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Friday, March 06, 2009

Cambodian tycoon works on Asean reform

Written by STEVE FINCH

Royal Group CEO Kith Meng says Asean talks on integration are progressing, despite critics of the bloc's inaction

THE financial crisis and economic integration dominated talk at the Asean Summit in Cha-am, Thailand, which ended Sunday. While Prime Minister Hun Sen was the public face of the Cambodian delegation, behind the scenes it was the country's best-known tycoon that played chief economic adviser.

Kith Meng, as the Cambodian representative to the Asean Business Advisory Council (BAC) and president of the Cambodia Chamber of Commerce, is driving the Kingdom's economic discussions on Asean and therefore plays a key role in developing a single market, the bloc's goal.

"The talks in Cha-am were very productive," the Royal Group chairman and CEO said by email on Thursday. "The aim is much greater economic cooperation and integration using the strength of Asean to weather the current global economic downturn and emerge together as an economic powerhouse."

As Kith Meng and others present in Cha-am acknowledged, the recent summit was perhaps the most important in the past decade, amid the current economic crisis that has begun to hit the region.

Singapore's elder statesman Lee Kuan Yew said Thursday the city-state could experience a 10 percent drop in GDP growth this year, AFP reported, and Vietnam is forecasting its lowest economic growth in years.

Asean's export-driven economies are facing the biggest challenge since the 1998 financial crisis, analysts say, but at the same time Asean is beginning to see itself as a catalyst for a world recovery. Thai Finance Minister Korn Chatikavanij told AFP before the summit that Asean is "increasingly the focus of the rest of the world".


Cambodia will play a central role in the development of some of these initiatives.


With Asean aimed at a European Union-style single market by 2015, the question remains how the bloc can reach its ambitious target.

An Asean fund "to allow companies ready to go regional and global to have access to affordable financing and investment" is one such initiative planned, stated an Asean BAC press release following the summit.

An Asean joint venture company was also proposed that would focus on using the strength of the region in agricultural and biofuel production "to meet demand for food security and alternative energy sources".

"Cambodia will play a central role in the development of some of these initiatives, particularly around the establishment of an Asean fund and public-private joint ventures," said Kith Meng.

An Asean Green Line designed to streamline the movement and transport of goods within the region is being piloted between Singapore and Malaysia, with Singapore and Indonesia also planning to roll out the project. And an Asean-wide brand was also discussed at the summit.

"The initiatives coming out of the meeting will establish an integrated economic bloc of almost 600 million people in one of the highest growth areas of the world," said Kith Meng.

But there remain question marks as to whether the talk in Cha-am will result in concrete practice that can fend off the worst of the global economic crisis and lead to economic integration in the vein of the EU.

"The gathered leaders made a lot of noise about deepening the integration of their economies to minimise the adverse impacts of the global financial crisis. But they failed to come up with any concrete measures," said an Economic Intelligence Unit report this week.

Kith Meng insists that the Asean BAC meeting at the weekend "was the most co-operative and focused" thus far. He will now largely be responsible - at least on the Cambodian side - for proving the Asean doubters wrong.
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Low garment sales, poor tourism to hit Cambodia-IMF

PHNOM PENH, A slowdown in garment exports and a drop in the number of tourists could cause Cambodia's economy to shrink 0.5 percent this year, the International Monetary Fund said on Friday.

That is a big turnaround from the 4.8 percent growth the IMF had forecast in November.

"Garment exports are under pressure due to sharply lower retail demand in the United States and European Union," it said in a statement after an IMF team ended a mission to the Southeast Asian country. Garments are Cambodia's biggest export earner.

Construction activity and foreign investment were also slow as external investors cut back, the IMF said said.

The World Bank projected foreign direct investment of around $800 million in 2008 and has said it could fall "probably to below $600 million" in 2009. (Reporting by Ek Madra; Editing by Alan Raybould)

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From the Foreign Press: Cambodia's oil resources Blessing or curse?

