Natural Rubber and the Euro Crisis Revisited

The Phnom Penh Post reports the PM announced that Cambodia will set up a rubber production and export promotion policy in view of increased global demand of the commodity.

The Mong Retthy group even has 2,000 ha of rubber plantation in Sihanoukville province, an area that has hitherto not been deemed ideal for growing rubber trees. Of course, you can plant rubber trees in many types of soil. You just might have to fertilize more heavily.

Mong Retthy also said that such policy would improve the sector very fast. Currently there are about 182,000 ha of rubber trees, both mature and immature, in Cambodia. The official goal is to increase that area to 300,000 ha by 2020.

Mak Kim Hong, president of Cambodia Rubber Association and owner of Chhub Rubber Plantation in Kampong Cham province, said a rubber export goal could attract more investment.

Those statements Mong Retthy and Mak Kim Hong make absolutely no sense to me. In fact, they are complete nonsense. You can set cultivating and export goals, which in itself is fine. But how these goals would improve the sector is something he would need to explain; and how it could attract more investment is also something that lacks any foundation.

Setting goals may expand the area of rubber plantations, as it has done over the past few years, but whether it improves it is highly doubtful. A look at plantations, both producing and maturing, will sometimes paint a different picture. A country attracts investment, regardless of industry, with favorable investment parameters, e. g. tax breaks, special incentives, etc., that are beneficial for the investor and, more importantly, if the investment will earn a nice return.

People cultivate a crop, e. g. rice, as there is local and international demand for it. You can’t practically go wrong with rice as a basic staple for the majority of the world population, notwithstanding the recent flooding of huge areas of rice paddies. Of course, the same goes for rubber. Cambodia has been a rubber producing country since French colonial days. Along with the avowed emphasis on agriculture as one of the main sectors rubber was once again included in official policy as a major product.

The increase in rubber plantations was immense over the last 3 – 4 years; from about 80,000 ha to about 182,000 ha now. Especially Vietnamese and some Chinese companies came in and obtained huge land concessions for rubber plantations. Local smallholders turned to rubber as well, seeing it was official policy and second it was a profitable undertaking. However, that last part is open to debate.

I refer to my post about the Euro crisis and Rubber Prices below. Since then prices have dropped to $3,400/mt for the equivalent of CSK5L on the Malaysian Rubber exchange. A price level we last saw in March of 2010. The difference then was that prices were on an upswing that culminated in over $5,000/mt whereas now that mark was now hit on the downswing; and there seems to be no end in sight.

Prices for CSK5L on the Malaysian Rubber Exchange for November 2011

It is exactly these wild fluctuations that can make or break an entire sector. All of a sudden, people that have invested in a rubber plantation find themselves in the unenviable position of having no return on their investment. After all, they had to wait for 6 years before they could even produce some cash flow. If the downward spiral of prices continues as in the past month that cash flow will be negative.

The following graph for smaller plantations illustrates this, although I very much doubt many a smallholder, and I am sure even some of the larger operators, will realize this. This is based on an investment of $5,000/ha, a production of 1.3 mt /ha p. a., and expenses including operation, amortization, capital expense, but no owner’s benefit. Values are in US dollars except for price/kg, which is in KHR. Naturally, prices for latex are understood to be average per year.

As we can see the breakeven point is at about KHR 7,000, if prices drop to KHR 4000 per kg the owner is losing big time. And it is not that we didn’t have this before. 2008/9 is still in vivid memory. Then prices dropped even below that KHR 4,000/kg.

If the investment is $10,000/ha because of higher land prices and with a medium production the picture looks like this.

It should be noted, though, that the above examples apply to plantations that were started from scratch, with purchase of land, clearing, planting, etc. The whole scenario is radically different if you look at the purchase of a working plantation or one on concession land.

If the investment is $20,000/ha for a working plantation of a little older trees and higher production the picture looks like this.

I will look at the parameters for concession land in a later post.

Looking at the news coming out of Europe, one is inclined to think that the same thing will happen again. What got the ball rolling was first Ireland, then Portugal, then Spain, and finally the worst case of all that in disturbing clarity – Greece. But now Italy is in the crosshairs, and even France is struggling to keep its stable standing in the financial world. Germany, the European powerhouse, with its stubborn chancellor is unwilling to do more than what has already been decided, which leads to great insecurity in the financial markets. The Hang Seng index hasn’t seen positive territory this entire month, it’s a permanent up and down in all the other major markets. Why? Because the signals coming from the European governments aren’t clear enough to make the markets gain confidence to buy their bonds. US banks got rid of their European exposure at the first sign of trouble there. Nevertheless, an unresolved Euro crisis will have its ramifications in the U. S. economy just as much as in Europe proper, with the Asian economies following as most of the Asian products end up on those markets.

I am asking again, ‘Why would this have any effect on rubber prices?’ On the one hand, it is understandable. If countries cannot finance their debts, austerity measures will have to be even stricter, possibly leading to a recession, which many economists predict will happen anyway. Recession means industry output decreases, and rubber will be affected by this as demand drops off. (This is a somewhat simplified explanation.) On the other hand, although nothing concrete has happened that would signify a decrease in demand, the fear of financial markets nevertheless provokes this rollercoaster ride. After all, China’s economy, the largest buyer of natural rubber, still hums along at over a 9% growth rate. Even Cambodia’s economy is set to grow by more than 5%. (If prices continue to decline the PM might have to correct his estimate.) So why do we rubber plantation owners have to suffer from this? Because we are at the bottom of the food chain. Speculators dictate the prices of stocks and commodities. As these speculators feel uncomfortable with what is going on in Europe, they get out of financial instruments that might threaten their profits. Rubber at this point in time is just a victim of the machinations of the financial markets – collateral damage, so to speak.

What we all, both big and small rubber operators here in Cambodia, can only hope for is a clear signal that the Euro zone will not break apart, that those practically bankrupt countries, e. g. Italy, Spain, and Greece, will be put on a safe footing, however that is accomplished, and that financial markets again gain confidence to buy those European government bonds. This coming week France and Germany will submit a plan of the financial restructuring of the Euro zone. Hopefully, this will send this long awaited signal and lead to some buoyancy in the market and thus at least stop the decline of rubber prices.

All this, however, leaves most Cambodian politicians and plantation owners unfazed. They see a marked increase in rubber plantations, and that’s enough for them to be optimistic. That this could come crashing down any time seems to elude them completely. Even the garment sector, not to mention tourism, would be exposed to this if this were to happen. Plantation owners are completely oblivious to what’s going on in the world. I thought maybe they would now be more amenable to lower their prices. But they still want a hefty $22,000/ha for a plantation that won’t produce for another year or so.

Bad boys, bad boys, whatcha gonna do when the cops catch you?

Rith (name changed), an elderly 65-year-old gentleman, was afflicted by a syndrome that no longer allowed him to drive a car himself. It had gotten so bad that at one point he had an attack of dizziness while driving and had to stop in the middle of the street. He was completely oblivious to the fact that just at that very moment the PM’s motorcade was coming down that street. The bodyguard details immediately suspected some sinister plot and approached the stopped car with drawn guns. Finding no plot to kill the PM, they swiftly moved the car to the curb and the motorcade proceeded. This happened a little over two years ago.

Since his condition didn’t improve, he decided to hire a driver. He owned one of those Mercedes S320ies at the time. The driver seemingly was a professional who had worked for an Okhna as driver/bodyguard. All these two years everything went well. There were no problems with the man, and obviously he thought that when Rith changed his car to a Lexus LX470 that improved his stature as well. (The Mercedes was too prone to breakdowns what with road conditions in Cambodia.)

A month or so ago, Rith decided to sell his Lexus as he just didn’t see why he would have to spend more than $25 a day on gas alone, and that was for driving in the city only. I occasionally used that Lexus with driver myself to drive into the countryside with business associates and easily spent $200 on gas. He decided to go for a smaller more reasonable car and got a 2007, you guessed it, Camry. Mind you, this car is not bad at all and it is the car of choice in Cambodia. At $27,000 it was a bit on the expensive side, but what can you do as long as the Cambodian government thinks high import duties and luxury taxes of a cumulative 115.325% are appropriate.

The driver, though, seemed to think that was beneath him and quit his job claiming he was busy with his family’s farm in the countryside. Rith hired a new driver but being a suspicious person didn’t quite trust him. In the end, he called the original driver and asked him back. After all, he had been reliable and trustworthy the past two years.

