Sunday, September 8, 2013

And Now What?

After a hiatus of three months and with the election finally over, and the results now officially confirmed, here is my commentary.

Against all my predictions, I really hadn’t believed it, Sam Rainsy was allowed back into the country to participate in the election campaign, although not as a candidate. I had thought the people had practically forgotten about him. Boy, was I proven wrong. Thousands of people lined the road when he arrived. Wherever he traveled during the campaign he drew good-sized crowds and obviously energized especially the young people. I have no idea whether Kem Sokha would have been able to accomplish the same results.

The election proved to be another eye-opener; this time not only for me but most certainly for the old CPP party stalwarts and not the least Mr. Hun Sen himself. Who would have thought that the new party (with its somewhat ridiculous name in my view) would garner so many seats.

They claim they even won the election. According to news accounts they have not yet shown any comprehensive evidence of that besides some forms that did not show matching numbers. They claimed interference from election officials and poor management of the polling stations. I am sure this is all true. Reading all these accounts I tend to believe that they indeed either came very close or even won this election. Their calls for an independent panel to investigate all these irregularities remained unheeded, as was to be expected. The outright refusal and the cursory review of the CNRP complaints by the National Election Committee speak volumes for themselves. It did not come as a surprise that the Constitutional Council confirmed the Election Committee’s results. So the result of 68 to 55 will stand. The final official announcement is on Sunday, September 08, 2013.

Sam Rainsy and Kem Sokha threatened to hold mass demonstrations. Most likely, they thought this would force the ruling party’s hand. I wonder whether or not they had the Middle Eastern and North African countries in mind. We know that all the regime changes there did not end well. I also don’t think that Cambodia can be compared with Tunisia, Libya, or Egypt; the culture, history, and mentalities are too different. The government obviously wasn’t sure about that as they prepared to counter any threat to what they called ‘stability’, meaning their rule, by moving police from the provinces to the capital.

Finally, Sam Rainsy caved in fearing that the government would indeed crush any unlawful demonstration – one has to bear in mind that normally demonstrations of only up to 200 people are allowed at a special site, Freedom Park – he declared it a ‘prayer meeting’.  Violence can erupt easily as examples in other countries have shown. In this case, it could be sparked by both sides. There were skirmishes before between supporters of both parties.

Long story short, we now know that the mass demonstration (which should at least number 100,000 if it is to be called mass demonstration) never materialized – the 'prayer' event went without any incident; both the demonstrators and the police remained calm. The police stayed unobtrusively in the background.

It is noteworthy, however, that this demonstration drew only about the same number of people – estimates range from 10,000 to 20,000 – as the one on Aug. 06. Expats who were there estimated the crowd at about 10,000. The park was only half full. The conclusion one observer drew was that it probably is always the same people who attend and that the party does not have that mass appeal for demonstrations as it believes it has. From what I hear from Cambodians, they have no taste for any confrontation with government forces. The majority of Cambodians fear that any further confrontations could turn in a civil war. Since Sam Rainsy announced those mass demonstrations many a shopkeeper kept his store closed - a sure sign of the prevailing uncertainty in the country.

Although Kem Sokha threatened with more demonstrations that  wouldn’t be so peaceful as in the past, the more likely outcome is that there will somehow be an arrangement between the two parties. Some even talk about a possible cabinet post for Sam Rainsy. Clearly, Hun Sen must be chastened by the result. His hold on power is not as firm any more. Of course, he has the military and the power structure on his side. But he can’t risk alienating the masses – the masses being the young people who constitute the majority in this country. The older this young generation becomes and the longer they see the flagrant disregard of their interests and the unfairness in their lives, the more critical and restive they will become. Hun Sen will have to make some drastic changes in his approach to the people’s welfare – token measures such as the land titling program won’t suffice any more.

One thing is clear, though. A change in government at this point would have been catastrophic. The current rather solid power structure cannot be changed overnight. Most of the upper echelons have vested interests in practically all sectors in Cambodia. How would Sam Rainsy win the support of the military commanders who rule their regions rather independently?

Here is an interesting observation as published in the New York Times in an article by Thomas Fuller on Sept. 06:

Kem Lay, a researcher who has conducted surveys and studied social trends for government ministries as well as for the United States Agency for International Development, said Cambodian intellectuals and human rights advocates were ambivalent about their political choices.

But Mr. Kem Lay said he also saw autocratic tendencies in Mr. Sam Rainsy’s leadership of the opposition — and a generalized lack of competence and experience among the candidates that the party put forward in the July election. “It would have been a big disaster if the opposition had won the election,” Mr. Kem Lay said. “They are not ready.”

On Sept. 07 there was another article by Thomas Fuller in the NYT. The following quote succinctly sums up the situation.

Analysts question how long opposition supporters will remain passionate about the issue. The three-hour protest, which was peaceful and largely confined to a public square, seemed relatively unthreatening to the 28-year-long rule of Mr. Hun Sen, who in addition to the apparent loyalty of the army and the police has a praetorian guard of thousands of soldiers. His party machinery is firmly entrenched throughout the country, its domination stretching from national institutions to village patronage networks.
End Quote

A rather worrisome Sam Rainsy trait is his blatant racism against Cambodians of Vietnamese origin. He calls them illegals. People who run on nationalistic platforms have historically never turned out to be good democrats and leaders. So in my mind it is rather doubtful whether he would be a good choice for prime minister. But who else is there? And finally, can Sam Rainsy and Kem Sokha, originally no bosom buddies, maintain that new alliance over the medium term or will it break apart due to inner disagreements? Stay tuned.