Waiting for the oil (and money) to flow

MANY countries have been afflicted by a "resource curse". Discoveries of oil or other mineral deposits are hailed as offering a way out of poverty. But hopes are dashed as corrupt officials pocket the money or squander it on grandiose projects. Cambodia, giddy at the prospect of an oil boom, hopes not to go the same way.

A recent report, called "Country for Sale", by a London-based NGO, Global Witness, points out that amendments to a 1991 law had the effect of placing the Cambodian National Petroleum Authority (CNPA), the body administering oil contracts, under the direct control of Hun Sen, the prime minister, and Sok An, his deputy. It alleges that millions of dollars paid to the government to secure oil concessions do not show up in the official annual revenue reports. Meanwhile, unrestrained mining exploration has seen thousands forcibly evicted from their land in the north, and has damaged six of the country's 23 protected wildlife areas.

The discovery of oil and other minerals was a godsend to Cambodia. Despite foreign-aid donors' constant pleas for restraint, logging companies have largely exhausted the country's once abundant forests. Chevron, a California-based oil giant, at first estimated its 2005 oil discovery in the Gulf of Thailand at 400m barrels, enough to earn about $1.7 billion a year, against the government's budget last year of $1.2 billion. Chevron was awarded the largest exploration contract in the block thought to be most productive. But it has found that the oil is scattered in pockets and hard to extract. Despite the recent fall in the oil price, the government still hopes production will start in 2012.

It will be very welcome: aid still makes up half of the government's budget, despite a decade of stalling on anti-corruption legislation that donors want to see. The World Bank consistently ranks Cambodia in the bottom 10% of all countries for controlling corruption. Michael McWalter of the Asian Development Bank, who advises the Cambodian government on oil, argues that the CNPA is underfinanced and ill-equipped to deal with the complexities of the oil business.

In March last year the United Nations Development Programme and the Norwegian government jointly organised a conference to discuss what the government should do. The advice included the creation of an independent, transparent oil fund. This, however, was largely based on the experience of Norway, which has an effective system of checks and balances.

Cambodia does not, and Mr Hun Sen and Mr Sok An have still not come up with a coherent plan for managing the oil revenues. According to Global Witness, the government decided at a meeting with donors in October not to join the Extractive Industries Transparency Initiative (EITI), an international coalition that would require full disclosure of oil, gas and mining revenues. Rather, it agreed to endorse only the principles underpinning the EITI, making its rules non-binding.

Government officials have responded to the allegations by lashing out at NGOs. At a conference in February, Mr Hun Sen called NGOs' criticism of his oil policies "crazy". And he has already alluded to the prospect that oil revenues may diminish the influence of aid donors-though he denies they have much anyway, since Cambodia can always turn to China, a generous donor, which, he says, despite its might, treats its partners with respect.
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Eubanks returning to Vietnam, Cambodia to help children

By Tom Marshall
Senior Advocate writer

A Mt. Sterling couple is moving to Vietnam later this month on a mission trip to help orphans overseas.

Enoch and Marissa Eubank are making the trip as part of Orphans Voice Ministries, an international adoption program that attempts to match parents in the U.S. with children from countries where adoption is difficult. They leave for Vietnam March 15, but will also spend time in neighboring Cambodia.

The Eubanks say God put in their heart to help children there.
“We felt, and God has confirmed for us, a call that we were meant to go there and help with those children,” Marissa said.

This is not the Eubanks first mission trip.
Last year they spent three months in Vietnam and Cambodia working at local orphanages and promoting Christianity in underground churches. Christians are sometimes jailed or suffer discrimination in communist nations.

The Eubanks served on previous foreign missions in Guatemala and Africa. Here in the U.S. they participated in the relief effort in Louisiana after Hurricane Rita.

That first mission to Louisiana inspired them to seek out more ways to help others and the trips abroad only worked to reinforce that, the Eubanks said “I felt I was doing God’s work and I liked that,” Enoch said. “That just kind of started everything. ... The hunger for that just grew. I saw people had a need all over the world.”

