Business as usual

The post-Thaksin recovery appears well-underway.

Air traffic between Thailand and Cambodia has returned to near-normal levels after plummeting at the height of the diplomatic spat earlier this month.

Bangkok-based carriers such as Thai Airways International (THAI) and Bangkok Airways saw bookings start to rebound last week.

… Bangkok Airways, which has the largest capacity between the two countries, saw Thais cancel flights to Siem Reap during the dispute. But there was a steady flow of foreign passengers, especially Europeans, said executives at the airline

… THAI, which has 14 flights a week between Bangkok and Phnom Penh, saw about 40% of reservations cancelled in the week after Thaksin’s visit

… But Thai AirAsia, which operates daily flights between the two capitals, said it was entirely unaffected by the souring of diplomatic ties.

Business with Thailand dropped significantly as a result of  Thaksin Shinawatra’s visit. Most notably, air and overland arrivals plummeted. The decrease hit Poipet casinos hard. Yet as soon as Thaksin left, cross-border trade began recovering. And while traders still fear a border closure, cross-border trade today is business-as-usual. If the tourist are coming back, Thai punters cannot be far behind.

All of which suggests that Thaksin’s visit will go down in history as a barely remembered footnote to November 2009. The long-term cross-country implications nil, the political significance even less. Contrary to the suggestions of hyper-inflated egos on the Thai side, there is just not that much that Thailand can do to punish Cambodia for its lack of fealty.

U.S. condemns Cambodian corruption

The U.S. House of Representatives recently introduced a resolution condemning corruption in Cambodia. The first clause:

Whereas the Government of the Kingdom of Cambodia employs threatening tactics, including the murder of opposition candidates, to curb political dissent;

And also:

Whereas Parliamentarian Mu Sochua, a member of the opposition Sam Rainsy Party, was stripped of her parliamentary immunity and given a criminal conviction for openly criticizing Prime Minister Hun Sen;

Whereas Ms. Sochua testified before the Tom Lantos Human Rights Commission on September 10, 2009, “I am one of thousands of innocent journalists, trade union leaders, teachers, and villagers who are tried by a judicial system that is well know for corruption, for incompetence and for acting under the control of the government and those who have political influence and money”;

The resolution, should it pass, is completely toothless. Still, it’s a sign that Uncle Sam considers human rights in Cambodia important enough to issue a meaningless resolution. That’s saying something.

Government bans cheap phone calls

The price war between Mobitel and Beeline is threatening state coffers, so the government has issued a letter effectively outlawing discount phone calls.

The letter also warns that offering free calls within networks or calls across networks at a price ‘lower than the one fixed by the state’ robbed the government of tax revenues by reducing company profits, adding that any firm that violated tax law would be subject to government legal action.

Drops in corporate profit of less than 10 percent will be met with broken knee caps. More than 10 percent and you sleep with the fishes. Capiche?

Greedy labor killing garment industry, management says

Garments exports, one of the main pillars of the economy, are down 25 percent so far this year. Exports to the United States, Cambodia’s leading buyer, are down 31 percent. Exports to the EU are down 10 percent.

Ken Loo, director general of the Garment Manufacturers Association of Cambodia (GMAC), said he told buyers Monday evening that they should maintain orders in support of the International Labour Organisation (ILO)-led initiative Better Factories Cambodia that attempts to guarantee labour standards.

He conceded, however, that “some buyers do not want to order garment products from Cambodia because they think that Cambodian [garments] … are too expensive”.

Cambodian garments are too expensive? Why?

The insinuation here is that Cambodian garment workers make too much money, thus driving the cost of garments beyond what is tenable on the open market. Macro-economists have a name for this kind of argument. In technical terms, it’s called as “a load of bollocks.”

Labor costs account for a small fraction of a garment’s total cost, typically 15 percent or less. In Cambodia, the average garment worker makes less than 35 cents per hour ($67 monthly wage average / 192-hour work month). The Gap, which sources from Cambodia, made roughly $221 million in profits between January and August this year.

House of cards

As always, The Mirror is full of good stuff, like the $2 million “Dragon” bridge at the new council of ministers building.

A dragon bridge of about 100 meters built from sand stone worth more than US$2 million was totally demolished last week, even though it had not yet been used. Some days after the demolishing of the dragon bridge, two stone posts in front of the new Council of Ministers building were also demolished without specifying any reason.