So one day recently he sent him to one of those Cambodian car washes. When the driver didn’t come back after some 40 minutes, he tried to call him but couldn’t get through. The phone was turned off. Now being the suspicious man that he is he had had GPS tracking system installed in all his cars; so the Camry had one too. He quickly checked it on his laptop and to his surprise found that the car was nowhere near on its way to him but was going in the direction of the Ministry of the Interior. The next thought was, ‘That guy is stealing my car.’ He called someone of his family who picked him up, followed the car, and drove him there immediately. He arrived just at the moment when a police officer was about to hand over money for the purchase of the car.

‘What are you doing with my car here?’ To which the police officer replied that the driver was selling it to him for $12,000. ‘Hey, this is my car.’ He produced his registration and ID-card. They promptly arrested the driver.

Now here is where the whole story gets a little murky. The police obviously wanted to pay in Khmer currency. So $12,000 is about KHR 48,000,000 and that’s quite a bundle. On top of it, it was fake money.

Rith was wondering whether the police had entrapped the guy by posing as potential buyers. Because there must be something wrong if somebody wants to sell a 2007 Camry for a paltry $12,000 in Cambodia. On the other hand, the police might sure have a way of producing a new set of ownership documents with which they could re-sell the car either here or ship it to Vietnam. From what I hear smuggling cars into Vietnam is still going on as unabated as in the 1990ies. There is no way of knowing what was behind it, or how the driver just happened to contact or know this police officer.

What now followed was the typical Cambodian dance. The police said if you want to bring charges, we need to keep the car. However, if you want to take it home right now, you need to compensate us for time and effort with $3,000. Whaaat???

Rith has family members working at the Ministry of Interior. Infuriated, he told them the story but they said, ‘Uncle Rith, calm down, bargain it down to $1,000, and be done with it. Because if you don’t they will keep the car as evidence, as they have every right, file formal charges against the driver, and it might take weeks before you see that car again.’ At his age, he had seen a lot and knew, of course, that was the way things operate in Cambodia. So he reluctantly started negotiating and they arrived at $1,500 in fees. He declined to file charges against the driver because that would exactly have entailed that interminable legal process.

So, bad boys, even when the police catch you that doesn’t mean you go to jail (although the driver spent one night in police custody). By good fortune or lucky circumstances, you just might go free despite the (attempted) crime.

The next day, when Rith picked up his car and the driver was released, the driver, his wife, and his child prostrated themselves before him and asked for forgiveness. Will he have learned a lesson?

When I heard this story I was flabbergasted. The driver knew the car had a GPS system installed. Although he probably thought that Rith was a frail old man now who wasn’t really agile both mentally and physically any more, he also knew that Rith was not without connections in the higher government hierarchy. Nevertheless, he tried to steal that car. Perhaps he was desperate for money, or in his mind the opportunity was too good to pass up. We won’t know. As for the police, if you aren’t a really big wheel this is how they work. And a big wheel’s driver probably won’t dare steal his car anyway, now will he?

The Proposed Budget Boycott

After some rather quiet time, the SRP is back in the news. I have been wondering about this, the more so as Sam Rainsy made an announcement in Paris a while back, in which he accused Bun Rany and Hun Sen of murder. Back in 1999, a very popular singer/actress was gunned down in broad daylight. Hun Sen was reputedly having an affair with her and, according to L’Express - a French newsmagazine, his jealous wife hired killers to put an end to the affair. Hun Sen was supposedly complicit in this. It should be noted, however, that there was never any concrete evidence. L’Express published allegations and assumptions, but could not provide any hard proof besides a diary. This latest accusation by Sam Rainsy did not make the headlines in Cambodia. Let sleeping dogs lie?

But now Sam Rainsy made another announcement that drew the PM’s ire. The SRP would boycott the budget deliberations and not even vote on it. It certainly is their right to boycott or not vote on it, but perhaps they should take another lesson in civics. They claim to be the only democratic party in Cambodia but seem to be rather ignorant of the role of an opposition party.

Last time I looked in other truly democratic countries, an opposition party’s function is to make opposite views heard in the forum of a parliament and in the media, put forth alternative solutions and resolutions, introduce laws they think are appropriate, and then vote on it. If they can’t get a majority to pass it, that’s too bad, but those are the rules by which parliaments work. Of course, if you only have 24 seats out of 120 there is practically no chance that you will ever get a majority for any proposal you introduce. But this is also a democratic principle. I can understand that they are pretty frustrated with all this, though.

Again, I grew up and lived in democratic countries, and had intensive civics lessons in school. If a party doesn’t like what’s going to be introduced as a law or in this case the budget, you vote against it. You do not show your displeasure by boycotting it in parliament. This is not a fundamentally democratic action. Either you are an MP or you should just not run or resign. SR wants to make the European parliament aware of the situation in Cambodia, reiterating the government’s mismanagement of funds, the prevailing corruption, and the generally dismal state of affairs in Cambodia. But at the same time, this party has not formulated one viable alternative plan or concept to bring about change in Cambodia. Time and again, they point at corruption at all levels of government as the greatest woe afflicting this country. No doubt it is prevalent, widespread, and probably unabated, never mind the office of the Anti Corruption Unit. Their work is the proverbial drop in the bucket. But boycotting parliament will not stamp out corruption, and trust me, the Europeans along with the U. S. definitely have different worries than looking at Cambodia to see whether the opposition party plays its democratic role or just flails its arms to make wind.

What I don’t understand is that this would provoke a constitutional crisis. Seven SRP MPs have resigned or will resign their seat under a party rotation policy. Parties in other countries have tried that too only to find out that it is not really workable. Given the SRP’s role in Cambodia, it is probably negligent in the great scheme of things. But those seats will be filled with party members from a list. Even if there were to resign at the time of the passage of the national budget, they CPP would still have their majority to pass it. The Assembly still has 120 seats, even if some seats are vacant. At the constituting session of this legislature, it had 120 elected members. If a party does not fill the seat it won at the election, it will just remain vacant.

It also appears somewhat nebulous how Sam Rainsy interprets the constitution. I believe he needs to take a few more civics lessons or at least consult with a competent constitutional attorney before making such, in essence, ridiculous announcements. Of course, thin-skinned Hun Sen as so oftern lost it and lashed out against him before analyzing the situation. It would not have been worth mentioning at all, just like the accusations he leveled at Hun Sen and his wife in Paris. These accusations sealed SR’s political fate in Cambodia once and for all. He is out of it, whether he realizes it or not. He seems to keep his head in the clouds not seeing that besides irritating Hun Sen from time to time, he is no longer a factor in Cambodian politics. Maybe that is why he comes forward with those half-baked pronouncements. Hasn’t he read the U. S. embassy cables dealing with him? You don’t have to be pro-CPP to be against Sam Rainsy and some of his party stalwarts. It is time that the good members leave the party and form their own new party that will have appeal to a broader base, similar to the SRP in its early days. It is time for Md. Mu Sochua to seriously think about this. Her talents are pretty much lost in that party. I am sure there are other intellectuals, emphasis on intellectual not business interests, that would find a home in that new party.

The Euro crisis and Rubber Prices

Anybody reading world news, especially on the economy, hasn’t seen one day go by without new disturbing headlines about the fate of the Euro, the Euro zone, and the consequences for the world economy.

This has been dubbed the second financial crisis; the first being the bursting of the real estate bubble in the U. S. (As it happens I was a victim of that bust as real estate prices plummeted to a level below the actual value, which came at a time when I was selling my house in Florida. Instead of pocketing a nice profit, I had to make do with just a fraction of that.) Anyway, the second financial crisis, although in part directly connected to the real estate bubble in the U. S., has been brought on by governments in the Euro zone overspending, which led to some countries having more debt than their GDP, e. g. Ireland, Portugal, Spain, Italy, and the most notorious of them all – Greece. Ireland’s banks were heavily involved in U. S. real estate. Some of them had to be bailed out by the government. Portugal and Spain had their own real estate bubble that could only burst as well, as all bubbles eventually will. Italy doesn’t know how to manage money to begin with – how can a country that has had 50 governments in 50 years ever properly administer itself? Greece, with no notable industry besides tourism, an overblown bureaucracy, a non-existent tax collection system, no administration to speak of, and where the public sector comprises 80% of the economy, submitted to the seduction of easy money and loaned money left and right to maintain an opulent life-style, as it would be termed for private individuals.

