South-East Asian countries seek economic integration

(lefrt-right) Prime Ministers Thein Sein from Myanmar, Samchai Wongsawat from Thailand, Nguyen Tan Dung from Vietnam, Hun Sen from Cambodia and Bouasone Bouphavanh from Laos at a summit summit in Hanoi (AFP/Hoang Dinh Nam)

Labels: Economic, Economic Success, Kith Meng, Mekong, Prime Minister Hun Sen, Thailand, Vietnamese

U.S. Forces Nine Major Banks To Accept Partial Nationalization

Labels: Economic, Global Economy, Global Market

A street scene in the city center of Phnom Penh in Cambodia. (Gavin Hellier and Robert Harding/drr.net)

Labels: Economic, Economic Success, Phnom Penh, skyline

Cambodia’s Transforming Tycoon

By Raphael Minder (The Financial Times)

The massage brings a smile to the face of a man who seems to find it hard to wind down. A self-confessed workaholic, the 39-year-old cannot imagine ever retiring or selling his Royal Group conglomerate because, he says, “this business is my passion”. He adds: “If I don’t work, I get sick. I don’t like to take it easy, I like to get things done.”

Such energy and intensity set him apart from the more relaxed attitude of the average Cambodian.

Mr Kith Meng has been at the forefront of Cambodia’s transform­ation from a backward, war-torn country into one of Asia’s fastest-growing economies, averaging 9 per cent growth a year over the past decade. Royal Group’s businesses include the country’s biggest mobile phone company, its first broadband provider and a bank that pioneered ATMs. It is about to launch phone banking.

Such activities have put Mr Kith Meng on a very different path from his fellow ethnic Chinese, who have tended to build family businesses in traditional sectors such as farming, mining and logging.

“We are going into every sector we can because Cambodia needs every sector to grow,” he says. “After that, we’ll see in what industry we want to be an Asian player.”

With such ambitions in mind, he has already started touring financial centres such as Singapore and Hong Kong to see how and when Royal Group should widen its presence in the region as well as list the equity of a company that has already made him a billionaire. (He refuses to value his assets precisely.)

Mr Kith Meng also has casino interests in Cambodia and one of his recent trips abroad was to Macao, the world’s largest gaming centre, accompanied by western bankers. His conclusion is unambiguous, and typical of a man who believes Cambodians must shed their inferiority complex towards other Asians. “Macao is already so crowded,” he says. “I think people in Macao should be looking here, not us looking there.”

Although he has so far confined his activities to his homeland, his ascent has started to draw comparisons with more renowned and far-reaching Asian tycoons, including Thaksin Shinawatra, the Thai businessman and ousted former prime minister. Mr Kith Meng scoffs at that particular comparison, insisting he has no desire to use his wealth as a political launchpad as Mr Thaksin did in Thailand, where he created his own political party. “I am a businessman and just don’t have any of that [political] ambition,” he says.

In fact, insiders say Mr Kith Meng’s allegiance to Hun Sen, Cambodia’s long-standing prime minister, has been crucial to his success. Royal Group’s meeting rooms are adorned with pictures of the Hun Sen family, confirming what he describes as “very good relations with the government”.

Mr Hun Sen was returned to power in a landslide electoral victory last month with the backing of a business community that has benefited from strong growth and political stability after decades of war. Still, the government’s record has continued to be stained by international corruption studies that rank Cambodia among the most corrupt nations in the world. On that topic, Mr Kith Meng echoes government officials, emphasising the billions of dollars of foreign investment that have poured into Cambodia in recent years as vindication of Mr Hun Sen’s efforts to guarantee a fair and transparent business and legal environment.

“From outside, people can make any statement they want, but those [investors] who actually come here realise that Cambodia is a place where they should do business,” he says.

Even though he also holds the honorific title of Okhna, the Cambodian equivalent of a British peerage, associates and some other local businessmen say he steers clear of fellow Cambodian high-flyers. While Royal Group is set to build one of the skyscrapers that are redrawing Phnom Penh’s skyline, the company’s headquarters are in a nondescript office block and are entered via an electronics dealership with peeling walls.

Asked about this surprisingly low-key location, Mark Hanna, his Irish chief financial officer, says: “It might seem strange but I don’t think he’ll ever move from here. Perhaps it’s a mix of feng shui, good luck and superstition.” Meanwhile, Mr Kith Meng has his own take on good fortune: “Luck is about intelligence and timing.”

Mr Kith Meng’s workplace may be modest but he does have some flashy tastes. His oversized Cartier gold watch is overshadowed only by his diamond ring. He also has a penchant for luxury cars, owning a Rolls-Royce and a Bentley. He has no plans to settle down. “I’m single because when you’re a workaholic you don’t have time for that,’’ he grins.

