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Monthly Archives: November 2012

Unilever Opens Green Office in Phnom Penh, Cambodia

Multinational consumer goods company Unilever opened their new, ‘green’, headquarters in Phnom Penh’s Khan 7 Makara district on November 12, indicating a trend in purpose-built office buildings in Cambodia.

Multinational firm Archetype was contracted to design the headquarters within Unilever’s color and programming guidelines, and Unilever also went out to local tender, according to Maks Mukundan, managing director for Unilever Indochina.

The new office design incorporates green and sustainable features such as incorporating as much natural light as possible, using energy-saving air-conditioning units, louvers for heat management and an open-plan interior.

“It’s a linked office. There aren’t separate offices or cabins; it’s a very open plan. You can see through the whole office, it enables vitality, interaction and for people to connect to each other,” said Mukundan.

According to Archetype’s architectural design director Michel Cassagnes, the market for office spaces in general is only just emerging.

“It’s not a mature market in Cambodia,” he said, adding that when Archetype does consult on office plans, their designs are oriented toward sustainable and green solutions.

“We’re members of the US Green Building Council and the one in Vietnam,” said Cassagnes. “For us there’s no question, green and sustainable design is for the future, for our children,” he added.

Ryan O’Sullivan, CBRE’s Agency and Professional Services Manager, agrees that demand for dedicated office space in Cambodia is increasing.

“The reasons for increasing demand are two-fold. First you’ve got new multi-national companies (MNCs) coming into Cambodia and then you’ve got existing companies here expanding,” he said.

According to O’Sullivan, spaces that are 100 to 200 square metres are in particularly high demand among the MNCs when they initially come to Cambodia, and they generally expand within one to two years.

Once an office space is secured, O’Sullivan said design is generally driven by where the focus is coming from. “If the organization is more Asian-run, it’s more multi-partitioned offices, whereas if it’s more Western, it’s more open plan,” he said.

Office spaces that have green and sustainable features are in demand as organizations increasingly become concerned with corporate social responsibility, said O’Sullivan.

As for the employees themselves, Mukundan said Unilever’s Cambodian employees are enjoying their new office space, “The first thing I heard was on Facebook, ‘new office photographs!’ so they’re really thrilled.”

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Koh Pich – Phnom Penh – Cambodia – Riviera Project to begin in 2013

Canadia’s Bank’s futuristic $100 million Riviera project on Koh Pich Island will begin construction early in 2013, according to a company spokesman.

Riviera project manager Chen Hok said that two 28-storey buildings and three buildings of 38 storeys will be built in early 2013, while they are working with their partners to aid the construction.

The project consists of apartments, a supermarket, condos, offices, an amusement park and a two-hundred metre-pool running across the tops of the 38 storey-buildings.

“The expenditure on this project is not determined because the price of building equipment and materials are unsteady so we don’t know precise figures yet,” he told Post Property.

Ban Souly, the sales manager of Riviera, said many potential customers are interested in Riviera; its 104 flats will be purchased immediately after the company announces it is to sell some parts of the five buildings.

“Many clients are interested in condos after it was announced that the average price is $1,800 per square metre,” she added.

Sung Bonna, Director of Bonna Realty Group and president of the Cambodian Valuers and Estate Agents Association said this project is an opportunity to succeed in making Koh Pich became a busy economic center so it will be popular after completing construction.

“The success of this project is due to good location and circumstance,” he added.
Dith Channa, general manager of VMC Real Estate Cambodia, agreed with Bonna, saying it is in a good location and is different to other buildings in Cambodia because it has the huge pool on top and also offers entertainment, so it has the potential to attract local and international clients.

“The project is in a good location and environment that is surrounded by water and fresh air, as Chinese Feng Shui is a priority. On the other hand, it also updates the beauty of Phnom Penh and real estate as well as attract tourists,” he said.

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Japanese Investment in Cambodia Grows, but Hurdles Remain

Japanese Investment in Cambodia is steadily increasing as a result of sharply rising wages in China and other Southeast Asian nations. But experts warned this week that for sustained investment growth and to avoid driving Japanese companies to other attractive investment destinations such as Burma the government must address the country’s skilled labor shortage and reduce electricity costs.

Japanese investment in Cambodia reached $75 million last year, up from about $35 million in 2010 and about $15 million in 2009, according to the Japanese Embassy.

This year, however, investment by Japanese companies will reach $300 million thanks to the $205 million Aeon Mall development in Phnom Penh, construction on which begins this month.

“The biggest advantage of Cambodia is the low cost of labor, Japanese companies made very big investments in China, Vietnam and Thailand, [where] labor costs are increasing rapidly,” said Hiroshi Suzuki, CEO and chief economist at the Business Research Institute for Cambodia.

Restrictions on foreign-owned business, especially in China and Vietnam, also contrast with Cambodia’s “free economic system” and minimal taxes, Mr. Suzuki said, adding that in Vietnam, companies must be 50 percent owned by Vietnamese nationals and have a board of directors that is also half-Vietnamese.

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Cambodia Bourse Sees End to IPO Drought – Cambodia Stock Exchange

Phnom Penh – Cambodia’s stock market is set for a revival early next year when initial public offerings are expected by at least four local companies, ending a drought for a bourse that has hosted just one listing since its trading debut in April.

State-owned Telecom Cambodia and Sihanoukville Autonomous Port are likely to list by June, while two private garment manufacturers are preparing for first-quarter IPOs, Cambodia Securities Exchange Chief Executive Hong Sok Hour said in an interview Monday.

