Bye, bye, Gold Tower 42??By Ros Sothea, VOA Khmer
Original report from Phnom Penh
05 November 2008
In September, before the globe slipped into a financial crisis, developers in Cambodia had planned at least 30 colossal construction projects, including a giant modern city, and buildings with as many as 20 to 50 floors.
But after the US housing market crashed and global markets plummeted, many projects, especially the biggest ones, have been delayed.
South Korean investors, such as BK Global, GS and Yonwoo have been hit hard by the economic crisis.
Teng Rithy, manager of BK Global’s Paros Mekong project, said the $250 million development had been slated to begin in October. It is now delayed.
The global economic downturn has slowed South Korea’s economy and brought its highest inflation in 25 years, Teng Rithy said. That means the company will lose money if it exchanges its won for dollars to begin construction.
More importantly, a credit crunch means investors can’t get the loans they’ve negotiated with Korean banks.
“We had planned to borrow 100 percent of the invested money, but recently Korea’s national bank didn’t provide loans to foreign countries,” he said. “Now it is very difficult…. There are no more investors providing loans to Cambodia.”
Teng Rithy said he was not sure whether Paros Mekong would continue in the future.
Other developers said they worried about customers backing away as the global economy sours.
Im Chamrong, general director of the construction department at the Ministry of Urbanization and Construction, said Cambodia had no new construction proposals in the past two months, but he refused to say how many projects were delayed or canceled.
Bonna Realty Group president Sung Bonna, who has studied the development of large construction projects, said 50 percent of them were delayed by late October.
“Foreign banks, as well as global financers, have delayed or cut down their finances for real estate investors,” he said.
Kang Chandararoth, president of the Cambodia Institute of Development Study, said investors have been forced to delay their project due to the shortage of foreign financing.
However, some investors say they have not had a problem with financial resources but have delayed their projects in the face of a new directive from the Ministry of Finance requiring them to keep more money at the National Bank.
The new directive, issued at the end of July, requires real estate investors to keep 2 percent of their total investment in the bank, restricting investment. Moreover, developers are only allowed to sell housing if they have finished 3 percent of the total construction, limiting the funds they can raise in advance.
Yonwoo, which is backing the construction of Gold Tower 42, a proposed skyscraper in central Phnom Penh, will likely cancel a $1 billion investment in a “modern city” project because of the new directive, said Rou Ratana, a sales manager for the company.
“We are delayed, and maybe completely cancelled,” Nou Ratana said. “The company is disappointed because when they are already facing the crisis, we have restricted their investment.”
Representatives of GS, which is supporting the construction of a 45-floor financial building along the Tonle Bassac, said they will continue unless the government makes more directives.
Nevertheless, Kang Chandararoth said the directive was likely just a pretext for some companies that have canceled or delayed their projects because of limited resources.
Either way, the delay will hurt Cambodia’s economy, which is in part driven by construction and real estate, he said.
Experts have already estimated a 20 percent fall in real estate prices since June.
Hang Chhun Narong, general director for the Ministry of Economy and Finance, agreed, but he said the slow process on some giant projects would keep Cambodia’s economic growth rate in check, sparing the country inflation and its own economic worries.
But after the US housing market crashed and global markets plummeted, many projects, especially the biggest ones, have been delayed.
South Korean investors, such as BK Global, GS and Yonwoo have been hit hard by the economic crisis.
Teng Rithy, manager of BK Global’s Paros Mekong project, said the $250 million development had been slated to begin in October. It is now delayed.
The global economic downturn has slowed South Korea’s economy and brought its highest inflation in 25 years, Teng Rithy said. That means the company will lose money if it exchanges its won for dollars to begin construction.
More importantly, a credit crunch means investors can’t get the loans they’ve negotiated with Korean banks.
“We had planned to borrow 100 percent of the invested money, but recently Korea’s national bank didn’t provide loans to foreign countries,” he said. “Now it is very difficult…. There are no more investors providing loans to Cambodia.”
Teng Rithy said he was not sure whether Paros Mekong would continue in the future.
Other developers said they worried about customers backing away as the global economy sours.
Im Chamrong, general director of the construction department at the Ministry of Urbanization and Construction, said Cambodia had no new construction proposals in the past two months, but he refused to say how many projects were delayed or canceled.
Bonna Realty Group president Sung Bonna, who has studied the development of large construction projects, said 50 percent of them were delayed by late October.
“Foreign banks, as well as global financers, have delayed or cut down their finances for real estate investors,” he said.
Kang Chandararoth, president of the Cambodia Institute of Development Study, said investors have been forced to delay their project due to the shortage of foreign financing.
However, some investors say they have not had a problem with financial resources but have delayed their projects in the face of a new directive from the Ministry of Finance requiring them to keep more money at the National Bank.
The new directive, issued at the end of July, requires real estate investors to keep 2 percent of their total investment in the bank, restricting investment. Moreover, developers are only allowed to sell housing if they have finished 3 percent of the total construction, limiting the funds they can raise in advance.
Yonwoo, which is backing the construction of Gold Tower 42, a proposed skyscraper in central Phnom Penh, will likely cancel a $1 billion investment in a “modern city” project because of the new directive, said Rou Ratana, a sales manager for the company.