The next five years will show whether it will be more of the same or whether there will indeed be the necessary changes, e. g. the separation of power, a reduction in corruption, a comprehensive reform of the public sector, etc., and most of all, a generational change - but not from father to son (the Hun family comes to mind) but a real change of ideas, concepts, and a commitment to real democracy.

Saturday, June 22, 2013

Owning A Dog

Owning a dog in Cambodia shouldn’t be any different from owning one in any Western country, or so you might think.

In most Western countries, dogs are considered an extension of the family and are sometimes treated just as well as the children. The basic difference in Cambodia is, at least in my experience, that a dog is just a dog here, although owning one has become somewhat of a status symbol among the emerging middle and upper middle class. They do treat them as pets but nowhere near like a member of the family. The most striking difference appears to me that dogs here don’t get any real training. People just let them out to do their business unsupervised. In other words, no one cleans up after them. Parks, the few there are, look accordingly. Especially the smaller dogs, but not only the, seem to be real vicious.  They attack just about any other dog. This is the result of being kept in a rather small confine the whole day.

The dog population is huge judging from the many stray dogs running around everywhere, scavenging food from wherever they can find it. These dogs often end up with the dog catcher who will sell them to Vietnam or ethnic Vietnamese and Chinese here for food. There people consider it a normal staple, even a delicacy.

But in the more tony neighborhoods people seem to take pride in owning a pure-bred or a woolly smaller breed, which more often than not is just another mongrel in my book. Then, of course, you have the people that go for a real guard-dog. The German shepherd and the Rottweiler are the breeds of choice. I got the feeling that most people in those gated communities own a dog as an alarm system, never mind that you have the so-called guards who patrol the neighborhood at certain intervals. In my ‘borei’ this has not prevented burglars from entering one house getting away with a $10,000 loot, and struck the same house three times with varying success, but still up to a $1,000 each time. The irony was that these people had two dogs – one a lap dog and one a pretty aggressive larger mongrel. The burglar climbed the surrounding wall and then onto the second floor veranda and entered a daughter’s room via the open window. So much for guarding the house and protecting your property.

What bothered me most was that dogs, practically all of them, bark when someone passes by their house. The houses all have front yard with a fence. Since there are so many dogs in the neighborhood you really have a concert going at times – not really a nice interlude in the middle of the night. It got better when the aggressive dog that was also giving to howling at night was gone when the owners obviously got too many complaints.

Well, we have a house on a rather large lot in the countryside near Kompong Som. It is pretty isolated so my wife used to feel a little uncomfortable at night. Never mind that we have a caretaker there, not to forget myself. When her discomfort got too big we decided we needed a dog ourselves – a guard dog, of course. My choice fell on a Rottweiler. They are powerfully muscled dogs and look absolutely fearsome. But they are excellent guard dogs and very protective of their pack; the pack being us. I chose this breed with a little trepidation knowing that these animals have a reputation for being aggressive. But then it all depends on how you raise and train the puppy.

We found one expat breeder who was going to have his bitch mated in a couple a months. When he notified us we thought about it again and decided to forgo getting a dog. We wouldn’t have the time to train it properly, traveling overseas quite a bit.

One time, there were some strange sounds at night and my wife got frightened. She then said we do need to get a dog. As it happens just then I saw an ad for Rottweiler puppies. This was also an expat who had his bitch mated. You just can’t help but fall in love with little puppies.  Here is ours.

 Unfortunately, he didn’t stay with us very long. We kept him in our house in Phnom Penh. Like everywhere else people keep their trash outside for the garbage company to pick it up. This is a great feeding ground for rats, as you can imagine. There were plenty around, and they weren’t really shy either. What we didn’t know was that their urine contains bacteria called leptospirosis. We were right in the middle of the rainy season. So naturally the puppy licked up water from the front yard. This was obviously contaminated and he infected himself. We and the vet didn’t recognize this immediately, we had him treated for stomach flu. These bacteria attack the liver and eventually it will stop working. So after only three weeks our little puppy died.

We thought we really didn’t want another dog now. But after a few weeks we changed our minds and went looking for another one. Finding a Rottweiler puppy in Cambodia isn’t that easy. We contacted a local breeder who said she had very nice German Shepherd and Rottweiler cross-breed. We checked them out. The place didn’t look too inviting and the puppies looked really unkempt and uncared for. Still we bought one who looked closest to a Rottweiler, although you never know how they turn out once they are six months or a year old.

After washing and brushing him here is what he looked like:

 We keep him with us all the time for the time being, that is, we take him to Kompong Som when we go there and keep him in Phnom Penh when we are there. We didn’t bother housebreaking him either. He stays outside night and day. We just cleaned up after him. Eventually we started taking him out for walks – I guess he was about 3 months old then. Keeping to a certain routine our puppy got used to his walks at certain times of the day and this is how he got housebroken, meaning he doesn’t do his business in our front yard  any more, except for the occasional pee after a long night. He had become a very nice companion for the entire family – a very quiet dog. He didn’t bark at all. Of course, that would come later on, as we were to find out. When we take him for walk we take a plastic bag and clean up after him.

