In a bid to stock 1.2 million tonnes of rice paddy, Cambodia has sent a draft memorandum of understanding to China asking the country for a $300 million loan to build more than 10 warehouses nationwide.
The draft MoU was prepared by the Ministry of Economy and Finance and sent to the Chinese government late last month, according to Mey Kalyan, senior adviser for the Supreme National Economic Council (SNEC) and leader of the project.
Kalyan said Cambodia is now waiting for the Chinese government’s response and expects to begin the project mid-year.
“We will build warehouses that ensure the good quality [of the paddy],” said Kalyan.
“Our goal is to build confidence to creditors so that those who store their paddy can use it as collateral for bank loans.”
Kalyan added that while the warehouse would be built by the government, it would be run by the private sector, with revenue coming from millers paying maintenance fees to have their paddy stored during the harvest season.
“The success of this project depends strongly on participants from the private sector,” Kalyan said.
A major portion of Cambodian paddy is exported to neighbouring countries through unofficial channels during the harvest season.
Because of this, millers face severe paddy shortages once the season is over.
Hun Lak, vice president of Cambodia Rice Federation, said that developing the warehouse system would help millers find more stable sources of paddy storage.
Lak added that there were other potential benefits as well.
“Once the government builds warehouse for paddy storage, we will be able to better realise which kinds of paddy have high market demand and how high the quality of our rice is,” he explained.
“If we don’t address such issues clearly, we will have a problem for this project.”
But independent economist Srey Chanthy warned that building more warehouses was far from a silver bullet.
Chanthy said that the country’s rice sector faced many other issues asides from a lack of paddy storage, explaining that rice processing techniques and the sector’s overall governance was still poor compared to other countries.
“If the government charges a low fee for millers to rent a place to stock their rice, it will increase the competitiveness of the Cambodian rice sector in some ways,” he said.
“But if the service change is not affordable for millers, they may turn away from using this service.”