A young Cambodian work force is gaining the purchasing power to buy goods like motorcycles, which have contributed to thick traffic on the streets of Phnom Penh. (Robert James Elliott/Bloomberg News)Friday, May 30, 2008
By Erika Kinetz
International Herald Tribune (Paris, France)
If private equity interest is the bellwether for the hot investments of the future, consider this: At least four new private equity funds, backed by brand-name investors, are aiming to bring $475 million of foreign investment into Cambodia.
"Eventually, Vietnam worked out well," Marc Faber, a fund manager and investment adviser known for his "Gloom, Boom, & Doom Report," said by telephone from Switzerland. "I think the same may happen to Cambodia."
Faber, who is on the boards of two of the new private equity firms in Cambodia - Frontier Investment & Development Partners and Leopard Capital - is not the only one who thinks so.
Jim Rogers, a commodities specialist who founded the profitable Quantum Fund with George Soros in the 1970s, and Robert Ash, former chief executive of AIG Asset Management Services, are also on the board of Frontier.
Heinrich Looser, the retired chief of private banking at Bank Julius Baer in Zurich, and Jim Walker, a former director and chief economist of CLSA Securities, are on the Leopard board as well.
The surge in interest is part of a general turn toward so-called frontier markets as investors seek shelter from the global credit crisis and diminishing returns in developed markets. It is also one more sign that aid-dependent Cambodia, with a gross domestic product of just $8.4 billion last year, could finally be inching out of the shadow of its chaotic past.
For many in the West, Cambodia remains tainted by the communist crackdown after the end of the Indochina wars. Yet China, South Korea and Malaysia have been pouring in investment. In 2006, foreign direct investment totaled $2.6 billion, up from just $340 million in 2004, according to the International Monetary Fund.
A rising segment of Cambodians - a third of whom still live on the equivalent of less than $1 a day - are snapping up Honda Dream motorbikes and KFC chicken drumsticks. Cambodia, which plans to open stock and bond exchanges next year, also has the potential to produce two things the world now craves: more rice and oil.
But take a drive out of the capital, Phnom Penh, where the first skyscrapers are rising in the country, and you return quickly to a landscape of water buffalo and thatch huts, governed by the rhythm of the rains.
That looks like opportunity to Marvin Yeo, who recently quit as a syndicate manager at the Asian Development Bank to co-found Frontier, which manages the Cambodia Investment and Development Fund, with a Singaporean economist, Kim Song Tan. They hope to raise $250 million by the end of the year.
Cambodia, Yeo said, "is where Vietnam was some 8 to 10 years ago." He likes a lot about Cambodia: its location in a fast-growing region, a young and inexpensive work force, rising productivity, a pro-business government, stable politics and strong GDP growth, which peaked at 13.5 percent in 2005 but was expected to mellow to 7 percent or 8 percent in coming years.
Thirty years of an isolating war, he added, have made Cambodia "one of the best investor diversification plays around."
But as Han Kyung Tae, the chief Cambodia representative of Tong Yang Investment, part of the South Korean Tong Yang Group, points out, promise and pretty macroeconomics are one thing; closing good deals on the ground are quite another.
Han has been trying to start an Indochina investment fund for more than a year. He said he had reviewed 30 to 40 business plans, but had yet to close a single deal. Tong Yang has scaled back its venture capital aspirations and now hopes to invest $25 million in a Cambodian information technology company, as part of a Vietnam-Cambodia fund, Han said.
His search, he said, was complicated by lack of transparency in a business culture built around sealed family empires. "It's hard for us to get the information we need to invest," Han said. "It's totally new to them. Some feel offended if I ask for financial information."
Investors also say that the weak legal system, immature accounting standards and corruption in Cambodia remain challenges. An anti-corruption law has been foundering for more than a decade, and Cambodia ranks near the bottom of Transparency International's corruption perceptions index.
Kathleen Ng, the managing director of the Center for Asia Private Equity Research, which is based in Hong Kong, sees private equity interest in Cambodia as largely "spillover" from a still-emerging Vietnam.