The dragon bridge was built with a beautiful design to connect the staircase of the building of the Council of Ministers to the double roads in front of it. This demolition wasted millions of dollar and raised questions among the public. Some people asked to which extent those responsible for these reconstructions will be blamed.

Apparently, the government could not be bothered with thinking up a new plan to rip off the taxpayer, so it just demolished the bridge and then borrowed another two mill from the Chinese to replace it. Some council. Elsewhere, The Mirror wonders about the city’s newest 10-story high-rise.

The press has to be praised to share information with the public, and to raise critical questions, where the authorities do not take the required action in time and on their own initiative, based on the law. Recently it had been reported: “Expert Official: Kompong Speu Deputy Governor and Oknha Tong Seng Constructed a 10-Floor Building opposite the Cambodiana Hotel in Phnom Penh, Violating a Ban by the Authorities” – according to this expert’s information, buildings in the area close to the Royal Palace must not be over 30 meters high. Finally, it was even reported: “Phnom Penh Municipal Governor Bans Citizens to Rent Rooms in the Illegal 10-Storys-High Building.”

… What is highly surprising, however, is the fact that the construction of this building was going on for many months – and after the bare construction had been finished, work was going on to equip the building and to paint it. But the authorities in charge of supervising all construction activities in the capital city did not intervene, Only now, after the building is finished, questions are raised. How comes the authorities did not realize a problem much earlier?

Authorities did realize the problem much earlier. But the Oknha, as Oknhas are wont to do, told them to Foxtrot Oscar. Tong Seng was going to build a structurally unsound high-rise of death, and no one was going to stop him.

Bank performance

The Post unpacks the NBC’s annual report.

The National Bank of Cambodia’s (NBC) 2008 annual banking supervision report, published on its Web site, showed that non-performing loans rose from 3.4 percent of total loans at the end of 2007 to 3.7 percent as of the end of last year. The absolute value of NPLs climbed from US$52.95 million to $87.44 million over the period as the total value of loans soared 54.7 percent from $1.51 billion to $2.35 billion.

… NBC Director General Tal Nay Im said the rise in NPLs was concentrated among a few banks – the report shows these are Canadia Bank, the Foreign Trade Bank of Cambodia (FTB) and ANZ Royal – but said the sector performed strongly.

… Around 32 percent of the FTB’s $86.1 million loan book was non-performing at the end of last year, slightly up from 30.7 percent a year earlier when it had $64.1 million in outstanding loans, according to the report.

Canadia Bank, which owns 46 percent of FTB, reported 11.1 percent of its $409.5 million in loans as non-performing, up from 6.8 percent of a $338.1 million loan book at the end of 2007.

Advanced Bank of Asia was the other poor performer in terms of NPLs, but its NPL ratio of 12.8 percent was an improvement on the 26 percent recorded a year earlier as its loan book doubled to $24.45 million.

Bad loans at Singapore Banking Corp dropped from 12.3 percent to 3.9 percent. ANZ Royal also suffered, with NPLs rising from 0.4 percent to 2.6 percent over the course of 2008.

Assuming this is all true, it appears likely that the Cambodian economy has found a bottom, and that the country’s nascent banking system has weathered the downturn without incurring any major damage. That’s good news.

Mobitel buys out foreign partner

Millicom International Cellular, the majority shareholder in both Mobitel and CTN, has agreed to sell 100 percent of its Cambodian assets.

Telecom operator Millicom International Cellular SA (MICC) said Tuesday it has agreed to sell its Cambodian operations for $346 million in cash to The Royal Group, its partner in the country.

The transaction, which is expected to be completed before the end of 2009, comprises Millicom’s 58.4% holdings in each of CamGSM, Royal Telecam International and Cambodia Broadcasting Services.

It values the Cambodian operations at an enterprise value of $605 million, representing an estimated 7.1 times 2009 earnings before interest, taxes, depreciation and amortization, or Ebitda.

Outstanding business reporting

Today The Post reports “Outstanding loans by microlenders down.”

THE Cambodian Microfinance Association last week reported outstanding loans have dropped 2.7 percent, or US$11.9 million, in the second quarter of this year compared with first quarter results.

“Outstanding loans dropped to $426.1 million at the end of the second quarter from $438 million in the first quarter, stated the CMA report released Thursday, noting that the number of borrowers remained stable at 1.03 million.

