Monthly Archives: June 2012

Cambodia has moved up 27 places on a biennial World Bank list that ranks the ease of importing, exporting and transporting goods in different countries.

Cambodia was ranked 101 out of the 155 countries included in the World Bank’s report titled Trade Logistics in the Global Economy, released today, which ranks countries based on the survey of about 6,000 people working for import and export companies.

Cambodia scored 2.56 out of 5 on the survey, with 5 representing the best possible performance for trade logistics. In the World Bank’s 2010 report, Cambodia scored 2.37 and ranked 129.

In this year’s report, Singapore ranked first place with a score of 4.13. Thailand ranked 32 with a score of 3.18 and the Philippines ranked 52 with a score of 3.02.

In a breakdown of the survey’s results, Cambodia scored worst on infrastructure, where it ranked 128.

Peter Brimble, senior country economist at the Asian Development Bank in Cambodia, said the improvement could be attributed to the country’s improving network of roads. “What you’re seeing now in Cambodia is the really tough challenge of moving from building roads and transport corridors to the softer side of improving logistics,” he said.

Economic growth in Cambodia is estimated to reach 6.7 percent this year, a 0.2 percent drop compared with 2011, the U.N said in a report released on Friday, citing a modest slowdown in exports from Cambodia to the U.S and Europe.

In its Economic and Social Survey of Asia and the Pacific reports for 2012, the U.N said that although Cambodia’s economy is still very narrowly based with a disproportionate amount of dependence still resting on the garment sector, the tourism and agriculture industries are predicted to register strong growth this year.

With manufacturing of garments expected to decrease slightly this year as economies contract in the European Union and the U.S, the U.N said that government incentives should be directed to new areas to create new economic activities.

“When countries fail to create new economic activities and sufficient productive employment, many of their citizens migrate overseas in search of better opportunities,” the report said.

Countries like Cambodia “should reduce their reliance on a few labor-intensive manufacturers and diversify their activities in order to become participants of supply chains,” the report added.

While Cambodia’s agriculture output grew by 3.3 percent last year, garment exports still accounted for 80 percent of all export revenues, according to the report.

Hang Chuon Naron, secretary of state at the Ministry of Finance, said on Friday that in 2011 Cambodia had exported 170,000 tons of milled rice to markets abroad compared to just 51,000 tons the previous year.

“Rice exports increased three times and 80 percent of the total amount went to Europe,” he said.

The Construction and real estate sector began to recover last year, according to the U.N report, following their collapse during the 2009 global financial crisis. Their recovery was spurred on by renewed credit to the private sector, as well as foreign investment.

Tourism also saw a recovery, increase last year by nearly 15 percent compared with 2010, while the industry as a whole increased by 5 percent.

The report also expressed concerns over possible inflation and the European debt crisis that is feared will curb the number of exports going from Cambodia to Europe.

“In 2012, the open economies of Southeast Asia are expected to be hit by the spillover effects of global uncertainties and growth moderation in China,” the report said.

Still, the report said that although rising incomes had led to rising inequality in Cambodia, the government’s “renewed focus on agriculture” could be an opportunity for more inclusive growth of the population.

Work on Phnom Penh’s landmark 32-storey apartment development project De Castle Royal has been “actively accelerated”, with the project now scheduled to complete as early as next March.

Manager of De Castle Royal’s Marketing Department Sokun Monica said that the construction has now completed on 30 storeys, with only two more floors left. “We speeded up our construction work to show our customers that our investment is relentlessly ongoing, unlike that of Gold Tower 42,” she said, adding that her company may start new high-rise projects once this project is completed and sold out.

The De Castle development project covers around 3,000 sq. m of land in Sangkat Boeung Keng Kang I, in Phnom Penh’s Kahn Chamkarmorn district. The development will consist of 392 units, together with supermarkets, swimming pools and gyms.

The construction started in 2008, when Cambodia’s property market was booming. “If Cambodia’s economy keeps on like this, I expect that my sales will increase. So far, my company has made three successful projects, and I think that this project would also have the same fate as previous projects,” Sokun said, adding that this project has been 60 percent sold out.

She added that one unit costs between $125,000 and $900,000, or $1,800-2,000 per square metre, and most of the customers are Chinese who have businesses in Cambodia’s industrial sector, as well as a small number of Cambodians, who bought them as investments.

