The Cambodia Rice Federation on Wednesday said the sector needed at least $200 million in capital infusion to enable rice millers to buy paddy from farmers, far higher than previous requests for assistance.
Chan Sokheang, vice president for the CRF, said the $200 million was needed as emergency capital to continue the purchase of paddy till January 2020. The rice federation official said there had been a drop in loan approvals from commercial banks, which coincided with the European Union’s imposition of tariffs on rice exports.
He did not provide additional details for why loan approvals were easing off. The rice sector was in January hit with tariffs for three years on exports to the EU, after Italy triggered protectionist measures in the ‘Everything But Arms’ trade scheme.
“We need $200 million to buy rice because the commercial banks have decrease the number of loans in the agricultural sector after [tariff] restrictions from the EU,” he said.
He added that available working capital was around $150 million, but the demand was for around $300 million to $350 million, hoping that multilateral institutions could help ease this credit shortage as well. Proposals had been made to the Rural Development Bank, he said, and they were awaiting a response from the Ministry of Economy and Finance.
In 2016, the Cambodian government infused $27 million through the Rural Development Bank to assist the sector, adding another $23 million in 2017. The new request is the largest request made so far.
Kao Thach, CEO of Rural Development Bank (RDB), could not be reached for comment on Wednesday and Thursday.
Agriculture expert Yang Saing Koma said he was unaware of why there was a credit shortage or why commercial banks were scaling back loan approvals to the sector. But that the RDB needed to increase available capital to rice millers, he added.
“When commercial banks don’t give out loans, interest rates are high and the Rural Development Bank doesn’t add capital, it will not be good at all for this year,” Saing Koma said.
While Cambodian rice exports to the EU are being tariffed, China has increased its imports of rice from the Kingdom, to preempt any drops in the European demand. At the same time, rice farmers have seen a decrease in prices and have been asked by the government to refrain from planting rice this dry season.
Leng Yen, a rice farmer in Banteay Meanchey province’s Monkulburi district, said it seemed the rice millers, how purchase, process and export rice, did not have money to buy paddy, which was already being sold by farmers at a low price.
“If the state gives loans to the big rice millers, the millers will be able to buy rice for storage and potentially the rice will fetch [us] a good price,” he said.
Cambodia exported around 400,000 tons of rice for the first nine months of 2019, a small two percent increase compared to the same period in 2018. The EU was still the largest importer of rice at 269,000 tons, followed by China which imported 170,000 tons, as of October this year.