Mr Kith Meng’s meteoric rise has drawn a mix of envy and disdain from some rival businessmen.“I can assure you that he has plenty of enemies here,” says a local financier. But he denies feeling threatened, describing his bodyguards as assistants who are “just here to support me”.

He makes no qualms about taking a different stance from the local elite, which tends to close ranks rather than open its doors to foreigners. “I [make joint ventures] with international companies, not Cambodian ones,” he says.

That openness may stem from an adolescence spent in Australia in the aftermath of the Khmer Rouge regime (see below). However, despite having Australian citizenship and maintaining a home there, Mr Kith Meng has “mixed memories” from his youth in Canberra. “In the late 1980s, Australia was a very discriminatory society,” he says. “I think that society has now changed completely.”

Now, Royal Group’s most important Australian connection is its joint venture with ANZ bank. Meanwhile, its telecoms business is a partnership with Luxembourg-registered Millicom International Cellular. Mr Kith Meng also has exclusive distribution rights in Cambodia for a gamut of multi­nationals, including Canon, Siemens and Motorola, as well as the restaurant chains Pizza Hut and KFC. Mr Hanna is among a dozen English-speaking executives working for the group, including a team of former bankers from Macquarie, hired to set up an investment bank for the sprawling business empire. “We, as Cambodians, need outside expertise,” says Mr Kith Meng.

Unsurprisingly, he likes to monitor any international news or report relating to Cambodia.

He cites reading as a favourite hobby, although he has to check with an assistant for the exact title of the book he is currently enjoying. “Hey, what’s the name of that book that I’m reading, that you bought for me?” he shouts across the room. “ Don’t Sweat the Small Stuffby Richard Carlson,” comes the answer. Wise advice, perhaps, but probably something Mr Kith Meng worked out long before starting the first chapter.

‘All this suffering has made me see that I had to be somebody’

Labels: Economic, Economic Success, Kith Meng

Asia's Next Tiger?

Labels: Economic, Economic Success, Election, hun sen

Real Estate Boom in Cambodia's Capital

A decade ago, Phnom Penh didn't even have a traffic light. Now, high-rise condos and offices are in development and land speculators are raking in profits

by Susan Postlewaite
Source: BusinessWeek
June 2, 2008, 7:39AM EST

At a construction site in the middle of the city, a yellow backhoe levels rubble left from the previous building, an old hospital, while dozens of workmen in hard hats and rubber boots scrape away at the dirt. Nothing that noteworthy about this scene—until you consider the location: the intersection of Monivong and Sihanouk Boulevards, in downtown Phnom Penh.

After spending most of the past three decades struggling to recover from the legacy of the Khmer Rouge's genocidal rule, Cambodia is in the midst of a real estate boom. If all goes as planned, the dirt at Monivong and Sihanouk will soon sprout the country's first skyscraper, a 42-story residential building funded by money from South Korea. A few kilometers away, near the river, workers are clearing a lot for another skyscraper, also Korean and even bigger, with 52 stories.

A decade ago, Phnom Penh lacked even a single traffic light. Today, as land speculators rake in profits and new developments lure tenants, the dilapidated capital, which until recently was dotted with dangling electric wires and garbage-strewn lots, is getting a makeover. All over the city, shanty towns and old villas are being sold for land value and razed to make way for high-rise apartments, office buildings, shopping malls, and new villas.

Other parts of the country are seeing development, too. Developers are targeting Siem Reap (BusinessWeek.com, 4/21/08), near the ancient temples of Angkor Wat, for new hotels.

Does Cambodia Need Skyscrapers?

The Phnom Penh skyscrapers, which will be more than three times higher than the tallest existing building in Cambodia, are the most dazzling projects. And the most controversial. The developer of the $240 million Gold Tower 42, Yonwoo Co., expects construction to take three and a half years to complete. Already, says Teng Rithy, sales manager for Gold Tower 42, "high-ranking Cambodians and some foreigners from other Asian countries" are plunking down deposits. "We are 80% sold out," he boasts.

Not everyone is convinced the skyscrapers make sense. Many lawyers, bankers, and real estate brokers in the Cambodian capital are wondering whether the skyscrapers will really go up and whether there is demand for new construction. So far, new buildings are not having trouble leasing, since the city suffers from a shortage of modern office space. Tenants like the World Bank lease space in rabbit-warren-like villas with odd hallways leading in all directions.

But residential skyscrapers are a new concept in a country that not too long ago was still giving away property, not trying to market a 40th-floor condo for $1.6 million. "I feel it's a little bit early for that," says Sung Bonna, head of Bonna Realty, one of the leading real estate firms in Cambodia. "They said it's going to be a success. But I don't know. If it doesn't happen, it is not good for us."

