The Henri Capitant Association in Cambodia participates to the writing of a handbook dedicated to the contract farming in Cambodia.
What is contract farming?
Contract farming is commonly defined as the organization of the farming production and sales, in the framework of a contract between producers and buyers of agricultural products.
Such practice is more and more common in many countries regarding food production because it helps to increase farming’s efficiency, to improve the livelihood of poor rural populations and reduces the rural exodus. Contract farming also secures contracts’ relationships and enhances better efficiency between the contracting parties, both for buyers and producers.
Indeed, contracting allows an immediate coordination, in which the conditions are explicitly stated through an enforceable and binding agreement; it dramatically reduces the risks linked to production and commercialization of agricultural goods. Hence, contract farming is based on a production contract that makes the producer responsible to produce and deliver the goods to the buyer, while the buyer undertakes to buy the products and generally participates to the production itself. As highlighted by the Food and Agricultural Organisation of the United Nations (FAO), “at a global level, contract farming has the potential to create economic wealth, contribute to supply chain efficiency through the production of higher quantities of better quality products and help to achieve food security objectives“.
Indeed, globally, contract farming supports family farming by allowing small producers to continue to work on their land and to evolve from subsistence production to commercial production. The FAO also stated that contract farming arrangements can also be seen as “a practical tool through which to achieve social objectives”. It is important to underline that through contract farming, contract parties can encourage to form producers’ groups or associations aiming at reinforcing small producers’ capacities or assuring better work conditions for workers.
Environmental preoccupations, which have a growing role in the international supply channels, are also present in contract farming. Parties of a farming production contract must pay a special attention to the ecological viability of their production practices. It is important to be sure that contract farming activities do not harm essential aspects of food security and nutrition (such as the biodiversity which guarantees that food regimes are diverse, sustainable and allow a proper nutrition).
Why building a legal framework for contract farming in Cambodia?
The Cambodia’s economy strongly depends on 4 pillars: agriculture, manufacturing, construction and tourism. In fact, Cambodia’s economy is highly dependent on agriculture, which contributes close to one-third of national GDP (about 28.7 % in 2014) and employs about half of the total labor force (48,7 % in 2013). This is because around 85% of the total population lives in rural areas and the majority of whom rely on agriculture (mainly paddy rice) as their primary income and livelihood source.
In effect, rice is the dominant crop in Cambodian agriculture. It occupies more than 80% of cultivated land. It is the most important agricultural export commodity and Cambodia has huge potential to increase rice production which will play an important role in Cambodia’s future agricultural growth. Then, it is necessary to identify better options for the national development in which contract farming occurred to be a real and possible solution.
What is the role of the Henri Capitant Association in Cambodia regarding contract farming?
Aware of the importance of making the legal framework for contract farming operations more accessible and understandable, the Henri Capitant Association in Cambodia has decided to work on this project, and associated itself to the Supreme National Economic Council to write a “Guide” on contract farming in the Kingdom of Cambodia.
On September 26th 2014, the Association participated to a Consultation Workshop on the Unidroit/FAO Legal Guide on Contract Farming, organized in Bangkok by the International Institute for the Unification of Private Law (Unidroit) and the FAO. With the other members of the Cambodian delegation, notably official personalities from the Cambodian Department of Agro-Industries and the Ministry of Agriculture, Forestry and Fisheries (MAFF), as well as members from the Cambodian Institute for Research and Rural Development (CIRD), the Association Henri Capitant in Cambodia explained clearly the legal situation of the contract farming in Cambodia. Our president, Prasnar YI, underlined the role of the existing contract farming’s legal framework in Cambodia, and emphasized the importance of complementary legislation such as labor law and insurance law. His analysis can be found here.
This experience was conclusive for the Cambodian public institutions, which decided to include our Association into the contract farming task force led by the SNEC, on December 25th 2014.
This task force met several times throughout 2015, with workshops and meetings dedicated to contract farming. In November 2015, these works led to the decision of launching the redaction of a Cambodian contract farming handbook, linked to the “supporting project to the commercialization of the Cambodian rice”, financed by the French Development Agency (AFD) and in collaboration with the SNEC.
The Handbook aims at offering a legal framework to which contract parties can refer in the elaboration of agreements and contracts between private actors, on the basis of participatory and responsible processes. We are convinced that this handbook will become a useful reference for all operators that use contract farming or that are involved in public policies’ implementation, legal research and capacity building. We hope that the Guide will contribute to create a positive, fair and sustainable environment for contract farming.
This handbook will be publishing during the summer 2016.
For any question regarding Contract Farming in the Kingdom of Cambodia, do not hesitate to contact us.
For more information about contract farming:
Consult the FAO/Unidroit legal guide on contract farming
Consult the GIZ organization’s handbook on contract farming