Cambodia’s fledging stock market has foundered since the boisterous launch last April of the country’s first-ever listing, the $20 million flotation of state-owned Phnom Penh Water Supply Authority. Industry executives say a dearth of further IPOs—as candidates struggled to meet regulatory requirements or decided to hold off until the market gains depth and liquidity—quelled investors’ initial exuberance.

The share price of Phnom Penh Water Supply Authority, which jumped 63% in its first week of trading and peaked at 10,300 Cambodian riel (about $2.56) on strong volume, has given up all its gains. The stock ended Monday flat at 6,200 riel, below its 6,300 riel IPO price.

The stock market is “a very new concept for the Cambodian people,” said Nguon Sokha, director general at the National Bank of Cambodia, in an interview last week. It will take time for the investor pool to deepen, she said. Of the 4,000 investor accounts at licensed brokerages, about a third are held by foreigners, according to the Cambodian bourse, also known as CSX.

On the other side, many of Cambodia’s large private enterprises don’t see an immediate need to go public. Acleda Bank PLC, for example—the country’s largest lender by assets—has long-term plans to list, but only when it needs fresh capital and considers the local regulatory and investment climate sufficiently robust, chief executive In Channy said Monday.

As central banker Ms. Sokha put it, the big private enterprises “want to see the state-owned companies list first and give momentum to the market.”

State-owned Telecom Cambodia and Sihanoukville Autonomous Port were originally scheduled to list by the end of 2012 but haven’t been able to meet listing requirements in time, said Mr. Hong of CSX. After they list, the government could pick Phnom Penh Autonomous Port, a state-owned port operator, for its next IPO, according to the executive, who expects the momentum for new listings to pick up over the next two years.

Some smaller private companies have shown a keener interest than their larger counterparts, stockbrokers say. The two garment manufacturers considering IPOs early next year, Grand Twins International and TY Fashion Co., should be submitting formal applications within a month, said Stephen Hsu, chief executive of brokerage Phnom Penh Securities, which is handling those deals. The two are likely to raise a combined $60 million to $70 million, he said.

“Several other companies—ranging from banks to electricity companies—are also exploring IPOs,” Mr. Hsu said. “If they pull off their listings, likely in the second half of 2013, we could have between seven to 10 companies on the stock exchange by the end of next year.”

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Benefits from ‘black gold’ Revenue from Cambodian oil fields could provide a big boost to development, if it’s done right

If Cambodia’s oil and gas sector is well managed, and transparent, it could provide the country a golden opportunity for investment, development and poverty reduction, said independent economist Chan Sophal, who spoke at a recent gathering looking at the economies of oil-producing countries.

Chan Sophal said crucial areas such as human resource development, agricultural production improvements and infrastructure construction, such as roads and irrigation systems, need large investments, which oil and gas could provide.

“These areas have enough absorption capacity as there is a lot of room for development,” he said. “Using a large share of the [oil and gas] revenue would help.

Potential revenues from Cambodian oil and gas production are forecasted to reach up to US$1.7 billion a year, according to a book on the country’s natural resources by Cheam Yeab, a Cambodian lawmaker and chairman of the National Assembly’s Finance and Banking Commission. This number is higher than Cambodia’s 2011 domestic revenue, which reached US$1.5 billion.

While Cambodia’s oil and gas sector is still undeveloped, the government expects to issue American oil giant Chevron an production permit license for exploration in the Gulf of Thailand by the end of this year. Between 70 and 80 percent of total revenue is expected to flow back to the government, officials said in September. However, revenues are not expected until around 2016.

There are still concerns that Cambodia risks being afflicted by the socalled “resource curse,” where oil-rich countries with poor regulations and high levels of corruption, such as Nigeria and Chad, were actually dragged deeper into poverty after the discovery of “black gold.” Revenues can end up in the pockets of corrupt officials or end up being spent on grandiose projects with little larger social benefit.

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Boutique Hotels on the Rise – Sihanouk Ville – Cambodia 2012

Local company VLK Royal Tourism Group has embarked on a joint venture with a Thai partner to build OC Hotel, a four-star boutique hotel in Sihanoukville. The venture was prompted by rising demand as well as increasing tourist numbers to the coastal area off the back of its listing on the Paris-based Most Beautiful Bays Club last year.

Chairman of VLK Lav Heng declined to disclose capital investment details or the name of the Thai partners, but did say during the hotel’s soft opening that the company undertook many years of market research on the potential for hotels of this kind in the area in addition to overseas market research to gauge demand among prospective travelers.

“We have not finished our development as the market demand is still huge. Our investment will be in proportion to market demand. If it becomes bigger, we will spend more. We’re trying to provide a four- or five-star service,” he said.

According to Lav Heng, the hotel was built in the hopes of elevating Cambodia’s accommodation options to be comparable to those of neighbouring countries like Thailand and Vietnam, and so and joint venture was ideal for this.

Amornarat Kongsaway, representative for the Thai partner in the joint venture, said her investment was certainly to cater to the increasing demand for boutique hotels. “We travel overseas a lot and we know the trends and what customers are looking for is something different,” she said. “That’s why we set up this boutique hotel. Customers want hotels that are unique, small and personalized. That’s our market focus,” she added.

According to Amornarat, social media will be the key to convincing prospective customers of the high standard of hotels in Cambodia.

“We have a lot of experience in this area … this is a good chance for Cambodia to show overseas tourists that Cambodia also has good standard hotels that can accommodate them,” said Amornarat.