So what? More interesting is the next paragraph.

The report also noted, however, that non-performing, or at-risk, loans had risen 1.75 percent to 3.39 percent during the same period.

That doesn’t sound good, does it? But maybe not. Who knows? Not The Post, apparently, which leaves it to the reader to try and make sense of the numbers. Furthermore, “non-performing” is not the same as “at-risk.” A loan can be one or the other, but it cannot be both. Even the most wet-behind-the-ears cub reporter should know this.

Leopard buys the beer

Leopard Capital, one of two private equity firms in Cambodia, is bullish on beer.

Leopard Capital, a Cambodian private equity firm, has completed the fourth deal from its $27m debut vehicle Leopard Cambodia Fund by investing $2m in Kingdom Breweries.

LCF will acquire a 55.5 per cent share of the brewery for its investment. The company, a Cambodian beer brewer, believes that with half the country’s population under the legal drinking age limit, consumption should shoot up over the next five to ten years.

Kingdom Breweries aims to secure a foothold by producing high-quality craft beer in a microbrewery in the Cambodian capital of Phnom Penh.

Kingdom Breweries is hiring.

Totally blackened

Reuters has the latest on Prime Minister Hun Sen’s visit to France

Cambodia’s government is drawing up an agreement to give France’s Total (TOTF.PA) rights to look for oil in its offshore block 3 in the Gulf of Thailand, officials said on Monday.

A provisional agreement was reached last week when Prime Minister Hun Sen was in Paris.

“Hun Sen told the French prime minister that Cambodia had decided to award block 3 to the French company, Total, for oil drilling after lengthy consideration,” Prak Sokhon, a senior government official who was in the delegation, told reporters.

What does a backroom oil deal with Total look like? It’s not pretty.

Economic instability

Good news and bad from the World Bank.

Cambodia’s economic growth has been dependent in large measure on tourism and exports of garments.  However, exports of garments in the second quarter of the year were 27% below those a year before and tourist arrivals 2% below.  The economy is expected to contract by 1% in 2009 and its possible recovery in 2010 is conditional on the external environment.  Corporate stress is revealing itself in these key industries, with 15% of garment factors closing in the first half of 2009 and the creation of new businesses falling by 50% (as measured by the number of firms registered at the Ministry of Commerce).  Credit to private sector, which was growing at double digit rates, has essentially stopped growing since October 2008.  Banks reportedly have low overall NPL levels, but it is highly likely that the corporate sector problems will translate into a much higher level of NPLs in the coming year.

Ok. Maybe there is no good news.

Markets get a reprieve

The Council of Ministers last week voted to temporarily halt all Phnom Penh market redevelopments, including the fabled Russian Market, whose vendors recently were handed eviction notices. Most stallholders welcomed the news.

“I was very happy when I got this news. Now I am dancing,” said Lay Silo, a vendor at Serei Pheap Market in Prampi Makara district.

“By doing this, it means he [Hun Sen] cares about us, and that he wants us to have good feelings when we do our business.”

Not everyone, however, waxed so warm and fuzzy.

Muth Phong told the Post that Hun Sen’s decree was designed to stop people from protesting market-development projects, which he says are inevitable.

“Developing countries can’t keep their old markets … so they will continue,” he said.

“The reason they stopped the market-development project was because vendors always protest when authorities want to develop.

“I do not believe the news [that development of markets has been stopped]. They just do this to make us feel confident for a while and later, they’ll start [developing] again,” he said.

Yep. That’s what “temporary” means.

Trouble in paradise

Emerging Textiles has the bad news.

Cambodia is confronted with a dramatic decline of its apparel exports, down 38% in March. Such a disaster is mostly due to the US economic recession and elimination of US quotas on Chinese products. Salaries were not raised at Cambodian apparel plants in the last years, in addition, leading to a fall in productivity and to repeated strikes.

Depending on whose numbers you believe, April was better or worse. Either way, though, it’s still bad.

“In addition to the slump in US and global demand for garment imports, there are a number of structural challenges to … sustained competitiveness,” US Embassy spokesman John Johnson said Tuesday, also citing low productivity and bureaucracy as constraints.

Moody’s reviewing Acleda

Local bank under scrutiny.

