2021, Volume 24, Paper 19
Cost-Benefit Analysis: Cashew Nut Processing Project Appraisal in Cambodia1
Kong Siv – Centre for Global Food and Resources, School of Economics and Public Policy, University of Adelaide, Adelaide and World Wide Fund for Nature, Cambodia.
David Adamson – Centre for Global Food and Resources, School of Economics and Public Policy, University of Adelaide, Adelaide.
Garry Griffith – Centre for Global Food and Resources, School of Economics and Public Policy, University of Adelaide, Adelaide, Centre for Agribusiness, University of New England, Armidale and School of Agriculture and Food, The University of Melbourne, Parkville.
The global demand for cashew kernels has increased in recent years, particularly in high- and middle-income economies, due to rising international demand for nutritious food. Vietnam supplies 50 per cent of cashews sold on international markets. However, Vietnam is dependent on sourcing raw cashew nuts (RCN) from other countries to fulfil export obligations. Cambodia currently exports more than 70 per cent of its RCN to Vietnam. It is estimated that Cambodia could earn an extra US$30 to 40 million from its cashew nut industry if it developed a domestic processing industry. The objectives of this research are to answer two main questions: first, is it profitable to establish a cashew nut processing plant in Cambodia; and second, if so, what are the main opportunities and constraints? Cost-benefit analysis is employed to calculate the return from developing a small-scale cashew nut processing facility in Cambodia, based on standard Net Present Value and Benefit Cost Ratio measures, over a 20-year time horizon. Based on the most likely set of assumptions, the results show a clear positive return being made from such an investment, with the project taking just two and a half years to reach its break-even point. Cambodia has several advantages for investment in the cashew nut processing industry, including high-quality RCN and high kernel yields, and tax exemptions for Small and Medium Enterprises. However, investors need to consider that the returns are sensitive to any decreasing price paid for cashew kernels. Additional challenges for investors include competition from Vietnam for the Cambodian RCN, the lack of skilled labour, and high electricity costs in Cambodia. In conclusion, though, despite these challenges, it is considered to be financially viable to invest in small-scale cashew nut processing in Cambodia.
Key words: Cost benefit analysis, Cambodia, cashew, small-scale processing
Download full document here