Investing in Cambodia’s future

Song Bona is a man with a plan. Not content with being one of the most powerful players in the Cambodian real estate market, he wants to take his company to the regional market, covering all aspects of the real estate business.

Speaking to Post Property in the bustling offices of BKK1, the affable Bona is soft-spoken but his unwavering ambition is quickly apparent.

Starting from a small office with just a desk and an old motorcycle in 1999, Bona is now the president of the Cambodian National Valuers Association and vice president of the Cambodia Real Estate Developers Association.

“Currently, our business includes real estate investors, developers, management, real estate and property agency and real estate valuation, so anything related to the real estate business, we cover it. We develop residential, we develop offices, we develop commercial. We do everything,” he said proudly.

Bonna has seen the ups and downs of Cambodia’s real estate market over the years, which he attributes to the instability of overseas investment, but this is now changing. “In 2006 and 2007, investors were mainly Korean and Chinese. Koreans were the main players. Now things are moving in a different direction. There are very few Koreans here. Most are Chinese, Vietnamese and Malaysians. Singaporeans and Japanese are coming now, too, which is a good sign for the Japanese to come to Cambodia. But now foreign investors account for about 30% of total transactions, and 70% are Cambodians.”

Bona said local investors are starting to look across the country, not just Phnom Penh. “The local market is divided into two parts: Cambodians from overseas and local Cambodians – mostly real locals. They are starting to look at provinces and other major cities like Siem Reap, Sihanoukville, Battambang, and some special economic zones near the borders of Siem Reap and Battambang.”

However, Bonna said Phnom Penh remains the best place to make a major real estate investment: “After the financial crisis in 2008 and 2009, property prices in some parts of the country fell by almost 50 or 60 percent. Prices in Phnom Penh have only fallen by 30 or 40 percent.”

He said Phnom Penh had weathered the storm well and was continuing to prosper. “Phnom Penh hit bottom as early as 2010 and then gradually levelled off until 2011, but prices in the provinces continued to fall until 2011. They are still flat and some provinces are still seeing some declines because of the lack of demand and supply. But overall, Phnom Penh is the best, especially in the city centre and government areas,” he said.

“Since 2011,” he continues, “transactions have increased by almost 20-30%, and as a result, prices have stabilized and recovered slightly: now we have just finished the first half of 2012, year-on-year transaction volumes have almost doubled compared to 2011. But prices have also increased, by an average of about 10%. Especially in BKK1 and Daun Penh and along the main commercial boulevards.”

However, Bonna believes that some of the more obvious stalled projects on Phnom Penh’s skyline need to be addressed. “If large projects in the city center are stalled, other investors will be worried. Sometimes they don’t think it’s a problem within the company, they think maybe there’s something wrong with the country, so they think maybe the economy is not so good. Sometimes, if possible, the ministry needs to pay close attention to the supply and demand situation and take care of investors.”

He rejected suggestions that Phnom Penh might be facing another property bubble. “I don’t think there will be a bubble in the residential market, buyers at this stage are different from previous buyers. Buyers at this stage are more concerned about actual needs and actual investment, unlike investors in 2006 and 2007,” he said.

As for commercial and office space, he is less optimistic. “There are concerns that there may be an oversupply in the future, but realistically, it will be a challenge to stimulate demand… The market will find a solution. In the next three years, this is not a problem. It’s good for the country, it’s good for customers, and it’s good for demand because there is strong competition.”

Bonna’s plans include listing in Cambodia

Stock Exchange, the country’s emerging stock market. “Now I am preparing the company, pushing it forward because for the first five years it was a family business, then the next five years it became a local business, and now our goal is to go international, so we are changing a lot of corporate governance policies, systems and structures, we are changing, our accounting and taxation and everything, and we hope we will be ready by the end of next year or early 2014.”

I asked him why he thought going public would work for him and what the company would do with the money raised. “We plan to invest in Cambodia. My personal nationalism means I prefer to develop my country, I prefer to invest in this country. We want to expand the brand throughout the country, that’s my plan, there will be a retail office in every province, every place.”

His plans to roll out the brand nationwide are already well underway: “We are already in Sianuuk and Siem Reap, Siem Reap is opening this week, and we will open in Battambang by the end of the year. We want to expand the business and make it easy for customers and investors to use, so that when they walk in, they’ll find it’s like a retail bank.”

But Bonna’s plans extend overseas as well: “We want to enter ASEAN in the form of a network, so we plan to open branches in ASEAN countries. Next year we plan to open a branch somewhere, my idea is Myanmar, Laos and Vietnam, to try to bring investors to Cambodia. We hope to go public to get funds to expand overseas business and encourage more investors to come to Cambodia.”

Bonna believes that now is a good time to invest in Cambodia. “Cambodia still has a lot of advantages and interesting things, with only some negatives in terms of reputation, but its culture and environment have more or less changed a lot, and it has also developed a lot in terms of laws and regulations. We know it’s not yet at the level that everyone needs, but at least it is changing and there are still positive signs.”

However, he still believes more changes are needed before the country can be truly competitive.

“We want the government to change more things, especially as we prepare to join the ASEAN Free Trade Area, so in order to be competitive, we have to change ourselves more: the most important thing is the law: regulations and enforcement and culture, so this is important, so I think we still need to change, compared to most other ASEAN countries, we have greater potential, we can attract investors from all over the world to Cambodia.”

Bona said Cambodia’s recent history makes it harder to compete internationally. “Cambodia is very young, whether it’s the government, the private sector, education, experience, business, human resources or anything else. So it’s very difficult. We’re not complaining about the government, but about the history of our country, so everything is difficult and it’s not easy to compete with other ASEAN countries.”

Finally, I broach the subject of Bonna Tower, a long-gestating project to build a grand office tower in Phnom Penh. “We don’t have the budget or the funding at the moment,” he tells me, “but this is our dream. As businessmen, if you don’t have a dream, you can’t move forward, and we have to build a dream that will move us faster towards our dream, but we hope that the dream will come true.”



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