First, we need to ask whether Cambodia is suffering from the same effects as other nations and whether the same sort of aid and support can be brought to bear in this country. Second, we also need to look at the current regional geo-political situation in face of repeated incursions by Thai troops into Cambodian territory. Some constraints might hamper the government’s ability to act decisively in either sector.
The media come out almost every day with another dire look at the Cambodian economy. If they are to be believed the country faces almost immediate collapse, or so one might assume. But is it really so bad, or can we discount some of the representations think tanks and many other institutions publish? What we do know, though, is that more often than not all predictions are more like reading tealeaves than anything else. Of course, they use certain parameters, but the values of those parameters are hypothetical, and as such rather subjective. Remember, some analysts saw oil prices at $200 at the end of 2008. The U. S. performed better in the 1st quarter of 2009 than analysts expected. So can we disregard them altogether? Certainly not, but rather than seeing them as absolute we should all take them with a little grain of salt.
The Prime Minister was originally very sanguine in his outlook and stated that the crisis will more or less bypass Cambodia, as it does not have an economic structure similar to other countries. He is right about the second part. Of course, he is a politician and they usually paint a better picture if they are in power or a bleaker one if they are the opposition. The same holds true in Cambodia. Naturally, he is now reviled for this remark from many quarters.
Of course, what he failed to see was that Cambodia with its narrow economic base and dependence on foreign economies, whether as the destination for exports or origin of tourists will eventually be affected one way or another. The current downturn in all major sectors proves the point.
On the other hand, we should also remember that leading politicians in the countries most affected did not see this crisis until it had already happened. It looks as though virtually everybody was literally caught with their pants down. I, for one, still remember the statements by the previous American presidential candidate John McCain that ‘the fundamentals of the American economy are strong’ right up to the minute big banks started to falter. The previous president didn’t have a clue whatsoever anyway. And the leaders in Europe weren’t faring much better either.
President Obama hastily cobbled together a stimulus package and a trillion-dollar deficit budget to put an end to the current downturn and to lead the American economy out of this recession.
Europe is still wavering and squabbling among themselves while the rest of the world is standing by, waiting for signals from the industrialized world to have its repercussions everywhere.
Now what about tiny Cambodia? Can Cambodia do the same? We know that the main sectors are the garment manufacturing industry, construction and real estate, tourism, and agriculture – mainly rubber, rice, and cassava (tapioca), and some palm oil. There is a fish industry, but it is mainly for domestic consumption, there was a somewhat sizable cashew nut production but many a cashew farmer converted to cassava or rubber.
Reportedly, the Cambodian national budget calls for $1.88 billion for 2009. $223 million or 11.9% is allocated for national defense and security. Unfortunately, the government has not made available the budget to the public or even the media. We do not know the allocations by sector. But we do know that the defense and security budget includes all expenditures for the military, the national police, the border police, etc. Therefore, this item looks less generous than at first glance. One also needs to remember the brief flare-up at the Thai border in 2008. It makes sense that the government wants to bolster its military power vis-à-vis Thailand. $399 million or 21.2% are set aside for health and education, which is less than most developed nations spend but still considered within an accepted range.
Budgets are passed and once people have money that is given to them, they tend to spend it. However, if there is a shortfall they won’t be able to. As the economy slows down and collection of taxes don’t meet projections all that allocated money may not be available to spend, so certain items, e. g. construction of new military barracks might be postponed, or some new schools might not be built. The major increases are to go into pay-raises for the military, teachers, and civil servants. They all say it is still not enough, and they are right. We should also remember that more than half of the budget is financed by foreign aid, namely a cool $1.0 billion.
Son Chhay, apparently the economic spokesperson for the opposition – not as one might assume Sam Rainsy, a financial expert - requested that the government impose tariffs in order to prevent cheaper imports from impacting the Cambodian marketplace. Previously he had also called for subsidies to farmers to strengthen their position.
Finance Minister Keath Chhon recently wrote that the government subsidized electricity with $300 million in 2008, and $450 million went to the fiber industry. But that was all in 2008. He said further that government intervention, say subsidies, accounted for about $500 million of Cambodia’s GDP, an estimated $10.3 billion at the official exchange rate or $29.24 billion by purchasing power parity. In other words, subsidies account for 4.9 % of the GDP. This is rather substantial. It would be interesting to know the public sector’s contribution to the GDP in order to really gauge the government’s efforts for the economy. I couldn’t find a source on that figure. Any emails to the finance ministry remain unanswered.
Now should the government support the private sector in a way similar to what the U. S. government is doing or would this be somewhat counterproductive as financial resources allocated for certain purposes, e.g. public works, would not be available there? In other words, funds to boost the garment industry would not be available for, say, building roads, which after all provide jobs in the construction industry. Consequently, you save jobs in one industry but lose jobs in another. I don’t think that makes a lot of sense. And remember, private businesses are for profit and business owners might not use public funds to bolster their overall business and save jobs but to guarantee their bottom line. We see market forces at work in the garment industry - nothing more, nothing less. It is not the government’s role to interfere in faltering businesses. These are not businesses too big to fail.
How would you support the tourism industry? You can’t just go out to foreign countries and corral tourists to be sent to Cambodia. Cambodia is attractive enough as a destination for individual tourists from Europe and the U. S. and package tourists from other Asian countries. If foreign economies tank, you can spend all the money you want in advertising but you may only say a very small increase, if that, in arrivals. What has been missed in the past can’t be caught up with over the short term – namely, a more diverse tourism infrastructure, mainly along the coast. Cambodia must appeal to package tourists from Europe and the U. S. The benefit lies in larger numbers. But the country just does not have an adequate infrastructure to accommodate those. Last year we saw an increase of just 5% as opposed to a predicted 25%. Well, the 25% were put out at the beginning of 2008 when the financial crisis hadn’t hit full force yet. All things considered, the 5% is still an impressive number. In the first 2 months of 2009, there were 2% fewer arrivals than in the same period last year. People in the tourism industry know this is nothing, certainly no cause for alarm. In spite of this being the high season, this is not a discouraging number, quite the opposite and the year is not over yet. This is not to say that the Ministry for Tourism shouldn’t make any efforts to lure more tourists into the country. But to spend extra money? I wouldn’t do that. Additionally, any dollar spent now will be just like of puff of wind and mostly ineffective, as it will show results, if at all, in July or August, traditionally low season in Cambodia with fewer arrivals to begin with.
Agriculture has been hit hard with a 40% drop in prices for cassava (tapioca) and a 15% drop in rubber exports in 2008 and the plummeting of prices by 50%. There is a rice surplus available for export, but it just so happens that other countries are saddled with the same problems. No amount of subsidy will alleviate this. After all, this is not a regional problem, this is a global crisis – one thing the opposition seemingly forgets when calling for protectionist measures.
The problems in agriculture are mostly homemade and structural. 90% of the entire annual rubber production is sold to Vietnam, which just rebrands it as Vietnamese and sells it on the world market. In times of slowing demand, Vietnam naturally stops buying Cambodian rubber and sells its own first. The marketing of the surplus in rice is hampered by the same problem. Recently, I was offered 200,000 mt to sell internationally. The agent for the seller couldn’t give me the international rice classification but gave me the Khmer names only. Nobody in Africa knows anything about Khmer rice, as good as it may be. Then they wanted a 15% down payment. This is unheard of in international trade, unless it’s a government. What I mean to say is that there is an insufficient knowledge base in the country, especially in agriculture, to market their products internationally.