Ho Vandy, president of World Express Tour and the co-chair of the private sector working group, applauded any investment into new hotels in coastal areas, particularly boutique hotels. He said Sihanoukville has about 50 hotels with more than 2,000 rooms which are modern but not boutique with some being quite dated in their design. Guesthouses add another 2,000 rooms to the province’s total.

“Despite having around 5,000 rooms, it does not cater to the increasing demand during public holidays or the high tourism season. Currently, the province can only cater to demand during normal periods, not special occasions, we are always facing this problem,” he said.

Ho Vandy attributed the rising popularity of the area to its listing last year on the Most Beautiful Bays Club. “The numbers of tourists are increasing in the coastal area since we became a member of The Most Beautiful Bay Club,” he said. “This development is a direct response to the increasing demand from both domestic and foreign tourists.”

The Ministry of Tourism’s figures show the number of international tourists in the Kingdom saw an increase of 23.6 per cent during the first nine months of the year. During this period, coastal areas saw an increase of 50.3 per cent, or 206,129 visitors.

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Construction Comeback – Cambodia 2012

Back in 2007 and 2008, Phnom Penh was positively abuzz with the sound of drills, hammers and cranes. Construction sites were found all over the city and it seemed that every day new projects were being announced in the media—a skyscraper here, a retail development there.

But then came the global financial crisis and beginning in the second half of 2009 and continuing through the next year, the bottom rapidly dropped out of the construction sector, leaving empty lots where projects had been planned or hulking, half-finished structures that were simply been abandoned, such as Gold Tower 42, US$240 million condominium project financed by a South Korean company that was suspended in September 2010. It still stands silent and incomplete on a piece of very prime Phnom Penh real estate.

Some ambitious projects never really got off the ground, such as the planned 52-story, glass-and-steel International Financial Centre, which was set to be completed this year. In addition to the offices, the US$1 billion complex was supposed to feature luxury apartments, an international school and a convention center.

But today, after a long lull, the sound of construction is again competing with the noise of motorbikes and tuktuks. Many projects, long delayed or brand new, are active thanks to the better economic environment, government policy around foreign property ownership and better credit provisions for the construction sector.

Skyscrapers are going up again, and actually will be finished this time. There is the the Vattanac Capital Tower, a 38-story structure worth US$170 million nearing completion, and the 29-story Riviera Tower being built on Diamond Island. Camko City, a satellite city a few kilometers north of the center of Phnom Penh, has also resumed construction although for years its future was in doubt. A new Japanese shopping mall complex is going up where the International Financial Centre was once planned.

In a word, construction has made a comeback. Investment levels, which had plummeted from US$3.1 billion in 2008 to US$840 million in 2010, climbed back to US$1.7 billion in 2011. The outlook for 2012 is even healthier. Investment in the first nine months of the year was US$1.8 billion, up from US$1 billion in 2011.

In addition, imports of construction products such as cement, construction materials and steel also increased by 48 percent, 23 percent and 193 percent respectively in the first eight months of 2012 over same period last year.

But industry experts say Cambodia is not experiencing the kind of boom it did before the 2009 collapse. These days, they say, people are more cautious and wary of speculation, and investors come with solid investment plans that can see projects through. In a word, it’s a more sustainable level of growth than the pre-2009 frenzy.

But there are some worries. Some are concerned that Phnom Penh could lose much of its architectural heritage to new construction. Others worry that the city’s infrastructure is not up to all the new structures, and traffic congestion, already bad, could get even worse.

GLOBAL REASONS

For Simon Griffiths, property manager at CB Richard Ellis (Cambodia) Co.,Ltd (CBRE), the rebound of the construction sector is a logical follow-up to the recovery of the world economy.

“The construction sector is performing well as one would expect. In an economic cycle one can expect to see a lot of development after an economic downturn,” he said. “Therefore many shrewd developers, who either slowed their developments during the global financial crisis or postponed them, have started again so that in one to three years the built environment will be ready to accommodate new or growing businesses.”

A more stable global economy has helped Cambodia’s economy to return from 0.1 percent growth in 2009 to 6 percent in 2010 and 7.1 percent in 2011. In 2012, the growth rate is expected to be between 6 percent and 7 percent.

“The construction sector is performing well and will be a strongly performing sector over the next five years,” added Griffiths.

The Economic Institute of Cambodia in its July Cambodia Economic Watch predicted the real growth rate of the construction sector would be 8.9 percent in 2012. Some analysts have gone higher, predicting 9.9 percent annually from this year until 2015.

In addition to a more sound global economy, the banking system has played an important role in the building recovery. As of March, loans by commercial banks for construction projects had jumped by almost 51 percent year-on-year to US$357 million.

The number of housing loans also increased, thanks to competitive interest rates, less paperwork required by banks and changing attitudes toward loans. Data from National Bank of Cambodia (NBC) shows total housing loans climbed to US$270 in 2011, an increase of 130 percent over 2010. In the first seven months of this year, the figure had already reached US$320 million, a 17-percent increase over 2011.

The government also played a role, approving projects more quickly and allowing foreigners to own property above the ground floor, said Lao Tipseiha of the Ministry of Land Management.

A DIFFERENT KIND OF GROWTH

But experts are quick to point out that the current situation is not a return to the unsustainable boom of a few years ago, which for Griffiths, is a good thing. He says real-estate booms are only positive in the short term and usually result in a graveyard of half-finished developments—like Gold Tower 42—and wild speculation.