A second wave of private equity investment in Vietnam - the Asian financial crisis of 1997 and 1998 obliterated the first - began to crest in 2006, rising to $2.0 billion in 2007, up from $166.5 million in 2005, according to the center.
The Ho Chi Minh stock exchange opened in 2000, and despite some recent trouble with expensive initial public offerings is beginning to build a track record of profitable exits, Ng said.
In December 2007, Vietnam Manufacturing & Export Processing Holdings became the first company based in Vietnam to be listed on the Hong Kong exchange; Merrill Lynch invested $22 million and realized $13.06 million through the sale of a third of its holdings, according to the private equity center.
Texas Pacific Group and Intel Capital, the venture capital arm of Intel, together invested $36.5 million in the Vietnamese Corporation for Financing and Promoting Technologies. Two months after it went public, Texas Pacific, which invested $21.5 million, sold less than a quarter of its holdings, booking a cash return of $22.17 million, according to the center.
"There's a level of confidence but Vietnam still needs to prove itself," Ng said. "You cannot just use a few divestment results to say, 'Hey, a place is doing well."'
She added that it might be too early yet for thriving private-sector equity investment in Cambodia, but that the country was ripe for development-finance institutions.
Proparco, the financing subsidiary of the French Development Agency, is "studying the possibility" of investing $5 million to $15 million in a Cambodia-focused private equity fund, according to Julien Kinic, an investment officer at Proparco. The French firm is already a shareholder in Dragon Capital, a Vietnamese asset management group, and has provided direct financing to several prominent Cambodian businesses, Kinic said. "Our interest in Cambodia is not new," he said. "What is new is the rising of the economy and the strong need for financing."
Douglas Clayton, who founded Leopard Capital last year, said that Leopard's Cambodia Fund had raised $10 million of its $100 million target since its inception in April, mostly from wealthy individuals and private banking institutions. He expects to close on Leopard's first project, a 250-unit condo project in the Cambodian tourist hub of Siem Reap, in the next few weeks.
"Cambodia needs several billion dollars of investment," said Clayton, who used to head the Thailand office of CLSA Securities. "Part of that can be private equity. The challenge will be to build the businesses. Most are early-stage investments. This is building basic industries and services."
Cambodia Emerald, which split off from Leopard in November, also aims to raise $100 million, said Peter Brimble, who directs Emerald with Bradley Gordon, a former corporate lawyer.
The funds are targeting investment in tourism, agribusiness, infrastructure, real estate, manufacturing and financial services, among other sectors.
Of course, what goes up can come tumbling down. Take Vietnam: After rising 500-fold from 2003 through the end of 2007, its stock market fell by nearly half in the first quarter.
Cham Prasidh, Cambodia's minister of commerce, said he was not worried about wading into the increasingly foreboding tides of global capital markets.
"Even if there is a world recession, if you develop the capacity to create an enabling environment for doing business and investment in Cambodia, you will survive," he said.
Besides, he added, Cambodia is ready to ride the waves: "We're surfers."
"Eventually, Vietnam worked out well," Marc Faber, a fund manager and investment adviser known for his "Gloom, Boom, & Doom Report," said by telephone from Switzerland. "I think the same may happen to Cambodia."
Faber, who is on the boards of two of the new private equity firms in Cambodia - Frontier Investment & Development Partners and Leopard Capital - is not the only one who thinks so.
Jim Rogers, a commodities specialist who founded the profitable Quantum Fund with George Soros in the 1970s, and Robert Ash, former chief executive of AIG Asset Management Services, are also on the board of Frontier.
Heinrich Looser, the retired chief of private banking at Bank Julius Baer in Zurich, and Jim Walker, a former director and chief economist of CLSA Securities, are on the Leopard board as well.
The surge in interest is part of a general turn toward so-called frontier markets as investors seek shelter from the global credit crisis and diminishing returns in developed markets. It is also one more sign that aid-dependent Cambodia, with a gross domestic product of just $8.4 billion last year, could finally be inching out of the shadow of its chaotic past.