Then there is this strange effect, I don’t know whether it’s a typical Cambodian feature. But once they see somebody is successful with one product they all scramble to trade or plant the same product. There were rising prices for cassava in 2007 and 2008 so many changed from cashew nuts to cassava. Now that cassava is afflicted by slackening demand, they don’t know what to do. Should the government simply buy up all the production that can’t be sold? I don’t think so.
The same applies to the rubber industry, which I happen to know intimately. The government actively encouraged the cultivation of new rubber plantations, and many followed that advice. Now world demand has dropped dramatically, and prices fell just as dramatically. Despite the drop, however, the industry will survive. They just face a lean year or two. Again, no subsidy would ameliorate this. We just need to wait for demand to pick up; and this will happen once the auto industry has retooled to better, more-fuel efficient, or alternative energy-driven cars. Tires will be needed for a long time to come, not to mention other huge industries that use rubber in their products, e.g. the health industry.
And now to the construction and real estate industry, which was fueled by mostly Korean investments and developers and Cambodian entrepreneurs who wanted to imitate them. For a while it all worked out well. I won’t repeat here what I wrote about extensively in other posts. Can the government do anything for this sector at all? The short answer is a simple no. The land law on the books, if enforced, is sufficient to protect landowners and prospective buyers. There is a need to regulate the industry, though. Developers’ escrow accounts serve to protect homebuyers and investors and should not be waived. Licensing of developers is another must. As I said recently, the speculators were dealing among themselves a lot of time. There were building and speculating for phantom buyers. They simply don’t exist in that large a number. Again, how can the government help? Aside from ensuring that shady developers don’t disappear overnight, it can’t.
The cause of Cambodia’s economic problems can be found overseas on the one hand and are structural on the other. For both there is no immediate remedy. Funds are scarce and limited and since this is a dollar-based economy, no amount of printing new riels would help, other than blowing inflation out of proportion. In the U. S. and other affected countries, it was and is mainly a financial crisis with repercussions across the entire economy. What Cambodia goes through is what can be called a tertiary effect – financial crisis abroad, recession abroad, dwindling consumption abroad, consequently dampening the Cambodian economy. Again, no amount of stimulus money can ward this off. Domestic consumption cannot be spurred artificially with the majority of people living hand to mouth.
I believe the only way to live through this is to sit tight and wait for the U. S., European, Korean, and other tiger countries’ economies, in short Cambodian trading partners, to pull out of the recession. The government needs to implement a better tax collection system, ensuring that state revenue is close to what is projected in the budget, stick to its programs, and spend the money where it is supposed to go.
The perpetual question of corruption comes into play at this point as well, and we are not talking about petty corruption of the policeman who collects $3 for a wrong turn and pockets it. We are talking about the corruption at the higher and highest levels. The government must make sure that all the money received as foreign aid, or earned as royalties for land or mineral concessions, or from leases of whatever kind, doesn’t end up in party coffers or in private bank accounts but in the national treasury. If that were accomplished Cambodia would have done a great deal to help itself and will live through this slow-down relatively unscathed and be ready for the upswing in 2010, which will hopefully be the year this nightmare ends.
Let’s not forget Cambodia simply does not have the structure and the size, let alone the resources, to implement policies a lá Obama. So far, comparatively it has not been battered as severely as the U. S. or Europe. That may be a poor consolation for the people who just lost their jobs. But it by and large is still a fact.
P. S. I worked 20 years in the tourism industry, and have 20-year experience in international trade (a few years overlapping), and am now engaged in the agricultural sector in Cambodia.
Thursday, March 26, 2009
Wednesday, March 18, 2009
Government Help for the Real Estate Market
This is rather lengthy so please bear with me on this one.
The Phnom Penh Post ran an article headline ‘A Helping Hand’, reporting on a request by the Real Estate Association for propping up their industry.
Let’s look at some of the things Sung Bonna, the owner of the largest real estate agency, and others said and whether or not they make sense.
A spokesman for local real estate agents is asking for a meeting with Prime Minister Hun Sen to make a case for government intervention in the property market in the hope of reversing a decline in sales and investment.
So they think that a simple statement by the Prime Minister will allay the effects of a world-wide recession? Don’t they understand what’s going on outside Cambodia? Do they live in a dreamland?
Sung Bonna, the president of the National Valuers Association of Cambodia, made the public call for a half-day meeting between the prime minister and key industry figures at a meeting of business people Friday night at the Almond Hotel. He warned the country faced bankruptcies and mass layoffs if the government did not take steps to ease investor and buyer concerns.
Now, please Mr. Bunna, what steps exactly do you want the government to take? If there are no buyers the government can’t just snap their fingers and buyers will come to Cambodia in droves to snap up previously overpriced, now discounted real estate?
"We hope the construction and real estate sector will receive a boost if the Cambodian government joins us to discuss possible solutions to the slump in the sector," Sung Bonna said. "If not, the slowdown will only worsen."
Because Bunna Realty is suffering as they can’t broker any deals, the government must step in?
Between 100,000 and 150,000 people were at risk of losing their jobs if the slump continued, Sung Bonna said. Job losses would not only hit realtors and construction workers but spread throughout the sector's value chain, hitting architects, furniture suppliers, lawyers and people in the building materials sector.
Guess what? This whole phenomenon is called economy. There are certain rules and laws that apply – the most fundamental one being the law of supply and demand. This is not a state-run, planned, Communist-style economy, this is called a free market in which market forces determine the actions of it.
The request for a meeting came a day after Sung Bonna called for more government involvement in the sector at last week's 2009 Cambodia Outlook Conference.
So when things turn sour they call for the government, although the majority of the people still don’t pay taxes, and property taxes are negotiable?
Sung Bonna told the conference that strengthening laws on land titles and property was the key to boosting confidence in the sector. "People are scared of Cambodia because we have no laws," he said. "This is a period where we need to compete with neighbouring countries. Any law that will make more headaches for investors we should temporarily withdraw and reconsider."
When business was flying high there was no call for more laws or their enforcement. Now all of a sudden we need them? People came when the market was hot, laws or no laws. The land law is pretty explicit already, isn’t it? And the Ministry for Land Management has been toiling away with LMAP for years now, ensuring that soft titles will be turned into hard titles. Again, a year ago this all was of no concern to the industry. They just kept building and building, buying up land, no matter who owned it, and now what? More laws to help speculators? Hopefully, not in your lifetime, my friend.
He was referring to the controversial housing development prakas temporarily shelved last year following an outcry from developers.
Korean developers in particular said they would be unable to progress with development plans should the rules take effect.However the government has repeatedly pledged it will be pushed through in some form.
The people need protection from shady developers and real estate speculators. The bad apples need to be weeded out. This is why Cambodia needs this regulation. We see what complete de-regulation entails. As a matter of fact, the consequences of de-regulation are now felt in Cambodia, in case anybody should have forgotten this.
At his opening speech at the Cambodia Outlook Conference, Hun Sen acknowledged the extent of the economic problems facing Cambodia as a result of the global economic crisis and called on the private sector to diversify and expand into sectors other than tourism, garments and agriculture. However, he was criticised for not setting out any concrete steps to boost the real estate sector.
"The government has concentrated on tourism, agriculture and the extractive industries but we have received no encouragement," Sung Bonna said.
Quit complaining. The real estate bubble was home-made and now you have to undo the consequences yourself.