Marissa said her desire to be a missionary dates back to elementary school. That’s when a group of missionaries spoke to her class at Mapleton Elementary about their experiences in Africa.
Marissa said she liked the idea of making a difference in the world.

As an adult, Marissa became familiar with Tony Brewer, founder of Orphan’s Voice, while attending church at Mt. Sterling’s Fellowship Christian Assembly. Brewer soon hired her to help parents in the U.S. with the adoption process.

Marissa told Enoch about the calling she felt from God to take things a step further and become an overseas missionary.

Enoch didn’t object and accompanied her on their first mission trip together to Guatemala in 2004. Enoch, who has considered becoming a pastor, said he found the experience rewarding and it planted a seed for further spiritual growth.

“When God brought us together he grew that hunger for (mission work) between us. ...,” Enoch said. “We prayed about it and confirmed it in a number of ways.”

One confirmation of God’s intentions, Enoch said, came during a trip to Lexington before one overseas mission when Marissa was a bit discouraged. About that time a car passed with “Go Now Go” on the license plate, the same message Marissa had felt God telling her.

In Guatemala they worked at an orphanage and handed out food to those in need. They married the next year and participated in another mission, this time to Africa, in 2006.

Last year, in Vietnam and Cambodia, they helped coordinate adoptions with parents in the U.S. Enoch, trained to be a physical education teacher at Morehead State University, also played with children and taught them how to care for themselves.

The Eubanks said many of the children had nothing and lived in squalor until they were taken in at the orphanage.

The orphans often come from broken homes, where the father, the family breadwinner, is dead or unable to work. Some scavenged in local dumps for food and clothing, the Eubanks said.
If they were hurt, the Eubanks said, the children had access to no sort of medical care.

The missionaries bring food, medicine and other supplies to the orphanages. This is critical, the Eubanks stress, because both nations have no system of social services like we have here in the U.S. On their upcoming trip, Marissa says they will spend six months in language training so they can better communicate with people there before continuing with their efforts to spur foreign adoption and spread Christianity.

Enoch said living in Vietnam and Cambodia on a long-term basis will give them the time they need to make a lasting effect.

“We will be able to get settled in somewhere and not just get a foundation started on a building, pass out some clothes and it’s time to go home,” he said. “We started praying that God would show us a specific place (to serve God).”

They say they will receive financial support during their mission from the church they now attend, Jeffersonville Baptist. Donations can be sent to the church at 145 Ky. Hwy. 599, Jeffersonville, Ky. 40337. In the memo portion of the check you should note “Eubanks support.”

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Boom to bust in Cambodia

By Tim Sturrock

PHNOM PENH - Potential buyers at the entrance to the Grand Phnom Penh International City pass through a 29-meter-high, 42-meter-wide arched gateway topped with 18 life-size bronze stallions, only to arrive at a moonscape of bulldozed earth and ditches.

When the project was unveiled in 2006, it proposed 4,000 residential villas and apartments at a projected cost of US$500 million. The joint Cambodian and Indonesian developers' promotional material promised the convenience of a shopping center and an international school surrounded by the beauty of ponds and manicured lawns, as well as a golf course and driving range.

Of the 4,000 units in the original plans, only 21 villas will be ready by April, followed by around 100 more units by the end of the year, Grand Phnom Penh marketing director Nhem Sothea said. Only 138 units, including 44 shops, have so far been purchased.

The first phase was to include 500 units, and that goal is unlikely to be met, Nhem Sothea said. Most sales so far, with buyers paying $99,000 for 42-square-meter terraced houses or $138,000 for 92-square-meter townhouses, occurred before the global economic crisis hit late last year. No one has yet purchased any of the properties billed at over $750,000.

"The market is really bad," Nhem Sothea said at his on-site sales office. "The market is not really up to expectation. The future of the project depends on demand."

Grand Phnom Penh is just one of a half-dozen so-called "satellite cities" that property developers once promised would serve as suburban getaways for Phnom Penh's growing affluent and expatriate populations. But those plans, worth a combined $3.5 billion, were conjured when Cambodia's property market was booming; developers now say they may scale back or delay indefinitely their ambitions.

