Wednesday, June 13, 2012

Some Things I don’t like in Cambodia

Some of the things listed below affect me personally, some of them only peripherally, some of them not directly at all. But living in a host country one will always have some kind of peeves. These are some of mine; maybe there are more but let’s not overdo it, right?


Much has been said and written about traffic here. For someone who drives daily in Phnom Penh and frequently overland, this is the most unnerving experience in my life in Cambodia. Especially irksome are the motorbikes when they weave in and out of traffic, not bothering with any rules or regulations, let alone common sense.

Nighttime driving on highways is definitely not recommended. The risk of running someone in dark clothes over walking along the road or ramming into an unlighted vehicle is just too great.

Neighbors’ Dogs

Now this is a really troubling feature of living in Phnom Penh. I live in a duplex in gated community where the houses are spaced about 2 m apart. The lot itself is 8 by 16 or so. Many people keep one or more dogs on the premises as an alarm system. These mutts bark at anything that moves in their vicinity. The guards make their rounds every hour or so. Now just imagine what barking concert this causes at nighttime. People have no idea how to train a dog, and that applies to Westerners as well. Of course, they also seem to forget that by barking at anything that moves by the whole purpose of alarming the owners of intruders is defeated, not to mention that keeping a dog in such a small area borders on animal cruelty, as I don’t see their owners ever walking them for exercise.

Neighbors’ Cooking  – Fish Sauce

I myself find Khmer cooking rather bland and simple compared to Chinese or Thai cuisines. They all have in common that they use generous amounts of fish sauce in preparing their dishes. Fish sauce actually does make for a fine flavor in the finished dish but while it is being prepared one has to endure a satanic smell. Fish sauce while being heated up gives off a nauseating smell. In true fashion, my neighbors use it almost every day so I get a good dose of it on a regular basis. I only hasten to close all windows and doors at that time.

Early Morning Noise

It appears that no matter what their jobs people get up early, that is, around 5:30 to 6 o’clock. Immediately, clattering of dishes, pounding of pestles, conversations held in high volume, children playing soccer on the street, motorbikes coming and going, cars honking, and so on, sets in. School minivans with their windows open playing loud music pick up kids. Some people also give their car a quick wash listening to the radio turned almost all the way up while the car doors or windows are open. And not to mention the above described dogs barking. It’s a pure pleasure.

 Lack of Professionalism in Business and the Public Sector

It seems as though most people here haven’t heard of the economic law of supply and demand. They set a an more or less arbitrary price and expect you to pay it, regardless whether or not there is a glut of the item they are selling and the competition might be more reasonably priced. Sometimes this goes even so far that their prices are higher than if you bought the same item abroad and had it shipped and paid import duty.

People try to sell you something without providing the facts, e. g. size, properties, quality, etc. This problem a lot of times stems from the fact that middlemen are involved in a deal of larger items such as land or cars.

Used car dealers in the West lie through their teeth to sell you a car, hence their reputation. Here they lie and are not even aware of it. They simply don’t know what they are selling. For instance, most of them might know the term ‘ABS’, but they really don’t know what it actually is. So if there is a ‘Limited’, there must also be an ‘Unlimited’?

It becomes really frustrating when you are trying to close a bigger deal. Accounting is a foreign word and concept to many people here. This may be good for them as taxes are based on accounting records but how can someone substantiate that a business really does generate that claimed income?

Cambodian government offices are notorious for being unfriendly, arrogant, and absolutely inefficient. You can be lucky if you see the person who you are looking for on your first attempt. Being a government employee always entails the liberty of being absent for long hours to conduct other business.

This even extends to doctors some of whom work for a government hospital but maintain a private practice part of the day. So just going to the hospital during normal office hours can be like a crap game.

Khmer Relatives

Khmer families usually are close-knit groups. Two or three generations often live together in one house. The extended family, that is, uncles, aunts, nephews, nieces, etc. are also seen as much closer members than in the Western family. If you enter a Khmer family as a foreigner, they usually embrace you as a full member. In my view, this unfortunately also applies to the extended family. I don’t consider myself related to my wife’s uncle or her aunt, let alone a cousin twice removed.

In this age of mobile phones people sometimes still have a habit of just dropping in for a quick visit without announcing it. They take it for granted that they can crash at your place for a couple of nights if they happen to need it. Needless to say, they think it is normal to be there for the meals as well. After all, they are family, aren’t they? Of course, this would fall under the category of hospitality but they could at least ask whether or not it is convenient. But the annoying and almost insulting attitude is that you have an obligation to help. I mean I am glad to help out in times of need but being expected to help because even more distant 'relatives' believe this to be my duty exceeds my willingness and generosity. It is also still widespread that older relatives expect respect from you just because they are older than yourself. Never mind, that they may be half-illiterate and used to work as a truck driver.

TV Programming – Khmer channels

I hardly watch Khmer TV but what I see from my wife’s watching, Khmer stations have a long way to go in terms of making interesting shows. Normal fare are Philippine soap operas, Khmer comedians with painted on mustaches (why do they always need that?), and shrieking dialogues, Chinese martial arts or ‘historical’ movies, and endless music shows with what to my ear sound like always the same tunes. There is one new channel that broadcasts music shows virtually the entire time – and it’s always the same singers and the same people dancing.