Chhean Dara, project manager of the $50 million Happiness City complex on Phnom Penh's Chroy Changvar peninsula, also called for government intervention. He said the company was offering 20 percent discounts on houses and villas to no avail and warned it would be forced to stop construction within three months if no new buyers materialised.
"I think that if the government cannot find any solutions to help turn around the real estate sector downturn, it will slow Cambodia's economic growth," he said.
Now, is that so?
The request for a meeting comes after sales activity in the Cambodian property sector dropped to almost zero after hitting a peak around the middle of last year, buoyed by an influx of foreign investment.
Asking prices had dropped between 30 and 40 percent from the June peak as speculators tried to offload holdings in a market with no buyers, Sung Bonna said.
That’s what you get from over-speculating. But then, you couldn't tell from what people are still asking.
He said a failure to act would not only increase social instability through rising unemployment but that the dual decline in sales and property values would erode government revenues from stamp duties on land transfers and VAT taxes on the sale of apartments, villas and houses.
While this is true, it is still a laughable argument coming from someone who profited handsomely during the good times. Yeah, in the U. S. banks are too big to let them fail, in Cambodia you get social unrest, isn’t that what Mr. Sam Rainsy usually says? Wielding the big stick, eh?
The government charges 10 percent VAT on the sale of properties and four percent transfer tax on the sale of land.
Land Management Minister Im Chhun Lim told the Post last month that the government collected $21.35 million in property transfer taxes in 2007, up from $1.47 million in 2003 due to better revenue collection and improved relations with the larger estate agents.
In a departure from his prepared presentation, Ngy Tayi answered Sung Bonna point-by-point at the conference. While acknowledging Cambodia's legislative framework needed to be strengthened, he reminded the audience that the sector had been hit hard by the global financial crisis, with foreign investors scaling back major developments. Real estate prices had also been badly inflated in recent years and that the market needed a correction, he said.
The government had also worked closely with the sector, he said, in large part through the Inter-Ministerial Task Force it established last year to liaise on policy development.
It had also played a key role in setting up the National Valuers Association, of which Sung Bonna is president, implemented rules governing certification of estate agents and was working through industry concerns over the prakas on housing development accounts in consultation with stakeholders.
The government was also continuing to develop its legal framework, he added, as well as creating standards on valuations and real estate transactions fees, drafting a code of conduct for real estate developers, setting up an institute for professional real estate trading, and establishing a housing development association.
It was also working towards integrating the National Valuers Association of Cambodia into the ASEAN Valuers Association, Ngy Tayi said.
The elaborations of Mr. Ngy Tayi are all correct but neglect to pinpoint the underlying problem. Cambodia was discovered by adventurous developers, mostly South Korean, in or around 2005. It went like this. One came in started a project and was welcomed warmly by both the government and business circles. Word got back to Korea that Cambodia is the place to be and you had what could almost be called hordes of Koreans coming in, all loaded up with bundles of cash, starting new, ambitious projects completely oversized for an impoverished country like Cambodia with a very slim capital base.
Cambodian business people jumped on the band-wagon and started buying and selling real estate like hot cakes. What they overlooked was that they didn’t buy land for projects that would eventually end up in the hands of the average population, but they traded basically among themselves, very similar to what happened in the banking industry in the U. S. (There, unfortunately, it was not only confined to the U. S. but, good marketers that the Americans are, they sold their toxic, worthless, financial products world-wide.)
If I were to estimate the number of major players, and I mean major, not the many bit-players, in the real estate market up to mid-2008, I would put that number at not more than 10,000 people, overseas Khmer included. I had pointed out before in several of my past commentaries that the number of units planned or being built was just beyond any realistic assessment of the market capabilities. This huge number could in no way be absorbed.
All those Korean and domestic developers did not conduct a market research, feasibility study, and proper financial budgeting and planning. They appeared to be more like adventurers than level-headed businessmen. What you see now are the consequences triggered, of course, by the world-wide economic melt-down. But rest assured, this would have happened in any event. A bubble will always burst if you don’t stop blowing into it. But greed, again just like in the U. S. and elsewhere, dictated the action.
A simple look at the demographics of Cambodia would have revealed even to the most optimistic developer that there plainly was no market for 100,000 additional units of town-houses (ptea leweng) at $25,000 to $45,000 for a ground floor (see article below), or up to $130,000 for a 2 ½ story building. Normal people don’t have this kind of money, cannot and won’t be able to afford it for some time to come in view of that miserable economic situation we’re all in now.
Let me give you those numbers again. Cambodia has 14.5 or so million people, of whom 75% live in rural areas, 30% live below the poverty line of $1.00/day, 60% survive on $50 to $75 a month, the average wages in the cities is at that level, average salaries are in the $200 to $300 range, big business is run by 5 tycoons, the per capita GDP is $2100. These numbers vary slightly from different sources. But even these most basic numbers can’t fail to tell you that the bubble was so inflated that it would burst, at minimum deflate eventually, which in my view has happened since there is still activity in the real estate sector, prices haven’t plummeted despite the official reports of 35% to 40%. In some sectors it’s more like 10% to 15%. Price structures vary widely by location. But then, 30% to 40% would call for drastic action, wouldn’t it?
Calls for government help make for good headlines but are altogether disingenuous, unjustified, and uncalled for. The people crying now are the ones who didn’t heed the basic fundamentals of the economics 101 in the past few years.
The Phnom Penh Post ran an article headline ‘A Helping Hand’, reporting on a request by the Real Estate Association for propping up their industry.
Let’s look at some of the things Sung Bonna, the owner of the largest real estate agency, and others said and whether or not they make sense.
A spokesman for local real estate agents is asking for a meeting with Prime Minister Hun Sen to make a case for government intervention in the property market in the hope of reversing a decline in sales and investment.
So they think that a simple statement by the Prime Minister will allay the effects of a world-wide recession? Don’t they understand what’s going on outside Cambodia? Do they live in a dreamland?
Sung Bonna, the president of the National Valuers Association of Cambodia, made the public call for a half-day meeting between the prime minister and key industry figures at a meeting of business people Friday night at the Almond Hotel. He warned the country faced bankruptcies and mass layoffs if the government did not take steps to ease investor and buyer concerns.
Now, please Mr. Bunna, what steps exactly do you want the government to take? If there are no buyers the government can’t just snap their fingers and buyers will come to Cambodia in droves to snap up previously overpriced, now discounted real estate?
"We hope the construction and real estate sector will receive a boost if the Cambodian government joins us to discuss possible solutions to the slump in the sector," Sung Bonna said. "If not, the slowdown will only worsen."
Because Bunna Realty is suffering as they can’t broker any deals, the government must step in?
Between 100,000 and 150,000 people were at risk of losing their jobs if the slump continued, Sung Bonna said. Job losses would not only hit realtors and construction workers but spread throughout the sector's value chain, hitting architects, furniture suppliers, lawyers and people in the building materials sector.
Guess what? This whole phenomenon is called economy. There are certain rules and laws that apply – the most fundamental one being the law of supply and demand. This is not a state-run, planned, Communist-style economy, this is called a free market in which market forces determine the actions of it.
The request for a meeting came a day after Sung Bonna called for more government involvement in the sector at last week's 2009 Cambodia Outlook Conference.
So when things turn sour they call for the government, although the majority of the people still don’t pay taxes, and property taxes are negotiable?