Moody’s Investors Service has placed ACLEDA Bank Plc’s (ACLEDA Bank) local currency long-term deposit and issuer ratings of Ba1 on review for possible downgrade. The bank’s other ratings are unaffected and carry a stable outlook: its bank financial strength rating of D; foreign currency long-term deposit rating of B3; foreign currency long-term issuer rating of B1; and local currency and foreign currency short-term issuer and deposit ratings of non- prime.

Acleda is purportedly one of the country’s strongest banks. What of the others? Meanwhile, garment sales, tourism numbers, and office rents are all down. Welcome to the new economy.

POSTSCRIPT: Moody’s also downgrades Kookmin.

Too much other people’s money

The latest word on Cambodia’s new breed of venture capitalist:

Leopard Capital has raised $27 million for its initial private equity offering focusing on Cambodia.

The Leopard Cambodia Fund invests in both companies and real estate in Cambodia focusing on venture, expansion and buy-out opportunities in the financial services, agriculture, food and beverage production, building materials, tourism and property development sectors.

“Cambodia is feeling the chill of the global depression through its garment and tourism sectors, and surely faces a couple tough years ahead,” said Douglas Clayton, managing partner. “This slowdown puts us in a favorable position to negotiate investments, as we can put cash on the table when few others are willing or able to. And land prices are correcting nicely from last year’s peaks, and bargains are finally starting to appear.”

The Daily frames it a little differently.

After launching a year ago with the goal of raising $100 million to invest in Cambodia, the private equity firm fund Leopard Capital said Monday it has collected rather less: about $27.2 million.

While $27 million is not as real as $100 million, it’s still pretty real. And apparently, it’s still more than Leopard knows what to do with. The fact is, there remains a dearth of  good, transparent investment opportunities out there, and word in investment banking circles is that Leopard has struggled to find worthy ventures to fund.

But that’s not so surprising. More prescient, perhaps, is the phrase “buy-out opportunities in the financial services.”

That doesn’t sound like a good thing.

Trouble looms in banking sector

World Bank and IMF offer warnings of Big 9 failures.

The World Bank and International Monetary Fund both warn that three of Cambodia’s nine largest banks are at risk of succumbing to the global financial crisis and a national recession.

Neither institution will name the banks in question, but both say new economic conditions in global finance have weakened Cambodia’s highly dollarized banking system.

Cambodia’s banks are at risk from a liquidity shortage, the slowdown of deposit growth and a rise in non-performing loans.

[...]

John Nelmes, IMF’s representative in Cambodia, told VOA Khmer in an interview Thursday that several of Cambodia’s banks are at risk. The banks are among the country’s nine largest, which together control nearly 90 percent of deposits.

“The risk in the banking system is now higher than previously,” Nelmes said. “The banking system is coming under increasing strain.”

Who will be first?

Black Monday

The global parasites of international finance have arrived.

The National Bank of Cambodia has selected Citi to provide global custodian services for its offshore investments.

[...]

According to the International Monetary Fund (IMF), Cambodia had gross official foreign reserves of $2.5 million at the end of 2007.

“We are extremely confident that the global custody services provided by Citi will be of major benefit to the National Bank of Cambodia as we look to expand and diversify our investments offshore,” says central bank governor Chea Chanto. “Citi’s quality of services and experience regionally and globally will be key to our future plans.”

Plans for remaining poor. Here’s the NYT on the country’s newfound financial manager.

On Jan. 16, Citigroup capped a devastating 2008 by announcing an $8.29 billion fourth-quarter loss. The bank also said that its head count had been reduced by approximately 29,000 since the third quarter and approximately 52,000 for all of 2008. Citigroup’s loss, which amounts to $1.72 a share, compares with a loss of $9.8 billion, or $1.99 a share, in the period a year earlier. The company has reported a loss for five consecutive quarters, and the Jan. 16 announcement of a staggering $25.2 billion in write-offs and losses in both its consumer and investment bank for the latest period brought its total charges to $90 billion.

Things have improved slightly for Citi since then, but only just. The company’s stock price fell briefly below $1 last week, its board is still facing approximately $55 billion in writedowns over the next 18 months, and its future existence is nowhere near certain. That’s hardly the place you want to park $2.5 million.

The way of The Strongman

Without warning, Prime Minister Hun Sen demanded Tuesday that authorities shut down Cambo Six. On Wednesday police moved in and by Thursday morning the nation’s largest bookmaker, with offices in every major city, was effectively shuttered.

