkes said. “Where the future is, is in Asia.”

He says he considers the assignment to be a long-term one, and he spends weekends riding around the city on his 1967 Vespa, keeping his eyes peeled for a property that he might like to buy himself.

Over all, the country’s financial forecasts and Phnom Penh’s growth seem to support his optimism.

Economists here generally agree that Cambodia will emerge from its year-long recession in 2010. And the International Monetary Fund said in September that, while the country’s G.D.P. would contract 2.75 percent this year, it would climb about 4 percent in 2010.

The capital’s 1.3 million inhabitants mostly live in low-grade concrete apartment blocks that form the city’s low skyline. But Cambodia’s tallest building, the 30-story Canadia Tower, opened Nov. 5. And the structure, which includes apartments for some Canadia Bank employees, is the first of several such projects planned for the city center.

Like many housing markets across the world, speculative buying and inflated land values produced a lot of phantom growth in Cambodia in recent years.

From 2005 to mid-2008, prices for some houses in Phnom Penh rose tenfold. Increasing foreign investment and large-scale residential projects like Gold Tower 42, a South Korean-funded 42-story skyscraper that is still being built, were just some of the factors that led industry observers to have faith in the country’s market.

But as the effects of the global economic crisis spilled over into Cambodia in late 2008, demand dried up, and housing prices tumbled dramatically — 40 percent compared with the same period last year, according to real estate agents.

“Before there was so much investment from developers in China and South Korea,” said Soush Saroeun, executive director of Asia Real Property, a Cambodian real estate agency. He said prices in Phnom Penh’s most affluent neighborhoods had fallen to about $3,000 per square meter, or $280 a square foot, from around $4,500 per square meter in July 2008. (High-end real estate in Cambodia is generally valued in U.S. dollars.)

Some observers here say that confidence in the market actually was boosted when the long-awaited proposal to allow foreign ownership was introduced by the Ministry of Land Management in April.

Some investors and analysts say, however, that the draft contains stipulations that would cause unnecessary complications, like the rule that no more than 49 percent of a condominium building’s units may be owned by foreigners.

The rule would cause “big problems for developers in the region in their initial business plans,” forcing them to sell to two distinct markets, said Matthew Rendall, a managing partner with the legal consultancy Sciaroni & Associates, based in Phnom Penh.

Sek Sitha, an under secretary of state for the land management ministry, said the restriction was included because the government wants “Cambodians to have priority over foreigners.” But he said the Council of Ministers, which is now reviewing the draft law, and the assembly would consider the concerns.

In Channy, chief executive of Acleda Bank, one of the country’s largest banks, said that expecting Cambodians to buy 51 percent of the units in a building created to appeal to foreigners was unlikely because few would be interested in such a costly investment. “Demand is very low,” he said. “Most of our loans go to local Cambodians, but it depends on the cash flow of the individual borrower.”

The proposal also says foreigners cannot be co-owners in land purchases, nor can they buy any properties within 30 kilometers, or 18.5 miles, of the borders, except in special economic zones.

Rory Hunter, chief executive of the local property developer Brocon Group, said developers could bypass the proportional ownership issue by offering long-term leases, rather than sales, on the balance of the units in a building meant for the foreign market.

And while the current 99-year lease is not, practically, very different from an outright purchase, “psychologically, people want to own freehold, not leasehold,” Mr. Hunter said. “It will give foreign investors more confidence regarding the security of their investment.”