Saturday, December 8, 2012

Economic Land Concessions

A few months back the PM signed a moratorium on the granting of economic land concessions. Nevertheless, a few concessions seem to have been granted after that moratorium. And recently after receiving another complaint from local people having problems with the concession holders, the PM stated the companies must abide by the stipulations of the concession agreement or lose the concession without compensation. This put the economic land concessions (ELC) back into the limelight.

Here is my experience with ELCs and how they work. These concessions transfer the authority for the exploitation of certain tracts of land from the government to an investor/investment companies. They may be for mining or agricultural purposes. The most notorious of them have in the past been concessions for the cultivation of rubber trees. There was practically a rush to start rubber plantations as investors saw an unprecedented rise of prices on the world market starting in 2008. Although there were dips in those prices the general outlook was positive as basically all natural resources disproportionately gained in value during the past five years or so. The underlying reasons for this may be a perceived or actual scarcity, increased consumption, and, in my mind, most of all, speculation.

Last year I had become involved in obtaining an economic land concession for a rubber plantation in Cambodia. A investor with interests in the automotive industry hired me as a consultant based on my long-term experience in Cambodia and the rubber business in particular. In the face of rising raw material prices this investor was looking to procure the raw material at its origin as part of a vertical integration into their business.

Originally, they were looking for a working plantation of about 3,000 to 4,000 ha, possibly broken down into separate smaller plantations. After looking at a number of them we shelved that idea as the state of these plantations was anything but up to par in terms of international standards. We then decided to try to obtain one of those ELCs and set out in locating suitable land.

One must bear in mind that only the Ministry of Agriculture can approve such an ELC and a certain procedure needs to be followed.

  1.  An investor cannot apply from abroad. They must have a registered company/corporation in Cambodia, a tax number, and a working bank account at a local bank. This company then puts in the application.

  2.  After locating a desirable tract of land the investor must apply at the Ministry of Agriculture (MoA). Comprehensive information about the investor and their financial qualification must be disclosed.

  3. The MoA maintains a computer data base listing the soil properties, land coverage, etc. of the entire country.

  4. They then review details of  the land in their database and decide whether it can be made available for a concession. This will initially comprise the questions of forest coverage and possible overlapping with other ELCs, either applied for or already granted. Officially, land covered by dense or semi-dense forest will not be approved for such a concession, which as we will see later can be a very important catch in the whole process.

  5. If available, the official bureaucratic machinery is set in motion.

  6. A commission consisting of representatives of the MoA, the Ministry of Environment (MoE), the Ministry of Commerce (MoC), the Council for Development of Cambodia (CDC), and the provincial government will be assembled to study the feasibility based on their own data and the investor’s application which includes financials, a business plan, and any necessary supporting documentation.

    The Ministry of Environment is tasked with conducting an ‘Environmental Impact Assessment (EIA)”. This is a comprehensive study covering every aspect pertaining the tract of land, e. g. soil, rain fall, waterways, elevations, structure of population, settlements, etc.

    The local government is to look into socio-economic aspects, e. g. local settlements, existence of community forests, impact on the local population on and nearby the planned concession.

    Compiling this EIA will take about three months. The EIA will designate the usable area, that is less waterways, religious sites, settlements, community property, etc.

  7. Once the application is approved by the committee, the MoA submits the application to the Prime Minister’s office. The PM will then sign an authorization for the MoA to enter into a concession agreement with the investor.

  8. It is now the investor’s job to draw up a master plan that is basically a business plan for the next 5 years taking into account any issues that might arise from conflicts with the local population.

  9. The agreement will allow the investor to clear the land after the master plan has been submitted and approved, the land in questions has been transferred from public land of state to private land of state. A special permit is issued for clearing. The investor can sell the lumber from the clearing of the land.

  10. The CDC will grant the investor’s company special tax status, e. g. tax exemption or reduction for the first 9 years, tax exemption for equipment to be brought in, etc. The company will then be listed in the investment register with the CDC.

  11. The whole process will take about 6 to 9 months; it can sometimes be expedited if an influential person aids the investor in the process.

