Cambodian retailers shaken by the after-effects of land speculation and economic crisis

By Ros Dina

In the middle of town or on the outskirts, in shopping centres or on little public market stalls, the sad diagnostic made by sellers is the same: for a few months now, business has been desperately slow. Already weakened by the consequences of the world economic crisis, Cambodia is experiencing the after-effects of several months of mad and unparalleled speculation in land. Indeed, many Cambodian consumers, among the wealthier, suffered the freezing of the savings they had invested in land, now affected by price stagnation. From jewellers to small street sellers, the effects of a reduced level of consumption are logically felt among merchants.

“Nowadays, Sundays are as bad as Mondays”, young Dary deplores. She sells fancy jewellery in a small shop on the third floor of Phnom Penh's brand new shopping centre, the Sovanna Shopping Mall. The first days after its opening at the beginning of 2008 saw crowds rushing in, but these days are now bygone, “even Sundays”, a traditional shopping and relaxing day for Cambodians. “Earning money is really difficult today. There are fewer and fewer customers, people do not come to the market any more”, the young woman adds, standing in front of her cheap necklace and bracelets.

11am. Around that time of the day, people usually rush about, but the market aisles are unusually quiet. Retailers are trying to keep busy reading newspapers and magazines outside their shop, while waiting for potential customers. Others mechanically dust their goods for the umpteenth time in the day...

The context then gives way to all sorts of situations, and anything will do to lure rare shoppers: a battle of promotions ensues, and signs offering 5% to 30% discounts cannot be missed. The shopping centre manager also did his own part and organised a prize draw boasting some big surprises, to attract a clientèle usually very fond of that type of game. Alas, customers are nowhere near the usual bustle. The majority of people who go to the new shopping centre is composed of high-school students, strolling around in groups of 3 or 4, but often more interested in the video game room located on the third floor than in window-shopping...

Where have all the customers gone?
“High-schoolers are not really good buyers”, Dary says, cursing her bad luck. “I rather find my best customers among the children of people affiliated to the high circles of power, or the children of wealthy Cambodians, who live here or abroad... But today, I have no idea where they may have all gone... Maybe they have gone back abroad”, she wonders. The young retailer, who used to earn a daily US$300 worth of sales when the Sovanna centre opened is now struggling to make more than US$50 a day.

Bargaining becoming fiercer with the days
Sok Long, a young Sino-Khmer owner of a mobile phone shop located near Dary's jewellery shop, shares her misfortune. In front of customers' demands, who are more and more inclined to bargaining, the young man feels desperate: “Even when I accept to cut my selling prices by a few dollars, customers don't want to buy... When a phone cost me US$120, they offer US$50 for it! I cannot lower my prices more... For a new mobile phone, I only make 2 to 3 dollars' profit”, Sok Long tells us, remembering the good old time - not so long ago - when high-ranking officials and their children used to buy two or three phones at once, without even trying to negotiate the prices...

Struggling to pay their business rent
The consequences of this slump in sales are starting to be felt: today, retailers find it hard to make ends meet and be able to pay for their business premises monthly rent. Little by little, Sok Long used all of his savings to be able to pay for his monthly US$875 rent, for an area equivalent to two shops. And he is not the only one making every effort to cover his expenses. On December 11th, shop-keepers at the Sovanna shopping centre went on strike for four days, demanding that the director reduce rents by 30% for nine months, due to bad business. Facing their discontent, the director-general eventually agreed to reduce rents by 10% for a period of 6 months.

From mobile phones to fruit and veg...
Mobile phone and jewellery shops in modern shopping centres were among the first ones to be affected by consumption decrease, but the crisis also struck those who sell vital products. Roth, a fruit and vegetables wholesaler and retailer at the O'Russey market in the centre of Phnom Penh, has not yet felt any change among his individual private buyers, he explains while tidying up his stall with the help of his wife. However, he did notice a drastic drop in whole sales. His eight main customers, who are restaurant owners, reduce their orders with every passing day, themselves experiencing difficulties with their clientèle. “At weekends, I used to sell US$800 to US$1000 worth of vegetables in just one day. Now, I only sell a quantity worth US$300 to US$500. For instance, an important restaurant owner, who makes noodle soup, only buys 10 dollars worth of vegetables every day - not that long ago, he spent 80 dollars.” For a few weeks now, Roth has watched his profit go down every day by 30%.

Households forced to cut their expenses
Nguon Chanthorn, who sells clothes at the Chom Chao market, to the South of the Phnom Penh airport on the outskirts of the capital, explains that she also tries to cope with the situation, like other retailers selling in that area of town. The mere income she manages to earn is not enough for her to sustain her standard of living. “Because of that situation, I had to reduce my daily food expenses to 3,000 riels (around 0.75 dollar) when I normally spend around 15,000 riels (3.75 dollars). Now, I only bring back home between 30,000 and 40,000 riels (between 7.5 and 10 dollars) every day, that is ten times less than before. So I only spend my money in vital goods now”, she stresses.

Near the Olympic market, this time, in the centre of town, a rice soup seller, having no customers to serve, watches people walk by. She started reducing her soup production weeks ago and now only makes half the quantity of soup she used to prepare. “Very few people have their breakfast out at the moment. Before, there was not enough room for everyone to sit. Today, my stall is very quiet, but it is even worse in other places!”, she said as her daughter, doing the washing-up, tries to explain: “It is probably because they invested their money in land, for speculations, and now they cannot sell it any more because of the economic crisis. When they used to come and have their rice soup here, they always talked land speculation and profit”...

Money frozen in pieces of land
This analysis tallies with the one made by president of the Cambodia Economic Association (CEA) Chan Sophal. “I believe that the main reason [for consumption decrease] is linked with the bad transactions generated by land speculation”, the economist puts forward. “Last year, in times of high economic growth, most Phnom Penh residents invested in land with a view to speculate. But this money now stays frozen”, he says, when income tends to decrease and consumers lack confidence, in a gloomy context of global economic recession.

The first victims of this contraction in demand, Chan Sophal details, are those sellers who cannot sell to customers, who themselves try to limit their expenses as much as possible, hoping for brighter days. But at the end of the day, this problem affects the whole economy, since sellers are buyers too... “When clothes sellers do not sell much, they reduce their expenses. Same goes for meat sellers: they do not have enough money to buy clothes”.

However, the CEA president would like to believe that the situation is not hopeless, but still reckons that a year at least will be needed before the situation goes back to normal.