Business 2 Business spoke with Executive Director, Mrs. Tean Ly, and Managing Partner, Mr. Matthew Tippetts, of M Invest about why Cambodia is fast becoming a Southeast Asian property investors’ destination.
M Invest is a player in the Cambodian corporate finance market since 2011, and has witnessed dynamic changes in the Cambodian properties marketplace. When the company began, many medium to large scale foreign investors did not have Cambodia on their radar screen. Tippetts reflects that since 2011, international investors have flowed into Cambodia at an unprecedented rate.
“With greater understanding of the Cambodian marketplace through more conclusive market research, it is moving onto the radar screen of more large international companies and investors. This is changing the face of Cambodian business.”
And why wouldn’t they? As Tippetts notes, “There are very few restrictions on investment by foreigners in Cambodia, unlike Myanmar,” M Invest’s other primary focus in Southeast Asia. Now that the post-war Cambodian economy has settled, dollarization has meant that currency risk is of less of a concern than for neighbouring countries. Further, “there are very few legal restrictions on the movement of capital in the Cambodian market.”
Real estate has been a tremendous driver for this growth, reflecting increasing confidence in the market, and interestingly a market where there is still low or reasonable leverage. This confidence is evidenced by the significant growth in the construction industry and infrastructure development within the past three years, further underpinning the real estate market.
But the Cambodian market does not appear to be driven solely by foreign investment. When M Invest first decided to set up operations, they assumed the largest majority of their business transactions would be with foreign clients and investors. However, as Tippetts confirms, “Most of our clients are actually Cambodian companies.” This suggests that the Cambodian market is growing domestically alongside new foreign investment, and successfully competing for market share: a promising sign for the future of Cambodian commerce and Cambodians.
Ly concurs adding that domestic consumers are also supporting this investment confidence in commercial real estate. ”A consumer culture is certainly growing in Cambodia with clear signs of an up-and-coming middle class. The new advent of Phnom Penh malls, cafes and movie theatres, suggests that consumer choices are increasing due to strong demand.”
Regardless, the Cambodian market still has peculiarities that any unfamiliar investor must understand. For instance, Tippetts notes the continuing need for educational improvement in Cambodia. Business qualifications of an international standard are still lacking in some disciplines, meaning private training programs may be necessary to bring local staff up to speed. Also, administrative processes and regulations related to undertaking business in Cambodia are not always as predicable as in other countries where these processes have undergone greater refinement. In regards to these uncertainties, Tippetts and Ly both stress that “investors looking to enter the Cambodian market must ensure they receive the best advice. Not only from advisors such as M Invest but also from competent law firms.”