This all sounds pretty straightforward but there are many pitfalls that might occur on your way, which will make the process take longer and most likely more expensive. Plus one mustn’t forget that one is dealing with a lumbering bureaucracy. After all, the price of the concession for 1 ha at that time was around $350 to $400; before the moratorium it had risen to $480/ha. (I am publishing these prices here as they have been widely reported in the media, otherwise I would have kept them confidential.) Needless to say this price includes some hefty commissions for several parties involved in the process.

So if you do the math, 10,000 ha will cost you anywhere from $3.5M to $4.8M. One can offset part of this with the sale of the lumber, but it won’t come anywhere near the initial capital outlay. Overall economics for a rubber plantation aren’t that great initially either. Clearing, planting, and maintenance the first year will be about $2,000/ha or $20M for 10,000 ha. Maintenance until the first yield after 6 years will run to another $30M ($500/ha p. a.).  So round about $50M will have been spent by the time some revenue is gained from that investment. We are not exactly talking small potatoes here. A long-term view of 15 years, though, will make it a profitable enterprise and the investment will have been recovered, barring any unforeseen events. Concessions are granted for 70 years with an option to extend.

Registering a company and getting a tax number is a pretty simple deal. It includes a lot of forms but it can be done in a week or two. Now comes the more difficult part - how to find suitable land. There is a score of middlemen in the city that once they hear you are looking will just scramble to come to your aid. As mentioned in another post, most of those middlemen are worthless as they pass on second- or third-hand information. Sometimes they don’t even know the location of it, let alone the properties of the soil, the forest coverage, and so on. We contacted severable reliable (mostly military) men and subsequently checked out about 20 or so locations, traveling the length and breadth of Cambodia. Finally someone pointed us to a location where a number of rubber plantations were already in operation, including a sizable state-run plantation. At least, that showed us that the area was right for it. In quick order we had soil samples taken and analyzed by the MoA – they have the only lab in the country that can do this. All the other labs only analyze for construction purposes. The samples were a mixed bag, not exactly what I had hoped for in terms of fertile red soil (like my own plantation) but it was usable.

Foreign companies, notably from Malaysia, Indonesia, the U. S., China, etc. use a local company to process the application with the MoA. There are two or three of those in Phnom Penh that specialize in this and have a reputation for reliability and trustworthiness. Most importantly, these companies are owned by very wealthy people so there are no chances of them absconding with your funds.

The investor concludes a contract with that company, in which the company guarantees to obtain the ELC, or will refund the funds put into escrow with them, less a certain administrative fee. Originally, we decided to go down that road ourselves.

We were put in touch with a company run by an overseas Khmer who had some good connections into the higher echelons of government. It turned out these connections were located at the Council of Ministers – but not a minister himself. This seemed kind of promising.

The usual agreement calls for a 20% down payment; this is for processing all documents until the stage the commission to study the project is formed. Let’s assume we are applying for 10,000 ha and the price for one hectare is $300, we are talking about $600,000.

The next installment, if you will, is for 60%,  $1,800,000. This will cover the MoA’s request for approval form the Royal Government, e. g. the PM, and the subsequent official recognition of the ELC by PM’s cabinet.

Another 10% $($300,000) is due for the official demarcation of the ELC, the preparation of the master plan, the EIA, and the permit to clear the land.

The final 10% ($300,000) is to be made before the transfer from public to private state land, an investment agreement is entered into between the investment company and the MoC, MoE, and finally the registration with the CDC.

The payments may not be in sequence according the outlined procedure above but the end result is the same. It should be noted that in all cases where one of the reputable companies has been used the concession had always been granted; in other words no money disappeared. There are instances, however, where crooked middlemen guarantee the investor a fast track against some upfront payment of say $100,000, only to disappear with the loot. I know of at least one such instance. I was also warned of people who use the same tract of land and offer it to a number of investors, rake in substantial down payments, again only to disappear. The scam used usually entails a map of the area with the designated land that needs to be signed by the local authorities first – these are four provincial agencies including the governor’s office. The middleman promises to get those local signatures required for the official application, for a hefty fee, of course. He does indeed get those signatures because the involved officials will anything for a fee, knowing it is not a legal instrument to begin with. They just signed a map.

To their dismay the investors will find out when they present this to the MoA, that it doesn’t mean a thing with them. The only authority to approve any land for an ELC rests with the MoA. Many of those maps have been submitted to the MoA, which only files it under ‘Incomplete Application’. These scams almost always go unreported as the mostly Asian investors hate to lose face to have fallen for it.

