Tuesday, December 16, 2008

Recent News

The appointment of Prince Ranariddh as the King’s chief adviser, on reflection, leads me to conclude that all the royals, the King excepted, are basically a non-productive group of citizens for Cambodia. They unsuccessfully tried their hand at politics and basically derived their prominence only from their royal status, which they came into rather involuntarily. This again shows that royalty and aristocracy are principally a thing of the past and have no basis for their existence in today’s world. In simple words, they are ‘free-loaders’. The appointment of those advisers – and one can only assume that those titles aren’t just honorary – will cost the Palace, which in turn is financed by the national budget, in other words, ‘Is it worth it?’

All these royals came back from abroad and basically failed in their efforts and endeavors in Cambodia, as has many an overseas Khmer who returned after 1993. Does this imply that overseas Khmer generally aren’t fit for life in their native country? Many a restaurant owner failed after the novelty effect had worn off. Attempts at import/export businesses failed because the Khmer magnates dominated practically all business sectors, and the way business is done here differs substantially from the Western way, in which those overseas Khmer conducted theirs, thinking the native Khmer didn’t really know how to do real business, only to find out the hard way that it was them who didn’t. Some tried civil service because of their party affiliation. One was appointed Secretary to the United Nations (at the time King Sihamoni was ambassador to the U. N. by the way). He came back once the position went to a CPP apparatchik. That former secretary was a doughnut baker in the U. S., a great qualification for a Secretary to the U.N., isn’t? And just as great a qualification for life back in Cambodia. He is now near destitute and carves out a meager living with odd jobs. And what about Sam Rainsy? After all, isn’t he a returnee who failed as well? They all thought their Western thinking destined them for higher stations in Khmer society, but for the most part failed miserably, with one notable exception – Kith Ming. This brash young man made millions, if not billions, with his bravado, intellect, and by doing his homework, not the least of which was to ingratiate himself with the ruling party.

On the economic front the news wasn’t all too bright. The government finally realized that the impact would not bypass Cambodia after all and revised their growth prognostication to 4.9% for 2009.

The real estate business has come to a full stop, at least on the surface. Officials and real-estate brokers estimate that the slump will last well into 2010 now and then return to normal. What do they mean by normal? The market was not normal in its overheated phase before June / July. So if they expect to return to prices of that time, I am afraid, they need to do a little homework in economics. Prices were and in some places still are at a ridiculous level. Prime properties are still more expensive in Phnom Penh than in parts of New York City, and I don’t mean Manhattan. I would think returning to normal would mean prices that are in relation to the value as measured by the possible return on investment gained from that property. If an investor ponies over $4000 to $8000 per square meter, how much rent can he expect to derive from a 4- or 5-story building, or even a 40-story building, for which the construction cost is proportionally higher? There just aren’t that many renters or buyers around in Cambodia yet that can afford luxury office space. It’s the same for condos. Who will pay between $100,000 and $500,000 for condos, and I don’t even want to mention the $1 million ones? Those are the prices paid in Miami Beach right now – and you have a much better infrastructure there. In short, people have their sights set too high for Phnom Penh. They need to get real and stop talking about normalization when they don’t know what normal is.

Officials also keep talking that agriculture can counter the downturn in the affected garment, tourism, and real estate/construction industry. How that should work still eludes me. Here is an interesting article http://www.phnompenhpost.com/index.php/2008121623219/Business/Trade-expo-opens-as-commerce-minister-predicts-strong-growth.html about that.

The Commerce Minister said the economic downturn has not severely impacted Cambodian trade? Where does he live?

He said, "The speed of economic growth will be lower, but if there are efforts to produce goods that meet market demand and to tailor agricultural output for the market, I believe that growth will not be much lower - at least nine percent." That statement reaches intellectual heights I can’t reach - that’s probably why I can’t understand it. Just a day before the government revised it’s projection, remember?

He said the agricultural sector could be a major source of growth through the establishment of a trade surplus. Well, according to the article above there is a surplus already. Most of the exports were garments, so for agriproducts to take up the slack will be a long way to go.

"The crisis has not severely impacted foreign trade. Trade with Vietnam and Thailand is still on the rise, and we expect that Cambodia's imports and exports will increase this year," Mao Thora said (secretary of state at the Commerce Ministry).

Hey guys, palm oil is down, cashew nuts are down, cassava is down, rubber is down, Vietnam slowed down buying considerably, Thailand trade was disrupted severely because of their crisis, and you are talking about business is great? As long as Cambodia has officials like these one can only hope that free market forces, meaning the private business sector, will adjust market properties according to reality.


Anonymous said...

Living in Siem Reap last year, I could see the bust in real estate and other businesses - just not sustainable, and too many empty new condos and shop houses. Was a lot of Korean capital looking for a home in Siem Reap; and Thai and Vietnamese money? On the other hand it is not Cambodia's fault what Wall Street and mortgage brokers did in the US. The fall in commodities has not helped. The businessmen staying at the Raffles Hotel seemed optimistic about Cambodian business at eh beginning of 2008. Maybe tourism will help because a lot of Westerners need somewhere cheaper and pleasant and Siem Reap is still a nice place to stay.

Anonymous said...

Flats and Condos pricing in Phnom Penh are suprisinly higher than my 3 bed room single family home in Boston, MA (USA) and Villas in Phnom Penh? Pricing are out-of reach for most of us who considered moving back to Cambodia...

KJE said...

You can still get decent housing in Phnom Penh if you stay away from Toul Kork and BKK. Those prices will eventually also come down. U.S. houses are mostly built of wood, which is still much cheaper than brickwork and steel. If you buy the lot and then have the house built to your specs you will be able to do this for up $125K altogether.

Anonymous said...

Thanks for the info...