Monday, September 3, 2012

An Open Letter to Anonymous

I received this comment on my previous post. It shows both truth and despair but does not indicate a balanced view of the circumstances and the special situation in which Cambodia finds itself. I thought it worthy of a reply outlining my thoughts.

The comment:

“Don't look back but to learn from mistakes and always look both ways before you proceed. How can a young professional Cambodian work for 300 USD a month and get ahead? How can we ever save to buy a house as houses here cost as much as they do anywhere else in the world? How could we ever afford anything more than a motorbike? When we work for another, our time is not our own, and so there are all sorts of demands and expectations, along with demands and expectations from family, there is now way we will ever get ahead. You explain it to me. You explain what needs to happen for poor Cambodians to own a home, and a nice boat like you have, and what makes you any better than the rest of us? Why is it that you deserve what you have and we have our lot? Yes, post this or don't post it, but aswer it.”

The reply:

Dear Anonymous,

I sense a great frustration in your comment, perhaps even bitterness. First let me explain how I got where I am now; not that my situation in life is such that one would count me among the rich. I would say I am well-to-do. But now I am in my last third, possibly even last quarter, of my life, so everything I have now has been earned over a lifetime, and it was acquired abroad, not in Cambodia, and, most importantly, it was acquired legally, not by theft, fraud, or corruption. It was not earned by speculating or gambling either. I am a very conservative businessman when it comes to these things. I don’t like high risks. These only rob you of your sleep and give you headaches, nightmares, and make for a bad family and social life, possibly lead to high alcohol consumption, or even drug use.

I got a decent education in several fields, both business and technical. After working at several well-paying jobs I opened my own business on a shoestring. According to opinion polls, being independent is more important to young entrepreneurs than making a great deal of money. This applied to me too.

Subsequently, I owned companies in several countries, among them Thailand and Cambodia in SE Asia in the early 1990ies. I do have to say though that my endeavors in Cambodia at that time weren’t overly successful. Although I did well, I left without any profit because of high expenses (guess why?) and shrinking profits as my solitary position as a foreign trading company slowly disappeared with the lifting of the U. S. trade embargo. I resettled in the West and joined another business.

I finally cashed out when I sold that business at a very good price after running and growing it for 14 years. One overriding principle in my life was that I did want to enjoy life while I was still able to – in the years when one is not yet frail and shriveled. My ambitions were, therefore, not  the driving force behind my business activities. A friend of mine proved my point only too well. He started out at the same time as I and worked his butt off his entire life because his career was paramount to him. He is dead already. He made a lot more money than I did. But I am still around to enjoy life. In the end, however, I fall into the same category as most somewhat successful businessmen; I made most of my money after I was 50.

Those stories of the billionaire wunderkinder, such as Mark Zuckerberg, are one in millions. Altogether, the U. S. only has around 3 million millionaires, that is less than one percent of the total population. At the same time the U. S. has about 15% of the population living below the poverty line, in other words, more than 50,000 Americans are poor. And don’t think poverty in the West is any different from poverty here.

Wealth is distributed very unevenly everywhere in the world. A lot people say it is getting ever worse. I personally believe the distribution is clearly out of balance tilting towards the super rich, ever since someone came up with the term ‘shareholder value’. This is just to put things into perspective. Don’t deplore your lot. Recognize what’s available and try to make it work for you.

I only came back to Cambodia to live here as I have a Cambodian wife. I used part of my money to invest  here and to build a nice house, and buy a boat – my major hobby. I don’t see why I should not enjoy the same lifestyle that I had and would have had if I had stayed in the West. I had all these things before I came here. Do I deserve them? You bet I do. I worked hard enough for them. Am I better than you? I think not. I just had better opportunities, grew up in a better economy and generally better era – at least in my mind. It helps if you are halfway intelligent and smart too.

So what can a young Cambodian professional do? First, and I guess you have that, he/she needs to get a good education. That’s easier said than done seeing as the educational system leaves much to be desired, to put it mildly. Nevertheless, there are chances even in the public educational system. If young people make an effort and study hard they can get a head-start on those who just watch videos on You-tube or play mindless video games. Choosing the right course of study at the right school is extremely significant too.