All countries have in common that their governments issued bonds to finance the big holes that had opened up in their economies - Ireland, Portugal, and Spain for bailing out their banks and Italy, which so far has not needed any help yet, for overspending in the public sector. I don’t want to go into any more detail here. If interested you can always find more in the big international newspapers – both off and online.

Now what does all that have to do with rubber prices? Well, what you read in the papers is that the ‘market’, in other words the ‘speculators’, immediately reacts to any news. Over many years, I have been following this with dismay. It had come to such a point that when there was even the slightest hint of a problem in the Middle East oil prices would jump up within a minute. One could even think that the news when some Middle Eastern potentate so much as broke wind the markets would react. It could be the Middle East, it could be China’s impending cooling of its economy; the reasons are as manifold as there are imaginative financial instruments.

Now for the past 18 months it has been the crisis of the Euro zone. Economists fear that when the rich European nations, mainly Germany and France, bail out their ‘poorer’ co-members, they would overextend themselves and cause the failure of their banks with catastrophic consequences not only for their economies but also for the world economy altogether. Adding fuel to the fire are those private, for profit rating agencies that feel called upon to judge the value of bonds, countries, companies, practically everything. They even downgraded the U. S. debt. The U. S., despite its economic woes, still is the world’s largest economy and without doubt will eventually pull out of its recession and its deep debts, however long it takes. Anybody who thinks that they won’t be able to redeem their treasury bills must live on another planet. So what is that downgrading supposed to mean and to achieve – perhaps maximizing profits for short-sellers? Promptly, the announcement had an instantaneous effect on the markets. The Dow Jones plunged 635 points. Ironically, treasury bills rose the next day – now who can understand that? One shouldn’t forget that those same rating agencies had given toxic real estate derivatives an AAA rating until the whole thing went bust.

Similarly, any news that comes out of Europe regarding the bailout of Greece has an instantaneous effect on the markets. Reading the news about this is like a roller-coaster ride. One day it’s more or less positive, one day is negative, with the negative outweighing the good news. It seems as though journalists thrive on painting bleak pictures.

Initially, all this had virtually no effect on rubber prices but when the Greek problem came up, they eventually took their hit too. In 2010, the strong Chinese economy overshadowed the Euro crisis. China is the largest buyer of natural rubber. Rubber prices remained at an all-time, and somewhat uncomfortable, high. This lasted until April/May of 2011 when Greece’s debt was finally reduced to junk status by the rating agencies. Paired with the fear of a weakening of European and U. S. economies, which would lead to a lowering of Chinese industrial output and reduced purchases of raw materials, this news started the slow but steady decline of rubber prices. This graph aptly illustrates this fact. These prices are for processed crepe rubber on the Malaysian Rubber Exchange; the Cambodian prices follow the exchange.

Month Price/100kg CSK5L

Jan 503.13
Feb 559.70
Mar 539.82
Apr 557.86
May 519.51
Jun 505.83
Jul 485.49
Aug 474.17
Sep 452.31
Oct 427.09

Prices for latex sold in Cambodia to processing plants follow a similar pattern as this graph shows, although there was a short recovery period in June when Euro zone ministers committed to a bailout package for Greece. Prices are $/kg.

Let’s see what this does in dollars and cents for the operators of rubber plantations in Cambodia. 40% of all plantations are smallholders, that is, they range from 5 to 50 ha. Let’s use a 30 ha plantation and an average production of 150 kg of dry latex per ha per month, or 450 kg for 30 ha.

Since February is the so-called wintering period on a plantation, we will start with April of 2011. The owner could record gross revenues for each month until October of this year.

April $ 17,313
May $ 15,255
June $ 17,454
July $ 16,098
August $ 15,606
September $ 15,686
October $ 13,185.

Compared to April the owner had approximately $4,300 less in his pocket in October; this translates into 25%, and that’s a lot of money in anybody’s book. Reason: the news had become extremely volatile in October; some even feared the collapse of the Euro zone. In previous months, the average price levels were helped by intermittent better news, which caused upticks in prices. A major positive decision was reached this week and so far, rubber prices hover a little above their lowest level in 2011. Of course, commodity prices are very high to begin with and an adjustment might be called for, but then markets don’t always react logically.

To those who think this is still a good income in a country like Cambodia I can say they are right but should not forget that those are gross revenues; operating expenses are considerable what with expensive fertilizers, fungicides, manpower, machinery, etc. Additionally, in order to get to this revenue level the owner needs to invest first in land, land preparation, then in seedlings, management, etc. Until trees produce good amounts of latex, the owner has to wait roughly 10 years. Although production usually starts after 6 years, yields are not in the higher range until year 10. So it’s not just sitting back and collecting money.

If you follow a certain reasoning you could say that Greece and the markets not only hold the European governments hostage but the smallholders in Cambodia too, not to mention the huge investment plantations. Greece with its unconscionable policies, and the speculators with their insatiable greed make their actions felt throughout the world. The rubber plantations are but a small part in the overall picture.

It is ironic that a country with a population of roughly 10 million people could get the large European economies (Germany with a population of about 82 million, France with 56 million) into a severe recession, not to mention the reverberations in the rest of the world. It is equally incomprehensible that the markets, say speculators, can determine a government’s policies. Mind you, this is a sector of the economy that does nothing but shuffle papers or hit keys on a computer keyboard and with that produce profits (or losses) for investors. It’s called investment banking. Most of the large banks are engaged in investment banking. They accept huge risks and but when they incur huge losses they all of a sudden become too big to fail and need to be bailed out by the government, in other words, taxpayers’ money. It is an old axiom that only money makes money, consequently if you have no money you cannot invest, but if you have money and you can invest and make a tidy profit, you should also be ready take a loss.

When I went to business school, I learned how to assess the value of a company based on its assets, liabilities, productivity, market position, long-term viability, earnings and earnings potential, etc. Those things have all gone out the window. The dot com bubble showed it, the real estate bubble showed it, and any subsequent bubble will show it as well. There is nothing wrong with trading in stocks, bonds, and such, but when it comes to buying and selling stocks, you don’t even have with borrowed money, a line must be drawn. Just look up the term ‘hedge funds’ and you will get an idea who dominates the financial world and who can ruin many an existence.

If you are interested in following the timeline of the Euro crisis, go to http://www.bbc.co.uk/news/business-13856580

Get out of Here

The SRP expelled two of their parliamentarians, one MP and one Senator, from their ranks for disloyalty. The affected politicians claimed they were kicked out to make room for some relatives of SRP higher-ups, otherwise known as nepotism. Critics of the party have accused the SRP of nepotism before, leveled even at their revered leader Sam Rainsy.

Claims and counter-claims, accusations and denials; these are the hallmarks of political life everywhere. So this incident is not really noteworthy for its happening; but I believe what is noteworthy is the fact that the SRP has no qualms about expelling members that it feels are no longer of value to the party. Also noteworthy is that, according to press reports, the party leadership made the decision. I am not sure what kind of inner-party procedures are set down in their by-laws but it reeks of an arbitrary decision – and this from a party that always portrays itself as the truly democratic political party in Cambodia.

The expelled ex-members indicated they would bring a lawsuit against the party. The party spokesman stated in response that the courts do not have jurisdiction over intra-party affairs. This spokesman is an MP himself and one must scratch one’s head and possibly raise an eyebrow or two at such pronouncements. An MP who is not cognizant of the fact that courts always have jurisdiction over disputes, no matter whom or what it involves, should probably seek employment elsewhere. You can bring a lawsuit against anybody if it is based on existing law. Of course, the outcome of that lawsuit is another question altogether.

A sort of funny story….

.....or maybe not. Petty crime is just as widespread in Cambodia as everywhere else. It starts with people stealing the make and type emblems off cars – the hybrid emblems are especially popular these days - and goes all the way to burglaries.

I live in a gated neighborhood in Phnom Penh with guards at three gates. They patrol the neighborhood at irregular intervals, both day and night. The community is walled in; barbed wire is mounted all around. Sometimes I wonder whether these guards would really be any help if you needed them. They don’t let just anybody in and ask motodups and tuk-tuks their business. But if you drive a car nobody will stop you. If the car is big enough they will give you a snappy salute.

Security is supposed to be good in those neighborhoods; at least my wife used to believe so. One recent night I was awoken by some loud noise. Being half asleep I couldn’t really make out what this was – a party, an argument, or what?

