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Monthly Archives: May 2012

UK to Open Investment Office

The United Kingdom Trade and Investment Office would establish a permanent branch in Phnom Penh in the expectation that economic ties between the two countries would continue to grow, Cambodian and UK officials said yesterday.  Bilateral trade has risen by 300 per cent during the past five years and was worth about US$400 mill-ion in 2011, according to the British embassy in Phnom Penh.  It increased by more than 40 per cent in the first quarter of 2012.  The trade and investment office would produce market reports and assist in business registration, officials said.
Cambodia’s garment industry has traditionally attracted the biggest share of UK investment.  Along with the trade-office announcement and a visit by Secretary of State for Wales Cheryl Gillan, Quantum Clothing, the UK’s largest company in Cambodia, opened its third garment factory here yesterday.  The factory investment was about $10 million, according to representatives at the embassy.
Officials and investors, however, are eyeing the potential beyond garments and construction, in which the UK has also invested.
“Technology, technology, technology . . .  The UK can invest in technology advancement in Cambodia and take us to the next level,” Pan Sorasak, secretary of state at the Ministry of Commerce, said yesterday after a speech by Gillan.
UK ambassador to Cambodia Mark Gooding said British companies would look at education, construction and financial-services investments in the future.
The United Kingdom was the biggest investor in Cambodia in 2011, according to Cambodian Investment Board documents, but the US$2.2 billion in UK money came almost exclusively in a single investment by a company incorporated in the Cayman Islands.  That company, the Post reported in November, was linked to Cambodia’s Royal Group of Companies.
No separate figure for UK investment in Cambodia was available, but the country invested only about $10 million in 2010, Investment Board documents show.
The United Kingdom was the only European investor in Cambodia last year, the documents show. 

Gillan, who met with Prime Minister Hun Sen during her visit, said the United Kingdom would look into other sectors for investment opportunities in Cambodia.
“Our challenge is to increase and diversify this trade and investment, and to maximise the opportunities for British companies in Cambodia while supporting sustainable development and poverty reduction,” she said in a speech.  Several of Britain’s largest companies, among them Prudential Plc and British Gas, were eyeing the Kingdom, Gillan said.

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Chinese Firm to Invest $100M in Rice Mill

A Chinese company from Yunnan province will invest $100 million to build a rice mill and processing plant in Cambodia with a local firm and export 200,000tons of milled rice to China beginning this year, official said yesterday.

The Yunnan Pan-Asia Agricultural Cooperation and Development Company Ltd signed a memorandum of understanding with Cambodia’s Soma Group Company Ltd signed a memorandum of understanding with Cambodia’s Soma Group Company Ltd to build the rice mill and export the finished product during a meeting Friday between Deputy Prime Minister Sok An and a delegation of investors from Yunnan province, Council of Ministers spokesman Ek Tha said.

“This is in line with our plans to export rice to overseas markets… and show the world that Cambodia is a key rice exporter,” Mr. Tha said, adding that the delegation, led by Yunnan governor Li Jiheng, did not specify where or when the plant would be built. “They will set up in a province which is a rice basket and in an excellent location where it is easy to ship to China.”

Mr. Tha said the exports were due to begin in December 2012, but that he didn’t know whether the plant would be functional by that time.

The mill will help Cambodia meet its agricultural goal of exporting 1 million tons of milled rice by 2015 and help famers get rid of surplus of paddy rice, Mr. Tha said.

“Cambodian farmers mostly export paddy rice to Thailand and Vietnam and are still left with a surplus because there are no rice companies to buy the rice, keep it in stock, process and export it,” he said.

Lim Bunheng, chairman of major rice export firm Loran Import-Export Co and the president of the Cambodia Rice Exporters Association, said the deal was a good sign for future exports to China.

“This is a good thing because if China opens up their market for our rice, it will be the number one market because we will save time and money,” Mr. Bunheng said. “And it’s an attractive market because of all the people there.”

Mr. Tha said the Chinese delegation also expressed interest in building two agricultural parks in Siem Reap and Banteay MeanChey provinces that would train Cambodians in new rice planting techniques and technologies.

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Mobius eyes smooth sailing in SEA

Mark Mobius, one of the world’s best known emerging market investors, sees bargains in Southeast Asian stock markets, especially Vietnam, but said on Thursday that it was too soon to start investing in fast-changing Myanmar.