The company we were going to use promised us such a fast track, but did not request an extra upfront payment but would adhere to the established agreement for this. So we started our negotiations for the agreement and quickly came to terms with them. They required us to write letters to the PM, the First Deputy PM, a number of ministers. Only one day later they said everything looks fine and we can go ahead. We hadn’t even signed the agreement yet. My investor flew in to meet with the Minister of Agriculture. The company had promised to set up a meeting with him. This was for us sort of a bona fide gesture that our project had been put on its way through the right channels.

Lo and behold, the Minister was not available but a member of the PM’s cabinet would be ready to welcome us. We were somewhat amazed that the meeting was not to take place at his office but at the Intercontinental Hotel. The meeting went sort of well but we were even more amazed when we learned later that the member we met was our contact’s (the Council of Ministers member) husband. That in itself is not unusual, as oftentimes several family members work in the government. But funnily enough, he was not even attached to the MoA, nor was he involved with concessions in the slightest. This surely raised some suspicion in our minds. We finally knew these people were really only blowing hot air when the facilitator called me one day not long afterwards and told me we could go ahead and start clearing the land. They had gotten the oral permission from the PM himself (like he would concern himself with such matters despite his propensity to micromanage).

We started stalling the negotiations for the agreement trying to find out more about the facilitating company. In the meantime we had also submitted, as advised, one of those maps to the local provincial authorities. The go-to man there asked for $100,000 but we rejected that outright. We finally settled on some small tea money. This again impressed upon us that not everything was kosher with all these people. After two months our go-to man came back with the signed map, but one signature was missing, and the governor had not signed it. In its place some illegible signature without stamp was added.

It was now time to call the whole thing off. We were not going to spend several hundred thousands of dollars only to lose them. Another very disturbing thing was that the owner of the facilitating company was a U. S. citizen. He could just take the down payment of $600K and disappear to and in the U. S. Tracking him down there would be nigh impossible. Adding to such suspicions was that this man, though nice and courteous in his demeanor, was not wealthy by any standard. In our minds, the temptation could be just too much for such a man. This is not to say that he would have done it, but we thought that it was quite possible for it to happen. We are not accusing this man of any crime or that he is a crook. Only circumspection prompted us to pursue another avenue.

We then went to the MoA directly, where we were told about those flimsy maps, got the necessary application form ($20) and started the application process ouselves. But a tentative land search revealed that this was densely forested land, and luckily though, did not overlap with an existing ELC. But it would most probably be rejected for environmental concerns. The Asia Development Bank and the World Bank had recently put great pressure on the government to abide by its commitment to preserve the environment. Well, that was very disheartening news, although I can imagine certain circles to be gleeful about this. I had visited that land myself several times and knew it was pretty densely forested but what I had seen was mostly undergrowth and not too tall, that is to say, old trees. Thankfully, we hadn’t spent any great amount of money, except that little tea money in the province.

We were also told we could try to obtain an exemption from the Minister himself. Sometimes this worked. We used an old acquaintance also at the CoC level but higher placed than our previous contact who is friends with most of the ministers to check for us. At that point we learned that several companies had already applied for that same land and had been rejected. Even a company run by one of the MoA highest officials, which had wanted that land, was turned down. So for us, that was the end of story for that tract of land. We wouldn’t waste any more time on that.

We now tackled the problem the opposite way. We simply asked the MoA to designate a tract of land available for an ELC for us. They gave us two locations, which I promptly visited. Once I got to the first one I was surprised to see tractors and heavy equipment clearing land where my GPS showed this would actually be the designated land for us. We called our contact at the MoA who said the coordinates may have gotten mixed up. On we went to the next location not too far away. At least here we saw no activity yet, except for Chinese people clearing adjoining land clearly delineated for them on our map.

In the meantime we had spent about 5 months on the project without any tangible results. My investor was getting impatient but agreed to hold out for this next tract and see what would happen. The rest is quickly recounted as the Prime Minister announced a moratorium on all new ELCs. Since we had not started the official application process we would not fall under those exemptions that were widely reported in the press and criticized by NGOs. End of story.

