The expansion of the sugar business from Thailand into Cambodia has hit a roadblock as Khon Kaen Sugar Industry Plc (KSL), Thailand's third-largest sugar producer, decided to withdraw its investment because of unfavourable business conditions.
Years of low global sugar prices, a sluggish market in Cambodia and the Generalized System of Preferences (GSP) trade scheme are factors discouraging investment in the country, said Chalush Chinthammit, president of KSL.
"Cambodia does not take advantage of the GSP to export sugar to Europe and the US," he said.
The EU and the US offer the GSP to help countries with weak economies, giving them trade privileges such as duty exemptions or lower tariff rates.
The lack of usage of the GSP in Cambodia coupled with low global sugar prices caused KSL to rethink its sugar business in the country.
Global sugar prices decreased for many years, while the costs of sugar cane plantations rose, said Mr Chalush.
The company was unable to cope with these circumstances, though global sugar prices began to improve this year after drought cut supply in many countries, he said.
KSL started the sugar business in Cambodia in 2006 by teaming up with Cambodian and Taiwanese partners to form two companies overseeing sugar manufacturing and sugar cane farming.
The Cambodian government agreed to have KSL and its partners work on 125,000 rai of land under a concession lasting 90 years.
"It is difficult to develop the sugar business in Cambodia because there are many challenges," said Mr Chalush.
Return on investment in Cambodia is not as good as in Thailand and Laos, he said.
KSL maintains its investment in Laos, where it was granted 60,000 rai by the government to plant sugar cane and run a sugar mill. The company earns more than 200 million baht a year in Laos.
As concerns about global warming grow, KSL seeks an opportunity to do businesses related to efforts to cut carbon dioxide emissions, said Mr Chalush.
The company joined hands with energy conglomerate Bangchak Corporation to co-invest in biofuel, including the development of sustainable aviation fuel (SAF), the biofuel for aircraft. SAF can be made from used cooking oil, crop waste or ethanol, and produces up to 80% fewer greenhouse gas emissions than conventional jet fuel, according to media reports.