“In the rush to make money, corners were cut and risks were taken,” he said. “A market based on overconfidence fuels a situation which will inevitably at some point fail.”

Today, however, he said projects are being planned more carefully, and buildings put up that respond to an actual need or demand.

Seng Sopheak, properties valuation manager at Cambodia Properties Ltd. (CPL), agreed and added that the recent boom and bust had made customers more serious about their property investments.

“Customers buy a house expecting the price to increase, but they also live there, not like in the past,” he said. “Investors come with a real plan—they aren’t speculators.”

For Noun Rithy, managing director at Bonna Reality Group, a leading real estate firm, while prices are going up, he expects them to do so more slowly. At the height of the boom, prices were going up 50 percent or even 100 percent in six months. “Now prices are rising step by step and are sustainable.”

Property prices in Phnom Penh have only risen between 10 percent and 20 percent compared to last year. In some provinces, they are very stable, rising just between 1 percent and 5 percent.

THE CHARMING CITY?

With several big projects are already underway, the Phnom Penh landscape is set to change. Recently, the government announced the approval of Diamond Island Tower, a 555-meter skyscraper estimated to cost US$900 million.

All the development has led some to wonder if Phnom Penh will lose what makes it special—such as its low-rise character or colonial buildings—and instead of being “the Charming City,” will begin to resemble Bangkok or Ho Chi Minh City in ten or fifteen years. Many experts doubt it. “It’s unlikely,” said Griffiths. “In the years of [Cambodia’s] civil war, Bangkok boomed and has had several property cycles since then which have added to the city’s development.” Besides, he added, the population of Bangkok, including its immediate surrounding areas, is 14 million, almost equal the entire population of Cambodia.

He believes that Cambodia will continue to develop, but more as a boutique location with a wide array of businesses in different sectors, but not on the scale seen in Bangkok and Ho Chi Minh.

“Phnom Penh has the chance to stand apart from the crowd,” he said.

However, the capital is growing, not only in terms of buildings, but people, too. In fact, around 4 percent of villagers in the countryside leave their homes annually in search of opportunities, according to the Cambodian Rural Urban Migration Report Project. Half come to Phnom Penh. While in 1998, 1 in 20 people lived in the capital; today it is 1 in 10. Traffic and parking are everyday headaches.

“Without planning or the infrastructure to support development, the result is gridlocked streets, cars parked on every available scrap of pavement and a lack of parks and greenery,” said Griffiths.

Experts say the government and developers have to work together to address these problems, especially with the lack of parking being built next to the big skyscrapers like Vattanac Tower. Otherwise, “the problem will get more serious,” said Seng Sopheak.

Lao Tipseiha of the Ministry of Land is also concerned. Pleased about the development, he says there’s another side to the coin. But it’s a tough problem to crack, since the only solutions he sees are to enlarge the city’s roads and increase its size.

In addition, he admits that some architecture worth preserving could fall victim to the construction crane, although he says the ministry does have restrictions in place, such as not allowing any tall structures to be built near the Wat Phnom landmark.

But elsewhere, the building is set to continue at a brisk pace. “I think 2012 is going to be a good year for the construction sector,” he said, adding that there are stacks of project applications just waiting for approval.

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Phnom Penh Villas Declining

For many years, Phnom Penh’s villas have represented the most attractive and obvious options for both commercial and residential use in the city, but experts say the number of villas available is on the decline.

The stock of villas is decreasing, due to the demolition and redevelopment of plots to make way for new real estate projects that offer higher yields. While romantics may mourn the changing face and skyline of the city, property professionals say it represents a move towards modernity that is good for the long-term future of the city.

A new report from international property company CBRE says the capital is “showing signs of regeneration, with single or double-storey properties being replaced with multi-storey buildings.”

The report says that a large amount of villas have been sold off to developers, and landlords who have kept their villas are increasingly turning towards commercial tenants.

While organizations like Microsoft, Coca-Cola, Unilever, the UN, the World Bank and a number of embassies still occupy villas, the report says that they are likely to move into the high-quality purpose-built office buildings that are springing up around the city, prompting further development of the land they currently occupy.

David Murphy of agents Independent Property Services agrees with the CBRE report. “We, here at IPS, have witnessed a definite decline in centrally located villa availability over the past three years. This is a result of the continued development of Phnom Penh’s central areas into commercial and residential apartment buildings, including the huge growth in the number of boutique hotels, particularly in BKK1, Tonle Bassac and Daun Penh areas.”

The report says the new supply of villas in the market is dominated by developments on the outskirts of the city, and that these projects are locally developed and driven by owner-occupiers.

“The supply in these suburbs on the outskirts has remained stable due to the lower land prices. Toul Kork in particular has a large supply of villas on the rental market.”

Murphy agrees. “This demand has resulted in expat families moving to places such as Toul Kork, Chroy Chongva, Psar Douem Thkov and even Boung Tompun. The availability in central areas is just not there anymore.”

David George, Cambodia country manager for CBRE, says “If we look at the market for villas regionally, we can see that over time those properties located in central locations will be developed for large commercial or residential schemes. In Bangkok there are now very few villas in the centre of the city. In Phnom Penh we will see the gradual shift from people living in villas to apartments and condos.”

However CBRE’s report says that villas will remain desirable. “Even with more economically viable rental options available in the market, demand for villas will remain strong. Some large international organizations have set requirements of being located in standalone properties due to security.” This will mean that, due to the high demand and the decrease in the existing supply, villa rents are likely to continue to increase in central Phnom Penh.

