Cambodia Firm Preps Huge Rice Order for Indonesia

By Dion Bisara 

The Jakarta Globe

August 31, 2012

Indonesia signed an agreement to buy 100,000 metric tons of rice from Cambodia annually. (Antara Photo/Novandi K Wardana)

 Siem Reap, Cambodia. Khy Thay Corporation, a Cambodian rice miller, said it was ready to ship up to 20,000 tons of rice to Indonesia starting this year and to buy Indonesian agriculture machinery valued at $380 million.

The move came after the countries signed a rice trade deal this week.

As Indonesia seeks to boost trade and investment in Cambodia, the country on Tuesday signed a deal to import as much as 100,000 metric tons of rice annually from the Indochina country.

Gita Wirjawan, Indonesia’s trade minister, and Cham Prasidh, the Cambodian minister of commerce, signed a nonbinding agreement on Tuesday. The deal allows Bulog, the state logistics agency, to import rice each year from 2012 through 2016 up to the specified cap. The import cap could be increased if needed.

Khy Thay, general director of Khy Thay Corporation, said that the company has been waiting for the deal, which would allow it to expand its market and justify its plan to expand its milling capacity.

“Right now we can ship rice at any time. We have 20,000 tons ready for shipment. You can see it yourself,” Khy Thay said at the company’s processing facility on Wednesday in Kampong Thom province, Cambodia’s second-largest province by area.

Khy Thay is a family company established in 1930, which buys rice from farmers and sells it, husked or unhusked, to Thailand and Vietnam. The company oversees a farmers’ association with 1.2 million members, each of whom owns about a hectare of land.

In 2008, the Cambodian government gave permission for the company to sell rice overseas including to Poland, the Soviet Union and other Asian countries.

Its latest facility, in Kampong Thom, about 150 kilometers southeast of Siem Reap, covers an area of 10 hectares of land and can mill 700 to 1,000 tons of rice a day. The company also has shipping facilities in Phnom Penh and Sihanoukville with a capacity of 7,000 tons to 10,000 tons, depending on the season.

“We have kept our stock unhusked, because we do not have silo technology to store husked rice. That is what we want to bring from Indonesia, as well as [rice] dryers,” said Samnang Heng, an adviser to Khy Thay Corporation.

Heng, who is also a history professor at Royal University of Phnom Penh, said the company plans to build 10 more similar rice facilities around Cambodia, with an investment of around $100 million each. It also plans to open smaller milling facilities in the Kamphong Thom province with a capacity of 200 tons a day. The smaller facilities will cost about $10 million to $12 million.

“We would like to bring in most of the machinery from Indonesia. We are also interested in Indonesian biomass generators that can reduce our energy bill by half,” Heng said.

Mohamad Helmi, director of Prabu Galuh Trijaya, placed an order for Indonesian rice dryers, millers and silos valued at $380 million. He said that Prabu has been in contact with some companies in Indonesia for the procurement, including Surabaya-based agriculture machinery producer Agrindo and Tracon Industri, a subsidiary of state-owned Rekayasa Industri.

Prabu is the Indonesian partner of the Khay Thay Corporation.

“I hope this agreement can be implemented this year as well,” said Helmi, adding that the company has secured more deals that can amount to as much as $1 billion over the next five years.

Helmi said the Indonesia rice import value from Cambodia “would be peanuts” compared to what Indonesia can export to Cambodia in terms of agriculture help like machinery and fertilizers.

Thinking logistically, Ika Yulita Hasanah, Prabu Galuh’s director, figures that Cambodia will need plenty of rice sacks as the country aspires to export 1 million tons of rice by 2015. The country is currently exporting 180,000 tons of rice annually.

“Vietnam might try to squeeze out Cambodia, following its deal with Indonesia, by cutting short its sack supply,” Ika said, “This is a big opportunity for any Indonesian company to supply the sacks or even build sack plants here.”

Cambodia still depends on sacks imported from its neighboring countries. The country is also lacking in rice-milling capacity and has been forced to export unmilled rice to Thailand and Vietnam, both of which are the biggest rice exporters to Indonesia.

Gita has expressed his support for any Indonesian company that ventures into Cambodia, “as it’s in-line with the Asean spirit.”

“The Indonesia rice import deal with Cambodia is based on the consideration that we need more standby supplies amid uncertain climate conditions,” Gita said. “Still, if it sparks more investment or trade opportunities, that’s better.”

Rice is the main staple for many of Indonesia’s 240 million people. Poor policy has made the country dependent on rice shipments. Indonesia typically imports rice from Thailand and Vietnam.