We have this small park in our neighborhood; it is full of dog piles. When people saw us picking up our dog’s pile they looked on with big eyes. They had obviously never seen such a thing. Although there supposedly was a campaign to that effect, no one seems to have heard of it. They handle this like they handle trash in general, which they simply drop wherever they are. So why bother with a dog’s pile?

He is now 8 months and, of course, he picked up this nasty habit of barking at passers-by, much to my dismay. He also does that early in the morning when other dogs return home from their morning walk (as mentioned, most people just let their dogs wander about by themselves). This noise woke me up so I put up a small wooden fence to the backyard where he stays at night. This way he couldn’t see the people or the dogs. The barking in the morning stopped. We are still working on the daytime barking. Of course, one mustn’t forget that this is in a dog’s nature. It’s his natural instinct  to protect his territory, and after all that’s what we bought him for.

The house in Kompong Som is walled in so he will only bark at people whom he doesn’t know coming through the gate.  So far, however, we still have to protect him, though, especially from other very aggressive and mean dogs that are likely to fight viciously with everything that comes close. After all, he is still a puppy; and there is always the risk of a rabies infection from those stray dogs.

These larger breeds grow very quickly but it takes them longer to develop all their natural instincts and drives. His sex drive seems to be fully developed already, though. He chases after all the females in heat and goes crazy. Here he is 7 months old:

For those who want to know: we paid $500 for the pure-bred Rottweiler, and $200 for mix. When the first puppy got sick we took him to Agrovet, a vet clinic run by two Frenchmen, and a Spanish vet. We also had his second shots administered there. Price tag: $60 for the shots, $80 for the first treatment against the infection with an overnight stay; $120 for the second treatment with an overnight stay, and the cost for the cremation after he died. Nothing but the best for a pure-bred dog.

With the second puppy we went to a Khmer vet (there are plenty around). Cost for a shot: $5; another shot for multiple kinds of protection: $15.00; and a third shot including a can of anti-itching spray: $10. The dog is healthy and strong.

Sunday, June 16, 2013

It Was to Be Expected

Election campaigns are never clean. The American advocacy groups and political action committees are masters of bending the truth, lying outright, throwing mud at the opponent, and trying to bury him/her along the way. These committees are especially formed for election campaigns in the U. S. Many Western countries have adopted the same methods, including Britain, Germany, and to some extent France (as far as I know).

The committees dig up dirt wherever they can to use it against the respective opponent. No party is immune from this. Some of it is really beyond the pale. Back in the 2004 campaign one such group maintained that the Democratic candidate then, John Kerry (the current Secretary of State), had not commanded a gun boat heroically in the Vietnam War when there was clear evidence to the contrary. They accused of him of lying about his war record. Or more recently, many will remember the birth certificate affair that has been hounding Barack Obama to this day. Some fools still claim he is not a U. S. born citizen. These are just two of the more egregious examples of campaigning in the U.S.

Of course, no one can expect that election campaigns would be better or cleaner in countries like Cambodia, which is practically run like a personal property of and by the party in power. With the overwhelming majority this party holds in the Assembly it is virtually a one-party state. Funcinpec with its one seat in the Assembly and a coalition partner with the ruling CPP looks more like a freeloader than an active and decisive political force. They might even disappear from the scene after this election, not that anyone would miss them.

Then we have the newly formed CNRP – Cambodian National Rescue Party. What I think of them I wrote in a previous post. Not that it would matter greatly in the current constellation, but nevertheless some CPP lawmaker thought up a fine way of getting rid of them in the Assembly altogether. He maintained that since the deputies who were elected as members of the Sam Rainsy Party and Human Rights Party and had now switched over to this new CNRP they have no right to keep their seats in the assembly as the CNRP did not take part in the previous election and hence cannot be represented in the Assembly. Strictly speaking, this might be true, at least for the members that were elected by proportionate vote. The ones that were elected directly can switch parties whenever they like, I think; they can become an independent member, although probably without the right to speak, but still with the right to vote. The idea gained steam and was promptly adopted. So all SRP and HRP members all of sudden found themselves without seat and salary, much to their chagrin. In a way it is a complete farce, not worthy of a democracy. I don’t think they did themselves a favor, but then we Westerners think differently. Needless to say, this was heavily criticized in the West, prompting the government to rebuke the U. S. State Department for meddling in its internal affairs.

Apart from that little ‘ruse’ to thwart the opposition’s work, the CPP singled out Kem Sokha to weaken his already fragile position even more. After many years a woman came forward to claim she lived with Kem Sokha and they had adopted two children. After a while he stopped paying her support. This cast a real bad light on Kem Sokha but this is surely no rarity in Cambodia where mistresses are practically the norm with middle-aged men with the means to afford one. Most certainly, this affair coming to light at this point in time was just a coincidence, right? This rather common story was played up in the CPP-oriented media in order to stoke outrage in people for such ‘amoral behavior’.