The next day we learned that a burglar had broken into a house nearby. On making his exit he encountered the 14-year-old daughter who returned to her room from a bathroom downstairs. She screamed her lungs out, grabbed the thief by his sleeve and tried to keep him from escaping. But she was no match. The burglar wrestled free and escaped over the balcony.

The people in the house are an American family. Now here is the baffling thing. They had been burglarized 4 times before. Each time the burglar entered the house through an open balcony door on the third (or some say second) floor. Nimble people can easily climb up to those balconies. Most Cambodian houses feature iron bars in the windows. They are an ugly sight but an absolute must as any builder will tell you. But all those bars won’t help if the door is left open.

The parents realized they had been burlarized after each incident – obviously money was missing - but failed to tell their kids so as not to frighten them - not altogether a smart thought. Consequently the kids didn’t feel they needed to observe the simplest form of safety precaution by keeping their doors closed, never mind the floor. Their house is located on the outer perimeter. The wall runs about one meter behind their house. The two adjoining houses are empty. On the outside of wall there is dirt trail – very convenient for any would-be burglars; equally convenient is that there is a gap in the barbed wire between the properties. They can just stroll along that dirt path and look who left the door open. I can only presume this is exactly what the thief in this case did. Having gotten lucky one time he just thought, ‘Well maybe I’ll get lucky with some other careless people.” He may have been surprised himself that he could break into the same house 5 times, assuming it was the same man. How naïve or stupid can that American family be?

The take each time: between $500 and $1,000.

After that incident, we heard that burglaries are not that uncommon in this community. People told about several of them; in one case the booty was a cool $100,000. Ah, these Cambodian people. They just love to keep their money at home, like there aren’t any banks in the country.

If I have more than $100 in my pocket, that is a lot. Who keeps money at home? Even if you want to do a large transaction, you can always go to the bank first thing in the morning. Unfortunately, checks are still a rarity in Cambodia’s business circles.

A house like this; easy to scale, right?

When You Need a Doctor….

Where do you go in Phnom Penh? I am sure this problems confronts most expats at one time or another during their time in Cambodia. I believe a fellow blogger - ”LTO-Cambodia” - gave a pretty good run-down some time back of what’s available in Phnom Penh. My recent experience makes me take up that subject one more time.

Fortunately, I am a very healthy individual and don’t need a doctor much. Since I usually leave Cambodia at least once a year I have any necessary check-ups done abroad, formerly in the U. S., now in Europe. Although the health care system is excellent, the cost in the U. S. is prohibitive, now that I don’t carry U.S. health insurance any more. Germany has an equally excellent health care system, and the cost is only a fraction of that in the U. S., even as a private out-patient. The great advantage there is you only need to go see one doctor. They all have the necessary equipment in their office, e. g. ultra-sound, X-ray, their own lab, etc. In the U. S. you are sent from one office to the next, which really makes seeing a doctor a big hassle.

Unfortunately, my wife is afflicted with some more or less minor health problems, which I presume to be the consequences of her early childhood during the Pol Pot years. Of course, she used to go to local doctors, or clinics, which abound in the city. Later she got quality health care in the U. S. and in Europe.

Here are our experiences with health care in Cambodia. A few years ago, around 2005, my son needed medical attention and we took him to one of those store-front clinics. The sanitary and hygienic conditions were repulsive and disgusting. Bedsheets were a nice ‘grey’; although people walk barefoot, the floor was grimy. The doctor wanted to give my son an injection, which didn’t happen because of his needle-phobia, and I was grateful for it in that instance as we really didn’t know whether it would have been advisable to have that needle stuck into him. So we left. Of course, compared to Western fees, these services are outright cheap, but you don’t know whether you go home in better or worse health. Needless to say, that was the first and last time we went there.

Initially, my step-daughter didn’t live with us in the U. S. During that time she was suffering from a rather rare syndrome in her intestines (I don’t want to go into details here), which we didn’t know about as it had not manifested itself before. But then she started suffering from nausea, vomitting, stomach and abdominal pain. A friend of my wife’s took her to a clinic. The first thing they did was hook her up to an IV, as they always do in Cambodia, whether you need it or not. The diagnosis was as hazy as the doctor’s knowledge. It was during the year we came to pick them up to come live with us. During our stay that same friend advised us to see a ‘famous’ doctor, apparently one of the chief doctors at the Calamette Hospital. He did bloodwork, took X-rays, and seemed to examine her thoroughly. His diagnosis: she had water in her abdomen. How it got there and the cause of it, that eminent doctor didn’t know. Treatment: another IV. Charge: $50.

When we got to the U. S. her symptoms persisted and I took her to an internist who just by looking at her was able to diagnose the problem (there were outward signs by which an expert recognizes the syndrome immediately). Naturally, he ran all the necessary checks and tests on her, including endoscopy and colonoscopy and started a treatment, which brought about a remission of that syndrome. Now that we are Cambodia she is still sympton-free and enjoys the normal life of young woman.

In my early years here I had a stomach problem, which was accompanied by a slight fever. Fearing a malaria-type infection my friend suggested I see the Tropical & Traveller’s Medical Clinic. A Western-educated doctor examined me, diagnosed minor food poisoning and gave me appropriate medication. Charge: $50. That was in around 1996.

My son suffered from sneezing fits. On one of his visits it got so bad that I took him to a nose-ear-throat specialist at the Aurore clinic. The doctor found the culprit quickly; unfortunately, the cure would have involved minor surgery, which we didn’t want to have done here. My son got some medication though, which helped alleviate the problem. Cost: $15, plus medicine (2009).

Since Florida my wife suffered from chronic allergies. These abated when here – for whatever reason – but one time they came back and got so bad that we decided to see the same doctor at Aurore. He prescribed a range of medicines; one of which produced a severe reaction in the form of stomach pain. Result: she needed to spend a night there in order to settle down her stomach; of course, an IV was administered as well. This time though, it definitely was part of the healing process. Cost for all of this: $100 for private room, food, care, medication (2010).

This past May, my son was visiting. He arrived with a severe cold, which I also unfortunately caught from him. Having had a rather good experience with the good NET doctor we went there again. Again, as seems to be the practice in Cambodia he prescribed about 5 to 6 medicines for him and for me. Charge: $25 plus $15 for the X-ray.

They eventually helped and after a week or so he was ok again. I, however, couldn’t shake off that cold, and on top of it I lost part of my hearing in my right ear. All that multitude of medications didn’t help. I went to see him about the loss of hearing; he said I needed to be a little patient. It is connected with the cold. After 3 weeks it hadn’t gotten better one bit so I decided to seek help from the NET doctor – a Russian gentleman - at that new hospital in Phnom Penh Thmey – the Sen Sok University Hospital. He prescribed a simple remedy: close your mouth and nose by clamping your hand over it, then exhale strongly so that your ear pops. Then swallow. Repeat that three times a day. After a week the hearing should be back. Lo and behold, it was back after a couple of days. Cost: $50 (2011).

Heartened by this experience, we went there again for a case of suspected heart troubles some time later. Fortunately, it turned out to be a false alarm. Cost of consultation and ECG: $100.

A splitting headache caused us seek their help again. The doctor order bloodworks and once the results were back prescribed the usual plethora of medications. The medications helped; the headaches subsided. Cost: $100 for the bloodworks, $40 for the consultation, and $60 for the medications.

Like many people we self-medicate minor problems. A few times there were urinary infections, which were healed with anti-biotics. But the problem with anti-biotics and with medication to relieve headaches, like ibuprofen or aspirin, is that they affect the stomach and can cause an inflammation of the stomach lining if taken over a longer period of time.

This happened to my wife. So we went to Sen Sok Hospital again. The good doctor, after listening to the description of the problems, immediately inserted an IV – what else? Then he suggested that she stay overnight for observation; additionally an upper stomach fluid probe needs to be taken and tested. So far so good, I thought, as he explained he needs to rule out certain causes to be sure which treatment to administer. The test came back negative, that is, no bacteria, fungi, etc.; diagnosis: gastritis from overmedication. Cost for test and consultation: $60.00.

