PHNOM PENH - KUWAIT has agreed to give Cambodia loans totalling US$546 million (S$767 million) to develop agriculture, build hydro-power facilities and construct roads, a Cambodian foreign ministry official said on Friday.

This is the second-biggest aid pledge ever received by Cambodia, after aid and loans totalling US$601 million offered by China last year.

'This is showing a stronger relationship between Kuwait and Cambodia, both political and economic', Cambodian foreign ministry spokesman Sin Bunthoeurn told sources late on Thursday after the ministry hosted bilateral ministerial talks.

He said they planned to open embassies early next year. The two countries have had diplomatic ties since 1997.

A Kuwaiti newspaper reported that Kuwait had leased rice fields in Cambodia to secure food supplies after Prime Minister Sheikh Nasser al-Mohammad al-Sabah met Cambodian leaders earlier this month.

Qatar's prime minister, Sheikh Hamad bin Jassim al-Thani, paid his first official visit to Cambodia in April 2008 and Qatar plans to invest US$200 million in Cambodian farmland.

Some US$486 million from the Kuwaiti loan will be invested in irrigation systems and hydro-power on the Stueng Sen river in the north-eastern province of Kampong Thom.

The remaining US$60 million will be used for building roads in the north-western province of Battambang, a rice-growing area, Mr Sin Bunthoeurn said.

Kuwait has signed more than US$27 billion of investment agreements with nine Asian countries during an Asian tour this month, its finance minister was reported as saying on Aug 17. -- REUTERS