Serviced apartments, currently springing up across the city, offer a more economically viable option for residential use, CBRE says, due to the costs involved in the upkeep of villas Murphy of IPS is sanguine about the decline of central Phnom Penh’s villas. “It’s progress, and while it brings great opportunity for many, you just hope Phnom Penh remains the Charming City.”

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IMF Staff Mission Completes the 2012 Article IV Discussions with Cambodia

Press Release No. 12/382
October 5, 2012

An International Monetary Fund (IMF) mission from Washington, D.C., headed by Olaf Unteroberdoerster, visited Cambodia from September 25 to October 5, 2012 to conduct the annual Article IV staff discussions.1 During the visit, the mission assessed macroeconomic developments and held policy discussions with ministers and senior officials of the Royal Government of Cambodia, and met a large group of stakeholders, including representatives of the academic and business community, NGOs, and development partners.

At the conclusion of the visit, Mr. Unteroberdoerster issued the following statement: “Resilient exports, robust tourism, and a strong real estate recovery continue to support Cambodia’s economy despite the global slowdown. During the first half of 2012, garment exports expanded by 14 percent (y/y) and tourist arrivals by 27 percent (y/y). Overall GDP growth is projected at about 6½ percent in 2012. Over the medium term, Cambodia’s growth rate could reach a potential of about 7½ percent, provided there is continued improvement in the business climate, infrastructure, and public service delivery. Inflation, after decelerating through mid-year, is projected to average about 3½ percent in 2012 and 4 percent in 2013.

The current account deficit (including official transfers) is projected to peak at 10 percent of GDP in 2012, in part due to moderating exports and strong investment-related imports, but remains fully financed through strong foreign direct investment (FDI) and official loans. Over the medium term, the current account deficit is projected to narrow to 5½ percent of GDP. Gross official reserves have continued their steady rise, growing by US$300 million during the first half of the year, and reaching US$3.3 billion in July 2012 (four months of imports).

Despite Cambodia’s favorable growth outlook and recent export performance, spillover risks from the still uncertain global recovery remain considerable. Potential downside risks in Cambodia could be a complicating factor, stemming mainly from potential labor market instabilities, extreme weather conditions, and rapid credit expansion affecting banks’ health. At over 30 percent, Cambodia’s rate of private sector credit growth so far this year is among the highest in Asia, fueled by easy domestic and global financial conditions and banks’ eagerness to lend. On the other hand, upside risks from improving power sector and rural infrastructure and increasingly diversified FDI amid positive spillovers from Asia’s rebalancing could provide a stronger-than-expected boost to Cambodia’s growth.

Against this background, discussions focused on the need to build greater policy buffers to cushion against adverse shocks in the near term and to reduce structural vulnerabilities and constraints to growth over the medium term.

On fiscal policy, revenue performance improved in 2012, with direct and indirect tax collections expected to rise by ¾ percentage points of GDP. The fiscal deficit is projected to narrow to around 3¼ percent of GDP, provided spending pressures are prudently managed. Going forward, rebuilding government deposits starting with the 2013 budget remains a top priority, enabling Cambodia to better absorb adverse shocks. From a longer term perspective, greater mobilization of fiscal revenues is imperative if Cambodia is to meet its vast development needs and maintain fiscal sustainability. The mission welcomed the government’s commitment to formulate a Revenue Mobilization Strategy. Simultaneous reforms in (i) enhancing revenue administration, (ii) designing fair and efficient tax policies, and (iii) promoting greater accountability and transparency are critical to make this strategy self-sustaining. The mission cautioned that, while greater revenue mobilization is key to increasing fiscal space, careful management of contingent liabilities in the context of recently adopted public debt management strategy is key to safeguarding it.

On monetary and financial sector policies, the mission welcomed the recent increase in the reserve requirement, a first step toward moderating credit growth. The plan to develop an interbank market, facilitated by securities that can serve as collateral, should improve banks’ liquidity management and help spur the move towards a more effective and market-based monetary policy framework. The recent launch of the credit bureau is improving risk management and credit allocation practices by banks and micro-finance intuitions. The mission welcomed the National Bank of Cambodia’s commitment to safeguarding the health of the banking system and agreed that the focus should be on continued strengthening of supervisory capacity, a more risk-based supervision, and strict enforcement of prudential regulations. Better coordinated surveillance among all relevant supervisory agencies is also critical to ensuring the stability of a rapidly evolving financial system.

To achieve a virtuous cycle of more self-sustaining and inclusive growth, creating policy buffers as outlined above should be complemented by structural reforms to support private sector investment and economic diversification. In this regard, the mission welcomed the government’s timely focus on infrastructure and skills development, and stressed the need for steadfast improvement in governance, delivery of priority social sector services, such as education and health, and the business environment.”

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Maruhan Japan Bank buys stake in MFI – Sathapana

Maruhan Japan Bank yesterday became the first commercial bank in Cambodia to make a direct equity investment into a microfinance institution by becoming Sathapana’s majority shareholder, with a 95.1 per cent stake. Financial details were not disclosed.

The shareholders who sold out to Maruhan were FMO, the international development bank of the Netherlands; Developing World Markets, a US-based asset manager specialising in microfinance investment; Tridos, the Netherlands-based global impact investor, Sathapana Employee Investment Limited and founding share holder; Cambodia Community Building NGO, according to a press release.