The next morning when I came to pick her up she was still hooked up to the IV – the third one she told me – and additionally there was another bag added to the drip. My wife complained that the doctor hadn’t been in to see her at all. I went to look for him. Well, I found him downstairs at the entrance cleaning his large Lexus SUV himself, watched by a couple of male nurses. I approached him and asked whether he would have a minute. So we went aside, he with sweat on his brow, and he explained that the second bag contained medicine for the inflammation of the stomach; once that was finished she could go home. As it happened, that took a little over two hours. The nurse mentioned that she wanted to hook up another IV, which met with our determined protests. We just wanted to go home.

A few minutes later, she showed up again with the bill in hand. The total: $297.49. I looked at it and thought there must be a mistake. After all, I had already paid $60 the previous night. They must have added the bill for the room by mistake twice. At the cashier’s office the woman explained that indeed this was correct as my wife had been there two days. She had checked in at around 5 pm. It was then 2:30 o’clock the next day, so she was charged $60 for the room, consultation, and nurse’s care twice. I objected strongly. Also on looking closer at the bill, I found that the charges for all medications were $125. I was wondering, “What on earth had been so expensive?” One IV was $20 to begin with, plus that special drip was $30. Long story short, I argued back and forth with the good doctor who finally agreed to reduce the bill. He had also prescribed 4 medications; for another $46, mind you. Two were for stomach relief, one was for fungi, and one – another anti-biotic - was for bacteria. Now that threw me. The tests were negative for both, and the anti-biotic was the culprit in the first place. How can that quack prescribe one redundant and one in her case harmful medication? I just told the nurse to keep them. In the end I paid $180, and made it clear to the doctor and the nurses that they wouldn’t see us again at their institution. That whole thing was a rip-off, if ever there was one. And the irony of this story: they advertise 50% discounts on a big banner at the entrance.

Now where does that leave people who look for qualified medical care in Cambodia? I still believe the Sen Sok Hospital is a rather good place to turn to. They have experts in almost all fields. Their diplomas are displayed prominently in the huge waiting area. Most have degrees from the U. S., France, South Korea, Thailand, or Russia. In addition to the NET, the OB-GYN is Russian as well. A few have Cambodian degrees. That international background persuaded me to go there in the first place, never mind the slightly higher cost. The way I see it the doctors there get a base salary and then receive premiums for patients treated and medications prescribed. It was rather conspicuous that on each occasion they wanted to keep my wife there overnight. I guess a way to avoid that is to talk to the doctor very clearly about the expenses.

The best-known hospital in Phnom Penh is the Calamette, a French-run hospital. At one time I needed to take an old aunt of my wife’s to the ER. The conditions there are appalling. People who look like they can’t afford it (e. g. that old aunt) are kept waiting for hours. Doctors simply refuse to look at them. That place is definitely not for foreigners, although from what I know it is the only place where emergency surgeries are performed. In general, if you are not going to be treated by a French doctor I wouldn’t go there.

The a. m. Aurore is a place with expert doctors as well, whether it is an internist, NET, OB-GYN, urologist, etc. The cost is pretty reasonable and although the place looks a little run-down, it is clean and has all the equipment needed. The experts also perform surgery in their fields. The rooms are located in the upper stories. At least you won’t have to bring your own food. They feed you too. A consultation is $25; the room with board is $60; an X-ray is $15. They also have an MRI; I don’t know the cost for that, though.

Another international-class hospital is the Royal Rattanak Hospital. This is a Thai-run institution; it is big and looks modern and clean. The drawback there is that they only provide general medicine, which may be enough in most cases, but I am a firm believer in specialized care. If you don’t earn a high income or have adequate health insurance you might not want to go there anyway; a consultation is $125, the rooms start at $250 a night.

Then there is the American Medical Clinic at the Cambodiana Hotel. It is staffed by American doctors; a consultation is $45. Again, the drawback here is only general medicine.

Other than that, I am sure there are a number of hospitals, clinics around that I haven’t heard of or know about. But who wants to try them out as a sort of guinea pig? We will most likely use the Aurore from now on.

A word about those ever-present IVs, people even ride on the back of a motorcycle attached to one; I don’t know for sure but I believe doctors prescribe them automatically as they know that strangely enough Cambodian people don’t seem to drink enough and may be dehydrated a lot of times. Dehydration is a major cause for headaches, and anybody who has ever come in closer contact with Cambodians knows that they suffer from headaches and migranes a lot.

But principally I go by two rules that a doctor whom I knew rather well gave me:

‘A cold will take a week to go away with medication, and 7 days without medication.’

‘Don’t ever have anybody stick a needle into you, or cut you open, unless it is absolutely necessary.’

And finally, depending on the kind of coverage, age, history, etc., basic health insurance is about $85 a month in Cambodia, which is cheap in comparison to the West but given the low cost of health care in general it usually doesn't pay to buy one. The big if is, of course, hospitalization for a grave illness, a traffic accident, or similar, treatment of which might run into the thousands, if not hundreds of thousands. Then you are screwed if you don't have one. Think about that when you go see a doctor next time, or better, get one now.

Next Steps for the SRP

The Appeals Court reduced Sam Rainsy’s sentence by three years to seven. This has been the only item about him in the news for a long time now. Nevertheless some still ask whether he will get that royal pardon or not. I personally doubt it. This time the rift was too deep.

In that context I would like to quote two cables courtesy of Wikileaks. At about the same time I had come to the same conclusions – and I am no politician. Sam Rainsy is currently a non-entity in Cambodia. His virulent anti-Vietnamese rhetoric just does not resonate with the people as a whole. He merely panders to the geriatric Lon Nolists overseas with his diatribes.

Cable Jan. 29, 2010 - Excerpt
9. (C) The SRP Permanent Committee agreed January 28 to file an appeal later during the 30-day window, even though the initial public rhetoric will focus on the inability to secure justice and the futility of an appeal. Among the core SRP leadership, there is a realization that the loss of Rainsy's charisma, his dramatic speaking style, and his ability to unite will be keenly felt in Cambodia. A strategy to hold several digital video conferences with Rainsy from France and assurances of renewed commitment by the party faithful appear to be attempts to put a brave face on a serious setback. Some in the SRP worry that Human Rights Party (HRP) President Kem Sokha is already intent on stealing away SRP members to
the HRP in an attempt to make HRP the "legitimate opposition" that the CPP knows that it needs. Fissures in the SRP appear to be emerging with one group of accomplished and publicly
popular parliamentarians such as Son Chhay and Mu Sochua potentially squared off against an inner circle close to Rainsy and Tioulong Saumura, Rainsy's spouse and fellow SRP MP. Some observers see the Rainsy case as an old CPP tactic to divide and conquer the political opposition and suggest the CPP tactic is working.

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COMMENT
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10. (SBU) In both the prelude to the hearing and the reaction to the verdict, the SRP appeared uninterested in addressing the actual charges of Rainsy's role in property destruction and incitement, and instead focused on the larger issue of whether the border markers are improperly placed (Ref B). Rainsy continues to claim sole responsibility for the removal of the temporary border markers, despite video
showing he did not physically uproot them but brandished them for the cameras after others had pulled them up (Ref A). With the January 27 verdict, Rainsy cannot return to Cambodia unless he goes to prison or receives a pardon, which requires agreement of the government. In the meantime, without a leader present in Cambodia able to project a confident image and articulate opposition perspectives, the SRP faces tough decisions about what to do next and the ultimate direction of their party. In the end, most find it difficult to imagine how Rainsy's stunt will increase the SRP's political relevance in Cambodia, despite the headlines it attracted by Rainsy's very visible and vocal efforts to mobilize anti-Vietnam passion while most of Cambodia's population was focused on Thai border issues. However the SRP emerges from
this incident, it is clear that -- at least for now -- the playing field for opposition politics has been reduced as a result.
RODLEY

Cable Dec. 18, 2009 - Excerpt
Rainsy is doing nothing to calm the waters form his Paris venue, where he lashes out at the government a and attracts opposition funding. If Hun Sen sticks by his recent fit of pique not to pardon Rainsy until Rainsy has served two thirds of his sentence, the opposition may well have to readjust its leadership calibrations.
End quote

Meanwhile of late, the SRP members of parliament sent a letter to the local director of the World Bank asking that the WB maintain withholding funds from the Cambodian government until the Boeung Kak Lake issues have been resolved. Although those issues are indeed thorny and remedies are overdue and come rather late, if not too late, I have never read or known that MPs advocate measures aimed against their own country no matter of what quality they think the government is; those funds indirectly benefit their own constituents, among others. It is the WB’s perfect right to suspend funds, but for parliamentarians to ask them goes against the responsibilities and duties of elected members of parliament; it directly contravenes the principles of democracy in my mind. As long as the opposition is of such a caliber there is no chance on earth that they will ever have enough stature to be part of a government. So where is the alternative leadership the U. S. ambassador refers to? Isn’t it time for them to be more vocal? I haven’t read anything from them or about them. Two years until the next election is not a long time in terms of a campaign that has to make do without a lot of money for media exposure.