Sung Bonna told the conference that strengthening laws on land titles and property was the key to boosting confidence in the sector. "People are scared of Cambodia because we have no laws," he said. "This is a period where we need to compete with neighbouring countries. Any law that will make more headaches for investors we should temporarily withdraw and reconsider."
When business was flying high there was no call for more laws or their enforcement. Now all of a sudden we need them? People came when the market was hot, laws or no laws. The land law is pretty explicit already, isn’t it? And the Ministry for Land Management has been toiling away with LMAP for years now, ensuring that soft titles will be turned into hard titles. Again, a year ago this all was of no concern to the industry. They just kept building and building, buying up land, no matter who owned it, and now what? More laws to help speculators? Hopefully, not in your lifetime, my friend.
He was referring to the controversial housing development prakas temporarily shelved last year following an outcry from developers.
Korean developers in particular said they would be unable to progress with development plans should the rules take effect.However the government has repeatedly pledged it will be pushed through in some form.
The people need protection from shady developers and real estate speculators. The bad apples need to be weeded out. This is why Cambodia needs this regulation. We see what complete de-regulation entails. As a matter of fact, the consequences of de-regulation are now felt in Cambodia, in case anybody should have forgotten this.
At his opening speech at the Cambodia Outlook Conference, Hun Sen acknowledged the extent of the economic problems facing Cambodia as a result of the global economic crisis and called on the private sector to diversify and expand into sectors other than tourism, garments and agriculture. However, he was criticised for not setting out any concrete steps to boost the real estate sector.
"The government has concentrated on tourism, agriculture and the extractive industries but we have received no encouragement," Sung Bonna said.
Quit complaining. The real estate bubble was home-made and now you have to undo the consequences yourself.
Chhean Dara, project manager of the $50 million Happiness City complex on Phnom Penh's Chroy Changvar peninsula, also called for government intervention. He said the company was offering 20 percent discounts on houses and villas to no avail and warned it would be forced to stop construction within three months if no new buyers materialised.
"I think that if the government cannot find any solutions to help turn around the real estate sector downturn, it will slow Cambodia's economic growth," he said.
Now, is that so?
The request for a meeting comes after sales activity in the Cambodian property sector dropped to almost zero after hitting a peak around the middle of last year, buoyed by an influx of foreign investment.
Asking prices had dropped between 30 and 40 percent from the June peak as speculators tried to offload holdings in a market with no buyers, Sung Bonna said.
That’s what you get from over-speculating. But then, you couldn't tell from what people are still asking.
He said a failure to act would not only increase social instability through rising unemployment but that the dual decline in sales and property values would erode government revenues from stamp duties on land transfers and VAT taxes on the sale of apartments, villas and houses.
While this is true, it is still a laughable argument coming from someone who profited handsomely during the good times. Yeah, in the U. S. banks are too big to let them fail, in Cambodia you get social unrest, isn’t that what Mr. Sam Rainsy usually says? Wielding the big stick, eh?
The government charges 10 percent VAT on the sale of properties and four percent transfer tax on the sale of land.
Land Management Minister Im Chhun Lim told the Post last month that the government collected $21.35 million in property transfer taxes in 2007, up from $1.47 million in 2003 due to better revenue collection and improved relations with the larger estate agents.
In a departure from his prepared presentation, Ngy Tayi answered Sung Bonna point-by-point at the conference. While acknowledging Cambodia's legislative framework needed to be strengthened, he reminded the audience that the sector had been hit hard by the global financial crisis, with foreign investors scaling back major developments. Real estate prices had also been badly inflated in recent years and that the market needed a correction, he said.
The government had also worked closely with the sector, he said, in large part through the Inter-Ministerial Task Force it established last year to liaise on policy development.
It had also played a key role in setting up the National Valuers Association, of which Sung Bonna is president, implemented rules governing certification of estate agents and was working through industry concerns over the prakas on housing development accounts in consultation with stakeholders.
The government was also continuing to develop its legal framework, he added, as well as creating standards on valuations and real estate transactions fees, drafting a code of conduct for real estate developers, setting up an institute for professional real estate trading, and establishing a housing development association.
It was also working towards integrating the National Valuers Association of Cambodia into the ASEAN Valuers Association, Ngy Tayi said.
The elaborations of Mr. Ngy Tayi are all correct but neglect to pinpoint the underlying problem. Cambodia was discovered by adventurous developers, mostly South Korean, in or around 2005. It went like this. One came in started a project and was welcomed warmly by both the government and business circles. Word got back to Korea that Cambodia is the place to be and you had what could almost be called hordes of Koreans coming in, all loaded up with bundles of cash, starting new, ambitious projects completely oversized for an impoverished country like Cambodia with a very slim capital base.
Cambodian business people jumped on the band-wagon and started buying and selling real estate like hot cakes. What they overlooked was that they didn’t buy land for projects that would eventually end up in the hands of the average population, but they traded basically among themselves, very similar to what happened in the banking industry in the U. S. (There, unfortunately, it was not only confined to the U. S. but, good marketers that the Americans are, they sold their toxic, worthless, financial products world-wide.)
If I were to estimate the number of major players, and I mean major, not the many bit-players, in the real estate market up to mid-2008, I would put that number at not more than 10,000 people, overseas Khmer included. I had pointed out before in several of my past commentaries that the number of units planned or being built was just beyond any realistic assessment of the market capabilities. This huge number could in no way be absorbed.
All those Korean and domestic developers did not conduct a market research, feasibility study, and proper financial budgeting and planning. They appeared to be more like adventurers than level-headed businessmen. What you see now are the consequences triggered, of course, by the world-wide economic melt-down. But rest assured, this would have happened in any event. A bubble will always burst if you don’t stop blowing into it. But greed, again just like in the U. S. and elsewhere, dictated the action.
A simple look at the demographics of Cambodia would have revealed even to the most optimistic developer that there plainly was no market for 100,000 additional units of town-houses (ptea leweng) at $25,000 to $45,000 for a ground floor (see article below), or up to $130,000 for a 2 ½ story building. Normal people don’t have this kind of money, cannot and won’t be able to afford it for some time to come in view of that miserable economic situation we’re all in now.
Let me give you those numbers again. Cambodia has 14.5 or so million people, of whom 75% live in rural areas, 30% live below the poverty line of $1.00/day, 60% survive on $50 to $75 a month, the average wages in the cities is at that level, average salaries are in the $200 to $300 range, big business is run by 5 tycoons, the per capita GDP is $2100. These numbers vary slightly from different sources. But even these most basic numbers can’t fail to tell you that the bubble was so inflated that it would burst, at minimum deflate eventually, which in my view has happened since there is still activity in the real estate sector, prices haven’t plummeted despite the official reports of 35% to 40%. In some sectors it’s more like 10% to 15%. Price structures vary widely by location. But then, 30% to 40% would call for drastic action, wouldn’t it?
Calls for government help make for good headlines but are altogether disingenuous, unjustified, and uncalled for. The people crying now are the ones who didn’t heed the basic fundamentals of the economics 101 in the past few years.
Monday, March 16, 2009
A Continuing Saga
Read this:
http://www.phnompenhpost.com/index.php/2009031624784/National-news/Not-so-happy-community.html
and this:
http://ki-media.blogspot.com/2009/03/canadia-banks-land-grabbing-tactic-in.html
But it's not only going on in Cambodia:
Watch this:
And this:
http://www.phnompenhpost.com/index.php/2009031624784/National-news/Not-so-happy-community.html
and this:
http://ki-media.blogspot.com/2009/03/canadia-banks-land-grabbing-tactic-in.html
But it's not only going on in Cambodia:
Watch this:
Visit msnbc.com for Breaking News, World News, and News about the Economy
And this:
Visit msnbc.com for Breaking News, World News, and News about the Economy
Friday, March 13, 2009
How's That For the 'Richest' Country on Earth
From the Huffington Post in the U. S.