Banks have already restricted loans for real estate as economic growth has slowed and as property prices have dropped - in the city center by about 25% since last July, and in the outskirts by 30%. Cambodia's gross domestic product growth is projected to fall below 5% this year, a sharp decline from the heady double-digit expansion the economy averaged from 2004 to 2007.

The global crisis is taking a toll on Cambodia's main economic growth engines: garments, tourism and property. There were some indications of a property bubble even before the global economic and financial collapse. As local property prices soared, the National Bank of Cambodia (NBC) in mid-2008 restricted access to loans by doubling banks' foreign currency reserve requirement to 16% from 8%. The NBC also capped the amount of real estate loans banks could make at 15% of their portfolios.

The central bank in February repealed those restrictions in response to a rapid decline in the property market. An International Monetary Fund report last month said Cambodian banks and the NBC needed to improve management of risks and banking supervision to avoid failing loans, which it said appeared to be rising.

Bulls to bears
While developers insist that their projects remain viable and have secure financing, the assertions come against plunging demand and a short supply of lending to potential buyers. Sung Bonna, president of Bonna Realty, said that speculators a year ago were buying up real estate with hopes to sell it later to developers for a profit. "Now even in general property in the city center there is not so much demand."

He predicted that at the most, only 30% of satellite city units could be purchased by Cambodians and urged the government to make Cambodian real estate more appealing to overseas buyers. Foreigners are at present barred from buying condominium units in Cambodia.

Indications of a slowdown are ubiquitous. Along the city's Tonle Bassac riverside, billboards for the satellite city Diamond Island City, planned for nearby Koh Pich island, show a so-far nonexistent metropolis that looks as if it were rendered by utopian cubists or futurists.

When the Overseas Cambodia Investment Corporation (OCIC) unveiled Diamond Island City in 2006, during the days of Cambodia's go-go property boom, the plan included a hospital, restaurants, a shopping center, park and series of homes, some with personal swimming pools, that ranged in price from $280,000 to $1 million.

Investment in the Koh Pich project could drop by one-third to $800 million from $1.2 billion, said Touch Samnang, the project's manager and architect. That would likely entail trimming the number of units from 15,000 to 12,000, depending on demand, which he said has been affected by the global financial crisis. OCIC is still building bridges to the island, yet no units are under construction. Touch Samnang admitted pre-sales have not gone as well as anticipated.

Of the 168 units planned in the project's $28 million phase one known as "Elite Town", buyers have purchased only 40% after more than a month of sales, he said. That's a huge drop over the past few years, when units at other OCIC projects sold out in weeks. Elite Town will be delayed at least six months or until mid-2010, and the entire project could be finished in mid-2017, about 18 months behind schedule, he said.

Asia is only too familiar with the damage that can be wrought by a property collapse, seen in Thailand, South Korea and Indonesia during the 1997-98 Asian financial crisis. Stephen Higgins, chief executive officer at ANZ Royal Bank, the country's largest, said he did not anticipate the same problems that Bangkok and other Asian cities faced in 1997 when hundreds of buildings were left half-completed when financing dried up.

"Where Cambodia is fortunate is that a lot of these project haven't been constructed," he said in an interview, nor did most property-owners in Cambodia have mortgages so the market has some residual strength.

The problem now is that so many projects attempted to take advantage of the property boom at once. Higgins says the financial crisis has acted as a correction in some ways, possibly stopping all the projects from happening at once and flooding the market. "It will take a bit longer but that is not necessarily a bad thing," he said.

In northern Phnom Penh, the cranes are still swinging at Camko City, a $2 billion, 120-hectare satellite project that originally boasted plans for 6,000 units. The new economic situation may force a rethink, according to Kheng Ser, a marketing counselor for South Korean project developer World City.