At the same time, however, rubber prices had fallen from a high of $5600/mt for SMR10 (or CSK10 in Cambodia) on the Malaysian Rubber Exchange in 2011 to $3,440/mt in January 2012 and $2,860/mt in June 2012. Investing about $50M in a new rubber plantation with fluctuations like this did not seem to be such a great idea after all. My investor, and I concurred, decided to shelve the plan at least until 2013 if not forever. Let’s see what the future in that sector holds. I personally believe that the tire industry can well live with the current price levels and leave the raw materials to the people who have been in the business for a while.

The moral of the story, though, is one can’t be too cautious in selecting one’s business partners, even if they appear to be highly placed, e. g. Under State Secretaries and up. Additionally, there are just too many of them that have the title but no authority whatsoever. According to some sources for every ELC granted in the past there are one or two that fell for a scam and made some people good money for nothing.

Sunday, September 2, 2012

An Open Letter to Anonymous

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

The comment:

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

The reply:

Dear Anonymous,

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Tuesday, August 21, 2012

Choosing a Bank

There is not much going on for us jaded Cambodia bloggers to write about right now – at least not for me. Politics in Cambodia is as usual – there is no change in how things are handled or mishandled, and the traffic police hasn’t changed either; they stop people wherever they can to bolster their meager incomes.

So today I will write about the mundane, like choosing a bank, which is a sort of important decision for everybody living in Cambodia, unless you want to deal strictly in cash as the majority still does. Not that I haven’t chosen a bank before since I have participated in Cambodian business life for a long time. Of course, I haven’t had the opportunity to check out all banks so I will just give the pros and cons of the ones I have banked with.

In the early 90ies, there was only one bank to speak of – the Foreign Trade Bank (FTB). One could do international transfers, open letters of credit (L/Cs), receive L/Cs, and they didn’t ask for a lot documents when opening a business account. At that time, I just gave them the name of the company, my passport and that was it. I did register a business here later on, though.

My requirements are pretty simple: I need to be able to make international transfers, possibly do the occasional L/C, although that has become rare, but most importantly, I want to do e-banking. If the bank pays a comparatively good interest rate, so much the better. Getting cash at an ATM is a must these days anyway.

So let me start with the FTB.

Opening an account is easy, whether it is a checking, savings, or fixed term account. A passport with a valid business visa is sufficient.

International transfers are handled at one of their offices. So you need to go there, fill out a form, and voila. Still cumbersome but normally it is handled quickly, smoothly, and efficiently. Funds usually arrive in overseas accounts overnight.

Fixed terms deposits are available but at miserly interest rates.

E-banking is confined to seeing what your account balance is. No other services were offered while I banked there. This is the reason why I closed my account there after 20 years. If need be I want to be able to make a transfer even when I am not in the country.

The fee schedule is normal, that is, not too much for overseas transfers. They offer a VISA credit card for their better customers, meaning you need to have some sizable cash in your account. I never bothered with that. I still use my U. S. issued VISA card and bank account.

They have three branch offices in Phnom Penh and a limited number of ATMs.

Customer service is good. The staff knows what they are doing. There are no wait times when you go to one of the branches due to the fact that they seem to have few customers to begin with.

Living in two places, I need at least an ATM in Sihanoukville. They have one at the port. That’s it. Too meager for me.


Since I own a rubber plantation in Kompong Cham province, I opened an account at the bank with by far the most branches and ATMs in Cambodia. Sure enough, they have a branch at the small town near my plantation.

International transfers: the same as with the FTB. You need to go to a branch. Service is quick and reliable.

Fixed term deposits: interest rates are pretty good for longer terms.

E-banking is not offered. But you can pay your power bills at ATMs, and power and water bills with your mobile phone. That’s pretty flexible. You can make transfers within the ACLEDA network by email.

You can also send cash by email to somebody who doesn’t have an account with ACLEDA. You email your branch with the details, including the recipient’s ID, and the branch where the person will pick it up and if done before 11 o’clock the recipient will be able to pick up his/her cash in the afternoon. That’s pretty nifty.

They have a lot of branch offices all over Cambodia, a huge number of ATMs, so you can get cash even in more remote towns like Kompong Trach. Kep, unfortunately, does not have an ATM but Kampot does.

The one small downside of that bank is the fact that they charge you fees even when you deposit money in one town and the account is registered in a different town. I guess this is for the communication as not all branches are online.