For many in the West, Cambodia remains tainted by the communist crackdown after the end of the Indochina wars. Yet China, South Korea and Malaysia have been pouring in investment. In 2006, foreign direct investment totaled $2.6 billion, up from just $340 million in 2004, according to the International Monetary Fund.
A rising segment of Cambodians - a third of whom still live on the equivalent of less than $1 a day - are snapping up Honda Dream motorbikes and KFC chicken drumsticks. Cambodia, which plans to open stock and bond exchanges next year, also has the potential to produce two things the world now craves: more rice and oil.
But take a drive out of the capital, Phnom Penh, where the first skyscrapers are rising in the country, and you return quickly to a landscape of water buffalo and thatch huts, governed by the rhythm of the rains.
That looks like opportunity to Marvin Yeo, who recently quit as a syndicate manager at the Asian Development Bank to co-found Frontier, which manages the Cambodia Investment and Development Fund, with a Singaporean economist, Kim Song Tan. They hope to raise $250 million by the end of the year.
Cambodia, Yeo said, "is where Vietnam was some 8 to 10 years ago." He likes a lot about Cambodia: its location in a fast-growing region, a young and inexpensive work force, rising productivity, a pro-business government, stable politics and strong GDP growth, which peaked at 13.5 percent in 2005 but was expected to mellow to 7 percent or 8 percent in coming years.
Thirty years of an isolating war, he added, have made Cambodia "one of the best investor diversification plays around."
But as Han Kyung Tae, the chief Cambodia representative of Tong Yang Investment, part of the South Korean Tong Yang Group, points out, promise and pretty macroeconomics are one thing; closing good deals on the ground are quite another.
Han has been trying to start an Indochina investment fund for more than a year. He said he had reviewed 30 to 40 business plans, but had yet to close a single deal. Tong Yang has scaled back its venture capital aspirations and now hopes to invest $25 million in a Cambodian information technology company, as part of a Vietnam-Cambodia fund, Han said.
His search, he said, was complicated by lack of transparency in a business culture built around sealed family empires. "It's hard for us to get the information we need to invest," Han said. "It's totally new to them. Some feel offended if I ask for financial information."
Investors also say that the weak legal system, immature accounting standards and corruption in Cambodia remain challenges. An anti-corruption law has been foundering for more than a decade, and Cambodia ranks near the bottom of Transparency International's corruption perceptions index.
Kathleen Ng, the managing director of the Center for Asia Private Equity Research, which is based in Hong Kong, sees private equity interest in Cambodia as largely "spillover" from a still-emerging Vietnam.
A second wave of private equity investment in Vietnam - the Asian financial crisis of 1997 and 1998 obliterated the first - began to crest in 2006, rising to $2.0 billion in 2007, up from $166.5 million in 2005, according to the center.
The Ho Chi Minh stock exchange opened in 2000, and despite some recent trouble with expensive initial public offerings is beginning to build a track record of profitable exits, Ng said.
In December 2007, Vietnam Manufacturing & Export Processing Holdings became the first company based in Vietnam to be listed on the Hong Kong exchange; Merrill Lynch invested $22 million and realized $13.06 million through the sale of a third of its holdings, according to the private equity center.
Texas Pacific Group and Intel Capital, the venture capital arm of Intel, together invested $36.5 million in the Vietnamese Corporation for Financing and Promoting Technologies. Two months after it went public, Texas Pacific, which invested $21.5 million, sold less than a quarter of its holdings, booking a cash return of $22.17 million, according to the center.
"There's a level of confidence but Vietnam still needs to prove itself," Ng said. "You cannot just use a few divestment results to say, 'Hey, a place is doing well."'
She added that it might be too early yet for thriving private-sector equity investment in Cambodia, but that the country was ripe for development-finance institutions.
Proparco, the financing subsidiary of the French Development Agency, is "studying the possibility" of investing $5 million to $15 million in a Cambodia-focused private equity fund, according to Julien Kinic, an investment officer at Proparco. The French firm is already a shareholder in Dragon Capital, a Vietnamese asset management group, and has provided direct financing to several prominent Cambodian businesses, Kinic said. "Our interest in Cambodia is not new," he said. "What is new is the rising of the economy and the strong need for financing."