Mobius, executive chairman of Templeton Emerging Markets Group, which oversees US$50 billion in emerging markets funds, said frontiers would outperform other emerging markets, but despite Myanmar’s potential in energy, manufacturing and consumer sectors, it was “too early” to invest there.

Despite moves to overhaul its economy, Myanmar still had some issues with its kyat currency and its rudimentary banking system, Mobius said during a presentation in Bangkok on Thursday.

The year-old civilian government has initiated a wave of reforms in the past eight months that have stunned the world after decades of isolation under military rule, but the process is still seen as fragile.

Its boldest economic reform so far is its “managed float” of kyat, which began only on Monday and replaced its multiple black-market rates. It has started to overhaul its fledgling banking system, but that could take time due to a lack of capacity, economists say.

For now, Mobius said established Southeast Asian markets would continue to perform well. He pinpointed Vietnam as an attractive bet, but did not elaborate.

Foreign fund flows gave a strong boost to Southeast Asian emerging markets this year, including the rallies of stocks in Malaysia, Indonesia and the Philippines to all-time highs and Thai stocks to 16-year highs.

“All Southeast Asian stock markets are going to do quite well,” he said.

Vietnam is trading at 13.0 times this year’s projected earnings, higher than the 12.5 times of Malaysia, 12.3 times of Indonesia and 11.3 times of Thailand, according to Thomson Reuters Starmine.

The Philippines is trading at 15.5 times, the highest in the region ahead of Singapore’s 13.8 times.

His fund was still buying Thai stocks and preferred oil and gas and banking shares, Mobius said. He added that Thailand was not expensive, despite recent sharp gains of the Thai market.

Thailand’s benchmark SET index has risen 16.85 percent this year, making it Southeast Asia’s second best performing bourse, trailing a 25.09 percent gain in the small Ho Chi Minh Stock Exchange.

Mobius said he liked growth potential of emerging markets where he invested with two themes-consumption and commodities and Indonesia’s motorcycle sales had illustrated the strong level of consumption in emerging markets.

Valuation for those markets on average was still attractive and the markets were still under-owned, added Mobius, who joined Templeton in 1987.

The performance of emerging markets was not so good last year because high supply of IPO in Asia that ate up money from stock markets, he said.

The 12-month forward price to earnings was at 10 times as of February this year versus peak level of 28 times in May 1988 and the bottom of seven times in November 2008, he said.

In terms of historical performance, Latin America led other emerging markets, followed by Asia and Eastern Europe, he added.

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Construction Approvals Grow

The value of construction approvals granted by the government increased 43 percent in the first two months of the year, compared to the same period in 2011, figures show. Some 315 potential projects, worth US$281 million, were given the go-ahead in the period, compared with 340 construction projects, worth $197 million, approved last year, according to Ministry of Land Management, Urban Planning and Construction figures obtained this week.

The ministry’s Construction Department Director Lao Tip Seiha said that the growth was, in part, due to an increase in the construction of coal-power plants, oil refineries and satellite cities.

“We have indeed seen a sharp increase in construction investment, which provides job opportunities, for skilled and unskilled labor, and helps alleviate poverty,” he said, adding that it also boosts the state’s income.

Growth in the sector has also led to increased demand for domestic and imported construction materials, he said.

“Manufacturer are happy because the number of order has grown, compared to last year, when the market was still unstable.”

Chhim Mao Charo, a Phnom Penh-based construction business owner, said that while projects in the city had increased, sales at the company had only increased by 20 percent.

“As long as demand for housing continues to increase, the sector has nothing to worry about,” she said, adding that while the Kingdom is capable of producing materials, such as bricks and cement, it still relied on the regional import of products, such as steel.

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Not just Sun, Sea and Sand – Sihanoukville

With the recent launch of flights from Siem Reap, Sihanouk Ville is truly becoming an important tourism destination, but it is also establishing itself as a commercial and investment-friendly destination as well.

As the home of Cambodia’s international port since 1960, Sihanoukville has always had a commercial setting, but more recent developments look set to position it as a key player in Cambodia’s economic future. Commercial real estate service company CBRE Cambodia has recently increased its involvement in Sihanoukville and the surrounding coastal area, working alongside key developers and landowners. CBRE says it sees the south of the kingdom as both a strong tourism destination and as a lynch pin for the import and export of goods. The company now has physical presence in the area, and says it expects to see this team expanding in time.

