Thursday, September 30, 2010

Cambodia's Construction Boom

By roatha007

Cambodia has seen unprecedented construction boom in recent years, driven largely by S. Korean investment. Mega construction projects include Camko City, Golden Tower 42, De Castle Royal, Koa Pich, Boeng Kok, PP Pearl, PPSES and River Palace. The boom is driven by economic factors and speculation:

Macroeconomic and political stability: This is the first and foremost driver. Improved macroeconmic management and CPP's dominance play a vital part in boosting confidence in construction investment.

Rapid economic and population growth: The stability has contributed to double digit growth . Combining with high population growth, it is expected that there will be more affluent people demanding better living and shopping places, entertainment centers...

Tourism boom (Angkor factor): Tourism is shooting up and is expected to boom in the near future. As a result, there is a high demand for hotels, resorts and entertainment centers. The trend is obvious in Siem Reap, and PP and Kampong Som are joining the rank. The upswing also helps prop up other sectors.

Influx of foreign investment and equity funds (spill-over effect): Cambodia's investment-friendly policy has attracted investors hoping to reap windfall profits. Some investors and private equity funds find Cambodia a safe heaven in hedging against international financial turmoils and avoiding strict regulation in neigbouring countries. Investing in real estate is a wise decision in this sense. Some Korean construction companies have shifted to Cambodia due to the high cost and restriction in VN.

Cambodia's lost decades: Decades of turmoils and destruction means Cambodia is in immense need of all types of infrastructure, both private and public.

Underground money: The laundering of money obtained from corruption and other illegal activities contributes to construction boom. Cambodia's present situation and lax law enforcement provide a rare opportunity for money laundering; investing in real estate in a fast growing economy is a best option in yielding quick and high return. Some development projects by foreign investors, esp those from eastern Europe, are in fact international money laundering.

Last but not least is speculation and somehow opportunism: The indirect-but-indispensable element is optimism. There are a lot of speculation about Cambodia's hidden wealth and positive prospect. These include agricultural potentials, unexploited natural resources (esp oil), tourism promise and political stability. The boom is much more about speculation than reality, as most mega projects are still in planning stage. Big investments in Cambodia are still very risky, and investors are adopting wait-and-see attitude.

Real estate boom in Cambodia's capital:

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