There are reports of tent cities popping up across the country as unemployment rises in a worsening economy. The biggest and highest-profile shantytown is in Sacramento, where hundreds of newly-homeless tent residents are cooking soup in old coffee cans.
Sacramento's KCRA reported this week that city officials plan to shut the tent city down.
No further comment needed.
Thursday, March 12, 2009
Putting It in Perspective
Recently, the IMF came out with a new prognostication revising their previous estimate of Cambodia’s economic growth from 4% to a contraction of .8%. Of course, this is a direct consequence of the dismal developments in the countries that contributed heavily to Cambodia’s growth in the past 8 years, the U. S. foremost among them.
Now that the U. S. has shed 4.5 million jobs in the past 18 months alone and unemployment stands at 8.1 %, the conventional wisdom is that garment exports will go down substantially as the U. S. is the main market for Cambodia. The current figures appear to prove it, with a 27% decrease in exports for the month of February alone. Last December it was 30%. The only ray of hope is that Cambodian garments are mostly low-end that are typically sold at discounters like Walmart. It is noteworthy that in this recession Walmart still manages to post sales and profit increases.
Likewise, tourist arrivals show a 2.9% reduction over the same month last year. And mind you, this is the high season. Tourist arrivals should at least be the same or even rise somewhat. According to the latest statistics the construction sector is holding sort of firm, although it was reported that some 3,000 to 5,000 jobs were lost there too.
Prime Minister Hun Sen finds fault with all those predictions, saying that all those number are altogether not that important. What’s important is that peope won’t go hungry in Cambodia. All those factory workers that lost their job can go back to their native village where they will find a rice paddy to cultivate, and a family that will take care of them. Surprisingly to his critics, he is not far from the truth. He may have oversimplified the problem, but in general this is exactly what people are doing.
Let’s look at few approximate numbers – I say approximate because in the end it doesn’t matter whether it’s 60% or 65%. Roughly 70% of Cambodia’s population lives in rural areas. Of those, a good 60% live on subsistence farming. In concrete numbers, this translates into 6.3 million people. I know a perfect example in my own family. My wife’s family comes from a small village in Kratie province, right next to the place where tourists go to see the dolphins. Of the about 100 families there, nearly 90 just live off their fields. If they produce a surplus they sell it on the market.
So the garment factory girls come back and find their wooden houses, a functioning family structure, and food to eat. They don’t have problems with heating or air conditioning. For power they use a battery, which is re-charged for a small charge at the home of someone who owns a generator. They wear simple clothes. There is one communal cell-phone which provides contact to the outside world. Yes, this is a simple life, and Westerners can only look on with widened eyes wondering how people can live like this. But let’s face it - this is reality, not only in Cambodia, but in most of SE Asia. And rural areas are exactly where the majority of the factory workers come from.
Of course, it would be nice if the share of subsistence farming would be reduced and that agriculture would contribute much more to exports and the GDP. We know the GDP is the value of the production and services of a national economy. And no, subsistence farming is not included, as by its very nature it does not contribute to the national economy but only serves to provide for the basic needs. So in that sense Mr. Hun Sen is right, but then, there are established criteria for measuring the GDP, and we can’t just change those for Cambodia’s sake.
Mr. Sam Rainsy calls for government support of agriculture to help those already suffering farmers. It’s easy to call for support when you are not in the government and don’t have to raise the money through taxes and import duties. Additionally, that support would most likely be a waste of money if you can’t sell your products. Just look at the cassava farmers. They are hurting. In the rubber industry at least the production can still be sold, albeit at much lower prices than a year ago. And size matters too. Cambodia cannot be compared to, say, Thailand. And Cambodia is 30 years behind in its development. Cambodia needs to be looked at with Cambodian eyes, not with Western eyes and a Western mindset. Of course, a lot of progress needs to be made to bring the country from its current level into to the middle section of the development scale. But when times are tough patience must reign.
So the fact that people can go back to their village is actually a boon for them. Yes, they are poor but they have to eat. And in this context let’s not look at the social problems, e.g. lack of health care and fundamental edcuation. This is for another, hopefully not too far off, time.
The Western alternative is no laughing matter. People losing their jobs, lose their homes, their savings along the line, their health care, practically their freedom. In my view it’s much more dire in the West. Recession hits people in the industrialized world much harder.
We all wish for those incredible growth rates to return. But let’s be a little more realistic with our expectations. This country has survived much worse times, and will also survive what will turn out be a little bump in the course of its history.
Now that the U. S. has shed 4.5 million jobs in the past 18 months alone and unemployment stands at 8.1 %, the conventional wisdom is that garment exports will go down substantially as the U. S. is the main market for Cambodia. The current figures appear to prove it, with a 27% decrease in exports for the month of February alone. Last December it was 30%. The only ray of hope is that Cambodian garments are mostly low-end that are typically sold at discounters like Walmart. It is noteworthy that in this recession Walmart still manages to post sales and profit increases.
Likewise, tourist arrivals show a 2.9% reduction over the same month last year. And mind you, this is the high season. Tourist arrivals should at least be the same or even rise somewhat. According to the latest statistics the construction sector is holding sort of firm, although it was reported that some 3,000 to 5,000 jobs were lost there too.
Prime Minister Hun Sen finds fault with all those predictions, saying that all those number are altogether not that important. What’s important is that peope won’t go hungry in Cambodia. All those factory workers that lost their job can go back to their native village where they will find a rice paddy to cultivate, and a family that will take care of them. Surprisingly to his critics, he is not far from the truth. He may have oversimplified the problem, but in general this is exactly what people are doing.
Let’s look at few approximate numbers – I say approximate because in the end it doesn’t matter whether it’s 60% or 65%. Roughly 70% of Cambodia’s population lives in rural areas. Of those, a good 60% live on subsistence farming. In concrete numbers, this translates into 6.3 million people. I know a perfect example in my own family. My wife’s family comes from a small village in Kratie province, right next to the place where tourists go to see the dolphins. Of the about 100 families there, nearly 90 just live off their fields. If they produce a surplus they sell it on the market.
So the garment factory girls come back and find their wooden houses, a functioning family structure, and food to eat. They don’t have problems with heating or air conditioning. For power they use a battery, which is re-charged for a small charge at the home of someone who owns a generator. They wear simple clothes. There is one communal cell-phone which provides contact to the outside world. Yes, this is a simple life, and Westerners can only look on with widened eyes wondering how people can live like this. But let’s face it - this is reality, not only in Cambodia, but in most of SE Asia. And rural areas are exactly where the majority of the factory workers come from.
Of course, it would be nice if the share of subsistence farming would be reduced and that agriculture would contribute much more to exports and the GDP. We know the GDP is the value of the production and services of a national economy. And no, subsistence farming is not included, as by its very nature it does not contribute to the national economy but only serves to provide for the basic needs. So in that sense Mr. Hun Sen is right, but then, there are established criteria for measuring the GDP, and we can’t just change those for Cambodia’s sake.