“It’s a great success for us that we’ve earned such strong support from our customers, and we will accelerate our construction can move in as soon as possible,” she said, adding that her sales will increase following many favorable indicators – in the past most sales were only to locals; after the government decided to allow foreigners to own property, the numbers of foreigners looking to purchase in climbing.

V-Trust’s Deputy Director Chrek Soknim said that recently that while Cambodia’s condominium market seems to be making little progress, due to the large number of investments in such high-rise buildings, the demand in not satisfied, because the economy is recovering.

The size of the market, he said, will improve and even double over the next two or three years, adding that most of the customers are very interested in condos in the Boeung Keng Kang area, followed by 7 Makara, Toul Kork and Daun Penh.

De Castle Royal’s location, he added, will be favorable both at the present time and in the future, as it stands in the city’s centre, surrounded by an area that is home to large number of foreigners.

Besides condos, he continued, office space is also in high demand. “If we look at Cambodia’s macro-economy”, he said, “we can see there is integration between the region’s macro-economies, and many firms are freely importing and exporting goods, especially in developing countries like Cambodia; foreign investors are very interested in such trends, so it will push the demand for office space higher.”

The four Towers that make up the Rose City Condominiums, located along the Tonle Bassac river, are now new slated to complete in late June, following more than two years of construction.

Work on the $70 million, 29 storeys Rose City began in 2008. The project, located near the new Sofitel Phnom Penh in the Chamkarmorn district, is part of the larger Bassac Garden City development by Overseas Cambodian Investment Corporation (OCIC).

Rose City Condominiums is around 90 percent complete, and is scheduled to finish this June or July, said Koh Pich Development’s Manager Touch Samnang, adding that this solely residential project has no office space for leasing.

Rose City’s marketing manager Souly said that its sales were going “smoothly”, yet she declined to say how many units had been purchased. “So far, it has been almost sold out,” Touch Samnang said.

Rose City is just one of OCIC’s small projects, and the company said it is beginning five other high-rise buildings on Koh Pich, such as Riviera. In the later project, there will be flats, malls, two 28 storey condos and three 38 storey skyscrapers with a 200 metre swimming pool on top of them.

The company also wants to erect a 555 metre high land mark building, which would be the second tallest in the world, and says its ground work is underway.

The owner of the $240 million Gold Tower 42 project in Phnom Penh has entered into arbitration with the project’s builder, in a bid to get work started again after construction halted on the project in September 2010 due to poor unit sales and cost overruns, official involved in the process said yesterday.

Lee Sun-hum, country director of Yon Woo Cambodia Co., Ltd the firm that owns Gold Tower 42, said the arbitration case in Seoul was started last year with Hanil Engineering and Construction Co., Ltd the company that was contracted to build the skyscraper located at the intersection of Sihanouk and Monivong boulevards.

Hanil broke ground at the site in March 2008, and set out on a mission to build Phnom Penh’s tallest building. But Gold Tower 42 was indefinitely suspended in September 2010 at the height of Cambodia’s property bust, which saw several other South Korean property projects including the $2 billion Camko City development in Russei Keo district grind to a halt.

“Regarding the case, I am waiting for the results from Korea, which we are expecting hopefully to happen at the end of May,” Mr. Lee said yesterday. “Once that happens, we shall try our best to restart the [building] process, but we have to get the results from Korea first,” he said.

Yoo Jeoung-hoon, an associate lawyer at Jipyong & Jisung, the firm representing Yon Woo and Daehan Real Estate Investment Trust, which has provided Yon Woo with financing for Gold Tower 42, said his clients had initiated the arbitration proceedings with Hanil.

“The case…has been pending on the arbitration which was instituted and initiated by Yon Woo, and not Hanil at the beginning, and this arbitration took place due to Hanil’s failure of performance,”Mr. Yoo said.

The contract between Yon Woo and Hanil stipulated that Yon Woo would pay a total of $130 million to Hanil to carry out the building work of Gold Tower 42, while the remaining $110 million cost of the project had to be raised by Hanil from sales of the tower’s commercial and residential units.

Only 55 percent of the total units had been sold in Gold Tower, and some buyers had failed to meet their payment duties, said an assistant to Daehan’s country manager Hong Joon-park, who spoke on the condition of anonymity because he is not authorized to speak publicly.

