Chi­nese in­vest­ment in Cam­bo­dia to di­ver­sify into SME fi­nance

The Myanmar Times - - International Business -

CHI­NESE for­eign di­rect in­vest­ment (FDI) in Cam­bo­dia is ex­pected to di­ver­sify into fi­nance and bank­ing in the near term, of­fer­ing mi­crolend­ing ser­vices to small and medium sized en­ter­prises (SMEs), said Peter Wong, South­east Asia and South Asia re­gional di­rec­tor at the Hong Kong Trade Devel­op­ment Coun­cil (HKTDC).

“There is mar­ket po­ten­tial here. Right now, the statu­tory govern­ing body (in China) is not that com­plete or rather it is not very com­pre­hen­sive, so there is a lot of grey ar­eas. This makes it dif­fi­cult es­pe­cially for SMEs which want to bor­row from banks,” Mr Wong said. Speak­ing to Kh­mer Times on the side­lines of a busi­ness mis­sion event or­gan­ised by HKTDC, he said SME mi­crolend­ing is the way to grow the sec­tor.

“I think it is a pos­i­tive area as it is needed. Chi­nese in­vestors are in­ter­ested in de­vel­op­ing these types of in­sti­tu­tions although they are aware that there are more than 40 fi­nan­cial in­sti­tu­tions op­er­at­ing in Cam­bo­dia,” he added.

There are now just a few Chin­abased banks op­er­at­ing in Cam­bo­dia, in­clud­ing the In­dus­trial and Com­mer­cial Bank of China and the Bank of China, as well as mi­cro­fi­nance lender Prince Mi­cro­fi­nance.

Yum Sui Sang, the chair­man of the Hong Kong Busi­ness As­so­ci­a­tion of Cam­bo­dia, said most par­tic­i­pants at the HKDTC’s meet-and-greet ses­sion were rep­re­sen­ta­tives of the fi­nan­cial sec­tor, in­clud­ing bankers, as well as pro­fes­sion­als in the telecom­mu­ni­ca­tions and in­sur­ance sec­tors.

Mr Yum told Kh­mer Times that the Chi­nese fi­nan­cial in­dus­try is cur­rently study­ing the lo­cal mar­ket to iden­tify the ar­eas that have the great­est in­vest­ment po­ten­tial.

HKDTC helps build busi­ness con­nec­tions by pro­mot­ing part­ner­ships be­tween po­ten­tial for­eign in­vestors and lo­cal play­ers, he said.

Ear­lier, Mr Wong said in his speech that Hong Kong is Cam­bo­dia’s sec­ond largest FDI source, ac­count­ing for $347 mil­lion last year.

“I am sure there is more room for busi­ness ties be­tween the two economies to con­tinue grow­ing. Re­cently, Cam­bo­dia ben­e­fit­ted greatly from ris­ing pro­duc­tion costs in China and the re­sul­tant re­align­ments in the sup­ply chain.

“The coun­try has been at­tract­ing pri­vate and pub­lic in­vest­ments in in­fras­truc­ture, man­u­fac­tur­ing and the lo­gis­tics sec­tors that added mo­men­tum to Cam­bo­dia’s eco­nomic devel­op­ment,” he said.

The fact is, Mr Wong said, Cam­bo­dia is an im­por­tant coun­try un­der the Belt and Road Ini­tia­tive (BRI), and more trade op­por­tu­ni­ties will emerge be­tween Cam­bo­dia and main­land China, with Hong Kong serv­ing as a plat­form for pro­fes­sional ser­vices and a fi­nan­cial cen­tre for in­vest­ment.

“In terms of sup­port­ing the BRI, HKTDC con­nects busi­nesses and cap­i­tal to projects and op­por­tu­ni­ties across dif­fer­ent coun­tries with our wide ar­ray of events and plat­forms. We hope that through our channels, qual­ity man­u­fac­tur­ers, sup­pli­ers, traders and in­vestors can jointly tap into the bur­geon­ing Asian and in­ter­na­tional mar­kets,” he added. He noted that the Asean-Hong Kong free trade agree­ment, ex­pected to come into ef­fect in Jan­uary, will fur­ther strengthen eco­nomic ties be­tween Hong Kong and Asean coun­tries by fa­cil­i­tat­ing the flow of goods, ser­vices and in­vest­ments.

Mean­while, Mr Sum ex­pects Chi­nese in­vest­ment to see a sig­nif­i­cant growth in 2019 as busi­ness needs in­crease, with Chi­nese in­vestors ea­ger to con­trib­ute to na­tional growth.

“You can see the strong re­la­tion­ship be­tween the two coun­tries. There is no doubt it would def­i­nitely grow but it also de­pends on Cam­bo­dian sup­port in­clud­ing li­cens­ing. China has al­ready given Cam­bo­dia a lot of quota.

“Hav­ing said that, Cam­bo­dian ex­porters should be hon­est. There are in­ci­dences of rice types of dif­fer­ent qual­i­ties be­ing sold as the same. Cam­bo­di­ans must know what is good and it must be main­tained. There is a mar­ket out­side but it de­pends on how Cam­bo­di­ans re­act. It is both side, not just ex­ports. Cam­bo­di­ans must com­pete with other coun­tries. Com­pe­ti­tion is very im­por­tant,” he said.

Asked about the rise in Chi­nese in­vest­ment in Cam­bo­dia in the face of the US-China trade con­flict, HKDTC’s Mr Wong con­firmed the in­crease but noted that is not the re­sult of ten­sions be­tween the world’s two largest economies. He fore­sees that a lot of man­u­fac­tures will re­lo­cate to Cam­bo­dia on the back of a surge in labour and op­er­a­tional cost in China.

“It is very ex­pen­sive. We are look­ing at all types of labour in­ten­sive man­u­fac­tur­ing that are show­ing an in­ter­est in mov­ing here. How­ever, the re­lo­ca­tion would also de­pend on the skills. Pre­vi­ously, they were gar­ment man­u­fac­tur­ers that moved to Cam­bo­dia but now they could be elec­tron­ics fac­to­ries as well,” he added.

“As China moves up the value chain or tech­nol­ogy evolves, fac­to­ries are look­ing to shift to places where labour is cheaper than China. The pos­si­ble sites are Myan­mar, Bangladesh and Cam­bo­dia, where we can find rel­a­tively cheap labour,” Mr Wong said.

So are Chi­nese real-es­tate in­vest­ments in Cam­bo­dia passé? Mr Wong dis­agreed, say­ing that real es­tate re­mains the tra­di­tional busi­ness in this re­gion as “ev­ery­one wants to have their own house”, so this in­vest­ment would not go away.

“Real es­tate is still a ne­ces­sity rather than an in­vest­ment,” he added.

How­ever, Mr Wong pointed out that high-priced prop­er­ties that only cater to for­eign­ers, par­tic­u­larly Chi­nese na­tion­als, could de­crease as de­vel­op­ers change their mind­set and build units for lo­cals.

“They can’t keep do­ing this be­cause in China there is a lot of prob­lems, like mea­sures to con­trol the out­flow of for­eign ex­change. I think if de­vel­op­ers here con­tinue to fo­cus on the Chi­nese mar­ket, they will not make any profit at all. So, I be­lieve they will di­ver­sify and start cater­ing to lo­cal needs,” he added.

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