Say what you want about the evils of gambling, but the Prime Minister should not be able to shut private businesses at his whimsy. By creating  uncertainty, such moves do immeasurable damage to the country’s business environment and reinforce beliefs that Cambodia is an outlaw nation.

And rather obviously, there is no rule of law. If the PM wants you closed, you will be closed. That you are a legally licensed business with rights for which your company paid millions, no matter.

That said, the unwritten story line so far in all this is that the local partner of Cambo Six is Okhna Kith Meng, whose offices at Mobitel were inexplicably surrounded by police two weeks ago. There are little doubts the two events are unrelated. Somebody, it seems, may no longer be on the ascendancy.

Short, poor, ill and corrupt

Ka-set  passes on a few predictions for 2009 GDP.

1. Prime Minister Hun Sen, 6 percent.
2. The World Bank, 4.9 percent.
3. The IMF, 4.8 percent.
4. The Asian Development Bank, 4.7 percent.
5. The Economist Intelligence Unit, 1 percent.

Inexact science, indeed.

Foreign ownership law on the way

From today’s Cambodia Daily, dead-tree edition.

The government is actively taking steps to allow foreign nationals to own property in Cambodia, with the Ministry of Land Management now drafting the legal framework, Information Minister and government spokesman Khieu Kanharith said Tuesday.

In a move Khieu Kanharith said will increase the ease of doing business in Cambodia, foreigners will be allowed to purchase the title for 100 percent ownership of apartments and condominiums. Land, however, will remain off limits to foreign buyers, he said.

The story suggests the law will go into effect in the next few months. The belief seems to be that with the real estate market in the doldrums — currently just one sale per day compared to 100 to 120 per day one year ago — the law will seduce cash-flush foreigners to rush into the Cambodian market. Many people are hoping the move will help revive a nearly flat-lined real estate market. Given the state of the global economy, such hopes seem irrationally optimistic.

Long on CamEx

Bloomberg reports that everything is on schedule for the new stock exchange.

Cambodia, the second-poorest country in Southeast Asia, plans to complete the listing requirements for its first stock exchange by April in preparation for a December opening, a top exchange official said today.

“Everything is on schedule so far,” Ming Bankosal, director-general of the Securities and Exchange Commission of Cambodia, said by phone from Phnom Penh. “We will finalize the issuing requirements by the end of the first quarter, and after that we’ll accept applications from companies.”

Yes. Everything is fine. Except …

“Now the U.S. is in the process of recovery and this recovery can spread to the world,” Ming said. “We hope that in late 2009, everything will be okay.”

The guy in charge doesn’t have a clue. Oh, brother.

The price of corruption, per kWh

Everyday VIA KI: As if more evidence was needed, Sam Rainsy Party member Son Chhay provides further reason to rage against Cambodia’s electricity machine.

Son Chhay indicated that the price of electricity in Cambodia is the highest in the region by at least threefold. He also indicated that experts claimed that there is no reason for EDC to incur any loss, even at the current oil price. He said that if EDC was properly administered without corruption, it can only make an even higher profit.

It’s not just poor people getting shaved here either, although they are certainly taking the worst of it.  The filthy rich crooks in charge of the EdC, with their extortionately high electricity rates, stand as a boot on the neck of proper economic growth. So instead of creating a legitimate business environment, the country gets stuck working with the Chinese government and foreign gangsters. And NGOs. All of which amounts to a pretty sad excuse for a proper economic policy.

Marriage tourism

Cat Barton and Vong Sokheng investigate the growing Korean marriage tourism business.

Like many Cambodian girls, Monika had always dreamt of marrying her very own Prince Charming. So after hearing an advert on the radio, she registered with the Chanthin Group, a Korean marriage brokering company. Almost immediately, Monika found herself in Phnom Penh, being introduced to a selection of South Korean men, one of whom picked her to be his future bride.

After three months of studying Korean culture and language every Saturday, Monika went to Korea in June 2007 and lived with her husband and his family.

No prizes for guessing how that turned out.

“I went to Korea to earn money, not for marriage,” she said, hinting at why the marriage lasted only a matter of months. She is now divorced and back in Cambodia.