Douglas Clayton, who founded Leopard Capital last year, said that Leopard's Cambodia Fund had raised $10 million of its $100 million target since its inception in April, mostly from wealthy individuals and private banking institutions. He expects to close on Leopard's first project, a 250-unit condo project in the Cambodian tourist hub of Siem Reap, in the next few weeks.
"Cambodia needs several billion dollars of investment," said Clayton, who used to head the Thailand office of CLSA Securities. "Part of that can be private equity. The challenge will be to build the businesses. Most are early-stage investments. This is building basic industries and services."
Cambodia Emerald, which split off from Leopard in November, also aims to raise $100 million, said Peter Brimble, who directs Emerald with Bradley Gordon, a former corporate lawyer.
The funds are targeting investment in tourism, agribusiness, infrastructure, real estate, manufacturing and financial services, among other sectors.
Of course, what goes up can come tumbling down. Take Vietnam: After rising 500-fold from 2003 through the end of 2007, its stock market fell by nearly half in the first quarter.
Cham Prasidh, Cambodia's minister of commerce, said he was not worried about wading into the increasingly foreboding tides of global capital markets.
"Even if there is a world recession, if you develop the capacity to create an enabling environment for doing business and investment in Cambodia, you will survive," he said.
Besides, he added, Cambodia is ready to ride the waves: "We're surfers."
14 comments:
Today, Khmer rides on motorcycle; Tomorrow, they will ride on private jet. Vote CPP to stay in the right direction.
cambodia is a good country to invest because it is like thailand 20 or 30 years ago, it is like vietnam 5 to 10 years ago, it is like korea 20 to 30 years ago, etc... so there are many great opportunity to grow in investment as cambodia is cheap and have good labor and investment laws. plus, cambodia is just the right size with eager young population growth and a proliferating young and educated population that are very eager to learn about the world and to help cambodia out of poverty. sooner or later, cambodia will change for the better. don't expect cambodia to stay the same like before, it will be replaced by younger, more eager and enthusiastic, newly educated population that will rival any neighboring country to come. don't let the small size of its land area and its seemingly smaller population fool you because there are many countries in the world that are the size of cambodia and even smaller and look around those countries can grow and become wealthy, so can cambodia. i'm very optimistic about cambodia given its people are fighters and survivors of one of the worst human tragedy any nation could face and yet outlived it and looking beyond the present for prosperity for all to enjoy. god bless cambodia and her beautiful khmer people.
I have study the history of Cambodia. We were on the same living standards of all level as Singapore back in the 60's. They used to learn how to have city planning from us. Now look at Singapore, they are calling us to learn from them. I bet Cambodia will pull itself out of this greed CPP control that only put money in their pockets. For more than 30 years HUN SEN didn't even bring Cambodia out of poverty. For Sihanouk, at least his time was great that was compare to Singapore back then. HUN SEN must do more. Or we need to let new leader take over with newly fresh brain and idea. Get out HUN SEN if you unable to put us in the right direction. Let someone else do the job!!!!!!!!!!!!!!!!!!!
Don't woory ! vote 4 Cpp next 1oys .yuon will name Phom Penh to NOUI' VANGnot NAM VANG.& hun sen will be in the house arrest.
FROM C-50 viet secret agent
That still sounds a lot better than Cambodia become "Little Harare" after Ah Spam Rainxy sell it to Zimbabwe.
Mr. Samraingsy will save khmer's life from devil Cpp yuon Kann Cass.
DOWN POUR AH PRET KYNIOUM YUON & POURK AH YUON KON TORP SROK KHMER!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!
1:49 , It's been 10 years already, we still ride motorcycle....... so WTF are you talking about!
You need us to give you another 10 years so we all can jump on an ox wagon? You call this moving forward? Check the dictionary under FORWARD and defined the definition. What you need to do is give up CPP and and vote SRP. SRP have the capability and the infrastructures to MOVE Khmer FORWARD. It's time for a fresh start! Khmer can't afford to sit still for another 10 years!