The prime minister weighed in by calling on Kem Sokha to solve the matter swiftly. He then went on to explain that he once helped a high-ranking opposition member from going to jail who had tried to pay for sex with a 15-year old virgin. He did not mention who it was so the public was left to infer and speculate.

Together with that Tuol Sleng fiasco the leading candidate did not cut such a great figure. Again, the prime minister publicly called on him to apologize or the masses would come out and demonstrate against him. He didn’t, and promptly there was a sizable demonstration at the Tuol Sleng site.

This all goes under the motto ‘Throw enough mud and some of it will stick’. In other countries the candidates themselves refrain from hurling insults at their opponents. Those action committees will do the job for them. But here the prime minister, not one to stay above the fray to begin with when it comes to choosing words, stooped to get involved personally by ridiculing Kem Sokha. That’s not very statesman-like, now is it? Isn’t that a role he apparently likes to play so much?

Of course, Kem Sokha is an amateur in the political arena; his populist pronouncements like the promise of a $25 pension for all retired people sounds so ridiculous that only the most naïve people would believe this. Unfortunately, the majority of the people fall into that category.

But the CPP must somehow intrinsically fear that this new party despite its many weaknesses and shortcomings might gain broader support among the population to break their two-thirds majority that they resort to these kinds of tactics. Or perhaps, they think it is all good fun and a sport for them?

Wednesday, June 12, 2013

To Lend or Not To Lend Money

Many Cambodians perceive foreigners as having money -  money to spend and money to lend. This manifests itself in the facts that the tourist gets his money taken by inflated tuk-tuk prices, at the Russian Market, also known as Tuol Tumpung Market, or elsewhere. Some expatriates get fleeced by bar-girls, or drink it away. In general, I would think it is a huge misconception.

However, if you have lived here for while and acquired either friends or possibly even a family (family being the greater family with once and twice removed folks as well) you will sooner or later be approached for a loan. So, you guessed it, I was the target for several  supplications to help out with people’s finances.

The first instance happened when I still lived stateside. One day my wife got a call from her uncle. That was some big expense for them, being poor folks, so it must be urgent. Of course, it was. They were in danger of losing their modest house. The bank threatened to take it away from them if they didn’t come up with the balance of their ‘home loan’ within a few days. It was some micro-finance  establishment. The balance was all of $2,500. If you don’t have any money this is a lot. They had obviously failed to make their monthly payments for some time. Who could turn these poor people away? So I agreed to lend them the money. They promised to pay it back as soon as their son who lived in Canada would be in a position to send them more every month.

Once we had relocated to Cambodia permanently they came to live with us for a while. As it happens many a time, we had a falling out and they moved back into their little house in Siem Reap. I drew a up a loan agreement, but being the ever-generous person, I did not include a term for the loan. It is interest-free to boot. Needless to say after that falling out, we never heard back from them and I guess I can kiss my money good-by. I also learned that they had used the original loan from the bank to extend micro-loans themselves but grossly miscalculated the risks and promptly lost those funds to ‘non-performing’ loans.

Another time, also still in the U. S., we got a call from a niece once removed. They asked for $5,000 which they needed to buy a car. They had $5,000 of their own. They wanted to use the car as a taxi. At that time you could hire just about any car with driver for $10 to $20 a day. On one of my visits I found out that they had bought the car already and gotten that $5,000 from a private person. They paid $200 a month in interest, which would translate into 100% interest. I could understand that they wanted to change that. As these people were not really in an emergency I advised them to go to a bank, e. g. ACLEDA, which makes car loans up to 40% of the value of the car. My friend even knew the loan officer and opened the door for them. When we asked them later what had happened they said they hadn’t dared to go to the bank. Also, since I had thought the business was a little shaky, I later learned that it was really going bad and they wanted to sell that car again. I would never have seen that money again.

The uncle’s son (divorced) in Canada was next to hit me up. He had been to Cambodia the year before and met a traditional Khmer dancer and wanted to get married. The problem was his business in Canada wasn’t going that great. He had made a big mistake with his divorce as the distribution of property left the wife with two houses, he got the business. The wife sold the houses at a good price and moved to Cambodia where she built a number of condos and rented them successfully. He, however, saw his sweat shop in Canada competing with imports from Cambodia, which sort of pulled the rug out from under him. In the end he didn’t have the funds to travel to Cambodia and hold that expensive wedding ceremony. He asked for $5,000 (this seems to be amount people think they can get easily). Remembering his uncle and his promise based on his son’s income I politely declined mentioning other capital intensive business. The wedding was a great success but he lost money – from what I heard from his father about $5,000. He had borrowed $10,000 from other people. They are still waiting for their money. The irony in this story was that once he got back to Canada he seemed to forget about his new wife because he didn’t contact her for months. He promised to send for her but needed money for the attorneys to prepare all the papers, etc. In the end, the wife lost patience and divorced him. The whole thing was done Cambodian style with no official paperwork, just the wedding ceremony. Am I glad I didn’t loan that $5,000.