Mr. Sam Rainsy calls for government support of agriculture to help those already suffering farmers. It’s easy to call for support when you are not in the government and don’t have to raise the money through taxes and import duties. Additionally, that support would most likely be a waste of money if you can’t sell your products. Just look at the cassava farmers. They are hurting. In the rubber industry at least the production can still be sold, albeit at much lower prices than a year ago. And size matters too. Cambodia cannot be compared to, say, Thailand. And Cambodia is 30 years behind in its development. Cambodia needs to be looked at with Cambodian eyes, not with Western eyes and a Western mindset. Of course, a lot of progress needs to be made to bring the country from its current level into to the middle section of the development scale. But when times are tough patience must reign.
So the fact that people can go back to their village is actually a boon for them. Yes, they are poor but they have to eat. And in this context let’s not look at the social problems, e.g. lack of health care and fundamental edcuation. This is for another, hopefully not too far off, time.
The Western alternative is no laughing matter. People losing their jobs, lose their homes, their savings along the line, their health care, practically their freedom. In my view it’s much more dire in the West. Recession hits people in the industrialized world much harder.
We all wish for those incredible growth rates to return. But let’s be a little more realistic with our expectations. This country has survived much worse times, and will also survive what will turn out be a little bump in the course of its history.
Sunday, March 8, 2009
The Real Estate Market at the Beginning of 2009
The newspapers have extensively reported about the current state of the Cambodian economy, and the real estate market in particular, so there is not much left for me to report outside a few personal experiences in this sector. I would like to highlight these with five examples, with which I have been familiar as recently as February.
In general, of course, it is evident that the market is soft and buyers are far and few between. No need to look for sellers – they are out and about in abundance, but as is so typical for Cambodia, a lot of them still haven’t got it. They are asking outlandish prices that are beyond the pale. However, they are still not shy to proclaim real bargains either.
Browsing the web pages of the two most reputable real estate agents one can find there is no scarcity of high-end luxury homes for sale in Tuol Kork or Boeng Keng Kang. You could think you are in West Palm Beach in Florida, Florence, Italy, or in Nice, France, and not in Cambodia. Homes for $3.0 million to $5.0 million are no rarity. Again, are there any buyers? I doubt it very much as people will probably just hold on to their money until the situation has changed – cash has become a somewhat rare commodity these days – and no one knows when that will happen. Estimates for a 2010 recovery may seem overly optimistic.
Nonetheless, there is some activity going on, maybe not so much with the professional real estate agents but with the many smaller developers or speculators that are not in dire straits, e. g. the ones that don’t have to service bank loans, or don’t have to complete a started ambitious project and don’t know how and where to raise the necessary funds. By all accounts, banks have severely limited their heretofore already comparatively small stake in real estate financing. Those independent operators have one advantage – there are no middlemen involved, they can pass on the 3% commissions to the buyers.
One thing is clear – and this is where the chickens come home to roost – the developers that invested heavily in the so-called Cambodian flats are looking at a very dim near future – at least in my view. Back in October 2007 I counted approximately 250,000 units, either begun or in the pipeline, based on the land being cleared at that time and on a physical count. This number was reduced dramatically by project stoppages, lack of financing, and a dried-out market demand. The ones that were completed for the most part sit empty. Just drive to the airport and you will find rows and rows of flat houses waiting for buyers and occupants. But don’t just look along Russian Boulevard, look inside, e. g. those little side streets. There are literally tons of empty flats – when I have the time I will go and count them and report it here.
But what about those mega-projects? Again, started projects, like Camko City, the Bassac Villas, and the Canadia High-Rise are going ahead, though at a slower pace it seems. Planned projects like the Golden Tower, the World City seem to be on hold – at least I couldn’t see any noticeable activity in both locations; but then I am on the coast and infrequently go to Phnom Penh. All those big tourism projects - Koh Puos, Koh Rong, Ream, Otres Beach – no activity, although the bridge construction to Koh Puos is still going on. As to the island itself, we’ll see in 2010 or 2011 whether all these plans are very realistic. The last three years press releases about super-projects were released in a steady stream. Now sobering reality has set in, I guess.
In summary, all this was to be expected if you just looked at the supply-and-demand situation. It is well known that South Korean investors didn’t do much of a country study before they came in with their bags full of money, which they now transferred back to Korea in order to take advantage of the slumping Won.
Everybody is waiting for the turn-around. Going by official statistics is no help at all. Growth prediction is haphazard at best, as the recent forecasts by major institutions more than aptly demonstrate – they range from a contraction of 1% to a growth of 6%. Analysts never got it right anyway. I have been following the dollar ups and downs for 30 years now and not once had one analyst gotten it right even over the medium term, likewise with oil prices recently. So read your own tea leaves. My money is on the last quarter of 2009 and the beginning of 2010 for improvements to start showing up. How Cambodia is going to fare is anybody’s guess. If you read some snide remarks by expat foreigners and overseas Khmer one would think they are glad Cambodia is finally being hit by the recession too. I believe there is a lot of jealousy involved here. Some just can’t believe that people made so much money on their land deals; and not only the powerful.
Here is my look at a few examples:
Cambodian Flats (Ptea Leweng)
These typically go for about $110,000 to $130,000 for the three-story version (as pictured). The two-story type is offered at about $50,000 to $70,000, and a one –story apartment in either type goes for $25,000 to $45,000. One floor is normally 4 x 16 m. The ground floor is more expensive as this space can be used for a store, shop, etc.
Western-style townhouses
Korean companies usually build these. One typical example is one called Vogo Village near the airport. Selling prices range from $89,000 for the smaller house (6 x 16 m) to $115,000 for the larger house (7 x 16 m). The property comes with 24/7 security.
The distinct feature is that these houses have two real floors, as opposed to the Cambodian Flat, which has this mezzanine half-floor – which usually is bedroom with a low ceiling. This is a nice and clean small community, set back about 500 m from road number 4 to Sihanoukville.
.jpg)
Bassac Villas
These are top of the line townhouses and villas. The villas all feature a very small lot but this is prime land right on the river, although most of them won’t have a view of it, as they are set back too far. Additionally, the condo buildings going up right now will obstruct the view. The villas go for about $300,000 and offer about 300 m2 of living space. The townhouses as pictured sell for about $200,000 to $300,000.
.jpg)
Phnom Penh Thmey Developments
This site developer offers lots at $140/m2, with an option to have the house built at $35,000 for the ground floor. The whole site comprises 94 lots, of which about half are sold already, and a few houses are under construction. It's located off Hanoi Road. Business has picked up these last few weeks.
.jpg)
Stung Hao Development
A Khmer developer has three ha parceled into 600 m2 lots. It is located at the junction of the road from Sihanoukville to Stung Hao and Stung Hao to Veal Ren. A corner lot sells for $12,000 and a middle lot sells for $10,000. A new port is being built across the main road to Sihanoukville. The developer is probably banking on this project. This looks like a good investment for people who only have a little money and can wait 2 or 3 years for this region to grow. (Not much to see in the picture.)
.jpg)
In general, of course, it is evident that the market is soft and buyers are far and few between. No need to look for sellers – they are out and about in abundance, but as is so typical for Cambodia, a lot of them still haven’t got it. They are asking outlandish prices that are beyond the pale. However, they are still not shy to proclaim real bargains either.