“There was not enough money made in sales [of Gold Tower 42] and Yon Woo would not pay the construction fees,” he said.

“In this situation, Hanil has an obligation to pay in order to complete the building because this is the responsibility of the construction firm according to the contract.”

A manager at Hanil in Phnom Penh, who spoke on the condition on anonymity because he is not authorized to speak to the media, said that financial woes were the reason behind construction work having stopped.

“As you know, the world economic crisis had a big impact on the market, so selling apartments and condos became very difficult. It is very true that it impacted Hanil,” he said, adding, however, that the company still wanted to retain construction rights of Gold Tower 42.

Currently standing at just 31 floors, Gold Tower 42 has became a concrete emblem of the speculative property spending that took place in Cambodia in the lead up to the global financial crisis, which hit the country in 2009.

Chhin Jin-tong, who put down a $1.1 million deposit on 400 square meters of retail space on the first floor of Gold Tower 42, said yesterday that he was still in the dark about the status of the project and his investment.

“We have gathered [six or seven] other investors to complain, but we have not gone to the courts yet because it is too expensive,” Mr. Chhin said, adding that he had no knowledge of the pending arbitration case in Seoul.

Matthew Rendall, a partner at Sciaroni & Associates, a legal advisory firm, said that tenants would likely be compensated for their investment if they decided to go to the court.

“Under Cambodian law, [the investors] paid money and Yon Woo didn’t deliver. It can be quite expensive to go to the courts but they have a strong case. With the ongoing case, it is simply a question of recovery, and where that money would come from,” he said.

“Had that lawsuit been in Cambodia, there could have been an opportunity for those purchasers to get involved, but the fact it is in Korea prevents those Cambodian purchasers from having their interests heard.”

Hanil’s share price as of yesterday on the Korean exchange has fallen by 51.68 percent year-on-year to 1,510 won, or $1.30$.

Cambodia’s exports to Thailand jumped 55 percent year on year in the first quarter of 2012 on what experts and official said was a smoother political relationship between the countries, as well as an easing of Thai border regulations.

The kingdom shipped US$85.4 million in agricultural products, recycled metal and fish to the western neighbor, data from the Thai Embassy’s Foreign Trade Promotion Office to Phnom Penh showed.

On par were increases in imports from Thailand, which dominated the bilateral trade relationship.

Worth $1.05 billion, imports of petroleum, processed goods, cement and consumer products from Thailand increased 58.4 percent during the same period.

“Now Cambodia’s economy is doing well and Thailand’s economy is improving. But more important is that the political relationship between the two countries is improving,” Jiranan Wongmongkol, an official at the trade promotion office, said yesterday.

Trade, particularly energy exports to Thailand, were set to increase during the next three years. The completion of a $3 billion coal-fired power station in Koh Kong province, a joint venture between Cambodian tycoon Ly Yong Phat and Thailand’s Ratchaburi Electricity Generating Plc, would see Cambodia’s first energy exports.

Loan disbursals in Cambodia’s baking sector increased by 33 percent to more than $4 billion last year, as the credit to the housing market and agricultural sector saw the largest amount of growth, the National Bank of Cambodia (NBC) said in its annual report, released yesterday.

While bankers said growth in the market was justified on the back of a strong economy, economists warned that a credit bubble could appear unless banks improved their ability to access the credit worthiness of borrowers.

According to the report, a third of all loans in the banking industry went to the retail and whole sale sectors in 2011, while loans to the agriculture and housing sectors together made up 15.1 percent of the market. Total loan disbursals rose to $4.36 billion in 2011, compared to $3.28 billion in 2010.

“We are seeing good growth in the sector,” said in Channy, CEO of Acleda Bank, the largest bank in the country. “We know their cash flow, how much of a loan they should get and we are better able to assess what they need to grow.” Acleda’s loan portfolio grew by 34.6 percent to $1.02 billion in 2011.

It was not only the commercial banks that experienced a large amount of credit growth last year. The NBC report also said that total loans handed out by microfinance institutions (MFIs) increased 50 percent to $641.53 million.

XINWEI Cambodia, China’s first step into the Kingdom’s telecoms market, planned to launch fourth-generation mobile services in August, according to officials and a company statement.