Constant News on Military and/or Police

Cambodia cannot shed its Communist past, or so it seems. A good segment of the news always covers some definitely insignificant information about the military and/or the police. There you see these high-ranking officers in large numbers busily making notes listening to some general. It also looks like there are no grunts or non-commissioned officers in the Cambodian military. You only see stripes on their epaulets. This type of newscast is typical of Communist countries.

The Role of the Military

This ties in with the previous point. Cambodia is a small country and apart from that dispute with Thailand about Preah Vihear where soldiers were used to uphold Cambodia’s honor it really does not need a military of more than 100,000 men. In case of a real war, Cambodia’s military would be no match with either neighbor. What other threat would there be? The 25% Cambodia is spending on its military could be used much better for different purposes, e. g. education. Of course, on the other hand, the military is a huge job creation program. Poor people who would otherwise be unemployed find a job here. It doesn’t pay much but it feeds and clothes them and gives them shelter too. But everybody who thinks he is somebody needs to be associated with the military; and if it is only through a military license plate. The military altogether enjoys too much presence in Cambodia.

Especially annoying is the power higher ranks believe they have over civilians – at least on the roads. They usurp the roads and streets as if they owned them.

Addiction to Titles and Status

Like many upstarts, Cambodians who have come into money crave to be outwardly recognized as someone special. You can buy titles like Ayadom (Excellency) or Okhna (to which there is no good translation; the Honorable might come closest). So if someone wants to be an advisor to a minister and he has the connections and the money he can call himself advisor to the minister and with it comes the title Ayadom, which greatly impresses more simple-minded people. Ministers and State Secretaries themselves are always referred to as Ayadom in the news, e. g. Minister of Defense Ayadom followed by the name. Businesspeople who acquired the title Okhna are addressed likewise. And again, a general in the military is also automatically an Ayadom and his wife a ‘Lohk Chumteauv. These ladies are then chauffeured around in a large Lexus SUV to do their shopping accompanied by one or two bodyguards who then carry the shopping basket at the Bayon supermarket. Never mind that this ‘lady’ used to be farm girl who can hardly read and write.

The first status symbol is a large car as evidenced by the many full-sized SUVs like the Lexus GX470, its twin the Landcruiser, and for a couple of years now, the Land Rover. Next comes a huge villa in a mixture of traditional Khmer and classical Greek or Roman architecture. Only the real wealthy can afford those, though, because these set you back by a million or more dollars. The ladies have their jewelry to show off. They would rather forego a nice trip abroad to see something of the outside world than not to be able to buy a new piece of jewelry to be admired by her fellow ‘Lohk Chumteauvs’.

Personality Cult Hun Sen and Bun Rany

This cult seems to be perpetrated more by the PM’s sycophantic underlings than by himself. People cannot say anything negative about Hun Sen or his wife Bun Rany for fear of that infamous slander statute. The courts in the U. S. would have been bogged down for years if George Bush had sued all the people who insulted him publicly. Here it seems the PM and his wife are made to be infallible. 

Traveling through the countryside, there is hardly any village without a Hun Sen school. People are led to believe it is Hun Sen who builds all these schools and roads. Just look at some the pictures on TV.

Although former King Sihanouk bestowed the title ‘Samdech’ on Hun Sen, I believe it is used as if he were the king himself. He is always referred to with that honorific. His full title is ‘Samdech Akka Moha Sena Padei Techo, loosely translated as ‘The Great Lord Protector’.

This sounds exaggerated for an elected politician and rather obsequious. I mean this is 2012 and not the the Elizabethan age. Additionally, it surely is a far cry from everybody is equal in former days. The reason he got this title is political but it nevertheless is not appropriate for a democratic leader. He is a plain and ordinary man who made it to the top (not always by democratic means). Couldn’t he be just the PM? He wasn’t highborn or anything, was he? Just the opposite, as he is proud to point out himself. He was a farmer’s boy educated in a Buddhist pagoda. The only thing lacking is huge pictures of the two in public. So far this is thankfully limited to the king’s picture.

Many other things could expand this list but thinking about this I came up with these first, and I must emphasize that my dislike is not in the order shown above. You might be wondering why I don’t include corruption in the list. This is simply because I am not affected by it, or at least I don’t feel I am. The policeman who puts the 10,000 KHR in his pocket doesn’t fall into this category in my mind. He does it because he simply doesn’t get paid enough, and neither does the official who wants $5 or $10 extra for a stamp for the same reason. This problem is cultural and systemic.

Are there things I like about and in Cambodia? Sure. But that is for another post.

