Lack of competition lets Ministry of Mines and Energy set sand price cap

Content image - Phnom Penh Post
After licenses were stripped and sand dredging was limited, the construction industry worried about the quality and lack of supply. Hong Menea

Lack of competition lets Ministry of Mines and Energy set sand price cap

After almost a month, the Ministry of Mines and Energy has officially announced the four companies that have been granted sand dredging licenses this past Tuesday.

When the ministry notified the companies who won the bidding for one of four available licenses, it also gave them an ultimatum of three days to accept the terms and conditions that apply: a price cap of $3.30 per qubic metre said Dith Tina, Secretary of State at the Ministry of Mines and Energy. He added that companies who didn’t accept or answer would be replaced by the next company waiting in line.

In an attempt to quell any accusations of corruption in the bidding process before they could even occur, the secretary of state also said:

“The bidding process was transparent because the ministry disclosed the prices companies bidded with, and there were no problems, especially because we had the media to witness it,” he said.

“If any company defames the ministry claiming otherwise, we will sue them for defamation,” he added.

The companies that were granted a dredging license are Chin Ling Construction company, Tann Kim Eng company, Khmer Anusa and another company that asked not to be identified.

The licenses will permit the four companies to dredge sand in four places among them Sdao Ta Ek in Kampong Cham province and Mok Kompoul in Kandal province.

While the companies have to sell sand to depots for a fixed $3.30, depots can charge the end customer up to $4.50 per cubic metre. If any company in the supply chain increases the prices over the caps it would lose the license, Tina said.

The ministry justified its price regulation measures to prevent the formation of a sand cartel that would overcharge a price sensitive construction industry that had previously mourned the increased cost of sand in May, after dredging was halted until enviromental impact studies could be conducted, Post Property reported.

Hy Pavy, director of Phnom Penh Port, estimated that Phnom Penh required 10,000 cubic metres of sand per day, which the dredging sites in Kandal, Kampong Cham, Svay Rieng and Prey Veng province supplied.

For an interim of six weeks, Phnom Penh Port was the only licensed dredger that could satisfy Phnom Penh’s appetite for sand after licenses were stripped until the bidding process was finalized.

Despite having lost the privilege to dredge after the new licenses were announced, Hy Pavy appears to be indifferent.

“Now sand is $4.50 per cubic metre. In general, the port does not have any competition with the new companies because the port had to dredge coarse sand in shallow water that bothered the shipping [network], so if the licensed companies sell finer sand cheaper now, it is better,” he said.

Touch Somnang, vice director of the Overseas Cambodia Investment Cooperation (OCIC) said the sand price cap of $4.50 was only about $1 higher than in previous times, which largely fluctuated on transportation costs of the increased distance from the new dredging sites to Phnom Penh. The director does not believe that the construction sector will feel negative impacts from the price cap. The ministry’s price regulation may have found an effective solution to curb discontent in the construction sector.

Only time will tell if the price cap will create a problem on the supply side.


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