My account there is in Khmer riel. But I can still get USD from an ATM. That’s another nice plus.

Customers can also get a VISA credit card once they have established their bona fides, e. g. maintaining a good positive balance in their account. I didn’t get one, so I don’t know how much their interest rate is.

Customer service is very good. Being one of the few foreigners banking at my branch, they know me personally and I seem to get preferential treatment and I never really had to wait in line. The staff is knowledgeable about their product, only when you get a trainee or novice there might be the occasional hiccup, but a supervisor is always nearby to help out.

Normally, this bank is pretty busy especially after paydays.


I had always heard that ANZ was not too great when it came to personal banking. We once opened an account in SHV because we needed to transfer a larger amount from Phnom Penh to SHV and didn’t want to carry the cash. (That account is still dormant.)

Last year I opened another account there as the company I consulted for preferred to deal with them as the main bank in Australia had a branch in that company’s country. Initially, I strictly used it for my dealings with that company.

Later I found they did offer e-banking with international transfers so I decided to close my FTB account and transferred my funds to ANZ.

ANZ has a pretty good presence in the major towns in Cambodia, but not nearly as many branch offices as ACLEDA or even ABA.

Fixed term deposits: don’t bother with ANZ; they have nothing to offer other banks don’t do better.

International transfers can be done online but it takes at least a couple or three days, if not longer, for the funds to arrive at their overseas destination.

Customer service sucks. The staff know their stuff but that’s it. For instance, if you make an online transfer you fill out the form and send it off. Don’t be surprised when nothing happens, especially when the transfer is going to Europe.

The form requires a SWIFT/BIC. In the belief you filled in everything correctly you hit the send button. When the recipient asked me after 10 days whether I had done the transfer, I checked my account and to my surprise found out that nothing had happened.

So I called them and was informed that they also require the IBAN, the European bank number. Mind you, they don’t have a field on the form for that number.

Now this happened to me twice; the second time after a longer period; I had already forgotten about that requirement.

I sent them an email and also talked to them on the phone to correct the form so this wouldn’t happen again. Wouldn’t it be appropriate if they sent you an email that they could not process the transaction? After all, they are an international bank. Nothing has changed to this day.

So forget about ANZ.

They also have high transaction fees.

They offer a VISA card if you maintain an account balance of $25,000, for which you earn .75% interest. The account maintenance fee is $25/month. I don’t know how much the credit card interest is as I sure didn’t make use of their generous offer.

The branches are pretty busy, I don’t know why, but then most people don’t need the things I do.

So altogether their reputation is well-earned for personal banking – yes, they are not that great. I don’t require business loans so I have no idea how they would fare in that field.

I still maintain my account there, though. Maybe in time I will close that too.


I had a rather decent account balance with ANZ for a few months expecting to use at least some of it for a planned investment. That hasn’t materialized so far so I was looking to at least make some money with a fixed term deposit. In my research, I came across ABA which came highly recommended as my closest friend and sometime business partner banks there.

I had originally been a little suspicious of that bank as I know its history. It was a joint venture between a Korean bank and a Cambodian entity with ties to the highest echelons in Cambodia. It was sold to a Kazakhstan group, which promptly fired the Korean president whom I happened to know,  and restructured it into one of the main banks in Cambodia. They seem to have the funds. Kazakhstan is an oil-rich country, so there must be people with money burn and invest in foreign countries. It seems to have worked out. I have not heard anything negative about this bank.

Consequently, I decided to try them out. I opened a savings and  flexible deposit account.

The staff I dealt with so far may need a little more training. But they make up for it with their proverbial Khmer friendliness.

Opening accounts is easy and quick.

They offer internet banking with all the features. International transfers need a transaction number generator which will set you back $25. The extra security is well worth the $25 in my mind.

ABA has a unique account I haven’t seen in my long experience banking in many countries. It’s called ABA flexible deposit. This account earns premium interest if a minimum balance of various amounts, depending on the interest rate, is maintained. You are even allowed to make withdrawals from that account. These interest rates stack up well in comparison to their fixed term deposit accounts.

Their transaction fees are competitive.

All this convinced me to give them a try.

They have a rather wide presence in Phnom Penh but are a little sparsely represented in the rest of Cambodia.

Needless to say, you get an ATM card and with the flexible deposit and  fixed term accounts you automatically get a MASTER card. The credit limit on that card is determined by your deposit.