The big difference comes with the vast disparity between the economies of the Western countries and Cambodia. One must not forget the last 40 years in Cambodia’s history to understand why Cambodia is still so much behind Thailand. But despite its many negatives, the Cambodian economy is catching up. What took Thailand 30 years to accomplish, namely to grow from an underdeveloped country into a threshold country, will take Cambodia only 15 years – on account of the more modern technology available today and the fact that changes happen must faster now. In my opinion, the first 5 years of those 15 have happened already.

Even with the best education it is still hard to find a job that would pay well enough so that people can afford the things that commercials on TV make them believe they need and want.  A good used car easily runs into the $20,000 range, a house in Phnom Penh is even more expensive than in most places in the U. S.; I would say they have reached European standards, where real estate is prohibitively expensive in most places. I would venture to say that most of the real estate, such as condos, duplexes, and villas, are owned by very few people who bought them for speculation or to rent them. Nevertheless, there is a growing middle class in Phnom Penh that can buy into those mush-rooming ‘ ‘Borei New World’ developments.

There is a very simple explanation why comparitive wealth spread to a large part of the population in the West and Japan – it is debt. Banks original purpose was to lend money to businesses and people to acquire things they needed to invest in growth and for individuals to fulfill their needs and other desires. This way they made more money available to average people so they could consume more. More consumption meant more production, more production meant more jobs, more jobs meant higher pay, and so on, and so forth. Almost the entire U. S. economy is based on home consumption.

This economic cycle is in its infancy in Cambodia. But banks do extend loans for purchases of motorcycles, cars, and homes. The collateral  of at least 40% is still rather steep but it is a start.

Another difference to the West is that when people get married there they don’t have kids right away so they can both work and save money for larger items, e.g. cars, homes, etc. In some countries they sometimes hold off having kids for 15 years just so they can afford all the things they believe they need.  Here in most cases the new couple promptly has the first baby almost exactly 9 months after their wedding. So traditional culture is an obstacle to material well-being. This, of course, does not take into account social implications.

But here, even young people can sometimes make it happen. When did most people make most of their money in Cambodia? Right, during the real-estate bubble. I know an at the time rather dumb young man without education. But he grasped the opportunity when it presented itself. He bought a small lot of land that appreciated quickly, so he flipped it and bought another larger one, flipped it, and so on. You didn’t need a lot of money to start with then, prices were so low. He is now in his early 40ies and lives very comfortably in his own house with a wife and two kids.

Another young man acted as a guide to Korean businessmen who came looking for real estate. He watched how they did it and imitated them on a very small scale and then traded his way up. He now owns 3 villas and a night club. Sure enough he also drives a new big Lexus SUV.

That’s all nice and fine, but what how do these examples help you? Keep working hard, look out for opportunities, and grab them if they promise a good return. But don’t make any stupid moves by borrowing money at high interest rates from people in the market, e. g. 120% per year. Don’t play those traditional money lending games like ‘tontin’. There is always a loser in a game. Look for niche products that would be a novelty and where you would be very competitive. The important thing is to get an exclusive because if you don’t others will follow doing exactly the same thing. Cambodians have a way of always doing the same as everybody else. That happened to me several times back in the early days. Look for a field that is a growth sector. How many phone shops, hair and nail salons, restaurants, computer shops, or even car dealers does Cambodia need? Investing in those you will probably be able to make a living, but just barely so. Another tuk-tuk on the streets might not be greatest idea either.

An individual many times does not have enough seed money to start up his/her own business. They way out is a partnership.

A nice mid-range guesthouse is still a good business despite their abundance all over the place. Most of them are run poorly and earn equally poor money. I know a string a very successful mid-range boutique guesthouse which turn a nice profit – but they are all run by foreigners. Because of their business background abroad foreigners have more experience and knowledge so they know how to run things in an efficient way. This knowledge is largely absent in many Cambodian businesses, as is the attention to detail, customer service, or reliability.

But then there is this seemingly insurmountable problem of family or traditional expectations a young man needs to fulfill unless he does not want to risk being estranged from his family. This is an area where I can’t really give advice nor do I want to. It is too tricky and too individual. One thing is for sure, tradition and conservatism hold back development. Just look at the definition of the word ‘conserve’ – to keep it the way it is. Too much progress too fast has not proved to be the right way either, as the recent examples in Arab countries demonstrate. This issue you must address and resolve for yourself.

And finally, this blog is not meant to arouse envy or jealousy in Cambodian readers. It is supposed to provide some insights and experience for other foreigners, overseas Khmer, and whoever is interested in things Cambodian.