The primary rationale behind the exit of these stakeholders was due to Sathapana achieving its objective of increasing access to finance for poor and rural communities, reaching a level of maturity that would make it attractive to a private sector financial institution to step in as a majority shareholder.

At this early stage of the acquisition, Maruhan’s general manager, Shizuo Onishi, said, the move is in line with the bank’s goal of developing Cambodia, and right now its position as the majority shareholder is philanthropic.

“In Maruhan’s view, the short- to mid-term goals are purely altruistic,” he said. “We’re doing this because we want to help develop Cambodia and in the short term, microfinance will be the key to that.”

However, the long-term goals for the acquisition do have monetary gains in mind.
“Our philosophy is that to generate profit in the future, we need to invest now,” said Onishi. “And so, we do expect in the long-term to make profits.”

In commenting on what piqued Maruhan’s interest in Sathapana, Chang-woo Han, chairman at Maruhan said: “We saw in Sathapana a pioneering company, with a strong business model and highly accomplished management team.”

According to the press release, Maruhan and Sathapana will continue to function as separate entities with the management structure of Sathapana remaining largely unchanged. Bun Mony, acting CEO of Sathapan said: “The investment that Maruhan will make in Sathapana will strengthen and enable us to reach goals previously beyond our capacity.”

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Construction Investment – Cambodia

Construction investment rises sharply Investment in construction in the Kingdom during the first nine months of this year rose 83.6 per cent, according to data from Ministry of Land Management Urban Planning and Construction last week.

The data showed that during the first nine months of this year the ministry approved 1,357 construction projects involving 5,593,284 square metres of total construction area and worth US$1.8 billion. The same period a year earlier saw 1,689 approved projects over 3,228,799 square metres of total construction area and worth $999 million.

Lao Tepseiha, deputy director of the construction department of the Ministry of Land management Urban Planning and Construction, said it is the biggest-ever increase, and involves projects as diverse as satellite city development projects, apartment buildings, villas, houses, shopping centres, business centres, offices, educational institutions, and hospitals as well as banks, hotels, factories, warehouses, and petrol stations.

“The growth is a good sign for the construction sector in Cambodia, when foreign investors are very interested to invest in construction. It’s good for now and the future,” he said.

“I think that given economic growth, political stability, and good cooperation with our foreign partners, investment will grow higher than last year because there are lots of new applications requested to the ministry, higher than the applications in September,” he added.

He said increasing domestic investment due to confidence in the political stability in Cambodia is increasing.

“There are many people investing in residential construction projects: some people use housing loans to buy house and some use their own cash. These factors make investors feel more confident in their projects, especially projects in Phnom Penh,” he said.

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AEON Mall Company Contributes to 50% of Road Construction

On 24th Sept. 2012, H.E governor KEP Chuk Tema allowed Mr. Yajima, President of Aeon Mall to participate in a discussion at Phnom Penh Capital Hall.

In the meeting, the Aeon Mall company president expressed his intention to build an asphalt road, 913m long, along the west river bank of Diamond Island, located in Tonle Bassac commune, Chamkarmon district.

The construction will be undertaken in joint cooperation between Phnom Penh Capital Hall and Aeon with the contribution being an even 50% split between the parties. The road is located between the swan bridge and the rainbow bridge. The construction also includes sewage installation and floor sidewalk improvements.

The road improvement project is estimated to cost around 2,123 Million Riel (approximately US$530,000).

Aeon Mall Company is a major mall investment and development company from Japan with more than 100 branches across Japan and many more countries across Asia. The company will start construction at the end of 2012, spending 16 months and around 200 Million US Dollars.

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More Visitors to Come to The Kingdom of Cambodia

Cambodia Airports estimates the number of passengers entering via Cambodia’s two international airports will increase by an average 8.8 per cent in 2013. That prediction is 1.2 per cent lower than the 2012 projection of a 10 per cent increase.

The lower forecast is due to the uncertainty of the global situation, especially the US and European countries, as well as the slowdown of the economy in China.

Cambodia Airports chief executive Emmanuel Menanteau expects the number of passengers will increase by seven per cent for Phnom Penh’s airport, to around 2.25 and 2.55 million arrivals for Siem Reap, a rise of 10.5 per cent, he said during a press conference launching Cambodia Airports’ new winter schedule.

“Cambodia is expected to maintain its economic and tourism growth momentum, key drivers to the rise of air traffic. The trend should be carried out all along the year 2013,” Menanteau said.

“However, the uncertainty of the global economy may impact on the overall demand of air transport, with spill-over effects on traffic in Cambodia,” he said.

Ho Vanndy, co-chair of the Tourism Private Sector Working Group, agreed that passenger numbers from the US and Europe are low, but said they are still potential customers for Cambodia’s tourism sector.

“We noticed that some airlines from Europe that used to operate charter flights suspended their operations between 2011 and 2012. We’re not sure whether or not the projections are accurate,” he said.

“However, if their economy is improving, we’ll have more tourists from them due to Condor Air beginning a direct flight from Frankfurt to Siem Reap once a week,” he said.

Menanteau said that a local carrier, Cambodia Angkor Air, will operate new flights between Siem Reap and Bangkok, with seven flights a week, and weekly flights from both Phnom Penh and Sihanoukville via Siem Reap.

Tourist arrivals by air rose 16 per cent over the first eight months of the year to 1.11 million tourists, of which those via Phnom Penh rose nine per cent. Figures for Siem Reap increased 22 per cent, according to the data from the Ministry of Tourism.