Customer services is good and wait times are minimal.

I checked out Canadia too, by far the largest bank in Cambodia. Their interest rates are downright stingy, and they have no internet banking, consequently, they clearly are not for me.

I had to deal with a number of banks for potential business loans for the company I worked with. After the financial crisis they are all very cautious in their approach when it comes to larger sums, like in the seven figures. Not one bank was different; they all had very strict requirements. If you are looking for a business loan you will clearly have to do your homework and approach each and every one of them.

Compared to banking in the U. S. and Europe, this industry is still developing in Cambodia but it has made great strides and I am sure it will be up to par in a couple more years. It sure is a far cry from the early days when some really shady people came to open a bank here. One can only surmise for what purposes they were used. Most of them have disappeared again after the government put in some stringent regulations in accordance and compliance with international organizations.

Sunday, July 22, 2012

Why Is It That Cambodian Reasoning is So Different?

I have gained considerable experience not only in Cambodia but in Thailand and Vietnam as well. In the latter two countries I have not seen this crass disparity between how people think and what we Westerners think makes sense or is logical.

The latest news on the political front is a case in point. Finally the Human Rights Party and the Sam Rainsy Party agreed to merge. Now this makes perfect sense, notwithstanding that the two party delegations had to met in Manila. After all, Sam Rainsy is banned from returning to Cambodia as jail time would be awaiting him once he set foot on Cambodian soil. They named the new party ‘Cambodia Democratic Movement of National Rescue’ – a mouthful – but it will most likely be shortened to the National Rescue Party in common parlance. It makes sense insomuch as combined the parties will be able to pool their resources better as opposed to competing against each other. They hope to garner about 30% of the vote in the next elections, which might not seem so farfetched based on the returns in last month’s commune elections. This would still only give them around 40 seats in the National Assembly, not enough to be meaningful in a parliamentary sense. Now speaking of reasoning, how will Sam Rainsy be able to lead the party? As party leader he is supposed to give impulses, formulate new concepts, and be visible as the leading candidate to the voting public. Barring an unlikely return he won’t be able to be active in the election campaign. After having publicly called Hun Sen a murderer any hope that there is a pardon in the pipeline must prove futile. A CPP spokesman already announced that Sam Rainsy’s political career is over. As a convicted criminal he is not allowed to run for office. Now why did they make him party chairman? Maybe they know more but for all practicable purposes this job should have fallen to someone else, perhaps Kem Sokha or Mu Sochua. Surely, being the president of the largest opposition party would not be enough in his special circumstances?

Another case of weird thinking and missing logic is the case against those ‘secessionists’. One of them, Mam Sonando, the owner of Beehive Radio, was arrested on his return from the Netherlands where he was assisting in putting together a case against Hun Sen and others in the government for crimes against humanity. Beehive Radio apparently had also broadcast several comments critical of Hun Sen. He is also suspected of inciting the secessionist actions in Kratie province. In one of his speeches the Prime Minister called for his arrest. Promptly, his obsequious underlings did just that. Naturally, they couldn’t use the impending action at the International Court of Justice. So they used secession as the reason for arresting him.

How can the people in power even begin to believe that someone would start a secession in a remote village in an equally remote (comparatively) province? The police and the military stormed the village, killing a teenage girl in the process. Who is to believe that? The public doesn’t have all the facts but by sheer logic it would seem suicidal to mount such a campaign in the current political arena. A village of a province in the middle of the country of all places. Cambodia is still one of the poorest countries on earth and dependent on foreign aid for about half its budget. Even the stupidest person would realize that a secession of a rural community would lead to absolute catastrophy. They would be an enclace surrounded by a hostile country that would not allow any goods to enter the enclave. A full blockade would be implemented. The enclave would literally be starved to death. Who would follow them in their secessionisst movement? All these simple questions make it abundantly clear that these charges are so farfetched as to be ludicrous. One is hard-put to understand how the government can expect the world to believe the veracity of those charges.

One thing, though, is remarkable in this whole deplorable saga. Mam Sonando knew he was going to be arrested on his return but returned nonetheless. He holds French and Cambodia citizenships so he could have safely stayed away. But he came home to face the music and to show to the world that he has nothing to hide and that he did nothing illegal.