At the national level, relations between Cambodia and South Korea are moving nearly as fast. South Korea is Cambodia’s number one source of tourists. South Korean money is largely responsible for Cambodia’s current real estate boom. Many of Phnom Penh’s largest construction projects — Camko City, Golden Tower 42 — are products of Korean-Cambodian partnerships.

Although there is no evidence yet to suggest that these partnerships are as unstable as their mail-order-bride counterparts, it seems at least a little likely that they too could be marred by overly optimistic expectations. After all, what kind of Korean man shops for a mail-order bride?

Brides often believe the Korean men they will be marrying are rich, successful businessmen.

But according to the IOM in Seoul, the men looking for Cambodian brides are often poor, badly educated or even mentally handicapped and have usually had difficulty finding a wife among the ranks of South Korea’s ambitious younger female generation.

The PP Post web site

Michel Dauguet, the Phnom Penh Post’s new CEO, spoke to the British Business Association last week. He said the Post’s new Web site will debut sometime next week.

While the number of print readers may be down, Dauguet divulged to his listeners that figures indicate the internet has actually increased the overall quantity of readers across the globe. And this is why, as of next week, the Post is going online. Influenced in design and content by the BBC and the Guardian websites, the Post’s website will deliver breaking news while maintaining a ‘community’ feel by offering community features and services such as a classified section. Encouraged by ‘citizen journalism’ the Post plans to incorporate non-journalists in their news reporting through mediums such as blogs that allow readers to offer opinion and insight into global, regional or local issues.

According to those who have seen it, the new site looks okay. Compared to what the Post has now it’s a phenomenal improvement, although that’s not saying much. The real measure of success, however, will be the content.  The Post plans to go daily inside of three months, and the new Web site is an integral part of the strategy — break stories on the Web, develop them in the paper. For Cambodian news junkies that means a legitimate online news source. Finally.

Priced out of the building boom

John Vink reports on the skyrocketing cost of bricks, the primary building block of Cambodia’s current boom.

The price of Cambodian bricks has exploded. There is such a demand by building companies for bricks (semi-handmade, Cambodian style and supposedly without child labour) that the big contractors, anticipating a supply gap, have started hoarding huge amounts of bricks, increasing demand to such an extent that the price of a truckload of bricks has soared nearly twofold, going from 370$ for one truckload to 850/1000$ in March 2008. The smaller contractors and builders are stuck: they used to buy one truckload at a time and now can’t afford to buy the next one unless they make their customer pay more..

Excellent photos, too. These kids are probably just “playing.”

And about those bricks: When building costs double, people stop building. In terms of signs of a cooling economy, a slowdown in construction is a good leading indicator.

MTV rocks Cambodia

In yet another sign of the coming apocalypse, Variety passed on news of a deal to bring MTV to your telephone.

Viacom’s MTV is using fast-developing Asia as location for new tech and new media experiments.

Company this week unveiled its first 3G mobile phone play in Cambodia with Cambodia Advanced Communications, and a partnership with Shockwave in Japan.

[...]

Pact in Cambodia sees MTV and Nickelodeon content offered to CADCOMMS’s 3G mobile phone subscribers. Provided under the ‘qb’ brand, video content will be delivered in mobile TV form or as video-on-demand.

Fast developing, Cambodia has unusually low penetration of traditional fixed line telephones and poor deployment of Internet services and its consumers appear to be skipping a generation of technology.

And then there’s this:

The qb launch will be marked by a Stacie Orrico concert in Phnom Penh’s Olympic Stadium with an anticipated 50,000 spectators in attendance.

Stacie Orrico? Talk about a jaded sense of humor. MTV comes to Cambodia and fronts up with a Contemporary Christian Music pop starlet. You think Duch will get a backstage pass?

Death business showing signs of life

Buddhists tend to burn their dead. But Chinese influence in Cambodia is growing, and Malaysian firm NV Multi is bullish over Cambodia’s burial business.

NV Multi Corporation Bhd’s unit NV Multi Resources Sdn Bhd has teamed up with an individual, Kau Kim Bac, to undertake the development, operation and management of a memorial park in Thloeuk Village, Angsnoul District in Cambodia.

The bereavement care services provider told Bursa Malaysia yesterday that the joint venture (JV) was in line with its objectives of expanding its business activities to other Asian countries. …

The project, which includes the acquisition of land measuring some 10ha, would involve the construction and eventual sale of a memorial park with columbarium, burial lots, temples, chapel, funeral parlour, crematorium, and leisure park with related infrastructure.