Friday, June 1, 2012

The Euro Crisis and Its Impact on Rubber Prices – Round II

It is apparent that European politicians are out of their depths dealing with this crisis. Six months ago they agreed on a parachute to bail out Greece from its irresponsible spending policies. That sort of softened the blow on the world markets and commodity prices after a sharp decline across the board began to rise gradually. Rubber prices reached $4,000/mt for TSR5L and $3,750/mt for TSR10 again at the beginning of April. (Cambodia sells their high-quality crepe rubber at a roughly 15% discount, which is roughly the same as the TSR10 price. It uses the TSR10 category as its benchmark.) While I viewed $3,000/mt for the TSR5L as a sustainable and economically sound level, I needed to revise this due to increasing labor and general maintenance costs. I now hold that the $4,000/mt is the right and acceptable price for all concerned – the farmer, the processing plant, and the manufacturing sector.

That spring did not last long for rubber prices. Obviously, some spring fever had also infected the Greek politicians, especially the leftist parties there, as they stalled in forming a government after the election which sent the markets jittering and promptly led to a downward trending of rubber prices, among others. Germans who bear the largest share for that parachute want strict adherence to austerity, which the Greeks find too hard to swallow, but is a prerequisite for further money injections into the Greek economy. Other countries want a loosening of the purse strings so investments can kick-start ailing economies in the Euro-zone. But let’s not get into too many details here. The whole thing is a quagmire. Interested readers can find ample information in all large newspapers. Only one thing is clear – instead of acting decisively European politicians are dragging their heels, thereby confounding the problem without regard for the consequences on markets and with the all-important issue of creating or at least maintaining jobs. 

The uncertain situation in Europe right now has in reality no immediate effect on any of the sectors of the rubber industry. Supply is the same and demand is the same, at least more or less. Worries about the future of the Euro do not mean buyers will buy less rubber right now. Only the ones speculating in rubber, and this is a small part, will hold off buying, hoping for a further decline in prices so they can stock up at low prices just to sell it off at a good profit once prices have recovered. But generally, the manufacturing industry will need just as much supply now as it will in June or July. Just-in-time management will prevent that sector from overstocking. They conclude term fixed price purchase contracts to offset wild fluctuations. The culprits are again the speculators – the one sector of the economy that has become the scourge of modern-day business. Impotent politicians and unconscionable speculators make for a deadly combination.

Markets will always rebound. It is just a matter of time. How long will it take? My guess is another 3 months or so. You have the new elections in Greece in June and you have the referendum in Ireland on the fiscal pact, which will both greatly influence how the rest of Europe will respond. No European government has promulgated a clear program about what they will do in any eventuality. But eventually they will have to do something. They can’t keep on muddling through forever. But I don’t think we have seen the bottom of rubber prices yet. Saying how low it will go would be like reading tea leaves. Who can predict anything these days? Professional analysts are highly paid but seldom get it right either. The Chinese economy is slowing down as well, which now prompted the Chinese government to open the money spigots to again make available money for mostly infrastructure projects. But even that news did not have any effect on prices. The worries about Spain overshadowed everything this weekend, sending all major markets into a downward spiral.

How does it affect the farmer in Cambodia then?  Dry latex sells for $2.12/kg right now. Production cost is anywhere from $1.00/kg to $2.00/kg. So it is hard to say where the break-even line is for whom. Larger plantations have higher operating costs; some plantations have lower amortization depending on how much they paid for the land, perhaps they inherited it, etc., etc. Let’s just use $1.50/kg production cost on average.  Based on past price movements the price would have to fall to $2,700/mt for TSR5L or $2,040/kg for TSR10. The last time we had that was in October of 2008. Six months ago the lowest prices we saw were on Nov. 29, 2011. TSR5L was noted at $3,393/kg and TSR10 at $3,196/kg. In comparison the prices on June 01, 2012, the date of this article, were $3,550/kg for TSR5L and $3,118/kg for TSR10.

All this leaves owner’s benefits or a general manager out of the equation. Labor costs were calculated for tapping staff and technical supervisors only. Larger plantations need shift foremen, section supervisors, etc., and a general manager. Production cost will rise in proportion to the size of the plantation. But in any event we are some way off from red ink.

One interesting aspect of the near future that might interest potential investors is the fact that many maturing plantations will soon produce a yield. Many private plantations were started with the sole purpose of selling it at some time during the maturing stage. Demand has been there and many a young plantation has changed hands. I am just wondering what the owners will do if they can’t sell theirs. They will have to look into managing it themselves, that is, hire staff, etc. My guess is that quite a few don’t want to go to those lengths. Most private owners are absentee owners and have little inclination of going into operating a plantation. I would think the current high prices will start to drop to more realistic levels. The latest offers I have seen for a 6-year-old plantation are in the range of $20,000/ha. That seems over the top when you consider that the investment over the 6 years was about $7,500 to $10,000/ha, again depending on the value of the land. So there is much room for negotiation. But then, Cambodian minds work differently. Some just don’t want to make any concessions. But even at high prices and factoring in amortization over 20 years purchasing a plantation still makes good economic sense. One must not forget that after the trees stop producing they will be cut down and the logs sold for use in mostly furniture. The owner still has the land after that time and can start a new plantation or plant a different crop. Most likely the value of the land will have appreciated considerably too.