Ongchamroeun Kanha
Despite its fertile land, Cambodian supermarkets tell a different story: shelves overflow with Thai canned goods, Korean instant noodles, and Vietnamese sauces, often overshadowing the scarce presence of local products. This issue does not stem from a lack of raw materials, but rather from the country’s limited capacity to process these raw materials into finished products.
This commentary will explore the consequences of limited agro-processing capacity on the availability and variety of domestically produced goods, affecting local consumption patterns. It will also examine how insufficient processing capacity contributes to Cambodia’s reliance on imports, ultimately hindering the growth of local markets.
The agricultural sector is one of the main contributors to Cambodia’s economic growth. In 2024, agricultural exports alone accounted for 22 percent of Cambodia’s overall GDP and provided numerous employment opportunities, particularly for rural farmers. However, the agricultural sector’s potential extends beyond the export of raw agricultural products —this is where agro-processing comes into play.
Agro-processing bridges the gap between the agricultural and manufacturing industries by transforming raw agricultural products into final goods, thereby adding more value. Products such as rice, milk, dried fruits, and dried meats are essential in daily food consumption. Unlocking the potential of agro-processing could boost agricultural productivity and provide significant benefits to the farmers by generating additional income. Moreover, expanding the agro-processing industry can enhance export opportunities, reduce reliance on exports, and contribute to Cambodia’s overall economic growth.
Beyond the economic benefits, agro-processing can also foster greater consumer trust and confidence in domestically produced goods, increase the variety of food for Cambodian people, and improve the affordability and accessibility of processed commodities to consumers.
Insufficient Capacity of the Agro-Processing Industry
Cambodia’s agro-processing industry lags behind its neighboring countries, such as Thailand and Vietnam. While the country is rich in raw agricultural products, most of these are exported to the neighboring countries for processing into value-added products. For instance, Cambodia exports maize, bananas, mangoes, tobacco, rice, cashew nuts, and rubber to Vietnam, only to import back higher-value products that were processed there.
This highlights Cambodia’s limited agro-processing capacity, which forces the country to export raw materials rather than process them locally, missing opportunities to create high-value products and reducing the variety of processed goods available for domestic consumption. According to a report by the Asian Development Bank (ADB), only 10 percent of Cambodia’s agricultural products are processed domestically, and processed products account for just 8 percent of the country’s total exports.
The majority of existing processed products are produced by small-scale enterprises, family-run businesses, or individuals, leaning to limited production and availability. Moreover, the presence of medium and large enterprises in the agro-processing sector is still minimal.
Small and Medium Enterprises (SMEs) in Cambodia face numerous challenges when converting agricultural products into finished goods, particularly in the food processing sector. The challenges include a lack of technical knowledge, inadequately skilled labor for machinery maintenance, and insufficient technical training opportunities. The shortage of skilled labor to repair broken machinery further hampers the growth of the agro-processing industry.
Additionally, high production costs—driven by the lack of machinery and expensive skilled labor—make locally produced processed goods more expensive than imported products.
Effects of Limitations on Consumer Preferences
The limited capacity of the agro-processing industry in Cambodia has had a significant impact on consumer behavior. As a consequence, Cambodian consumers have increasingly turned to imported goods.
Many Cambodians often perceive the processed food from Thailand and Vietnam to be of higher quality than domestically produced products, which has led supermarkets, wet markets, and convenience stores to prioritize imports. Consumers typically value high quality, attractive packaging, and hygiene when selecting food, which has led to a perception that food from wet markets is unsafe and unsanitary.
Furthermore, the limited variety of locally produced food further drives consumers to purchase imported products. Data from 2014 to 2018 shows that the import of agri-food in Cambodia accounted for around 84 percent of the total value, while exports of processed food represented only 12 percent during the same period. This highlights the strong demand for imported processed food and the insufficient capacity of local agro-production.
Additionally, the higher cost of domestically processed products has further impacted consumer choices. Cambodian consumers are highly price-sensitive and tend to favor lower-priced products. Many consumers opt for high-quality products that are often imported from Thailand and Vietnam, which are priced lower than similar locally produced items from micro, small, and medium Enterprises (MSMEs).
As a result, when locally produced products are priced higher than their imported counterparts, consumers are more likely to purchase imported goods. This creates significant competition challenges for the local agro-processing enterprises, reducing their market shares and profitability.
Policy Recommendations
Cambodia’s agro-processing industry is crucial for economic diversification and holds significant potential to leverage exports, promote domestic growth, and shift consumer behaviors toward locally made products. However, the limitations within the agro-processing sector hinder the accessibility and affordability of high-quality processed goods in Cambodia, while also increasing the country’s reliance on imports. The lack of locally processed food erodes consumer trust and confidence in domestic products.
To address the challenges facing the agro-processing industry, collaboration among the government, relevant stakeholders, and the private sector is crucial. Tax incentives play a crucial role in promoting locally made products in Cambodia by encouraging domestic firms to increase production through reduced tax burdens.
In addition to tax incentives, government subsidies are essential for both farmers and agro-processing producers. Specifically, subsidies for farmers should include access to fertilizer, seeds, and technical support to help sustain raw material production and improve the quality of agricultural outputs to meet the needs of agro-processing industries.
For agro-processing producers, the government should support technical training programs to enhance labor skills and provide subsidies such as discounted electricity rates or improved access to electricity, especially in rural areas where power infrastructure is limited.
Moreover, implementing standardized evaluation and certification processes is vital to ensure product quality, strengthen consumer confidence, boost domestic goods’ credibility, and create greater opportunities for local products in international markets.
Finally, launching a “Buy Locally Made” campaign through social media platforms, leveraging influencers and public figures, can effectively promote Cambodian-made products, particularly among the youth, and increase nationwide support for the “Made in Cambodia” brand.
Kanha Ongchamroeun is currently a fellow of the Adenauer Young Scholars for Excellence (AYSE), a public policy training program co-organised by Konrad Adenauer Stiftung (KAS) Cambodia and Institute for International Studies and Public Policy (IISPP) of the Royal University of Phnom Penh (RUPP). This article was first published in Cambodianess.