The Beijing-based firm will deploy its homegrown network technology, McWiLL, and was expected to launch top-to-bottom operations that, according to the statement, would be backed by China Development Bank.

Minister of Posts and Telecommunications So Khun said yesterday that Xinwei has been testing operations. He said he expects to receive next week a formal letter from the company detailing its operation plans.

Deploying the 4G mobile connections that Xinwei claims it will offer would require a US$100 million investment So Khun said.

“I know this service will be a step up with 4G. But I don’t know if it will succeed. This will depend on [Xinwei’s] promotion and pricing,” he added.

Despite Xinwei’s presence in 21 countries-including North Korea, Myanmar and the United States-regional telecoms analysts have said there is little information available on the company.

Cambodia will see the first international development of McWiLL for mobile services, although Xinwei was also working on networks in Papua New Guinea, Zimbabwe, Ukraine and Brazil, according to the website.

The company has not put a dollar figure on its Cambodian operations, and representatives have routinely denied requests for interviews.

China Development Bank visited the firm in Cambodia late last month and intends to “fully support the globalization” of Xinwei networks, according to the statement.

The state-owned bank was cited in an early 2011 US-China Economic and Security Review Commission report as providing and unfair pricing advantage via noncompetitive to China’s Huawei and ZTE, the world’s two largest technology device manufacturers.

The state-owned Cambodian Life Insurance Company opened its doors yesterday, becoming the first insurer to offer life insurance in Cambodia. In Meatra, director-general of Cambodian Life, said his firm would offer both fixed-term and full life coverage, with policies starting at $5,000. “The establishment of life insurance in Cambodia is a creation to diversify financial services in the form of new investments and family financial planning in the long term that manages unforeseen risks in the future,” he said. Ty Atith, assistant to the chairman of the General Insurance Association, praised the new service as a progressive move for the insurance sector, but said it would be some time before most Cambodians were able to afford such insurance. “The product is really only affordable to those coming from affluent families, because it is modern and they understand what it is for,” he said. Cambodia Life is 51 percent owned by the government. The remaining 49 percent is held by private firms based in Indonesia, Thailand and Hong Kong.

VimpelCom Ltd., the Russian mobile telephone operator that runs the Beeline brand in Cambodia, is reviewing its assets in Cambodia to decide whether it should stop doing business here or merge with another firm in the country, an official at the company said yesterday.

“We will conduct a thorough review of each of the company’s assets to determine where we want to elevate capital,” Bobby Leach, communications director at VimpelCom, said by telephone from the company’s headquarters Amsterdam. When asked whether Beeline plans to leave Cambodia or whether the company would be sold, he said: “We have several options, but we have not completed the analysis.”

According to its first-quarter financial report released yesterday, VimpelCom said the average revenue generated from each of its users during the first quarter had more than halved to $1.6 compared to $3.5 in the same quarter the previous year.

In Southeast Asia, the company’s operating revenues increased by almost $13 million year-on-year between Cambodia, Laos and Vietnam. However, the company last month decided to sell off its Vietnamese assets due to falling profits “We left Vietnam because we realized we came in late to an overcrowded market,” Mr. Leach said, declining to divulge revenue figures for their Cambodian operations.

VimpelCom devalued its Cambodia and Vietnam operations in a statement in March by $527 million.

Beeline, which began operations in Cambodia in May 2009, is one of 10 mobile operations here vying for customers in an oversaturated market. Several of the operators are reportedly in talks to carry out mergers and acquisitions.

Property price in Phnom Penh are rising for the first time since 2009, growing by as much as 10 percent in some areas of the capital during the first quarter of the year, real estate experts said yesterday.

After years of stagnation in the property sector due to weak demand following the global financial crisis, data from the National Valuers Association of Cambodia (NVAC), shows that the cost of both residential and commercial properties are beginning to increase in the city.

“Prices have increased between 5 and 10 percent for both commercial and residential properties in the first quarter,” said Sung Bonna, CEO of Bonna Realty and NVAC’s president. “The situation of the economy is good, and foreign investors can see that.”

Residential property prices around the riverside at the beginning of the year averaged between $2,000 and $3,500 per square meter. Prices there now are reaching as high as $3,850 per square meter, according to the NVAC data.

