A Cambodian Agarwood company is teaming up with a Thailand investment partner to spend USD 100 million improving the quality of Cambodia’s agarwood trees, according to a memorandum of understanding signed by the two companies yesterday.

Thoub Chankrassna Khmer Co (TCK), which owns agarwood plantations and an incense factory in Preah Sihanouk province, has partnered with Thai-based First Capital Group (FCG) in the hopes of improving the growth, processing and manufacturing of Cambodia’s 1 million agarwood trees.

Agarwood, a fragrant wood harvested for its aromatic, religious and medical applications, is a non timber forest product that can fetch prices upwards of $4,000 per kilogram in Cambodia. But despite high prices, Cambodian farmers have struggled to profit from their plantations, according to TCK’s director Keo Sokunthea.

“Cambodian farmers have not had sufficient resources to process and extract agarwood oil,” she said at the announcement of the MoU yesterday. “Most importantly, they have not been able to access the regional or international market to commercialise their agarwood trees and agarwood-related products,

[which] has caused discouragement to a majority of agarwood growers, forcing them to abandon their agarwood plantations.”

She added that FCG was an ideal candidate for this joint business venture, as it has been involved in agarwood business activities across the region and has access to modern technologies for producing agarwood oil and related products.

Sean Goh, CEO of FCG, said that the company planned to spend $100 million solely on improving the quality of Cambodia’s agarwood trees. If Cambodia could produce top-grade agarwood resin, the country’s 1 million trees could be a potential goldmine, he said.

“We use the best technology, and of course we have to take good care of the tree,” Goh said. “We need to invest this capital in the improvement of quality of the trees, because of course we will get a better return when we are producing top quality [agarwood] oil.”

Agarwood resin grows inside the trunks of wild Aquilaria trees. Through inoculation technology, it is possible to stimulate the growth of higher-quality agarwood resin inside the trunk of the tree, which in turn can be processed to create oil called “oud”. Oud oil can fetch between $30,000 and $100,000 per kilogram, depending on the quality of the resin and the market, according to oud oil monitoring firm Sustainable Asset Management.

According to Goh, the company plans to inoculate agarwood trees in several locations in Preah Sihanouk and monitor their progress six months after inoculation. The company also plans to establish a processing factory in Sihanoukville following that process.