In the latest effort to mitigate the impact of plummeting rice prices, Prime Minister Hun Sen said on Monday that the government was seeking $300 million from China to boost the capacity of rice millers and provide funds to them for purchasing paddy from farmers.
The announcement, made during a graduation ceremony in Phnom Penh, came just days after the premier approved a $27 million grant to rice millers for purchasing paddy—$20 million from the government and $7 from the Rural Development Bank. The average price per ton of paddy dropped from $250 in mid-August to $193 last week.
“Our capital is not enough,” Mr. Hun Sen said on Monday. “The state’s immediate release of $20 million was a necessary intervention to resolve the impacts incurred by our farmers.”
“For a medium-term solution, I have worked with Chinese leaders and our specialists are working with Chinese officials, because we need $300 million from our friend China to build” mills, kilns, storage warehouses and other infrastructure, he said.
Speaking at a press conference at the Rural Development Bank in Phnom Penh on Monday, Ros Seilava, an undersecretary of state at the Finance Ministry, said the government planned to invest $300 million in infrastructure to store and dry paddy by next year. He said he was unsure whether this was the same money that the prime minister had requested from China.
“Regarding the long-term plans, we achieved the first plan, winning the [award for the] No. 1 best rice in the world,” he said, adding that a second plan to increase milled rice exports to 1 million tons annually had been overzealous.
With many farmers struggling to repay loans, Mr. Hun Sen again appealed to microfinance institutions on Monday to be flexible with late payments, to reduce or eliminate interest fees and to refrain from lodging court complaints or seizing property.
Opposition lawmaker Son Chhay said public pleas to profit-seeking companies would not protect farmers unless real policies were enacted. “The government has to have a law to manage these banks,” he said. “To control the interest rate you cannot just go and tell the bank ‘don’t do that’ without having a law in place. What bank is going to listen to that?”
Miguel Chanco, lead regional analyst for Economist Intelligence Unit, said the government’s financial intervention was no surprise, as it “could benefit the ruling party politically at the coming commune elections” set for June next year.
“However, if we were looking at a longer time horizon, I wouldn’t say that it’s a sector that I would put all my cards on as rice prices are unlikely to return to the heights seen in the late 2000s,” Mr. Chanco added.
“Public funds would be better spent on long-term measures to wean more people off rice farming, thereby reducing Cambodia’s vulnerability to the ebb and flow of global commodity prices.”
(Additional reporting by Kang Sothear)