I have study the history of Cambodia. We were on the same living standards of all level as Singapore back in the 60's. They used to learn how to have city planning from us. Now look at Singapore, they are calling us to learn from them. I bet Cambodia will pull itself out of this greed CPP control that only put money in their pockets. For more than 30 years HUN SEN didn't even bring Cambodia out of poverty. For Sihanouk, at least his time was great that was compare to Singapore back then. HUN SEN must do more. Or we need to let new leader take over with newly fresh brain and idea. Get out HUN SEN if you unable to put us in the right direction. Let someone else do the job!!!!!!!!!!!!!!!!!!!
Dear 2:17 AM;
Glad that someone like your good self have studied the history of Cambodia.
You ought to congratulated for frankly said that "We were on the same living standards of all level as Singapore back in the 60's. They used to learn how to have city planning from us", which was true.
One thing here that you are totally wrong here [For more than 30 years HUN SEN didn't even bring Cambodia out of poverty], and to be accurate, Hun Sen is in power less than 30 years [January 1979 until date].
Mind you that between 1979 to 1989 [prior to Paris Treaty/Accord] Cambodia was somehow at war between the State of Cambodia and the warring factions at the Cambodia-Thai border. Cambodia at that time was isolated completely from the outside world due to and thanks for the shameful modern diplomat history which turned blind eys on the sufferings of all Cambodians inside the country even if they [states who voted and supported Pol Pot regime as ligimate person at UN seat] knew that Pol Pot regime managed to wipe out millions of innocent lives but they insisted that warring factions should be supported so they could still wage war againgst Hun Sen instead of an opened and peaceful dialogue to end the war and the sufferings of people there.
So here the 10 good years were gone without any fruitful meaning.
Cambodia was opened its door to the world again in 1993 with the UN sponsored election. The new government was formed then and there were 2 PM to start with and therefore the 2 PM should be equally responsible for the entire period that they were in power.
Nevertherless, any one from the outside world would say that Cambodia since then [1993] has made steady progesses: Political stability and economic boom but still encourge the RGC to speed up reform in all frontiers and beleiving that Cambodian people would agree that there is always room for improvement.
And you, 2:55 STFU!!!
Under Somdach Akkar Moha Sena Bat Dey Dek Cho Hun Sen, Cambodia will soon to start to manufacture its own domestic motocycle. Then it will exported that worldwide while starting a domestic automobile manufacturing. And then it will exported that as well while it will started its own domestic jet manufacturing .... , and that will definitely going to take more than a few years, Ah Pleu (4:31). No one can do it better than the CPP. Everything, is fully described in the new Pentagon Strategy, which should be released soon to the public. Therefore, don't be surprised to see 85% + of Khmer people will voted for CPP in this coming election.
Hun Sen and his ministers are YUON HANOY WOOD WAX STOOLs similarity to (DERM TRAACH, KLONKG, KOKI, TBENG ) and so on. YUON actually used to seat and steping on, obviously it such a sticky wood. Yuon GV did not like it but they need it any way for now, yuon will cleaved for fire wood once the gaz price crept up higher.
Don't worry be happy, May GOd bless Khmer all
Who care? At least, we won't be anything like Zimbabwe that controlled Ah Spam Rainxy and his cyclo drivers clan.
To 4:52AM
Are you trying to be funny? Ahahahh
I tell you what! Your Samdech Hun Sen is running out of ideas to recreate Cambodia into a great country! The reason is that your Samdech Hun Sen think he owned Cambodia and he is the chief executive officer (CEO) of Cambodia and he can do anything he wanted!
Hey! When a person owns something and using it for 30 years and the person don't give a fuck anymore! Cambodia is falling apart as a country whether you know it or not!
4:52AM,
Were you saying 85%+ Khmers already have had and understood the new "Pentagon Strategy" that is not yet available to public knowledge?
Altough I hope the US will do the right things to Cambodia in their policy to counter the Chinese, I wish Khmer people would never have to go through another tragedy like in the last cold war.
For right now, if we can just manufact better plastic jars than the craps we are currently importing from Vietnam, we then can look forward to your prediction of "domestic jet manufactoring."
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