Strengthening Cambodia’s Horticulture Market System

Recent years have brought new opportunities in Cambodia’s horticulture sector, but those wishing to capitalize on these opportunities face many constraints. There is considerable competition from imported produce and relationships among Cambodian market actors are limited. Few support services are tailored to farmers’ needs and there is little value addition.

Feed the Future Cambodia Harvest II is a five-year project, now at its halfway point, working to help Cambodia accelerate horticulture sector growth and strengthen the horticulture market system. This case study describes Harvest II’s blended buyer-led and market systems development approach, citing examples of progress to date and posing several learning questions about the project moving forward.

The Blended Buyer-Led and Market Systems Development Approach

Harvest II began in April 2017 with a buyer-led approach. This approach differed from more traditional approaches in its demand-side orientation and focus on particular buyers as the market entry point. Most of the project’s initial partners were buyers who wanted to source more from producers, but who were stymied by various constraints. To address this blockage in the market system, Harvest II formed “commercial partnerships” that brought together the buyer, producers, and other relevant market actors to identify shared goals and plan solutions to address binding constraints.

As it worked with these buyers and their suppliers, Harvest II amassed more evidence of the systemic constraints affecting the sector and recognized that its partnerships could serve as a foundation for efforts to foster higher-level, systemic change. With encouragement from USAID, Harvest II began to integrate market systems development theory and practice into its approach. This required intense learning to both understand market systems theory and test ways to apply it in Cambodia. Over the next year, the project blended the buyer-led and market systems approaches.

Businesses Beginning to Generate System-Level Change

As Harvest II partners have pursued their growth plans, many have adopted new business models and improved practices. By the end of FY19, cumulative sales at the farm and firm-level reached $22 million and cumulative investment was almost $5 million. In many cases, innovations have led to benefits not only for the firm and its immediate partners but also the larger market system, thus laying the foundations for more systemic change. The following examples demonstrate how firms working to strengthen and grow their own businesses can help contribute to larger system-level changes:

• A vegetable wholesaler and aggregator expanded his network of suppliers, co-developed a production schedule, and linked with an input supply company to build supplier capacity. These changes allowed him to establish an agreement with a modern grocery store to supply vegetables on a regular basis, thus increasing his sales and creating a more stable and reliable market outlet for his suppliers. The success of this arrangement demonstrates farmers’ capacity to meet strict product specifications, and the grocery store is exploring additional partnerships with other aggregators, thus contributing to market system change.
• A vegetable retailer focusing on safe, locally-grown products provided its suppliers with training on Good Agricultural Practices and set up a Participatory Guarantee System, thus improving quality and ensuring a more reliable supply chain. This led to improved sales and a more stable market for producers. In terms of the market system, this pilot demonstrated the feasibility of expanding the supply of safe, locally grown vegetables, a market segment with growing demand. 
• A vegetable seed company decided to invest in training farmers on production methods; it also set up training on seed varieties for vegetable buyers and input retailers. This investment boosted demand for the company’s products, leading to increased sales. The effort also helped strengthen the market system through enhanced coordination among various market actors – the seed company, input retailers, buyers, and producers – to improve vegetable production, a binding system-level constraint.
• A new dried fruit processing company invested in a provincial-level factory and began production line testing. It developed its supply chain through linkages to fruit collectors and trainings on product specifications for producers. By expanding the country’s capacity to access dried fruit export markets, this new value-added activity brings benefits to the market system.
• A microfinance institution is developing a smartphone app with technical and market information for producers. This app aims to not only boost productivity but also increase the chances of timely loan repayment and eventually increase revenue for the MFI. The app demonstrates an innovative application of technology to provide a cost-effective solution to a key system-level constraint – producers’ technical capacity and access to information – and thus has the potential to inspire even greater change in the market system.

Moving into 2020: Increasing Focus on System-level Change

In the coming year, Harvest II will focus more explicitly on catalyzing system-level change in four promising subsectors: vegetables, mango, longan, and cashew. In thinking systemically about each subsector, the project developed strategies that included the following elements:

• A growth objective, i.e., identification of promising opportunities in domestic and/or export markets.
• The main system-level changes needed to capture growth opportunities. These changes often involve developing private sector capacity to address constraints around productivity and supply chain management.
• Interventions to support the needed change. These often involve identifying and supporting potentially influential market actors willing to increase their engagement, coordination, and problem-solving to address constraints around productivity and supply chain management.

Conclusions and Learning Questions

Thus far, the blended buyer-led, market system approach seems well suited for Cambodia’s emerging horticulture market. Yet there is still much to learn, test, and scale-up. In 2020, Harvest II will be looking to answer the following questions:

• What is the most effective way to showcase success? Some Harvest II partners are emerging as potential role models and influencers. In the coming year, the project will aim to identify the practices and business models that could inform or inspire others, and test ways of showcasing them to different audiences.
• Are project interventions supporting the envisioned system-level changes? In developing its subsector strategies, the project developed hypotheses about the key opportunities for growth, the system-level change needed to support that growth, and the interventions that would lead to that system-level change. During the coming year, the project will look for indications as to whether the interventions do in fact support the envisioned changes.
• Are the project and private sector co-creating the change? The project aimed to devise interventions that also aligned with the interests and capacities of market actors who would need to “own the change” – i.e., invest in and sustain it over time. The project will need to monitor partners’ engagement, assess whether they are investing time and resources in the change, potentially adjust the approach to better align with the private sector’s agenda, and nurture private sector ownership of the effort.