Crematorium and leisure park? WTF?

The WB mantra: peace, political stability and the rule of law

VIA SOPHAK: Nisha Agrawal, the outgoing country manager of the World Bank, spoke recently to the Economic Times. Like just about everyone these days, Ms. Agrawal is bullish on Cambodia, but …

Q: What are the economic prospects of Cambodia in the next five to ten years?
A: Cambodia has abundant resources, which give it a potential that has not been fully utilized. For instance, the land has not been fully utilized. Another great resource is people. And there is all this oil and mineral wealth as well as forestry.

The question in each of these areas is how to get a good quality of development that is sustainable, environment-friendly and equitable to poor people.

Cambodia also needs investors, and to attract them it needs three things: peace, political stability and the rule of law. Cambodia now has the first two. But there is still concern about the rule of law: the court system is not functioning well.

Q. What other sectors Cambodia should focus on?
A: There are no reasons for Cambodia to focus on any particular sectors – instead it would be better to improve the investment climate for all sectors so that Cambodia can have a diversified economy. Cambodia’s narrow base of growth makes it vulnerable by the SARS epidemics. The Cambodian garment sector may be weakened by Vietnam’s entry to WTO, or the potential lifting of safeguards on Chinese productions.

What is important to attract investors are three things: peace, political stability and the rule of law. Cambodia now has the first two. But there is still concern about the rule of law. The court system is not functioning well at the moment and while Cambodia has many laws, it is diffucult to enforce them.

The Country has abundant land, natural resources, labor, and capital. What is missing is certainty for investors that rule of law can provide.

Did we mention the rule of law? The World Bank may very well get what it wants. Word on the street is that the government is poised for a post-election crack down on corruption, which is making a lot of people nervous — especially the opposition. Arresting your political opponents, however, is not quite the same as cleaning up corruption, and in the eyes of the watching investment world, actions of the government can serve only one of two motives: enforcing the rule of law, or entrenching the culture of impunity. It can’t be both.

Daily business headlines

Urban-Rural Divide Set To Widen

Phnom Penh’s skyline is set for a dramatic change, now that South Korean companies have confirmed plans to build two skyscrapers in the Cambodian capital. The 42-storey Gold Tower is scheduled to be completed by 2011, while a 53-storey structure will be ready the following year.

SAAG eyes maiden O&G deal in Cambodia

SAAG Consolidated (M) Bhd, an oil and gas (O&G) services firm, hopes to win its maiden O&G deal in Cambodia in two years, as the group attempts to capitalise on its existing power plant operations and an emerging petroleum sector in the fast-growing Indochina nation.

ADB to provide Cambodia with 42 mln usd loan to upgrade rail network

The Asian Development Bank (ADB) and the government of Cambodia have launched a project to restore rail traffic between Thailand and Cambodia by 2010, by rehabilitating around 600 kilometers of track and reconstructing another 48 km near the Thai border.

Expectations high for new business-dispute court

Bernama reports on Cambodia’s latest attempt to quell foreign investors’ fears of the Kingdom’s rampant lawlessness.

The Cambodian Ministry of Commerce has finalised a 40-article draft law creating an independent commercial court and arbitration body, said China’s Xinhua news agency quoting a local media report Monday.

Mao Thora, Under-secretary of State for the Commerce Ministry, has said that it is hoped that the specialized court for business disputes will be formed by 2009, the Cambodia Daily newspaper said.

Many are hoping that a commercial court would improve Cambodia’s capacity to fairly judge disputes in the business sector, and thus move the country further on the road toward a sound market economy, it said.

In a country where the justice system is weak, Mao Thora said the specialized commercial court is needed to ensure investor confidence.

The country is, to put it mildly, badly in need of an independent court system. That such a thing could be created, however, is anything but clear. Cambodia’s culture of impunity is world renowned. Corruption is as prevalent as oxygen.

To the average outside investor surveying the Kingdom, that corruption is a deal killer, which makes it all the more important that the government get this court right. To do so would assure investors that Cambodia is an honest game and not a con. Such legitimacy would boost investor confidence to the stratosphere and open the floodgates to the world’s corporate investors. Because really, the only thing standing between Cambodia and the world’s waiting investment billions is a little honesty.

So can the goodfellas go legit? That really is the billion-dollar question.