He claims sales at Camko have been better than at rival developments, with 80% of the city's first phase 1,009 units of apartments, small villas and houses sold at prices of up to $330,000. According to Kheng Ser, the villas and houses will be completed this month and the tower blocks by the end of the year. However, designs are not complete on Camko's much larger phases two and three, he said.

Even the country's best-known tycoons are scaling back their property development plans. Sok Kong, president of Cambodian conglomerate Sokimex, said that he would delay plans on a 218-hectare satellite city to be called Beong Chhouk Township, though he said a land dispute was the main reason for the delay.

"We drew the master [plan] a while ago," he said by telephone. "I have to delay three or four years." He said he wants to focus his financial resources on his $1 billion Bokor Mountain development in Kampot and another hotel project on Phnom Penh's Chroy Changva peninsula.

Hard-hit Koreans
Meanwhile, South Korean-financed projects have faced some of the heaviest cutbacks. The global economic crisis, which has hit South Korea particularly hard, has leveled original plans for a proposed $300 million, 953-unit Pharos Mekong satellite city on five hectares of the Chroy Changva peninsula, according to an e-mail from Kheang Piv, a marketing manager for the Korean-owned project developer BK Asia Pacific.

He wrote that after the global financial crisis began, Korean finance dried up and the company could not get the money it needed to move forward. The company planned to start construction in December, but pulled back in November, Kheang Piv said. "It is not the right time for us to sell such kind of luxurious, high-end apartments. Eventually, we decided to keep our project on hold till the desirable time," he wrote.

The International Finance Complex is perhaps the largest South Korean-backed real estate project in Cambodia to feel the financial pinch. Korean firm GS Construction & Engineering broke ground in June on the IFC's seven skyscraper mixed-use complex near the Tonle Bassac. But the entire development has now been postponed until at least 2010, and then only three of the original planned seven buildings will be built. The project, originally projected to cost $1 billion, has been winnowed down to around $500 million.

In September, Korean firm Booyoung Company shelved plans for a development on a more-than-100-hectare expanse of land near Russian Boulevard because of uncertainty in the market, according to Jong-seon Choi, general manager for Booyoung in Phnom Penh. "We stopped because of the financial crisis," he said. "It's very uncertain."

The economic situation has also stifled less ambitious projects. At the proposed 500-unit, five-hectare Dream Town near Phnom Penh International Airport, only 30 units have been sold and its 2012 completion date will likely not be met, said Kong Vannsophy, manager of the project's developer, Cambodia Priority Property Investment.

"If we rush and no people buy, we lose money," he said. "A lot of other projects are facing these conditions."

ANZ Royal Bank's Higgins said the risks have grown regarding demand for Phnom Penh's satellite cities because many are in remote areas. "You would have to expect that the downturn in the property market will have some impact in those projects," he said. "By definition you are setting up in a new area, whereas if you set up in Phnom Penh you know there is going to be demand for it."

He said ANZ will not likely loan money to borrowers seeking to purchase property in satellite city projects. "It's difficult to say. We should not have a big appetite for it. We want to see something built."

Tim Sturrock is a Phnom Penh-based journalist. He may be reached at

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PM: Ex-chief of Cambodian military forces to become deputy PM

PHNOM PENH, Prime Minister Hun Sen has confirmed that former commander-in-chief of the Royal Cambodian Armed Forces (RCAF) Ke Kim Yan will soon become deputy prime minister in charge of anti-drug trafficking, said English-language daily newspaper the Phnom Penh Post on Friday.

"In the near future, General Ke Kim Yan will be appointed deputy prime minister, and he will be chairman of the National Authority for Combating Drugs," the premier told the closing session of the annual conference of the Interior Ministry here on Thursday.

Once on Tuesday, Tea Banh, Deputy Prime Minister and Minister of National Defense, told local media that "the government will send the request (of the appointment) to the National Assembly. When the National Assembly approves it, you will know."

If approved, Ke Kim Yan will become the government's 10th deputy prime minister.

The general has been without a position since being removed as RCAF chief by a Royal Decree on Jan. 22.
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