Bonna says the whole idea of a real estate market in Cambodia is so new that no one can predict how it will turn. "We used to share property, not sell it. After the Pol Pot regime, however many properties you want, you can take all of them." He says there is a need for more modern restaurants, office buildings, and commercial centers, but the supply and demand for residential properties is in balance.

Korean Connection

For now, though, there are promising signs. Prime Minister Hun Sen—whose government at one point or another signs off on the big development deals—likes the skyscrapers and he wants more of them, according to his aide, Sry Thamarong. And land prices are hot. A traditional shop house—4 meters wide by 18 meters deep and going up four to five floors—along the river that sold in 2006 for $300,000 is now going for $600,000 to $700,000. But this is still much cheaper than Ho Chi Minh City in Vietnam, the real estate agents say.

Since Cambodia is still a very poor country that has never seen so much investment capital flying around, the trend is unnerving some observers. "Where is the money coming from? Cash coming out from under the mattresses, cash coming from overseas," says John Brisden, vice-chairman of Acleda Bank, the largest bank in Cambodia. He calls the real estate boom "very unusual" because much of it is not being financed by bank loans. Are there signs that the boom may be running its course? Brisden doesn't see a sudden popping of the bubble. Instead, he says, "people envision a slowdown. The scenario is a lot of empty high-rise properties but no forced sales."

Most of the big new projects are coming from Korea. Financing the Gold Tower 42 skyscraper is Korea's DaeHan Real Estate Investment Trust. Yonwoo is the developer. A director at Yonwoo in Seoul, who asked not to be named, says his company began exploring real estate development opportunities in emerging economies three years ago, when Korea's domestic construction market began cooling. "In view of a number of wealthy Cambodians and a growing number of foreign investors arriving in Cambodia, we are confident Gold Tower 42 will be a success," the director says. Phnom Penh-based salesman Rithy says there are "high-ranking Cambodians" involved in the project, but he won't say who.

Investors Face Legal Hurdles

The 52-story skyscraper announced in January is a project of Korea's GS Engineering & Construction. The Seoul company plans to start construction in June and finish in 2012. A 34-story project near the Russian embassy will have serviced residences for 280 households and several floors of apartment blocks on top, as well as shopping and an international school, according to GS spokesman Choi Byoung Geun. "Cambodia really needs this kind of Class A facility," says the business development chief in Cambodia, Mu-Hion Woo, who figures by the time the $1.2 billion project is built, the demand will be there.

A Korean developer is also behind Camko City, a new suburb northwest of Phnom Penh with a $2 billion price tag that is in the early stages of development. World City, the property developer, began construction last June and is scheduled to complete the first phase by November, 2009, according to Korean contractor Hanil Engineering & Construction, the Seoul-based company that is also the contractor for Gold Tower 42.

There are some legal hurdles for potential investors to overcome. For instance, foreigners are not allowed to own real estate outright in Cambodia. But there are plenty of ways to get around the law. Foreign investors can set up a joint venture with Cambodian partners, use long-term leases, or put the land in the name of Cambodian partners. There's even the possibility of becoming Cambodian. "With an investment of a certain size, you can get citizenship. It's a contribution to the country," says Matthew Rendall, a lawyer with Sciaroni & Associates, a law firm in Phnom Penh.

Evictions in the Name of Development

National Assembly lawmaker Sam Rainsy, a former Finance Minister and leader of the largest opposition party, calls many of the real estate deals "shady." He argues that Cambodia is awash in illegal cash plundered from the sale of national assets, including illegal logging and the sale of public lands, where land titles are easily changed and the sales revenues never get accounted for in the state budget.

And there has been a social cost to all the new development. The scramble for prime land has led to widespread evictions of people without clear land titles to the properties. A report by human-rights group Adhoc in Phnom Penh says in 2006 and 2007 more than 50,000 people were evicted for development. Chan Soveth, program officer at Adhoc, says he expects 4,252 families in Phnom Penh to be evicted from villages surrounding Boeng Kak, a lake in the city where a developer wants to build a new township that will have condos, a hotel, and shopping. "It is very bad and getting worse," says Soveth. Adds human-rights lawyer Am Sam Ath of the nongovernmental organization Licadho: "There is no balance between the big development and the rights of the people."

But with land prices continuing to skyrocket, regardless of what happens with the skyscrapers, there is no indication that the land speculation boom will stop. "No one can predict," says Bonna, but he thinks it could run "maybe five years more."

With Moon Ihlwan in Seoul.

Postlewaite is a reporter for BusinessWeek in Phnom Penh.

Labels: Economic, Economic Success, Phnom Penh, Real Estate

Labels: Economic