It shows visitor numbers from ASEAN countries rose 38.6 per cent and account for 42 per cent of arrivals. Those from Europe increased 11.7 per cent for a 17 per cent share, while figures for the US rose 12.7 per cent, contributing 4.9 per cent of arrivals, and China’s went up 31 per cent.  

The Ministry of Tourism expects Cambodia to receive three million tourists this year, about five million by 2015 and seven million by 2020.

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Hun Sen Announces New Airport

Hun Sen announces new airport Prime Minister Hun Sen requisitioned 768 hectares of land on Saturday that will be used to build an international airport in Kampong Chhnang after 2025.

During presiding over a land title distribution ceremony in Kampong Chhnang province, the prime minister announced the expansion of the airport.

“I have previously informed you about the vision of a new international airport that will be implemented, but I did not identify Kampong Chhnang,” he said.

Ten days ago, Hun Sen said at the launch of the 2012-2020 Tourism Development Strategic Plan at Vimean Santepheap that the current airports cannot serve the increasing numbers of passengers expected to arrive in Cambodia. But he did not indicate in this speech plans for a new airport.

“We cannot use Pochentong Airport after 2030. By 2025 or 2030, we expect to use the airport here, 90 kilometres from Phnom Penh,” he said.

There are 1,463 hectares at Kompong Chhnang airport, with citizens controlling 768 hectares of that land. In comparison, Phnom Penh International Airport occupies 450 hectares of land.

Ministry of Tourism officials forecast that foreign visitors will increase to four or five million by 2015 and this will climb to seven million in 2020. “So Kampong Chhnang airport will become the site for the international airport,” Hun Sen said.

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Serviced Apartment For Rent Near Russian Market (Toul Tom Pung Market)

This new serviced apartment near Russian Market is now available for occupation, the apartment is fully furnished with the following services:

  • Cleaning
  • Laundry service
  • Internet
  • Cable TV
  • Garbage collection
  • Parking

The apartments range from 60 sqm to 110 sqm with private balcony,  the lease available from 6 months.

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BBC – Cambodia Approves Lower Sesan 2 Hydroelectric Dam

Cambodia’s government has approved a controversial hydroelectric dam on a tributary of the Mekong River.

The joint venture involves Cambodian, Chinese and Vietnamese investment of $781m (£488m) and is due to be completed within five years.

The project in northern Stung Treng province is known as Lower Sesan 2.

Environmental campaigners say the dam will damage the river’s biodiversity and devastate the livelihoods and homes of thousands of people.

A government statement said the approval came after eight years of study into the possible environmental and social consequences.

It said Prime Minister Hun Sen had ordered new homes to be built for an unspecified number of families who would be resettled for the project.

Activist Meach Mean, of the 3S Rivers Protection Network (3SPN), estimated that more than 50,000 people would be affected by the dam.

He called on the government to organise a public forum to discuss concerns before going ahead.

“We are surprised by the approval,” he told AFP news agency.

“We don’t know clearly about the process to build the project. We are really concerned about the impact on the people’s livelihoods, water, and ecology system.”

In September, a report by UN human rights envoy Surya Subedi also raised concerns about the dam, saying communities did not believe they had been adequately consulted about the project.

Damming the Mekong River has caused widespread controversy in South East Asia.

Although hydroelectric dams allow countries to generate vast amounts of electricity, they also threaten massive changes to the ecosystem across the Mekong basin.

In 1995, Cambodia, Laos, Thailand and Vietnam set up the Mekong River Commission to help manage and co-ordinate use of the river’s resources.

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Property Management Issues in Vietnam and Cambodia

In Vietnam, many owners of condominiums in building complexes in Hanoi have been involved in lengthy disputes with the management over disagreements involving service charges. The Ministry of Construction in Vietnam has now had to issue a guide code, setting maximum levels for the service charges.

In the case of condominium service charges, after calculating correctly, the fees were higher than the service charges put forth by the Hanoi People’s Committee. The final amount must be agreed upon by more than 50 per cent of apartment residents and more than 50 per cent of board members.

The main issue currently arising in Phnom Penh is the implementation of a committee for the true co-owners within developments. One of the main issues is the developer retaining control of the property’s management. Often a company linked to the developer is appointed to manage the property, thus making a profit from the co-owners, even though the true owners of the building have not agreed on the appointment.

Cambodia does have laws in place that state that co-owned buildings should have a committee set up to address such issues involving management. However, the law doesn’t state when a committee should be set up, leaving co-owners with a certain lack of control.

In the West it is common practice for co-owned buildings to have committees making key decisions on management issues. The service charges often reflect day-to-day running costs, but also a sinking fund for future maintenance requirements, easing the burden on co-owners when expensive defects arise in common areas. In Phnom Penh, due to the infancy of the condominium market, sinking funds are not being set up. In the future this could become a problem for co-owners. Low service charges may seem attractive initially, but if an inexperienced management company is in place, budgeting will be inaccurate, leaving the investor out of pocket in the long run.

Meanwhile, the prices of apartments in Hanoi continued to decline in the third quarter of this year, reflecting the prolonged stagnation in the city’s real estate market.

CB Richard Ellis Vietnam’s third-quarter report on the Hanoi property market showed similar trends. “Secondary asking prices continued to drop by 5 percent quarter- on-quarter to an average of about $1,730 per square metre, following a downward trend that started in the last quarter of 2011,” said CBRE executive director Richard Leech.