Boating in Cambodia

First off, there is no boating in the sense we normally understand it in Cambodia. There are a couple of charter boats in Sihanoukville for tourists, notably one run by a Kiwi and an Aussie – a 12m regular fishing vessel, with a small bar, head, and so on. They offer day trips to outlying islands. Other than that, you don’t see a whole lot of recreational fishing.

I am an avid boater and had to do without one for over a year now. I am really itching to get back on the water. Although, to be honest I am not that great a fisherman, this is still my most favorite pastime. People who fish know what I am talking about. There is nothing quite like it if you are out on the water dropping your lines to the bottom and getting that bite and the line starts reeling off like crazy. Of course, those are the great times. The other times are much more frequent though; you just sit there and nothing moves. It’s really frustrating sometimes. You see all those nice fishing reports online accompanied by trophy pictures or even videos of the catch, and you were out there to show zilch for it. The only consolation is that those great reports are usually written by pros – charter captains - this is one way to lure new customers to their business; and they know from long experience where the fish are. We all know the saying ‘You got to fish where the fish are.’ To find that out, though, takes time and patience, not to mention a bit of money for the gas. Those marine motors don’t just sip gas, they guzzle it. Nevertheless, the true fisherman never gives up.

Now if one were to believe boat salespeople the only thing you need is a great boat, preferably big, with big, powerful motors, and the fish will just wait to snap up your bait. Frankly, I succumbed to that sort of persuasion once myself. I got a nice boat that could take me out 100 miles offshore. More often than not, I didn’t come home with dinner for four, maybe for one. At $3.80 a gallon, I had just blown $100 for one fish.

Now I am ready to get back into boating here as well. After all, the main reason I bought land and built a house on a riverbank about 500 m from the open sea was that I could get out quickly, maybe just for a quick spin of an hour or two and head back in, hopefully with a cooler full of fish. But where to get that boat? I had been looking all over the place but apparently the only thing available were those traditional wooden fishing boats that lie low in the water and have a sort of a lawn-mower motor with a driveshaft and propeller attached to them. The bigger ones have Diesel engines; but they normally only produce 30 hp and that doesn’t get you anywhere fast. Those boats are affordable sure enough, but it really isn’t what I was looking for. They go about $2,500 for a smaller one (used with motor) to $20,000 for a bigger, new one as in the picture with a 30hp – Diesel.

10 m traditional fishing boat

Then one day I spotted an ad on www.bongthom.com – somebody was selling a 10 m traditional boat and a speed boat with twin 200hp Yamahas. The traditional boat was $5,000, if I remember correctly, but it had that diesel engine, bilge pumps, etc., so maybe this was an alternative. The speed boat was $40,000 and with those two motors would have burned a big hole in my pocket. I checked them out both. Not for me.

The seller, a guy named Rob (he won’t mind giving his name here as this will possibly help him) – friendly as he is – pointed me to another outfit in Koh Kong. They had a 22’ center console monohull with a 140hp Yamaha on it, which exactly fits my bill. So off I went to take a look at that boat.

If I ever saw a ‘great’ salesman, here he was. This was a boat made in Thailand by an American. Supposedly, it was new and hardly had any hours on it. The first look I got I thought that thing is at least ten years old. The seats were all mildewy, both outer and inner hull had nicks and scratches, the gelcoat was dull, and signs of rust all over the place. The motor seemed to have been either re-built or at least tuned and serviced lately. Anyway, the owner started by telling me he didn’t like the way the boat was built, e. g. the hull (gunwale) was not smooth, the beam was too narrow, etc., etc. I made that trip for nothing.

Looks good in the picture, but.....

On the positive side, though, this guy – an Aussie just like Rob – imports rigid inflatable (RIB) boats from Australia. They are really nice and I would indeed buy one of those if the price wouldn’t exceed my budget. Which brings me to the question of import duty and taxes. The salesman said he paid $2,500 for that Thai-made boat, but isn’t sure how much it would be now. My guess was that since boats are luxury items just like cars in Cambodia the import duty and tax would be the same, namely 115%.

This is a RIB

Now Rob back in Sihanoukville told me he is starting his own boat-building business in Sihanoukville, and maybe he could help me with that; especially since the approximate price he gave me was exactly within range of my budget. A locally built boat would not be subject to those outrageous duties and taxes. Of course, all the special marine hardware, brackets, etc. would have to be imported, but the duty on those is but a fraction (15% plus 10% VAT). The only downside I found was that the boats were going to be made of fiberglass-encased wood. I am a firm believer in full fiberglass boats; fiberglass doesn’t rot. Hardwood is too heavy for a speedboat, so the plywood used is particularly susceptible to rotting. I read up on that and found that another risk is called ‘delamination’, that is, when and if the fiberglass were to peel off the wood exposing it to water. You really got a problem then. Rob has a partner, Ted, who is the actual boat builder. He hails from Connecticut; and all the coastal states in the U. S. are prime boaters’ country. Ted honestly said he couldn’t deny that but this is where the craftsmanship of the boat builder comes in. You do shoddy work, you will have a problem; you do it right, we will all be happy.

Then my Khmer friend told me of a shop in Phnom Penh that makes full fiberglass boats. He used to work with him when he assisted in building a luxury wooden river cruise boat for a French touring company a few years ago. I looked for him and found him on state road no. 5 to Battambang along the riverside. It was a typical Khmer operation, which doesn’t really instill confidence in foreigners. I am used to that from car repair shops where I have never been let down, so I wasn’t put off too much. He only builds smaller boats up to 16’, 17’. That’s a little too small to go offshore. But he promised me he could help me import any boat I wanted. He also claimed that there is no import duty as Cambodia doesn’t have a code for boats yet. I was quite excited. Maybe, after all, I could get a nice fishing boat from the U. S. and promptly checked online. I found two excellent boats in California. The freight would be around $5,000, but if the tax was halfway like the guy said I was ready to go for it.

I wanted this beauty

He checked with the customs department. That took forever, of course, and in the end he emailed me some sample tax invoices which showed anywhere from 15% plus 10% to 100%. Bottom line, he didn’t really know.

So I contacted one of the larger freight forwarders in town. If they wouldn’t know, who would? As I had suspected import duty, luxury tax, plus VAT comes out at a compounded 115.25%, just as with cars. There went my dream of getting one of those nice boats. Because in the end I would have to shell out something like $40,000 for a boat that would sit idle about 90% of the time. I don’t believe in paying that kind of money for a used car, why should I pay this for a boat? That price is only an average price tag here for a 2008 model, most of them go for $60,000 to $80,000.

After some hard thinking, I made up my mind and ordered that boat from Rob and Ted in Sihanoukville. Here is a model of what it will look like except that it will be a center console and the deck layout as well as the transom will be designed differently. If you are interested in a speedboat for fishing, diving, snorkeling, here is his phone number 016 511 251. Hopefully in 6 to 8 weeks I will be on the water catching snapper.

Something like this

Incidentally, Rob does have quite a bit of experience with boats. First he is the operator of the Beach Club in Ream, where he uses two traditional boats for his guests there. He also has that 32-footer(I believe)with the twin motors, and operates three speed boats at the Sokha Beach Hotel activity center.

Population Growth and Its Price

Looking at a normal street scene one cannot help but notice the overwhelming majority of young people. They can be a pesky lot when they ride their motorcycles with abandon and without regard for their own, or other people’s lives. Traffic would run a lot more smoothly and with fewer accidents if it were not for those obnoxious young people (not to mention those motodups and tuk-tuks).

