Two global life
insurers are opening offices in Cambodia, one of Southeast Asia's few untapped
insurance markets, as they strengthen their foothold in a region that could
eventually be a key driver of revenue growth.
Britain's No. 1 insurer Prudential said on Monday it won
in-principle approval from the Cambodian government to open a wholly
foreign-owned life insurance operation. The announcement came within a week of
Canada's top insurer Manulife saying it would set up its country office in
Phnom Penh.
Manulife, which once leaned on Canada and the United
States for the bulk of its revenue, now derives a third of its sales from Asia.
For Prudential, the region became the largest contributor to its operating
profit last year.
As the developed economies in Asia become saturated,
insurers such as Manulife and Prudential are flocking to Southeast Asia, drawn
by its young populations and lack of insurance policy holders.
Until now, the industry has ignored Cambodia, a country
with a population of 14 million and a per capita GDP that the World Bank
estimates at $750. But the disproportionate number of young people in the
country - with the majority of the population under the age of 30 - coupled
with the pace of economic growth, has proved tempting to both Prudential and
Manulife.
While few in the industry are expecting major revenues
from such a tiny nation, they acknowledge its growth potential within the
10-member Association of Southeast Asian Nations (ASEAN).
"With its emerging middle class, we see Cambodia as
a virgin market with very significant potential," David Norris, a Hong
Kong-based spokesman for Manulife, said in an e-mailed statement on Tuesday.
Cambodia's economic growth clocked in at over 10 percent
from 2004 to 2007, according to data from the International Monetary Fund. Last
year, it expanded 6.1 percent, just behind Indonesia's 6.5 percent, and is
forecast to be the region's fastest-growing economy in five years' time.
FOREIGN INVESTMENT
Cambodia, the current chair of ASEAN, has received
significant investments from China and South Korea in the last few years. In
April, it launched its own stock market with a single listed company under a
joint venture with Korea Exchange, Asia's fourth-largest bourse operator.
Financial services are in their infancy in Cambodia,
where the state was practically dismantled under the ultra-Maoist Khmer Rouge
regime from 1975 to 1979. During the period, 1.7 million people, or a quarter
of the population, died.
British ambassador Mark Gooding told Cambodian government
officials last week that Prudential would invest $7 million in the country,
which is the minimum capital required for an insurer to operate under Cambodian
law, according to reports in the Phnom Penh Post and China's official Xinhua
News Agency.
Besides Prudential and Manulife, the only other life
insurer operating in Cambodia is the government-controlled Cambodia Life, which
received its license and began operating at the end of May.
Unlike other Southeast Asian governments that place
limits on foreign companies, Cambodia allows foreign insurers to own 100
percent of their businesses.
It may further sweeten the deal for life insurers by
limiting the number of licenses it makes available to a total of four, a source
with knowledge of the situation said, declining to be identified because the
information was confidential.
Entering Cambodia will also be relatively cheap, industry
analysts and bankers said.
Prudential and Manulife have operations in neighbouring
Vietnam and Thailand and may be able to leverage management expertise from
those countries, they said.
Reuters
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