Bangladesh rice deal shelved

A farmer harvests rice crop in a paddy field in Phnom Penh’s Russey Keo district in 2015.
A farmer harvests rice crop in a paddy field in Phnom Penh’s Russey Keo district in 2015. Vireak Mai

Cambodia has failed to finalise the terms of a massive 250,000-tonne delivery of rice to Bangladesh, with industry insiders claiming that shipments have been cancelled as millers do not currently have the stockpiles to meet export demand while hopes for further negotiations appear to be dwindling.

The rice deal was originally made in August, when relevant ministries from the two countries signed a memorandum of understanding (MoU) and made plans for initial shipments of rice to begin being shipped to Bangladesh in November.

 

Hun Lak, vice president of the Cambodia Rice Federation (CRF), said that a letter of credit could not be reached because the two parties could not agree on finalised terms and conditions for the shipments.

“Because the terms of the deal and the payment conditions could not be agreed upon by both Cambodia and Bangladesh, scheduled rice deliveries have been cancelled,” he said. “We will discuss this again in a later meeting.”

 

He added that the state-run company Green Trade, which is in charge of managing the deal, would be required to schedule a future meeting to continue negotiations. However, he declined to provide details for when further discussions would take place.

The rice deal, which was originally made to replenish Bangladesh’s stockpiles after heavy flooding earlier this year destroyed the country’s crops, had the potential to see Cambodia sell up to 1 million tonnes of rice over the course of the coming five years.

Commerce Ministry spokesman Long Kemvichet said that while the framework for the deal remains in place, the ministry is still negotiating the terms with Bangladesh.

“We are still negotiating an export of 250,000 tonnes of rice, but nothing has officially been finalised,” he said.

Song Saran, CEO of Amru Rice, said that the Cambodian industry is struggling to meet Bangladesh’s immense demand for rice.

“Logistically, rice storage in Cambodia is still limited, so it’s an obstacle for us to reach the 250,000-tonne goal which we have promised Bangladesh,” he said. “Even if we’ve already agreed on a price, it is still possible for this deal to fall through if we can’t agree on the terms of supply, quality control and payment.”

A report released in late August by Reuters claimed that two Bangladeshi officials had finalised a price agreement with Cambodia at $453 per tonne. While the Kingdom’s millers balked at the price as being unprofitable, Cambodian officials repeatedly denied that an official price agreement was ever made.

Kim Savuth, chairman of Khmer Foods Group, said that the deal was ill-fated to begin with as millers would not have enough time to harvest white rice before the November shipment.

“When the CRF came to ask me to supply white rice, I could not as I did not have enough stock because the harvest season was not yet finished,” he said.

“I have no idea how this deal with Bangladesh can work.”

Nevertheless, the private sector might be able to handle the terms of the deal more effectively than the government, according to Hean Vanhan, undersecretary of state at the Ministry of Agriculture.

“Our rice stock is empty. That’s why we could not export rice in accordance with the agreement,” he said.

“The government is handling the deal, but they should give the job to the private sector, because the private sector knows well how much rice is in stock and knows how to work efficiently.”