With all these young people, Cambodia is headed down a path that should be cause for concern. The people as such seem to be quite unable to raise, educate, train, or otherwise guide their young people so that they may become productive members of society. More than 50% of the population is under 25 years old (CIA World Factbook). As the World Factbook states, it will be the government’s daunting task to fashion a policy that helps create jobs. These jobs have to be generated in the civil sector, as the country certainly doesn’t need any more civil servants who while away their days pestering the people they are supposed to serve. In one of those leaked cables, the U. S. Embassy also notes that the PM and his government are faced with this great problem and may fear the consequences of this imbalance as those young people, after getting at least a minimal school education, all of sudden find that the world out there doesn’t have the jobs that would afford them a life that is portrayed in all those TV commercials. These commercials invariably show people driving shiny cars, having the latest cell phones, and all live in well-appointed houses or apartments. An especially stark contrast between reality and the TV dream world are the kitchens shown on TV. Even in more affluent houses in Phnom Penh you will hardly find any of those nice and shiny kitchens with the most modern appliances. (The fact is that an estimated 70% still cook their meals on wood-fires.)

It appears as if TV sets are turned on 24 hours a day. And since the young people have nothing to do but watch TV most of the time (excepting the better-off kids who own a computer and spend their time in front of that), they eventually find out that their expectations of what they can achieve are way overblown. This indeed does pose a grave risk for Cambodian society as a whole. High un- or underemployment among the young creates social problems. Dissatisfaction generates unrest, crime, and higher drug use.

A ghastly reminder of that happened just a few days ago when three young thugs robbed and shot dead a moneychanger in broad daylight in plain view of many people in front of a curbside market near the airport. Their take: $30,000. Especially horrifying was the calmness and magnanimity with which one gangster shot that woman, took his time arranging the box with the money to sit right when getting on the pinion seat of the motorcycle and then rode off into traffic. Dismayingly, nobody moved to help that woman on the ground. (The media report that the son-in-law tipped those people off.)

As Americans know very well, their country is among the ones with the highest crime rates in the world. Explanations often quoted are the disparity between rich and poor, the dwindling middle class, and the economic problems that led to an unemployment rate of about 10%. There are distinctive similarities between these two otherwise so different countries. In Cambodia the unemployment rate is around 20%, the disparity between rich and poor is even more drastic, petty crime is ever-present, serious, and violent crime an almost daily occurrence. Add to that the general lack of individual discipline, the disregard for rules, regulations, and the law, and you have all the ingredients for future social upheavals.

There is virtually no middle class in Cambodia. In fact, it probably is rather difficult to define social classes to begin with. We know there are rich people as evidenced by their flaunting their wealth with grandiose villas, multiple luxury SUVs, and spending habits that rival those of African chieftains and Arab princes. But where are the people that hold down clerical jobs in private companies and government? People that make, say, around $500 to $1,000 a month. The jobs paying that kind of money are far and few between, as anybody who is somewhat familiar with the local economy knows. Then, of course, we have the vast lower class; the people that just survive on the bare minimum. To be honest, after so many years I am still amazed how they do it. Everybody seems to own at least a motorbike, cars clog the streets of Phnom Penh, and even in villages many people are proud owners of a car.

But what are the prospects of all these people that enter the job market, where they cannot find jobs; sometimes for lack of knowledge, sometimes because they studied the wrong subject, mostly though, for lack of a broader economic base – there simply aren’t enough jobs. What they do know, however, to put it somewhat crassly, is how to make babies. All these young people seemingly get married before they are 22, at least that goes for the women, and the young men are not much older. Parents are afraid their daughters will become old spinsters if they are not married by that age. These parents are maybe not even 40 themselves, or barely over 40. And in most cases, within a year of their wedding the young people are proud parents of a baby boy or girl. A second one will be on the way shortly thereafter, and so on, and so on. In other words, that population growth will go on unabated exacerbating the serious situation in the job market exponentially. People in Cambodia as a rule have more than two children, the number that would sustain a population. Of course, part of the problem lies with the good old Asian tradition to have as many children as possible so these would support their parents in old age. But if those children have no jobs, no prospects in life, that tradition is going to blow up in their parents’ face. The children along with their parents will be destitute. The children can’t afford to support their parents any more. It may eventually lead to the children abandoning their old parents and who then have no way of supporting themselves. This dire picture is especially true for Phnom Penh and its surrounding districts that grow ever closer together on account of that resurgent building boom. It is an established fact that the urban poor’s plight is far worse than their fellow fellow citizens’ in rural areas are. The break-up of the traditional Asian family takes place first in the cities, and that is definitely noticeable in Phnom Penh. Sometimes, however, this is not restricted to just the young people.

Two cases in point:

A nearly 70-year-old couple gave up their son to a Canadian couple for adoption when he was 12 years old. They believed the son would have a better life there, and naturally thought, that he would support them later; which he did, being the good Cambodia son that he was.

That first happened in 1972 or so. Subsequently, wanting another child they brought up an adopted daughter who then unfortunately got married to a drunkard. The drunken husband fell off his bike and was killed in the accident. He didn’t provide for his family to begin with but now he left her with a baby girl and no prospects of supporting herself. She got married to another man, but obviously had a disposition to live with an alcoholic because that second husband was a drunkard too. They produced four children. Anybody can guess what will become of those children.

The in the meantime adult son in Canada fell on hard times with his business after the financial crisis in 2008 and was unable to support his natural parents further. Their adopted daughter was also unable to take care of them. In the end, these foolish (one cannot say otherwise) people borrowed money using their house, the only asset they had left, as collateral and used it in a small-time loan-sharking business. Loan-sharking because they charge outrageous interest rates, e. g. from 5% to 10% per month. Of course, it’s unsecured loans, as small as the loans may be, so a premium interest rate may be acceptable, but 120% per year? The reasoning goes like this: you have $5,000, you get $500 a month, which is enough for them live on. We all know the catch, of course. And that promptly happened after a while. Somebody couldn’t pay and they were out of their money, owing the bank, which threatened to take their house. To their great relief they found somebody who loaned them the money.

These old folks have an even older mother, around 98. Now this bleak situation meant they couldn’t look after her any more either, not that they had done that a lot before. They simply ignored the fact that the mother was still alive. Thankfully, the youngest son of that old lady and his daughter at least give the mother and grandmother shelter and a little food. Guess what? The situation isn’t much better in that part of the family. The granddaughter’s husband sired four children with his wife and two with his mistress - on a policeman’s salary.

And then there is this old lady, over 70, she doesn’t really know how old she is, who also adopted a daughter as her husband died before they had children together. She brought her up, but that daughter was in the habit of spending money she didn’t have. She always borrowed from neighbors and so-called friends. In the end, the situation had become so bad she had to leave the little village on the outskirts of Phnom Penh where they lived. She left the son she had with her mother. Needless to say, that the husband had left a long time ago. The grandson seemed to be a decent guy. He stayed with his grandmother and took care of her. But this only lasted until age 19. He got a job as a driver at a garment factory, met girl, promptly impregnated her, and under her threat of suicide married her. Here he was with hardly a place to live, no job (which he lost during the downturn after 2008), but with a wife and a baby. Eventually, he took off too to find a job elsewhere, forgetting about his destitute grandmother who doesn’t know where the next meal comes from. (She did find somebody who is helping her out though.)

These two examples show how poverty will eventually break up a family; and these are not singular cases. When push comes to shove, not much seems to be left of the moral fiber that normally makes up the core of family values in Cambodia. They also show that no matter how precarious their situation, people will produce babies regardless. In another post I had mentioned that in rural areas these values still seem be very much intact. Children take care of their old folks. But here too more and more young people migrate to the urban centers to find ‘better’ jobs in a garment factory or in the construction business.

Nonetheless, traditional values still play a determining role in starting a family both in urban and rural areas. These traditions and values only confound the population problem.

Another case in point:

A young man, by now 28, went to college and got a bachelor’s degree in tourism, which isn’t much worth in the grand scheme of things, but nevertheless, he got a better education than most. Best of all, nobody helped him. He paid his way through college by working in the mornings and at night. In the afternoon, he went to class. Now one would expect that he would go about planning his future a little better, and that always includes some sort of family planning. First of all, he got married before he graduated because his parents and the prospective wife’s parents put a lot of pressure on him. They threatened she might go with another suitor. After all, she was a ripe 22 years old and might miss the boat. His manly pride couldn’t take that. So he did the deed. In my typical Western concept I had advised him, first, not to get married before he had landed a proper job after graduation, and, second, don’t have kids until he was somewhat settled financially. He agreed wholeheartedly, but his in-laws had a different plan for them. Just four months into his marriage, his mother-in-law consulted with a fortuneteller who predicted that this year was very auspicious for the birth of a grandson. As things go, she ruled that her daughter was to have that baby this year and they promptly set to work. Not too long afterwards, we learned they were going to be parents. In the beginning, it didn’t seem all that bad, as he had indeed landed a job as a hotel manager and made $500 a month. Three weeks into that job the owners let him go as they found out that a rookie couldn’t really help them fill the hotel. Well, he found out the hard way that life ain’t that easy after all. Now he and his wife live in his in-laws' house, without a job, and a baby on the way.

