Ambition Trumps Reality in Investment Figures

By Simon Lewis and Phorn Bopha
The Phnom Penh Post
February 6, 2013

Since 2008, a whopping $28 billion worth of investments has been pledged by local and international firms looking to set up lux­ury hotels, a new airport and even Cam­­bo­dia’s first horse racing venue.

–News Analysis

But a closer look at the list of in­vestments approved by the Cam­bodian Investment Board (CIB)—a figure often trumpeted by officials to demonstrate the health of the Cam­bodian economy—re­veals how many of those investments have ei­ther stalled, or stopped completely.

In 2008, $10.8 billion in investments were approved by the CIB. Yet a significant number of those investments never went further than the drawing board.

Take the Cambodian firm Ever­green Success and Asia Resort Development Ltd.’s promised $1.84-billion tourism investment at the Ream National Park in Preah Sihanouk province. Provincial gov­ernor Sboang Sarath said this week that he had not heard anything more about the project since it was announced in 2008.

“There is nothing happening yet, they have a plan to develop the area, but I haven’t seen anything yet,” the governor said. “They might have an internal problem.”

While some investments includ­ed in the annual investment figures have gone ahead—namely hydro­pow­er dams, garment factories and ag­ro-industrial plantations—the larger, mega-projects—that have raised eye­brows on their announce­ments —often never see the light of day.

Other approved investments from 2008 that have yet to materialize include a $516 million “horse racing center” to be built by Heng Development & Horse Racing Co. Ltd., and a $300 million five-star hotel and spa in Sihanouk­ville pledged by the Israeli company Queenco Tourism International.

In 2009, that year’s investment figure was a comparatively modest $5.86 billion. But more than half of that total was for the $3.38-billion plan by the local conglomerate Roy­al Group to convert the almost un­inhabited Koh Rong off the coast of Sihanoukville into a high-end tourist resort, complete with casinos, hotels, golf courses and polo fields.

Some four years on, Royal Group, which was granted a 99-year lease to the island, is apparently still looking for partners to create the multibillion dollar resort, according to the company’s website.

Investments in 2009 also included a $53.8 million and a $62.5 million holiday resort on Koh Ton­say, or Rabbit Island, off the coast of Kep province.

Neither project has started, said Chhay Khoeun, director of the provincial tourism department

In 2010, the CIB approved just $2.7 billion in investments, but more than a third of that total was un­der a single South Korean project named NSRIA, or New Siem Reap International Airport, which was valued at $973 million.

Some three years on, the NSRIA has yet to break ground, while the company’s CEO was jailed for fraud last year, before having some charges overturned on appeal in a Korean court. The airport’s financer, South Korea’s Busan Savings Bank, collapsed in a major financial scandal in 2011.

Seoyoung Park, a spokeswom­an for the project, said last week that there were “developments” in the search for new financing for the airport project.

Also that year there was a $114 million hotel development in Phnom Penh by Hassan (Cambodia) Development. Othsman Hassan, a CPP secretary of state at the Labor Ministry who is behind the yet-to-begin development, said it would be built, but “maybe next year.”

Although it may be too soon to tell if pledged projects from 2011 will come to fruition, more than half of the $7 billion approved by the CIB that year was taken up by two mega-projects. One was the highly controversial $2.1 billion Shukaku Erdos Hongjun Property Development—an ambitious high-end real estate project which led to the filling in of Phnom Penh’s Boeng Kak lake and the forced evictions of thou­sands of lakeside residents.

The former lake site is now a massive, barren sandpit in the middle of the city and there is no sign of the grandiose real estate project.

Another investment from 2011 was the $2.2 billion investment pledged by a Caymen Islands entity, linked to Royal Group, to produce ammonia urea fertilizer in the Sihanoukville Special Economic Zone.

Vinojit Ambalavaner, project director of Nitrogen Chemicals and Fertilizer (Cambodia), was bullish about the future, saying he hoped the fertilizer project would get off the ground sometime later this year.

“We’ve completed the feasibility study and we’ve got our equity investors in place,” he said.

Asian Development Bank senior country economist Peter Brimble said the total investment figures for each year should be treated with caution since they were “purely approvals.”

“There’s often the incentive for big companies to announce things,” Mr. Brimble said, citing the case of the Hopewell Project in Thailand, in which a Chinese firm built only the standing supports for an elevated rail and road link in Bangkok, simply to help its efforts to win work in China. “It was really done to get a road project in China,” he said.

Former ANZ Royal Bank chief executive Stephen Higgins said that officials were often eager to approve big investment projects, and that numerous examples of abandoned projects could be found in the investments prom­ised before 2008. He also noted that some companies with approved investments were not even searchable on the Internet.

“If you Google them, invariably you can’t find them…. They’re just not legitimate businesses,” he said.

“The figures that are pledged investment should be treated with a very high level of caution. History has shown that they do not have a very high level of reliability.”

The CIB’s 2012 investment figures, obtained last week, record $2.28 billion of pledged investment for last year.

This includes the $205 million Aeon Mall from Japan, a milestone in Japanese investment in Cambodia for which construction began in December.

Another standout project, which has not been publicly announced, is a $640.6 million investment by well-known businessman Sok Kong’s Sokimex Corporation, for a “resort development” at the Kirirom National Park in Kompong Speu province.

Svay Vuthy, Sok Kong’s representative in charge of development projects, said a “masterplan is un­der way” for the project. Mr. Vuthy said the development, which is planned on 2,200 hectares of land, would be similar to the company’s $1 billion Bokor Mountain project, which includes three large hotel-casinos and is currently under construction in Kampot province.

Sokimex is also building a $120 million hotel on Phnom Penh’s Chroy Changva peninsula.

Mr. Vuthy said gaining approval for such investments was just the beginning of a long process for a large project like Kirirom.

“The time [before the project gets under way] is dependent on us submitting the plan to the ministries,” he said. “Once it is approved, it won’t take long to start the project.”