In Chamkar Mon district south of Sihanouk Boulevard, prices in January were between $1,000 and $1800 per square meter depending on the quality of the property but prices have now risen to as much as $2,000 per square meter.

Property prices increased as much tenfold from 2005 to July 2008 with the most expensive land in Phnom Penh rising to as much as $5,000 per square meter. But that growth was mostly fueled by speculation and the property bubble burst in late 2008.

Keuk Narin, vice president of Asia Real Estate Cambodia (ARC), said the part of the reason for the upward trend in prices was due to higher investor demand and banks giving more mortgages. He also said more foreign investors were beginning to take advantage of the foreign ownership law for condominiums, which came into effect in 2010.

According to figures from the ARC, there are currently 16 condominium property projects in existence or being built in Phnom Penh. Once they are all complete there will be a total of 3,193 units available for sale.

The ARC said, about 75 percent of the units had been sold, and 80 percent of the buyers were foreigners.

Although condominiums compose only 15 percent of the total residential market in Phnom Penh, Mr. Narin sad demand for such projects looked particularly strong, with prices in some units having increased by 15 percent in the first quarter of the year.

“But it is not only condominiums shop houses, other residential [buildings] and most commercial property is up 5 to 10 percent,” Mr. Narin said. “People are becoming more confident in the market.”

Mr. Narin added that grade A condominiums are currently selling for an average of $1739 per square meter, while grade B and C condominiums are selling for an average of $1014 and $770 per square meter, respectively.

Whether this is the beginning of another property boom remains to be seen.

Bank officials also said that demand for housing loans was increasing.

“I think most of the banks are giving more housing loans at the moment, and where one of the reasons is that foreigners are buying property, the other is that… banks view property as a safe sector to go into, especially ownership,” said Phan Ying Tong, country head for Cambodian Public Bank.

Despite the encouraging signs, observers say property developers should be wary of repeating the errors of the past.

“There was a lot of speculation on land here and that was slightly unrealistic,” said David George, country director for real estate firm CB Richard Ellis.

“In today’s market, there is still all the risk of developers not looking at the market correctly and oversupplying it.”.

Thaicom Public Company Ltd., which owns a majority stake in local phone operator Mfone, announced on Friday that they have devalued the company by about $1.31 million as profits in the first quarter dropped by half.

“In an effort to reflect the fair value of its business operations and holdings, the company also reviewed all its investments and decide to include an impairment loss on the company’s investment in telephone operation in Cambodia,” the statement said, adding that profits dropped from about $2.66 million to $1.34 million over three months.

The disappointing news for Mfone comes less than two months after the Minister of Posts and Telecommunications, So Khun, said that Thaicom was currently negotiating to sell the company to locally owned operator Qb.

Atip Rittaporn, managing director at Shenington Investments, Mfone’s holdings company, would not comment on the possible sale, but said that the revenue drop comes as a direct result of ongoing price dumping in the sector caused by an oversaturation of mobile phone operators in the Cambodian market.

“The environment is not what it used to be. It is just the way it is right now. There are too many operations,” he said. We are currently analyzing very hard how the industry will be in the future, but right now there is no clear direction. We will wait and see.”

Entertainment Gaming Asia Inc. (EGA), announced Monday that it will break ground Thursday on a new $ 7.5million Slot Hall casino in Poipet province along the Thai border, EGA said in a statement.

The casino will open by the end of the year with 300 gaming machines spread over 1,100 square meters of space, according to the statement.

“The Poipet Project… will be constructed as an extension of an existing popular casino and will be operated by the company under its Dreamworld brand name,” according to the announcement.

EGA, which provides gaming machines to Phnom Penh’s Naga World Casino, is backed by Macau-based Melco International Development Limited, according to its website. The chairman of Melco is Lawrence Ho, the son of gambling mogul Stanley Ho.

The new project is only one of many casino related activities in recent months. Last week, EGA announced that it would hold the grand opening of another casino located in Pailin province called Dreamworld Casino.

In March, Melco announced in a financial statement that it would increase its involvement in Cambodia’s casino sector by providing 200 gaming machines for the $1 billion Thansur Bokor Resort and Casino on Bokor Mountain in Kampot province, which opened last week. That project is being developed by Sokha Hotels and Resorts, a subsidiary of Sokimex.