At the bottom rung of society you have the absolutely ignorant, one is tempted to say dumb, people who have no idea that there is such a thing as birth control. Of course, these people are poor to begin with, they are absolutely uneducated, just scrape by, but their natural drives are well defined. They don’t know how to support the family of six to begin with, always complain about the poor hand they were dealt in life, but then before they know it, there is a fifth child on the way. The mother says, “I didn’t even know I was pregnant until I was 5 months along.” Suuure! There is an office of the The Reproductive and Child Health Alliance (RACHA) in Phnom Penh. They provide birth control devices for people free of charge. But one needs to know about these things first, right?

All these factors relative to the population and its growth come together in Cambodia, a country that is trying mightily to overcome its third-world status. There are no easy answers or quick-fix solutions available for this overwhelming problem. One answer surely is education both sexual and general, but that will take generations before any tangible results would be seen. China’s policy of a one-child family was cruel and drastic, led to infanticide, and was counter-productive. Surely, this is one thing the government here doesn’t want to even begin to consider.

Certain segments of the opposition conjure up social unrest as the one means to unseat the hated government. There is an email campaign underway called ‘The Lotus Revolution’. I have no idea who is behind it; I just somehow got on their mailing list and this is how I learned about it. This is a pipe dream at best in my opinion. The Cambodian people are submissive in character and won’t go to these extremes, not by a long shot. Nevertheless, a program needs to be put in place that stems the population growth. The government has so much influence on the mass media, especially TV. A PR campaign driving home the need for birth control over and over again would be a first step. Most assuredly, the statement on TV by a highly placed person in Cambodia that the country needs more people is not pointing the people in the right direction and I am just puzzled what that person was thinking. The government and NGOs helped bring down the number new HIV infections. Surely, this problem deserves just as much attention.

The Ubiquitous and Mostly Incompetent Middleman

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

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

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

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

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

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

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

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

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

Back, .... and some 'Pretty Good Economic News'

After a hiatus of more than 2 months I am back. I took a trip to Germany and Italy for 6 weeks and since my return have been extremely busy with my (consulting) job, so that between that, checking on things at the rubber plantations, and my search for a fishing boat, I haven't had much time to dedicate to writing about Cambodia -as it is.

I have to say one thing. The Italian waiters, especially in Venice, could really learn something from the normal waitstaff at Cambodian restaurants. I do understand that Venice gets run over by about 20 million tourists a year - the city itself is only about 300,000 - so the waiters might sometimes get a little harried, but one would think the basic courtesies could still be extended to the people who in effect pay their wages and their tips.

There are different mentalities in that country, as in any other larger country too; that was made strikingly clear in the city of Verona where service was outstanding and the waiters' politeness was impeccable.

Nevertheless, what a contrast to Cambodia where in the many years I have been here I really haven't met with a rude or impolite waiter/waitress; never mind their oftentimes incompetence; at least, they do it with a smile on their face.

On another note, I am a regular reader and previous poster on Khmer440.com. Their website got a makeover and it looks much different and the front page is now really good. I can only recommend one of the recent contributions by one of their regulars, '7 reasons why I should probably marry a Cambodia woman'. This is really a funny, somewhat self-deprecating piece, but it does hit the nail on its head. You can read it here http://khmer440.com/k/2011/08/7-reasons-why-i-should-marry-a-cambodian/.

Again here is a quarterly newsletter put out by Leopard Capital by email. All in all, they paint a pretty good picture of the Cambodian economy. For those of you who don't receive it I am attaching it below:

Economic Update

  

In 1H 2011, Cambodia is beginning to see signs of a return to the robust pre-crisis economic activity after a retraction in 2009 and modest recovery in 2010. Economic growth forecasts for the year have been revised upwards to 8.7% by the Economic Institute of Cambodia, while the IMF and the World Bank currently predict a more conservative 6.5%. The elevated forecast is being driven by three of the Kingdom's four economic pillars-garments, tourism and agriculture-while recovery in real estate still remains nascent.

Garments benefit from relaxed regulations. The garment industry contributes more than 70% of Cambodia's exports. In H1 2011, garment exports surged 32% YoY to US$ 1.9 billion as a result of loosened European Union regulations governing rule of origin and increasing demand from Asian countries. As of January 1, 2011, under the Everything But Arms (EBA) trade initiative, least developed countries such as Cambodia could export to the EU duty- and quota-free if the country manufactures 40% of the product's value, whereas the previous threshold was 70%.

Tourism increases with more direct flights. Cambodia's second largest source of income is the tourism industry. In H1 2011, tourism arrivals rose 13% YoY to 1.4 million with Vietnam, Korea and China as the largest sources of tourists, respectively. Ticket sales at Cambodia's main tourist attraction, Angkor Wat, rose 33% YoY to US$ 20 million during this period, and total revenue from the sector is expected to reach US$ 1.9 billion in 2011. An increase in direct flights to Cambodia is one of the principal drivers behind the overall increase in arrivals-Air France has even relaunched direct flights from Paris to Cambodia in July after a 37-year hiatus.

Agriculture also benefits from relaxed regulations. Accounting for a third of the Kingdom's GDP, the agriculture industry also benefited from the relaxed EU export regulations, among other factors. In H1 2011, rubber exports increased 84% YoY to 21,511 tons (US$ 102 million); milled rice exports increased 369% to 80,442 tons ($46 million); and cassava exports increased 88% to 212,018 tons (US$ 8.7 million). Prime Minister Hun Sen has set a target of exporting 1 million tons of milled rice by 2015-a feat considered attainable if the Kingdom builds another 25 to 30 rice mills (a US$ 350 million investment) to expand production from currently just five major mills.

Real estate starts to recover. Cambodia's fourth economic pillar, real estate, has started to show signs of recovery in 2011. The value of approved construction projects (i.e., housing developments, apartments, factories and tourist facilities) increased 94% YoY to US$ 638 million in H1 2011. While land prices for commercial and residential properties in Phnom Penh have still remained flat since the end of 2009, demand and prices are expected to rise over the next two years.

Banks are also rebounding. With 35 banks, Cambodia's congested banking sector showed signs of a rebound in H1 2011. Aggregate loans among the Kingdom's three largest banks increased 9.5% YoY to US$ 2 billion-loan books for ACLEDA, Canadia and Campu grew 11.9%, 10.6% and 5% YTD, respectively. Banks are expecting a surge in agricultural investment to continue driving the increasing demand for loans. The growing agricultural sector has also led to more loans and deposits at the Kingdom's 27 microfinance institutions (excluding ACLEDA)-loans among these MFIs increased 6.7% YoY to US$ 505 million in Q2 2011, while deposits increased 33% to US$ 69 million.

CSX opens with no trading. The long awaited Cambodia Securities Exchange (CSX) officially launched in July, making Cambodia one of the last Southeast Asian nations to open a stock market. However, no companies have been listed yet for trading. Three state-owned enterprises-Phnom Penh Water Supply Authority, Sihanoukville Autonomous Port and Telecom Cambodia-are expected to list by year's end.

Inflation is a rising concern. Driven by rising food and petroleum prices, the Kingdom's inflation rate rose to a 14-month high of 6.5% in May 2011, exceeding the inflation rate of neighboring Laos and Thailand but still well below Vietnam's rate of 20%. The Cambodian government had recently raised its 2011 inflation target by 50 basis points to 5.5%, while the World Bank and the IMF predict 5% and 6.5%, respectively, for the year. To mitigate inflationary concerns, the National Bank of Cambodia is considering raising the reserve requirements of commercial banks from 12% to 16%.

End

Being in the natural rubber business, I am a benefactor of the upsurge in prices, and despite those irrational up and down swings in the stock markets, rubber has been holding pretty steady over the year. There was some drastic drop from around $4,900/mt for crepe rubber to around $4,700 right now, but the expected drop to $4,000 is not in sight despite some predictions that there has been an oversupply since July. I will continue reporting on that particular market situation.