The Ministry of Commerce announced last week a $400 million proposal by three Chinese firms to build state-run rice warehousing facilities to increase the Kingdom’s storage capacity.

Lacking such capacity has been a longstanding issue that sector experts say has in part hampered ambitions of reaching the 1-million-tonne rice export target.

Commerce Minister Sun Chanthol met with representatives of Chongqing Foreign Trade and Economic Cooperation, Chongqing Grain Group and Guangdong Foreign Construction to discuss the possibility of building warehouses in Battambang, Pursat and Kampong Thom, according to ministry spokesperson Ken Ratha.

“The three companies have come together and proposed a plan for warehousing,” Ratha said.

Construction on the three facilities is planned for 2016, but Ratha said the firms need to confirm a start date after looking into the logistics of the plan.

The Cambodian government last year had drafted a memorandum of understanding asking the Chinese government for a $300 million loan to build 10 warehouses across the country, capable of storing 1.2 million tonnes of paddy. As of July last year, the two sides were still negotiating the conditions and requirements of the agreement.

The recent visit of the Chinese delegation was linked to the Cambodian government’s proposal last year and was “under the same package”, with negotiations still under way on the working capital of the rice sector, according to Mey Kalyan, project leader and senior adviser to the Supreme National Economic Council.

“[The agreement] is a work in progress,” he said. “There are many players and interests to consider before finalising this.”

According to Kalyan, multiple interests had to be considered before going forward with the plan, given that the building of the warehouse will be a public project, but utilisation will be by the private sector.

“We have to know what we want do and do it correctly,” Kalyan said. “We will resolve it as soon as possible and move forward carefully.”

Given that Battambang, and other neighbouring provinces like Pursat and Banteay Meanchey account for a third of the country’s paddy output, the new warehouses were welcomed by Kann Kunthy, CEO of rice miller Brico.

However, Kunthy said it would be more useful if the warehouse were equipped with drying facilities, which would mean that fresh paddy could be dried and stored for a long period of time.

“The big harvest is in November and December, which means you must have a huge warehouse with first-class drying facility to be used during these two months and then the paddy can be used for milling for the next 10 months.”

While currently millers and exporters have limited storage facilities, which means they are only able to buy a limited amount of fresh paddy and sell it, a warehouse with dried paddy stock would help increase exports across different markets, Kunthy added.

“Milled rice from fresh crop, within three months of harvesting, is for markets like Malaysia, China and certain parts of Europe where Southeast Asian people live,” he said. “They prefer more aromatic and soft rice.”

“The second market is Singapore, Europe and the US, which prefer older paddy because the rice is not as sticky.”