Asia Golden Rice, the Kingdom's biggest rice exporter, is looking to neighbouring countries for suppliers and business allies to maintain growth in both foreign and domestic markets.
To penetrate the Cambodian market, the company plans to form a Phnom Penh-based joint venture with a local and a Japanese partner. The business, to be set up there, will focus on rice trading. To secure a steady supply, it will enter into contract-farming agreements with Cambodian rice growers.
Tougher competition and the effects of alleged price dumping by Vietnam have prompted Thai rice exporters to look for new sources of rice that is both inexpensive and of the right quality.
Asia Golden Rice president Sombat Chalermwutinan said the company was forced to go the contract-farming route in Cambodia because securing a large contiguous growing area proved difficult. In addition, entering into contracts enables the company to work with targeted farmers on developing planting methods and controlling the quality of seeds used.
The company earlier looked into doing business in Burma, but encountered many obstacles, particularly in the areas of security and trade facilitation.
Sombat said Cambodia offered advantages to investors in agriculture, including low production costs, fertile soil, plentiful growing areas, a zero-import-tariff deal with the European Union.
He admitted the country had drawbacks from a business perspective, including a lack of skilled farmers, poor infrastructure, weak supply of high-quality rice seeds and political problems.
The firm's investment in Cambodia is projected to reach Bt500 million. The operation will likely be based in a potential farming area outside Phnom Penh, where Thailand's Siam Cement Group is currently constructing a port. Near the mekong River, the area is well-suited to rice plantations and it is expected to yield two crops a year.
"We can help Cambodia to export more. However, the company's investment there [will not extend beyond] the next three to five years," he said, adding that a team from Asia Golden Rice is currently in Cambodia studying conditions there.
Cambodia produces 30 million tonnes of paddy rice a year but its rice-export industry is underdeveloped. As a result, the country sells most of its rice to Vietnam, which in turn allows that country to export more.
Vietnam is already investing in growing in Cambodia, one of the reasons for the recent surge in its exports of the country's rice, which is cheaper than Thai rice.
Sombat said the rice produced in Cambodia will be exported to many countries, including Thailand. The company will focus on growing high-quality rice to capture more of the premium-rice market.
"We can't say Vietnam won't overtake Thailand as the world's biggest rice-exporter within the next three to four years - but it will be forced to work harder," Sombat said.
Long-term, Sombat said he was more worried about Cambodia's potential as a rice producer than Vietnam's, as the former's soil and other environmental conditions are similar to Thailand's, particularly when it comes to growing jasmine rice, a crop in which many of Thai agriculture's hopes are invested.
In a related development, the company has launched an aggressive domestic marketing campaign with Singha Corporation to market jasmine rice under the Pun Dee brand. Asia Golden Rice will package the product and Singha will handle distribution.
Eventually, Asia Golden Rice hopes the alliance with Singha will extend into the export market, in which the latter's beer brand is already well known.