Next up was one of my wife’s nephews. She has quite a lot of nephews and nieces. He had borrowed $300 before for a new car engine, which he indeed paid back more or less promptly. Now he also  had wedding plans; never mind that he was still in college and made a living as a part-time tuk-tuk driver. He did own a car, a tuk-tuk , and a bicycle, all of which he rented. The timing was essential as he had a competitor whose parents had also been in touch with the bride’s parents.  To me it looked more like a wedding out of hurt pride than of love. Anyway, he needed  $3,000 to pay for the preparations of the ceremony. Of course, he hoped that he would get that money back from the table money people give at weddings. As additional collateral he offered the next harvest of cassava, which he said was a dead-sure thing moneywise. Prices were at a very good level and he stood to make about $10,000 from that harvest.

I have a thing about Khmer reliability when it comes to paying money back. I suggested he wait with his wedding until he has finished his studies and found a job. But as anyone can imagine, that fell on deaf ears. I said I am not going to pay for his wedding this way. He needed to find another solution, e. g. sell his car. This is what he did in the end. It didn’t get him the needed $3,000 but only $2,500. The party was also a great success; unfortunately, he too lost money. At least his father-in-law was of some means, so not to worry.

Another time, I was to shell out $10,000 for some small hotel that someone we know wanted to build in Kratie. He had bought the land and now needed to run everything through the authorities. That’s what he needed the money for. He has a gentleman from the U. S. who is backing him in this. He will fund the whole thing; the catch, though, is that this gentleman still needs to sell his house in the U. S. The proceeds were to go into this project. The Khmer guy promised to pay me back after one month – the time it would take to sell the house. He sure doesn’t know the U. S. housing market. Needless to say, I again politely declined.

Of course, it is quite common that employees ask for an advance if there is some unforeseen circumstance. I usually reject those too; because his family will go hungry the next month. If it is one thing the average people here (and probably elsewhere too) don’t have the slightest clue of, it is that they don’t know how to manage money. Many people in the West, especially in the U.S., overspend, max out their credit cards, or take out second mortgages to fund extravagant purchases, but at least there is a developed consumer oriented financial industry, which is virtually non-existent here. So people better not spend the money they don’t have. It usually doesn’t end well.

Friday, May 31, 2013

With Candidates Like These …

…you can’t hope to win more seats in the upcoming election, let alone dream of winning it. The latest flap, whether manipulated or true, came when the CPP played snippets of a recorded speech Kem Sokha made. He claimed that the Vietnamese fabricated all or part of the story of the Tuol Sleng prison; at least according to those snippets. (If I remember correctly, the Americans tried to do the same after the Vietnamese had invaded, sorry, liberated Cambodia.)

No matter what he said, even if it were in another context and how long ago it was, it’s bad news. Politicians must be aware that their opponents will seize on each and every opportunity to paint the bleakest picture of them. Election campaigns are just like the Internet; it brings out the worst in people. Kem Sokha really does come across as a political amateur, too.

The top candidate of that new party is, of course, Sam Rainsy, never mind that he cannot stand for office, that he is abroad, is not allowed to return and is not on the official election roll. Whether this is based on a wrongful conviction in a ‘kangaroo’ court, or has legal merit, is not for this blogger to decide. In the end the reality remains that he cannot win an Assembly seat. That spot could have been allocated to another candidate, given the slim chances of increasing their number of seats, which is highly doubtful by any stretch of imagination.

Then there is that merger of SRP and Human Rights Party. Not too long ago these two parties were at loggerheads over policy, name of party, etc., but in the end they thought their combined efforts could turn the tide. How they arrived at that conclusion will remain their secret in light of their present weak position. Bundling their efforts appears futile and will most certainly not result in gaining more seats; mind you, the SRP currently holds 24 and the HRP just 3 seats out of 124 total. They have no support in the media as most of them lean towards the CPP out of self-interest. Obviously, they have no large campaign coffers either. So how can they ever hope to break the CPP’s two-thirds majority?

The choice of the new name for the party is somewhat odd too, at least to some observers – the National Rescue Party. If ever there was an ineptly chosen party name, this is it. The dictionary defines it like this: Rescue comprises responsive operations that usually involve the saving of life, or prevention of injury during an incident or dangerous situation.

The party stalwarts may have thought of rescuing Cambodia from the pernicious grasp of the ruling party. I am not so sure whether the name really resonates very much with the people. After all, life for most of them has improved, whether or not the government’s critics like it. Yes, there are still way too many conflict situations regarding land grabbing, evictions by unconscionable ELC holders, etc. Even the U. N. rapporteur stated that the overall situation has improved, albeit in small steps, and a lot still needs to be done. And lo and behold, the power outages have decreased considerably and come election time, the EDC promises those will be a thing of the past. (In the rural town where I have a house that was afflicted with daily 9 to 15 hour outages, they have disappeard since the Khmer New Year.)

So ‘rescue’ really does seem like an inept word. Perhaps Cambodian Party for Social Justice, or a similar less catastrophe-laden name would have been a better choice. Although Prince Thomico of the royal household joined that party, another prominent member of the SRP, Mu Sochua, remains surprisingly quiet. Maybe she is not too happy with all the recent events, and possibly with Kem Sokha being the vice-president.