Browsing the web pages of the two most reputable real estate agents one can find there is no scarcity of high-end luxury homes for sale in Tuol Kork or Boeng Keng Kang. You could think you are in West Palm Beach in Florida, Florence, Italy, or in Nice, France, and not in Cambodia. Homes for $3.0 million to $5.0 million are no rarity. Again, are there any buyers? I doubt it very much as people will probably just hold on to their money until the situation has changed – cash has become a somewhat rare commodity these days – and no one knows when that will happen. Estimates for a 2010 recovery may seem overly optimistic.
Nonetheless, there is some activity going on, maybe not so much with the professional real estate agents but with the many smaller developers or speculators that are not in dire straits, e. g. the ones that don’t have to service bank loans, or don’t have to complete a started ambitious project and don’t know how and where to raise the necessary funds. By all accounts, banks have severely limited their heretofore already comparatively small stake in real estate financing. Those independent operators have one advantage – there are no middlemen involved, they can pass on the 3% commissions to the buyers.
One thing is clear – and this is where the chickens come home to roost – the developers that invested heavily in the so-called Cambodian flats are looking at a very dim near future – at least in my view. Back in October 2007 I counted approximately 250,000 units, either begun or in the pipeline, based on the land being cleared at that time and on a physical count. This number was reduced dramatically by project stoppages, lack of financing, and a dried-out market demand. The ones that were completed for the most part sit empty. Just drive to the airport and you will find rows and rows of flat houses waiting for buyers and occupants. But don’t just look along Russian Boulevard, look inside, e. g. those little side streets. There are literally tons of empty flats – when I have the time I will go and count them and report it here.
But what about those mega-projects? Again, started projects, like Camko City, the Bassac Villas, and the Canadia High-Rise are going ahead, though at a slower pace it seems. Planned projects like the Golden Tower, the World City seem to be on hold – at least I couldn’t see any noticeable activity in both locations; but then I am on the coast and infrequently go to Phnom Penh. All those big tourism projects - Koh Puos, Koh Rong, Ream, Otres Beach – no activity, although the bridge construction to Koh Puos is still going on. As to the island itself, we’ll see in 2010 or 2011 whether all these plans are very realistic. The last three years press releases about super-projects were released in a steady stream. Now sobering reality has set in, I guess.
In summary, all this was to be expected if you just looked at the supply-and-demand situation. It is well known that South Korean investors didn’t do much of a country study before they came in with their bags full of money, which they now transferred back to Korea in order to take advantage of the slumping Won.
Everybody is waiting for the turn-around. Going by official statistics is no help at all. Growth prediction is haphazard at best, as the recent forecasts by major institutions more than aptly demonstrate – they range from a contraction of 1% to a growth of 6%. Analysts never got it right anyway. I have been following the dollar ups and downs for 30 years now and not once had one analyst gotten it right even over the medium term, likewise with oil prices recently. So read your own tea leaves. My money is on the last quarter of 2009 and the beginning of 2010 for improvements to start showing up. How Cambodia is going to fare is anybody’s guess. If you read some snide remarks by expat foreigners and overseas Khmer one would think they are glad Cambodia is finally being hit by the recession too. I believe there is a lot of jealousy involved here. Some just can’t believe that people made so much money on their land deals; and not only the powerful.
Here is my look at a few examples:
Cambodian Flats (Ptea Leweng)
These typically go for about $110,000 to $130,000 for the three-story version (as pictured). The two-story type is offered at about $50,000 to $70,000, and a one –story apartment in either type goes for $25,000 to $45,000. One floor is normally 4 x 16 m. The ground floor is more expensive as this space can be used for a store, shop, etc.
Western-style townhouses
Korean companies usually build these. One typical example is one called Vogo Village near the airport. Selling prices range from $89,000 for the smaller house (6 x 16 m) to $115,000 for the larger house (7 x 16 m). The property comes with 24/7 security.
The distinct feature is that these houses have two real floors, as opposed to the Cambodian Flat, which has this mezzanine half-floor – which usually is bedroom with a low ceiling. This is a nice and clean small community, set back about 500 m from road number 4 to Sihanoukville.
.jpg)
Bassac Villas
These are top of the line townhouses and villas. The villas all feature a very small lot but this is prime land right on the river, although most of them won’t have a view of it, as they are set back too far. Additionally, the condo buildings going up right now will obstruct the view. The villas go for about $300,000 and offer about 300 m2 of living space. The townhouses as pictured sell for about $200,000 to $300,000.
.jpg)
Phnom Penh Thmey Developments
This site developer offers lots at $140/m2, with an option to have the house built at $35,000 for the ground floor. The whole site comprises 94 lots, of which about half are sold already, and a few houses are under construction. It's located off Hanoi Road. Business has picked up these last few weeks.
.jpg)
Stung Hao Development
A Khmer developer has three ha parceled into 600 m2 lots. It is located at the junction of the road from Sihanoukville to Stung Hao and Stung Hao to Veal Ren. A corner lot sells for $12,000 and a middle lot sells for $10,000. A new port is being built across the main road to Sihanoukville. The developer is probably banking on this project. This looks like a good investment for people who only have a little money and can wait 2 or 3 years for this region to grow. (Not much to see in the picture.)
.jpg)
Tuesday, March 3, 2009
Recent News
I.
Yesterday the Phnom Penh Post published and interview with Dr. Lao Mong Hay, a researcher with the Asian Human Rights Commission and former member of the Khmer People’s National Liberation Front.
Dr. Lao is very critical of the current government with respect to human rights and other civil issues. What’s remarkable is that this KPNLF was allied with the Khmer Rouge, the same way the former King was. Of course, it was all in the interest and furtherance of human rights. I am not saying that people can’t reform and have a change of mind and philosophy but the fact remains that people, no matter what shade of political color, who allied themselves with the Khmer Rouge are just as responsible for their actions as the Khmer Rouge themselves. And this does not exclude the U. S., the United Nations, where the Khmer Rouge held the seat of Cambodia, and the Chinese, and finally King Sihanouk himself. Events and actions leading up to the 1993 elections may possibly be excluded, but let’s face it, all these talks and conferences were held for political expediency to see that each party got its objectives implemented.
This is not to say that Dr. Lao was complicit, but those explanations that one was not really involved always sound sort of hollow. Additionally, Dr. Lao is now a staunch royalist, and sometimes his views as expressed in his commentaries on Asian Online are somewhat out of tune with the reality of present time.
However, what I wanted to highlight when citing this interview are the following passages:
Quote
What do you think about the new alliance between the SRP and HRP?
I don't think the two parties could work very well together. There are clashes of personality. There are no clear ideas or policies. This sort of alliance comes and goes, and they'll need to work hard to consolidate their unity.
What do you think caused the royalists' decline in politics?
Authoritarianism. When leaders are so autocratic, their subordinates lose their creativity. I have met some of them. At the beginning, they were very bright, but after one or two years there were no more ideas because they were not allowed to think.
There are some princes that have continued to be in politics, for instance Sisowath Sirirath. The nation might be in crisis later on, and we might need the royalists as we did in the 1980s and 1990s. And who can be sure our ruler will not appoint his descendants, like Kim Il Sung and Kim Jong Il have? He could become King under a new name.
How do the old political leaders - like Son Sann - compare with new leaders, like Sam Rainsy or Kem Sokha?
Some of those old leaders started off with work experience as government officials and then, when the French left, they became leaders. For the time that the French had been in Cambodia, they left behind a reasonable working system of government: the basic institutions of the Cambodian state, and the rule of law. So we were more conscious about rules. Compare this to leaders now. How long was Sam Rainsy in government? Two years, and at the top. And Kem Sokha: What work experience in public administration does he have?
