Thai sugar producer withdraws from challenging Cambodian market

Khon Kaen Sugar Industry Plc (KSL), Thailand’s third-largest sugar producer, has withdrawn its investment in the Cambodian market due to unfavourable business conditions, marking a significant setback in its regional expansion plans.

According to KSL President Chalush Chinthammit, years of persistently low global sugar prices, a sluggish market in Cambodia, and the underutilisation of the Generalised System of Preferences (GSP) trade scheme have been key factors in this decision.

“Cambodia does not take advantage of the GSP to export sugar to Europe and the US.”

The GSP, offered by the EU and the US, aims to assist countries with weaker economies by providing trade privileges such as duty exemptions or lower tariff rates. However, Cambodia’s lack of utilisation of this scheme has significantly impacted KSL’s strategic decisions.

Despite the global sugar price improvement this year due to droughts reducing supply in many countries, the long period of low prices and rising costs of sugar cane plantations have taken a toll on KSL. Chalush noted that the company could no longer cope with these adverse circumstances.

KSL first ventured into the Cambodian sugar business in 2006, partnering with Cambodian and Taiwanese firms to establish two companies focusing on sugar manufacturing and sugar cane farming. The Cambodian government granted KSL and its partners a concession on 125,000 rai of land for 90 years.

Still, Chalush highlighted that the return on investment in Cambodia is not as favourable as in Thailand and Laos.

“It is difficult to develop the sugar business in Cambodia because there are many challenges.”

In contrast, KSL continues to see success in its Laotian investments. The company was allocated 60,000 rai by the Laotian government to plant sugar cane and operate a sugar mill, generating more than 200 million baht annually in Laos.

With growing concerns about global warming, KSL is exploring business opportunities related to reducing carbon dioxide emissions. The company has partnered with energy conglomerate Bangchak Corporation to co-invest in biofuel initiatives, including the development of sustainable aviation fuel (SAF).

SAF, which can be produced from used cooking oil, crop waste, or ethanol, reportedly emits up to 80% fewer greenhouse gases than conventional jet fuel.

As KSL shifts focus from its Cambodian operations, it remains committed to its ventures in Laos and its new sustainability efforts. This strategic pivot underscores the company’s adaptability and commitment to responding to both market conditions and environmental concerns, reported Bangkok Post.