“We are delayed, and maybe completely cancelled,” Nou Ratana said. “The company is disappointed because when they are already facing the crisis, we have restricted their investment.”
Representatives of GS, which is supporting the construction of a 45-floor financial building along the Tonle Bassac, said they will continue unless the government makes more directives.
Nevertheless, Kang Chandararoth said the directive was likely just a pretext for some companies that have canceled or delayed their projects because of limited resources.
Either way, the delay will hurt Cambodia’s economy, which is in part driven by construction and real estate, he said.
Experts have already estimated a 20 percent fall in real estate prices since June.
Hang Chhun Narong, general director for the Ministry of Economy and Finance, agreed, but he said the slow process on some giant projects would keep Cambodia’s economic growth rate in check, sparing the country inflation and its own economic worries.
13 comments:
The real estate in Cambodia are over price and now has dropped
around 50% and continuous to drop. There is a lot of real estate
for sales, but no buyer.
Now it is time to kick out all the
illegals out of cambodia and reclaim back the land
hamona hamoot
this is good to hear I want the land price to be lower close to become useless so there won't be land grabbing issues.....you see we hear little about the land grabbing things now......
Cambodia needs investors (local or foreigners)for the continuos growth of the country's economy. Cambodia's land is very fertile and excellent for all kinds of utilization from farming to building skyscraper. Cambodia's land value is not over priced as compare to our neighboring country Vietnam and Thailand. In facts, Cambodia's real estate is only at 35% rate and has 65% growth rate. Therefore, it is too premature to concluded that real estate in Cambodia is over value. Amid, the world financial crisis, the real estate in Cambodia is slowing down but will not crashed.
Cambodia is a great place to invest in real estate because the country's economy has great growth potential. Cambodia needs to tighten on the rule of laws and improve in practice to attract more foreigner investors.
Cambodia will see another growth rate within the next 3-6 months from now. Cambodia will continues to grow and expand hers horizon.
Investing in Cambodia provides job opportunity for the locals, stronger economy, less homlessness, decrease poverty, orphanages, beggers, prostitution and many more...
Cambodia is rising to the international competition and we need individual with innovative ideas and vision to build our country.
Young Generation Oversea
I think those overseas investors were not really going to develope anything. They were there just to fool those silly rich people. They are probably ran away with all the deposits they took for the projects.
I agreed with 6:24AM. We should minimize our anger or hate but to seek solution to assist the locals in Cambodia. We should continues to seek unity among our people and support each other in time of needs. We should not walk away from them but to engage and have open dialogue with them for the sake of our people.
Dream on, fake (6:31). There is no "unity" in Cambodia. Winner takes all is the name of the game. Get it?
I agreed with 6:29AM and 7:23AM. This high rise building might be a scam to get newly rich Cambodians who are happy they have money to waste. Now it sounds like those Okya apartment might not happen. Scam has money forms and trick even Khmer in the US know how to scam people too. Two of them are now in jail in Massachussett. These two scammed those greedy Cambodians who believed they will make a lot of interest by lending the two thousand of dollars.
By the way talking about real estate properties, rich and middle class cambodians inside and outside bought properties in Cambodia. Even my relatives are talking about 6 figures in their properties. Now see what happens. How much can their property worth now?.
As it happens in the US, American are selling their home in the hot market and buy the expensive one. The home that used to value at $200,000, they pay up to $500,000 and more. Now most of them filed bankcrupcy.
People outside, don just say something without doing. If u really want to help poor Cambodians, u should try to convince foreign investors or some French-Cambodians and US-Cambodians who are rich to make business in Cambodia. By doing it, a lot more would not be jobless and not become poorer.
Some Oknha or rich class of Cambodia are not willing to help the poor. In stead they are killing the poor by any mean.
You always blame or criticize the Hun Sen's big head government, Just come to change if you think u are better than him or his puppets. We poor educated need high educated who are really khmer from abroad to help the economic development or growth of cambodia. More knowledge imported, poor become better off.
Well there are a lot more that u guys can help. You are all welcome except gangs, drug dealers, Ki bastards who just say rather than do.
from a man living in Cambodia
6.24 Young Degenerate Overseas. Put your money where your mouth is. You have lost touch of the situation in Cambodia by living o/s and your facts are not right
I am from Gold Tower42 wold like you to take out the picture of our project, and the word bye bye, gold tower42?? because of that pic very effect to our project, anyway our project 100% complete on Time
Haaa ! projector!
6:20AM, you are dragging Cambodia back to 1979 when the land price is nothing. Only stupid people would do that. We don`t succeed in poverty eradication by just erase all of the poor. We need to find the root causes and inject the right medicine. Likewise, in order to prevent land grabbing issues, a real policy must be made and implemented effectively so that both the rich and the poor would not just act carelessly (some of the poor are also the land grabber themselves).
We need Cambodia to be strong, in particular, its economy. In that case, economics activities in Cambodia must carry on. Wishing or making land prices zero is not the option in achieving this goal.
I am not from oversea, the real Khmer.
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