Even as the skyline of Phnom Penh grows with the symbols of modern
architecture, Cambodia's economy still faces a host of challenges.
At 187 meters, Vattanac Tower is
currently the tallest building in Cambodia. Workers are still adding the last
window frames to the top floors but the structure stands finished.
It overtook 118m Canadia Tower
last year and may soon be overtaken by the more ambitious Gold Tower 42, a
project currently stalled at around 20 stories, which all but completes this
triumvirate of new skyscrapers in Phnom Penh’s rapidly rising Central Business
District.
Designed to look like a Chinese
dragon pointing out to the Mekong River, Vattanac Tower is all feng shui, glass
and steel designed by British architects and built with an estimated $170
million of Cambodian cash.
David George, country manager of
CBRE, one of the building’s letting agents, notes that Vattanac will be the
first and only Grade-A office space in Cambodia when the first eight floors
open for business in the first quarter of 2013.
“If you were in Thailand or Hong
Kong, this is comparable in terms of quality,” he says.
Meaning “progress” in Khmer,
Vattanac symbolizes an economy that stalled during the financial crisis,
causing construction to slow, but which is once again on the upswing.
“You need the domestic market to
be working for these kinds of buildings to go up,” says George.
On the surface, Cambodia’s
economy is certainly improving. In September, the IMF raised its 2012 GDP
growth forecast from 6.3 to 6.5 percent and, in Asia, only China and Laos are
tipped to grow faster in 2013. The World Bank’s December forecast predicts
Cambodia will experience an average annual GDP growth rate of 7 percent over
the next five years.
But the positive statistics
obscure the potentially debilitating structural issues: namely, the economy is
susceptible to external shock.
The World Bank forecasts a
0.5-percentage point fall in GDP growth for 2012 versus the previous year
mainly due to an anticipated drop in garment and agricultural shipments, which
together account for 90 percent of Cambodia’s total export earnings.
Although garment exports climbed
nearly 10 percent to U.S.$3.54 billion in the first nine months of 2012,
consumer confidence in Cambodia’s biggest market, the United States, is
believed to have declined in December as Washington struggled to reach a consensus
on tax hikes and spending cuts ahead of the New Year. Meanwhile, demand for
garments in the EU, Cambodia’s second-largest market, remains sluggish as the
euro-zone crisis persists. In other words, the festive shopping period in the
West is not expected to have been that merry for garment producers in Cambodia.
But projects like Vattanac Tower have softened the blow.
“The overall impact on the
industry sector is somewhat mitigated by the strong performance of the
construction sector in the first half of 2012,” the World Bank said in its
report.
Tourism is also booming as
ever-larger numbers of overseas visitors head to Cambodia’s star attraction
Angkor Wat. On December 31, Cambodia looked to further tap into the millions of
visitors to Thailand each year as the two neighbors started a joint visa
scheme.
But Phnom Penh-based economist
Chan Sophal says that with garments and tourism remaining crucial pillars of
growth, confidence in an economy with so much room for expansion must be
tempered by its vulnerability to external shocks.
At the height of the global
crisis in 2009, Cambodia saw one of the most severe positive-to-negative GDP
swing in East Asia as it recorded a mild recession following a period of
booming growth.
“It [the economy] is still dependent
on external factors in the short and medium term,” says Chan Sophal.
Like many of the region’s rapidly
growing economies, the growth data and positive headlines coming out of
Cambodia belie the staggering lack of progress on the ground.
When ruling party senator and
sugar tycoon Ly Yong Phat opened a new sugar refinery in Kampong Speu province
last week, he promised total investment of $400 million.
“We are trying to make the rural
areas of Cambodia into a business place,” he was quoted by the Phnom Penh Post
as saying.
Some 10,000 workers are to be
hired for the project, which includes sugar cane plantations, said Ly Yong
Phat. But wages start at just 12,000 riel (U.S.$3) per day, he added, and there
are fears that in creating these low-paid jobs, the project may simultaneously
wipeout the livelihoods of some farmers. In a country with a notoriously poor
record on land rights, Ly Yong Phat is considered among the worst offenders,
according to rights groups.
At the same opening ceremony,
Prime Minister Hun Sen gave his most explicit endorsement yet of a Cambodian
trickle-down economic model, which has seen a wealthy few get richer while the
majority remain among the poorest in Southeast Asia.
“Make the bosses rich in
Cambodia,” Hun Sen said, Cambodia Daily reported. “Because when there are
problems – for example when people need help with flooding – our local
investors contribute a huge amount of money.”
Critics argue that Hun Sen’s
emphasis on the rich has prevented many in the country from escaping poverty.
The Gini coefficient, which measures inequality with zero being perfect
equality, climbed from 0.35 in 1994 to over 0.4 in 2004. Although crime – a key
concern for multinationals looking to invest here – has dropped in recent
years, the U.S. State Department still warns potential American tourists that
“Cambodia has a high crime rate, including street crime.” Furthermore,
widespread protests over issues like land disputes, low wages and conditions in
garment factories remain a frequent occurrence.
About 300 workers protesting in
Phnom Penh recently threatened a mass strike in the New Year should Hun Sen
fail to lift the minimum wage above $61 per month, more than in Bangladesh but
below average incomes in rival garment producing nations such as Vietnam.
Despite an ILO-led Better
Factories initiative that was supposed to make Cambodia a model for low-income
clothes manufacturing, there have been a series of reported mass-faintings in
recent years and conditions are reportedly as bad as ever. Recently, the Phnom
Penh’s appeals court upheld murder convictions on two men widely deemed to have
been framed over the 2004 killing of prominent union leader and government
critic Chea Vichea.
The judiciary is seen as among
the weakest institutions in a country which languished in 157th place out of
174 countries included in Transparency International’s 2012 corruption
perception survey. This was slightly better than its 164 ranking Cambodia received
the previous year when Transparency International studied more countries.
“The system is still very
corrupt,” says economist Chan Sophal. “[This] may be good for some investors
but not so good for others.”
Steve Finch
Business & Investment Opportunities
Saigon Business Corporation Pte Ltd (SBC) is incorporated in Singapore since 1994. As Your Business Companion, we propose a range of services in Strategy, Investment and Management, focusing Health care and Life Science with expertise in ASEAN 's area. We are currently changing the platform of www.yourvietnamexpert.com, if any request, please, contact directly Dr Christian SIODMAK, business strategist, owner and CEO of SBC at christian.siodmak@gmail.com. Many thanks.
No comments:
Post a Comment