So what it all boils down is that this election will be no different from the last one: The CPP will maintain, if not increase, their hold on power, the opposition will promptly cry foul, claiming that the election was not free and fair, whether true, half-true, or untrue, and Hun Sen will enter his 29th (is it?) year in power. 

Wednesday, May 29, 2013

Trying to Invest in a Guesthouse/Small Hotel in Cambodia

Let’s make it clear: we are talking about a smaller investment, say around $250,000, not something in the multi-million dollar range. There are many big projects in the pipeline but we still have to see any of them become reality; whether this is Koh Rong where the Royal Group has been trying to drum up investment capital, or whether it is the many Chinese investors that have a lease on land and haven’t done anything with it, or whether it is the Sokha Group that has owned a huge part of the eastern end of Ochheuteal Beach for years but hasn’t shown any sign of using this prime piece of land for another 5-star hotel. Perhaps the one on Sokha Beach is not as successful as hoped for. There is also a French group holding a lease for Koh Russei, or the Monarch  company (Russian?) that leased Koh Tang. Neither has shown any sign of actually doing something with their lease. Of course, Monarch is a burnt child with their failed Hawaii Bach project.

Now why do I want to invest in a hotel, of all things? I have a long history with this country, if you can call more than 20 years history.  Somewhere else I had written about how it all started. But this is not what I want to go into again here. After many years of going back and forth between the U. S. and Cambodia, I finally relocated for good here.  The reasons were manifold. Originally, I wanted to relocate to a country in Europe, Italy or Spain. The U.S., my home for 20 years, had become too conservative and was moving ever more to the right, not to mention the hypocrisy in public life – not good for a died-in-the-wool liberal. It needed to be to a warm climate, too. Although I am married to a Khmer wife, Cambodia was a second choice. I liked the country well enough but there were too many things I wasn’t ready to adjust to. I also wanted to remain in a Western cultural environment. But what finally decided our move was that all my funds were in U. S. dollars, and I would have had to write off nearly 30% due to the rate of exchange. So, my wife being Cambodian, the economy here being dollar-based, there really was no practical alternative. Plus you are pretty much left alone in Cambodia if you don’t pay too much attention to the things some organizations are wont to criticize.

I had invested some money in a small working rubber plantation, which didn’t do too well in the beginning. But I didn’t need the income as I still earned money from my other business in the U. S. The bottom fell out from the plantation business during and in the aftermath of the financial crisis but recovered more than nicely a couple of years later. Although now it is not as profitable due to the drop in rubber prices, it still pays well enough to live comfortably.

Part of my professional life was spent in the tourism/hospitality industry, both as an employee and later as a self-employed businessman (before I turned to import/export as the travel industry underwent a drastic change with the introduction of the Internet). Being the owner of a rubber plantation is not one of the most challenging jobs you can imagine. So I have been looking for something else to do. The closest thing for me was to go back into the tourism/hospitality business. Trading was out of the question as I really did not want to compete with the native businesses and their tiny margins. Tourism is still a growth sector and if done right there is money to be made. I can point to many examples. But equally numerous are the businesses that simply don’t know what it takes to attract foreigners to their property. As mentioned elsewhere, customer service is an unknown term for most Cambodian businesses.

So I set out on buying or leasing a guesthouse/boutique hotel. At one point I even wanted to start from scratch but the numbers wouldn’t work out. Anyway here is my experience with both local people and expats. My search has been confined to Phnom Penh and Sihanoukville, although I did venture into Siem Reap at one time.

As a hotel contracting manager for a very large tour operator I checked out many resorts all over Asia and know my way around. I am a professional and know what factors determine a 3-star, 4-star, or 5-star hotel, and I know marketing. My aim was to go into the 3-star category, which constitutes the broadest base of the industry.

First project:
Build a 3-star 50 room resort at Otres Beach (near O); investment volume $7 million. The one hectare of land needed would have been $1.1 million alone. Since I didn’t have that kind of money myself, I looked for investors – unsuccessfully; end of story. The land we looked at was later leased by the Queenco Casino Group, although they haven’t put in a resort yet. They are probably waiting for the airport to accommodate direct flights from abroad. That’s been a long time coming, with the usual promises, promises, promises.

Second project:
The same thing on beach land north of Stung Hao (about 20 km north of Sihanoukville); the seven owners of the land couldn’t agree among each other  on the price. So this deal fell through. I later heard that Ke Kim Yang had bought the land. It is still sitting there undisturbed. I sometimes go by boat to that beach to swim.

Third project:
Again the same thing, but this time in Chrouy Svay; pristine beaches, clear and clean water; the catch: no hard title, no access roads, no electricity, no water, no nothing; this would also have been so isolated that it would have had to be a Club-Med type resort; too much hassle; no thank you.

Fourth project:
Ream National Park – at that time the government had just set aside a small area for tourism development. We checked it out and got all the nods from the officials when practically overnight we learned that a Chinese group had leased the entire southern part. Well so much, so good; just another concept down the drain. Never mind that the Chinese have done squat there in the 4, 5 years since. At least there is a small tent resort, which appears to be doing well enough, although this is far from being a money-making enterprise.