Unquote
So authoritarianism is to blame for the royalists decline? What should the royalists’ role in a democracy be anyway?
The royalists have nothing going for them except that they were born into a royal family. Retaining a royal title and entering politics is taking advantage of their ancestry by implying to less educated people they know better than the rest. And, one must not forget that kings were historically authoritarian. Only the uprising of the disenfranchised masses changed that.
It appears that most of the royals in Cambodia still seem to consider this ‘their’ country and people, and not that they are just one of the people. King Sihanouk is the best example when he still refers to the people as ‘my children’. He is not and never was the father of the nation, most certainly not during the difficult political times of the 60ies and 70ies.
So I would think that royals should just relinquish their royalty if they want to enter politics – and be Mr. or Mrs. Citizen like everybody else.
A very interesting point he made, however, is on the alliance between SRP and HRP. So there are no clear ideas or policies? Well, I am just a lowly blogger in this case, but if anybody cares to check many comments I made on this blog, this is exactly what I, as a neutral observer, have pointed out for a long time. Blasting the government is no alternative and no way to set change in motion. Personally, I don’t know about their personalities, but if reports from people who are familiar with this are to be believed, this alliance won’t survive the next elections. And the opposition’s lack of experience is actually frightening. The current government isn’t the best by any stretch, but I would fear for Cambodia’s future if the opposition came to power in the near future.
The whole interview can be read here:
http://www.phnompenhpost.com/index.php/National-news/A-visionary-behind-the-scenes.html
Please note that KI-Media, otherwise an ardent publisher of Dr. Lao’s views, this time did not re-publish the Phnom Penh Post’s interview on their blog.
II.
Another interesting tidbit comes courtesy of KI-Media, which posted the SBS video on ‘Country for Sale’ on their website. I did not bother to watch it but the excerpt with the interview of the Australian ambassador is definitely intriguing.
A similar dwelling as Dey Krahom had to be removed and people moved elsewhere to make room for the new Australian embassy. Now, obviously this is somewhat hard to explain in view of the outrage that followed the Dey Krahom saga. As ambassador of a democratic nation that strives to observe human rights she is surely aware of the sensitivity of this issue but seemingly did not really know how to handle that curve-ball.
But maybe this just goes to show how difficult it really is to know what to do and what not to do in situations like this, as opposed to how it should be done?
Quote
MARGARET ADAMSON: No, I understand what the principles are, but it is difficult indeed to actually have the documentation, documentation that is accepted, to enable those claims to be respected.
Unqote
Yesterday the Phnom Penh Post published and interview with Dr. Lao Mong Hay, a researcher with the Asian Human Rights Commission and former member of the Khmer People’s National Liberation Front.
Dr. Lao is very critical of the current government with respect to human rights and other civil issues. What’s remarkable is that this KPNLF was allied with the Khmer Rouge, the same way the former King was. Of course, it was all in the interest and furtherance of human rights. I am not saying that people can’t reform and have a change of mind and philosophy but the fact remains that people, no matter what shade of political color, who allied themselves with the Khmer Rouge are just as responsible for their actions as the Khmer Rouge themselves. And this does not exclude the U. S., the United Nations, where the Khmer Rouge held the seat of Cambodia, and the Chinese, and finally King Sihanouk himself. Events and actions leading up to the 1993 elections may possibly be excluded, but let’s face it, all these talks and conferences were held for political expediency to see that each party got its objectives implemented.
This is not to say that Dr. Lao was complicit, but those explanations that one was not really involved always sound sort of hollow. Additionally, Dr. Lao is now a staunch royalist, and sometimes his views as expressed in his commentaries on Asian Online are somewhat out of tune with the reality of present time.
However, what I wanted to highlight when citing this interview are the following passages:
Quote
What do you think about the new alliance between the SRP and HRP?
I don't think the two parties could work very well together. There are clashes of personality. There are no clear ideas or policies. This sort of alliance comes and goes, and they'll need to work hard to consolidate their unity.
What do you think caused the royalists' decline in politics?
Authoritarianism. When leaders are so autocratic, their subordinates lose their creativity. I have met some of them. At the beginning, they were very bright, but after one or two years there were no more ideas because they were not allowed to think.
There are some princes that have continued to be in politics, for instance Sisowath Sirirath. The nation might be in crisis later on, and we might need the royalists as we did in the 1980s and 1990s. And who can be sure our ruler will not appoint his descendants, like Kim Il Sung and Kim Jong Il have? He could become King under a new name.
How do the old political leaders - like Son Sann - compare with new leaders, like Sam Rainsy or Kem Sokha?
Some of those old leaders started off with work experience as government officials and then, when the French left, they became leaders. For the time that the French had been in Cambodia, they left behind a reasonable working system of government: the basic institutions of the Cambodian state, and the rule of law. So we were more conscious about rules. Compare this to leaders now. How long was Sam Rainsy in government? Two years, and at the top. And Kem Sokha: What work experience in public administration does he have?
Unquote
So authoritarianism is to blame for the royalists decline? What should the royalists’ role in a democracy be anyway?
The royalists have nothing going for them except that they were born into a royal family. Retaining a royal title and entering politics is taking advantage of their ancestry by implying to less educated people they know better than the rest. And, one must not forget that kings were historically authoritarian. Only the uprising of the disenfranchised masses changed that.
It appears that most of the royals in Cambodia still seem to consider this ‘their’ country and people, and not that they are just one of the people. King Sihanouk is the best example when he still refers to the people as ‘my children’. He is not and never was the father of the nation, most certainly not during the difficult political times of the 60ies and 70ies.
So I would think that royals should just relinquish their royalty if they want to enter politics – and be Mr. or Mrs. Citizen like everybody else.
A very interesting point he made, however, is on the alliance between SRP and HRP. So there are no clear ideas or policies? Well, I am just a lowly blogger in this case, but if anybody cares to check many comments I made on this blog, this is exactly what I, as a neutral observer, have pointed out for a long time. Blasting the government is no alternative and no way to set change in motion. Personally, I don’t know about their personalities, but if reports from people who are familiar with this are to be believed, this alliance won’t survive the next elections. And the opposition’s lack of experience is actually frightening. The current government isn’t the best by any stretch, but I would fear for Cambodia’s future if the opposition came to power in the near future.
The whole interview can be read here:
http://www.phnompenhpost.com/index.php/National-news/A-visionary-behind-the-scenes.html
Please note that KI-Media, otherwise an ardent publisher of Dr. Lao’s views, this time did not re-publish the Phnom Penh Post’s interview on their blog.
II.
Another interesting tidbit comes courtesy of KI-Media, which posted the SBS video on ‘Country for Sale’ on their website. I did not bother to watch it but the excerpt with the interview of the Australian ambassador is definitely intriguing.
A similar dwelling as Dey Krahom had to be removed and people moved elsewhere to make room for the new Australian embassy. Now, obviously this is somewhat hard to explain in view of the outrage that followed the Dey Krahom saga. As ambassador of a democratic nation that strives to observe human rights she is surely aware of the sensitivity of this issue but seemingly did not really know how to handle that curve-ball.
But maybe this just goes to show how difficult it really is to know what to do and what not to do in situations like this, as opposed to how it should be done?
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MARGARET ADAMSON: No, I understand what the principles are, but it is difficult indeed to actually have the documentation, documentation that is accepted, to enable those claims to be respected.
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