Sunday, September 4, 2011

The Ubiquitous and Mostly Incompetent Middleman

Anyone who has ever done business in an Asian country and Cambodia in particular knows that the use of an agent, or middleman, is virtually unavoidable. Much of the information someone needs in regard to especially real estate is not general public knowledge or available, say, on the internet. There are a couple of good real estate agents in Phnom Penh and Siem Reap but most properties for private or small business use are handled by middlemen. Industrial properties or concession lands are rarely handled by those agencies.
Now there are middlemen and middlemen. Some really work on behalf of the seller and these usually have the necessary information ready.

The great majority of them, however, have no clue what they are talking about. They could work as tuk-tuk drivers, motodops, waiters, policemen, or soldiers; the latter two, mostly higher-ranking officers, constitute the majority of all middlemen, at least in my experience, and they usually do have connections that can help. The other ones, on the other hand, just vaguely heard that somebody wants to sell something. They pass that information on among their friends and people they know. Eventually it will reach someone who knows someone who is looking for just that particular item, or piece of land.

A case in point is my search for an additional smaller working rubber plantation. I am looking for a plantation in Kompong Cham province, close to the one I already own. I happen to know a middleman who supposedly does have a good knowledge of what’s available in that sector. So I asked him to be on the lookout for me. I had been searching for some time already without any workable results.

After just a few days he got back to me with a few proposals. Though I had given him the district of my plantation, the ones he suggested were all about 100 km away. How can my manager work these two plantations on a daily basis, which is an absolute must.

Next he brought back three plantations near my district, albeit a little overpriced. When asked where exactly they were, he said the other middleman didn’t want to disclose it just yet. He was clearly afraid he might be cut out of the deal. So I said, ‘Let’s take a look.’ Prices can always be negotiated. On the day we were supposed to leave he called early in the morning, saying the one I was most interested in had already been sold; and he wasn’t so sure about the other ones; the guy he was talking to said maybe the soil isn’t that good (never mind that the plantation was 14 years old already), etc., etc. In other words, a typical case of ignorance where this middlemen just wasted somebody else’s time, but thankfully in this case no money. I just told him to forget about looking for another one. As is often the case, he didn’t know the owner directly but had talked to another middleman; and I am not sure whether that was the only one in the chain.

A while back something similar happened. A guy told me he had a 6-year-old plantation. Great, we were going on an inspection trip anyway, so we went to take a look a look at the same time. We picked up the
two middlemen and while we were talking on the way, the second guy mentioned that the trees were only three or four years old. I just dropped him off in the main district town, he was from the area anyway, and went on my way. Was he just looking for ride or what? I still amazes me that people would waste so much time for nothing.

I am sorry to say this is not limited to Cambodian middlemen. In my consulting job I source large plantations for foreign investors. I have come to learn that there are certain nationalities that I should be wary of.

One day I got a call from somebody overseas who said he has a client – a tire manufacturer - who wants to buy a large plantation. Since he made it clear he was acting as an agent and belonged to one of the nationalities I am usually somewhat suspicious of I didn’t want to harness the horses unnecessarily so I didn’t get in touch with some of my contacts. I informed the agent of the legal situation in Cambodia, and told him if he is serious he should come and visit the plantation. I was somewhat surprised when he actually did make plans to come and look at a plantation. So when he got here he told me he had another appointment in the afternoon, could we do this in the morning. We picked him up at his hotel and on the way he told us he would be picked up later in a town near our location. I had expected we would discuss his plans a little more in detail, but this obvious disregard of our efforts raised an immediate alarm with me, but we were on our way already. He was clearly on a fishing expedition and I presumed the whole thing would lead to nothing. So I showed him just any plantation. Long story short, this indeed didn’t lead to anything. He really didn’t have the clients lined up yet but was just trying to find buyers himself with the first-hand information he got from us. Finding investors is actually part of my job. So what did he think he can do differently? People just don’t realize that this scattershot system is a waste of time in 99% of the time.

Then there are the other kinds of middlemen, or rather facilitators. They are not middlemen in the real sense of the word but people who actually handle these things for the government in a semi-official capacity. There is usually one go-to guy who works at a higher level job in one of the ministries or is a military man with close connections to the minister or state secretary, sometimes the PM himself. They know their stuff and will take care of everything. Anybody wants to do business in Cambodia on a large scale where land concessions or blanket government approval is needed is well-advised to find such a person. Everything else is mostly not worth the time and money. And stay away from the dime a dozen middlemen that can only give vague answers and cannot get you in touch with the seller or owner directly.


Anonymous said...

How do you handle with a land dealer who acts as like an owner and prevent prospective buyers from directly contact with owners? This is one of the many disadvantages the land owners are facing. In eighter case, both would have nothing to gain.

KJE said...

If he acts like he is the owner you shouldn't deal with him in the first place. This person is probably up to no good. Ask him for the title to the land, either hard or soft. With that you go the Cadastral office of the district and check it out whether it's really registered there. If not, it's fake. If it is registered then you know the name of the real owner already and will know how to find him, I am sure.

If he refuses to give you a copy of the title, forget this person.

If you are very much interested in a particular piece of land, check with the Cadastral office, give them a tip and you will find out who the owner is without that middleman.

If you are just checking, go see the one of the larger real estate agents in PP to get pointers.

Anonymous said...

Is there a fee for varifying a property title? What is your worst experiences when buying a property in Cambodia?

KJE said...

$10 should do it: $20 for express and courteous service.

Personally, I have done three property transactions in Cambodia and have not had one bad experience. My one middleman for two deals was the military commander of the district; and a nice tip helped the third and large transaction to go off without a hitch.

Anonymous said...

How would you protect your property titles from being confiscated by a powerfull individual? Let's say you had purchased a small, medium, or large-scale agriculture land and later on someone come and claimed that the land is the state owned land? This has been the biggest concern among most potential investors in Cambodia today.

KJE said...

If you have a hard title, verified by the Ministry of Land Management, there won't be any problem. The cases you are referring to always involve land, the legal ownership of which is not clear. People sometimes believe they own it because they have lived there for 5 years, which is the period acc. to law when occupancy of unused land turns into ownership. But this will always be disputed by the rightful owner who always claim he has the soft title. In case of large pieces of land that somebody wants to develop the cases are more complicated. The people living there need to be resettled and the question of compensation almost always ends in dispute. These are very thorny problems and each one is different.