Since my more high-flying concepts obviously couldn’t be realized I left these plans alone for a while. The time wasn’t ripe for them either – we are talking 2008 – 2011. In the meantime, I built a house, bought some additional land for speculation (still dormant), bought a new car (sort of expensive, given the Cambodian import tariffs), bought a powerboat for fishing and other fun (also expensive as it was custom-made), so my investment funds had somewhat dwindled. I had also been busy for more than a year as a consultant for a large investor who was seeking an economic land concession (which failed).

When that ended I again became intrigued by the hotel business. My friend who is a very successful co-owner of now two boutique hotels in Phnom Penh reinforced my thoughts by offering to be a partner.

Foray into Siem Reap:

A nice guesthouse with 26 rooms in a good location; it made decent money; the Khmer owner wanted to go into the luxury sector so he wanted to sell the guesthouse. He was one of the few people I met who actually kept good books and knew exactly where he stood. We settled on a price ($70,000 based on an annual net profit of $40,000 – with a manager’s salary accounted for). He now needed to get the landlord to transfer the lease. But this turned out to be the deal-breaker: the landlord wanted to increase the rent so much it would have made the business unattractive – an all too familiar story in Cambodia.

Boutique Hotel in Colonial Vila Phnom Penh:

10 rooms, remodeled a year ago, total investment over $100,000 (for new electrical wiring and plumbing, among others), location a little off the main tourist spots, catered mostly to NGOs. Asking  price: $40,000. Now this made us scratch our heads. His explanation: his partner is in Thailand, she can’t come back as she has children there, so needs to sell quickly. He wants to get out too. So far so good. But when we asked for some accounting background he said maybe we could do this unofficially without any supporting documents  in order to speed it up. Too fishy for me.

Boutique Hotel Phnom Penh:

10 rooms, good location, good room rates, occupancy rate over 85%; profitable, how much exactly we didn’t get to find out as the asking price was $300,000; the owner said he had invested $200,000 to remodel it. But he had no long track record, as he had only owned it for a year. For me: too much for such a small hotel.

There was a sister hotel close-by; same story, same price. Thanks, but no thanks.

Riverside property:

8 suites with balcony and view of the river; nice but at $250,000 also too expensive. How are you ever going to earn the money back.

To his credit: he only wanted to sell if the right offer came along; makes sense.

Upscale Boutique Hotel in Neo-Colonial Style Villa, Phnom Penh:

8 Rooms incl. 1 junior suite; with restaurant, room to add two or three rooms; Boeung Koeng Kang area; no profit so far; the operator had it for 8 months only, had invested about $50,000, but had a high-level government job waiting for him. We were very much interested in this property as it had a lot of potential. We made an offer, but now he decided that he needed to be on the lease and we would sublease it. That didn’t sit well with us; too many potential complications later on. Sorry, no can do.

Low-end guesthouse near Sokha Beach:

Located practically at the back of the Sokha Beach Hotel Bungalows, across the little lake; 10 rooms, vacant at that time, up for rent at $1000 a month; the previous owner had room rates of $10 to $20. The condition of the rooms was more or less desolate, in other words, a lot needed to be done to upgrade this property. In the end we didn’t like the location. One could also buy it for $1.2 million.

Far end of Otres Beach project:

We wanted to build 10 upscale bungalows with swimming pool and beachside restaurant on a lot 30 x 55 m. We crunched figures upwards and downwards, turned them left and right, but in the end we didn’t see how we could come out with a decent profit for an investment of approx. $250,000. The 10 units were simply not enough, and we did not want build 2-story bungalows for marketing and financial considerations.

Guesthouse Serendipity Road

This was a 16-room property offered at $165,000, including a well-running restaurant, or so he says. Room rates are in the $20 range; occupancy not known; the price includes the security deposit; rent is decent; but a lot needs to be done with this property. Some of the rooms were really a mess; the kitchen looked unsanitary;  in the West the restaurant would be closed. How he can make money is beyond us, and how he can ask this kind of money likewise. Last I heard he sold it for $90,000 (still too expensive); so he was desperate.

Guesthouse  on Tola Street

Now this is one of the best mid-range places at Ochheuteal; everything is nicely laid out with 38 rooms,  a swimming pool, and a restaurant;  the rent is so low that I don’t want to mention it here. The owners rented the land and built the entire resort. They said they aren’t selling but if the offer is in the high 6 figures they might contemplate it. We had a nice chat, that was it; very good place, no doubt about it.

Guesthouse on Beach Road

This is also one of the most successful places at Ochheuteal. Like the one above the operator rented the land eight years ago and built everything from scratch. The rent is equally ridiculously low so I am sure he got his initial investment back even at moderate occupancy rates. The place is very popular and got good reviews. The operator isn’t sure whether he wants to sell it either; sometimes he is fed up with working 24/7, other times everything works so well that he doesn’t really want to let go of it. The lease has enough time on it; but at $400,000 it’s not exactly a steal; not within our range.