The port itself has seen both physical and economic expansion in recent years. The latest figures show an increase in revenue of 22 percent in the first quarter of 2012, compared with the same period last year. In order to support and take advantage of this kind of growth, seven new Special Economic Zones (SEZ) have been given the go ahead in the area, offering a number of economic advantages to their occupants. The key concepts behind the SEZs are that they will encourage new industries in Cambodia, thus diversifying the types of commodities that are produced and exported and also accumulating new technologies through Foreign Direct Investment (FDI) in the Sihanoukville area.

Fiscal incentives such as tax holidays, full import duty exemption for raw materials, machinery and equipment, no export tax and 0 percent VAT are enticing to investors. Reports have claimed that investment into these SEZs rose by 683 percent in 2011, with the Council for the Development of Cambodia (CDC) approving 39 new projects worth a total of $715.25 million and with Sihanoukville housing the largest of these, the signs are promising.

Sihanoukville, as well as Cambodia as a whole, also has the potential to benefit from recent issues that have affected investors in Vietnam, through aggravating operating issues. These have included the significant increase in the number of strikes in Vietnamese factories by workers demanding higher wages and also the increase in inflation in the country. While Cambodia’s level of FDI grew by 14 percent in 2011, Vietnam has seen a fall in recent years from $19.9 billion in 2010 to $14.7 billion in 2011.

With Sihanoukville’s close proximity to Vietnam, a cheap labor force and economic incentives from the likes of the SEZs, investors do not have to look far for a new location.

A further future economic enhancement of the region will be the construction of Cambodia’s first oil refinery. With construction due to start this month and a completion date set for 2014, the site will see a proposed investment of $1.6 billion through a joint venture between Cambodian Petrochemical Company (CPC), China National Automation Control System Corporation and Sino March Company of China. The Cambodia government hopes that the development will grant Cambodia fuel self-sufficiency and that it will play a strategic role in the industrialization of Cambodia, while supplying up to 2,000 new jobs in the area. It has also recently been announced that Ford will be opening a car manufacturing plant in Sihanoukville to produce their Everest SUV for the growing Cambodian market. Another longer-standing investor and major employer in the region is Carlsberg, who have invested heavily in the expansion of the Cam brew brewery in Sihanoukville. The presence of these multinational in the area is a clear indication of the confidence that they hold the future of Sihanoukville as a commercial centre in Cambodia and in South East Asia.

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Skyscrapers in Phnom Penh to Attract Investment

The construction of five skyscrapers on Phnom Penh’s Koh Pich Island is set fuel international investor confidence in the coming months, according to industry experts.

The development, named the Koh Pich Riviera, is part of Overseas Cambodia Investment Company’s US$300 million project and is slated for completion is 2017, according to deputy manager Chin Hok.

Upon completion, two of the buildings will comprise 28floors, while the remaining three will be 37 storey’s high, surpassed only by Gold Tower 42 has, however, been postponed for more than a year, leaving it 11 storey’s short of its target, with no restart date in sight.

“There are many shopping malls, hotels and residential units surrounding the project, and as of today, 104 units have been sold,” Chin Hok said, adding that this is a positive sign for future sales.  He was, however, unable to provide an estimate for the total value of the project.

The development of OCIC’s latest project is a positive sign that the property sector is reconverting, Cambodia Real Estate general manager Sen Chanrietrey said.  “We congratulate the project because it will boost investor confidence. If units are reasonably priced, it will surely succeed,” he said, adding that he could not guarantee the strength of the market in the coming years.

Sung Bonna, president and CEO of Bonna Realty Group and president of National Valuers’ Association of Cambodia, said the project had been undertaken at the right time, as the market is once again a favorable investment destination.  He added that the key factors for a project to succeed included location, brand power and the climate of the market.

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Cambodia Kingdom – $60.3m loan for flood relief

The Ministry of Economy and Finance yesterday signed a US$60.3 million loan package with Asian Development Bank in to aid in reconstruction efforts after the Kingdom last year suffered its worst floods in a decade. Minister Keat Chhon, calling the loans “a timely response of our need for the development”, said ADB would provide $55 million, with the Australian government, through its development arm AusAID, donating $5.3 million. He estimates the total rehabilitation costs were as high as $66.8 million, however, the Cambodian government would bridge the gap with its own funds. The government already had spent $45 million on restoration efforts since last year’s floods, he said.

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