Developers have been revising business strategies in terms of target customers and the types of products offered, putting greater efforts into sales and customer service and showing a willingness to compromise on prices and payment structures, he said.

“Looking ahead, in the current buyer’s market, the buyers’ purchasing power and mentality will drive the market recovery,” Leech said.“ A dim economic outlook through to 2013 will further dampen buyer confidence, and the flight to safety will strengthen savings at the expense of investments.”

Phnom Penh condominium prices remain stable and sales figures for new developments have been good.

The city is starting to see an influx of supply, with a number of new condominium developments entering the market. Investment is still largely driven by speculation into up-and-coming areas. Phnom Penh is currently lacking a high-quality completed condominium development in BKK that would attract investors with a good rental return.

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Onyx Hospitality Group is looking to expand its portfolio to the "CLMV" countries of Cambodia, Myanmar, Laos and Vietnam, as well as to Malaysia, as it positions itself to reap the benefits of upcoming Asean economic integration.

The Thailand-based hotel group, whose goal is to become one of Asia’s leading hospitality management chains, also aims to add another 40 properties over the next six years to its current portfolio of 34 hotels and serviced residences.

“Following the great advantages presented by the Asean Economic Community, which comes into effect in 2015, the tourism and travel sector will allow free movement, particularly for transportation, tourists and related business in the region. It will be a great opportunity for us if we have a network in those countries,” Peter Henley, president and chief executive officer of Onyx Hospitality Group, told The Nation.

“It also seems that room supply in the Kingdom has almost reached saturation point, so overseas expansion becomes more important for the group,” he said.

Onyx’s 34 operational properties include the Amari hotel and serviced-apartment formats. The group has four brands: Amari, for upscale hotels and resorts; Saffron, which comprises luxury hotels and resorts; Shama, for luxury boutique serviced apartments; and Ozo, a budget property brand.

Seven properties are under construction and due to be opened by 2015. In the Kingdom, the Ozo Chaweng Samui is scheduled to be opened next year, and the Amari Residences Pattaya in 2015.

Overseas properties set for opening this year are the Amari Ludhiana in India, the Ozo Wesley in Hong Kong, Shama Heda in the Chinese city of Hangzhou. The Ozo Colombo in Sri Lanka will open in 2014, followed by the Shama Lux Bundside East in Shanghai in 2015.

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3 New Airlines Slated to Launch Direct Flights to Cambodia

 PHNOM PENH, Oct. 24 (Xinhua) — Three international airlines are scheduled to launch their direct flights to Cambodia in the near future, according to a report of Cambodia Airports, the developer and operator of the country’s international airports, released on Wednesday.

The new airlines are Condor Air of Germany, Qatar Airways and Lao Central Airlines.

Condor Air is slated to launch the flight between Frankfurt and Cambodia’s Siem Reap province from November 3, 2012 with its B767- 300 plane, which can be seated by 270 passengers.

Qatar Airways is expected to start the flight between Doha and Cambodia’s Phnom Penh from February next year with its A330-300 plane, which can be seated by 305 passengers, the report said.

Lao Central Airlines is also due to operate daily flights between Vientiane and Phnom Penh with a B737-400 aircraft, which can be seated by 168 passengers.

The report said that the Qatar Airways and Lao Central Airlines subject to approval from Cambodia’s State Secretariat of Civil Aviation.

According to the report, currently, 25 airlines have been operating at the country’s two international airports on a scheduled basis.

The kingdom’s two international airports recorded a total of 1. 26 million international arrivals in the first eight months of this year, up 18 percent from 1.07 million arrivals at the same period last year.

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Garment maker eyes economic zone in Cambodia

 The private company HOdo Group Co Ltd, a textile and garment company in Wuxi, Jiangsu province, is looking to expand its presence in Sihanoukville, a province in southern Cambodia, in an attempt to diversify its business. 

Zhou Haijiang, president of the company, said it has made hefty investments since 2007 to establish the Sihanoukville Special Economic Zone in the Prey Nob district. The project now occupies three square kilometers and is expected to be eventually expanded to 11 sq km. 

The total investment in the zone is to reach $320 million, Zhou said. 

“After its completion, the zone could help create 150,000 jobs for the southeastern Asian country in the next few years,” he said. 

Zhou, 46, is one of 24 private entrepreneurs who have been elected to be delegates to the 18th National Congress of the Communist Party of China, which is scheduled to start on Nov 8. 

HOdo, which sells clothing under its HOdo brand, had 35.1 billion yuan ($5.6 billion) in revenue in 2011, an amount that has continued to show double-digit percentage increases since 2008. 

The economic zone is a fully functional business park, which has already attracted 23 companies. 

Among them are eight foreign companies, including the Ireland-based Horseware Products (Cambodia) Co Ltd, US-based Galey Global (Cambodia) Co Ltd and French Cambodian Gateway Underwear Co Ltd, Zhou said. 

More than 95 percent of the employees at the zone are local residents. 

“HOdo’s attempt was made to echo the nation’s call to ‘go global’, and the park is one of nine economic zones that have been initiated by Chinese companies abroad,” Zhou said. 

The construction of the zone has been aided by low costs, favorable trade conditions and the vast market of the Association of Southeast Asian Nations. 

Insiders said veteran workers there earn about $100 a month and companies employing about 1,000 people will pay about 27 million yuan less to operate in the zone than they would at the average factory in China. 

Cambodia also has no quotas limiting the amount of cotton that can be imported into the country, which helps companies there reduce their costs for raw materials.

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