Guesthouse Mid-town

This one intrigued me a lot. The owner offered a guesthouse with 8 rooms, a restaurant, and a fishing charter boat for $60,000. According to his estimate the boat alone is worth $40,000, though I would put it in the $25,000 to $30,000 range. The guesthouse is shabby, one cannot say otherwise, unfortunately. The restaurant/bar does not do a lot business as there is no barkeeper who can attract guests. It mainly serves as the booking office for the boat tours. The fishing charter business, however, would have made it worthwhile. The boat seats 18. I could have put in a ‘fishing guide’ to accompany the guests. The Khmer skipper has been running the boat for 8 years. He knows the spots and how to handle a boat. The problem was that I didn’t want to and can’t run the guesthouse/restaurant myself. So I was looking for someone to manage it for me; I would sublease it for just the rent of $700. But the numbers no matter how long we crunched them just wouldn’t show a decent income for the manager, let alone a return, even a small one, for me.

Guesthouse  II on Tola Street

This is a new building; the catch is that the landlord wants to rent only half of it because he lives in the other half. He counts eight rooms, whereas we could use only seven, the eighth one was too small. In general, the building is designed as a residence and not as a guesthouse. There is enough room for a swimming pool and a small restaurant. Three of the rooms have their own kitchenette. The rent at $2,000 is a little too much. A little difficult the way it is designed, so a no go for us; we would have liked the location and the space. Our offer to rent the whole building was declined.

Guesthouse Chong Ochheuteal

This is one of the ugliest guesthouses I have seen in Cambodia. The big plus is its location right on the beach, that is, there is the road in front and then the beach. It has thirteen rooms all facing the ocean with beautiful views of sunsets; enough room for a swimming pool and expansion of the beach bar into a restaurant.

The rent at $1500 is very decent; transforming this guesthouse, especially the façade, into a more upscale small hotel would be worth it. This would be well within our budget.

But here comes the catch: there is an environmental problem of worrisome proportions. The nearby small river flows directly into the ocean, which wouldn’t be so bad if it didn’t carry waste water from the not too distant water treatment plant of Sihanoukville. At times there is a stench wafting over from some place (the local people don’t really know from where) that will drive away any guests staying there.  Obviously the chemicals used in the treatment plant also flow into the ocean. Guests have complained of itching. Too bad.  Another disappointment.

Guesthouse II on Serendipity

This is another dreamer. He is asking a cool $100,000 for his 27-room low-end guesthouse. He rents part of the premises to a diving outfit, offsetting the $1300 rent. He makes about $1000 to $1200 per month as his income; in other words, no real profit. When asked how he arrived at his asking price he just said he thinks it’s a fair price considering. Considering what?

Guesthouse  near  Ochheuteal

We are looking at 27-rooms, all air-conditioned,  all completely renovated; the owner invested about $60,000 into 8 new rooms (included in the 27), redoing the restaurant and the reception. Asking price: $165,000 including the security deposit. Room rates around $20, occupancy around 55%. Although the price is negotiable and the place is well-regarded by guests, we didn’t believe that even a much lower price could be recovered in a decent amount of time. A disturbing factor was that the owner has owned the place just one year. He wants to open a place on one of the islands. Why, if this one runs well and considering all the logistical problems for the islands?

So altogether, there has not been one place that fit our bill. Each one of the properties we looked at had one or more negatives. We are looking for a place to rent in a good location, preferably with a hard or at least uncontested title near the beach, which we can remodel, transforming it into a near 3-star property. Ideally, it would have 12 rooms with enough space to add 10 more or 25-30 rooms ready to use. This size hotel is much easier to fill than a 50 or 80 room hotel. If there is no swimming pool, we would put one in, same for a small restaurant. Together with offering sports activities, boat tours in our power boat, free transfers, etc., such a property will attract the appropriate clientele. The room rates will be according to the standard offered. There is enough low-end accommodation in the $10 to $25 range; we don’t believe there is a need for more. Plus you can’t really make any money at those rates.

People, whether Khmer or expat, who mostly invest in a guesthouse/small hotel/restaurant/bar usually say the profit is what they take out. Strictly speaking, that is wrong, of course. They pay themselves a salary, which is part of the expenses; they also need to amortize their investment they in most cases need to make (with or without interest) over the duration of the lease, and what is left over after that is their profit, or the return on investment. Many hope they can get their money back by selling the lease, but then the buyer faces the same situation.

In this context I usually use the term owner’s benefits, which includes salary, car expenses, entertainment expenses, health insurance; but these are all part of the expenses and do not constitute profit. The above naturally applies to leased properties only as foreigners are not allowed to own land. The accounting would be somewhat different in that case.  If you are married to a Khmer spouse, you can buy the land in her/his name, but the capital required makes this unfeasible for most. Frankly, I would not invest $2.0 million in land and a hotel in Cambodia. There are better ways to earn very good money with this kind of capital without the headaches that accompany the management of a larger hotel.

Sihanoukville is on the verge of transitioning from backpacker central to a flashpacker and middle-class tourist destination. It still lacks mid and upper range properties. Although there is a handful around, it is not nearly enough to arouse serious interest from larger tour operators in Europe, Australia, the U.S., Korea, Taiwan, etc. This transition will also help shed Sihanoukville that noxious reputation of being a haven for sex tourists, pedophiles, and other low-life that frequent such places as Victory Hill - the sooner the better. Cambodia could do without the riff-raff. Meanwhile, we keep on looking.