It would be hard for visitors to miss the affluence that is revealing itself in Phnom Penh now. There are numerous shopping malls, large and small, massive government buildings and a host of international banks. Despite all that, the plan for huge investment in building Southeast Asia’s tallest office building there cannot but raise enormous curiosity.

The Phnom Penh one knew of after the Vietnam War was a dusty, boisterous city filled with traditional markets and sizzling roadside barbecues. But there was an air of ambition in the new generation as well as in expat residents.

The Khmer capital city has changed dramatically over the past few decades. Viewed from Psar Thmey (central market), two high-rises – Canadia Tower and Vattanac Capital Tower – stand out as the new landmarks. Shaped like the back of a dragon, the Vattanac Capital Tower is now the tallest building in Cambodia. The 188-metre, 39-storey tower has dominated Phnom Penh’s skyline since it was completed in 2014.

Khmer tycoon Chhun Leang of the Vattanac Group invested US$170 million (Bt5.8 billion) to build the country’s first skyscraper bringing luxury lifestyle to Cambodia. Its official website advertises the building as consisting of two impressive towers and a glass and steel podium: Vattanac Capital Tower 1 is a 38-floor skyscraper with grade A offices, luxury retail and a world-class five-star hotel; Vattanac Capital Tower 2 is a lifestyle cube which has a cinema, fitness, forecourt and medical floors among a host of other attractions.

Many international brands such as Hugo Boss, Brioni, L’Occitane and Longchamp opened their outlets in the tower to serve ultra-rich Cambodian elite and foreigners.

While analysts and observers said Vattanac Capital Tower’s business was not so successful due to low occupancy and limited shopping activities there, the Vattanac management team said the business was doing well. “With the opening of our hotel, Rosewood Phnom Penh, later this year, we expect our business will continue to prosper. We believe that there are still plenty of investment opportunities in Cambodia and we invite all prospective investors to join us on this exciting and rewarding journey in Cambodia,” said a senior official of the group who declined to be named. Construction of high-rise buildings – 10 to 40 storeys high – is booming these days.

There would be more tall buildings in future. Sino Great Wall Inter-national and Wuchang Shipbuilding Industry Group Co Ltd have signed a joint-venture with Cambodian-owned Thai Boon Roong Group, investing more than $2 billion to build another twin-tower building that would rise 560 metres above the ground, 108 metres taller than Petronas Towers in Kuala Lumpur.

To have the highest building in Southeast Asia is a dream of the people of the country, rather than a viable business proposition, said president of Cambodian Values and Estate Agents Association Kim Keang.

“No tall building in this region can make profit; it would be only a symbol of the country, not something investors would be interested in. If you have $10 billion and are going to die very soon and have nothing else to do, you can build it and put your name there,” he said.

“But for business people it doesn’t make sense. Taipei 101 does not make profit, Petronas Twin tower cannot make profit, so why would they build in Cambodia? Who will invest $2 billion for such dream?”

Nevertheless it remains a dream for many Cambodians though it may be inaccessible to them.

Cheng Sotha a 37-year-old housewife, said: “It is good for the image of Cambodia if we can see more and more high buildings in our city. There are some, but too few if we compare with Bangkok, Singapore or Kuala Lumpur where my family and I go on tours. We feel happy and proud to see these high buildings in our city just like those we see abroad.”

Indeed, it was a dream for Phnom Penh residents to see a beautiful and modern city since the Khmer capital city was damaged and dilapidated by the Khmer Rouge during 1975-1979. Born a year after Khmer Rouge was ousted, Cheng Sotha said she was not aware of what the Maoist regime did with the city. Older generations have bitter memories of a ghost town.

During the years when she was growing up, the economy was still bad and living standards quite poor. “But it is different now. We have peace, we can travel wherever we want, so why can’t we have high buildings in the city. It is a symbol of modernisation of our country,” she said.

Cambodia languished in conflict and civil war for a long time. The country has just started to enjoy the benefits of peace, restoration and development after the 1990s when it opened itself to foreign investments. Rebuilding the city began 27 years ago when Taiwanese investors paraded to purchase land and property for real estate development.

Phnom Penh city development has seen ups and downs over the past decade. Land and property speculation inflated prices between 2005 and 2008 when investors from South Korea entered the sector. Real estate in Cambodia, however, was hit by the global financial crisis in 2008. The price of land went down from millions to only thousands of US dollars. It was not a good time for city building, many people lost their jobs, many lost their businesses and many went bankrupt, said a land developer who has been in the business for 10 years.

There were a few constructions in Phnom Penh during 2008-2011. “That was a very quiet time. There were not many projects in Phnom Penh then. You did not see luxury cars like Land Rover, Rolls-Royce or BMW here during that time,” said Kim Keang.

Construction in Phnom Penh sprung back to life again in 2012 when the government talked about economic integration into the Asean community since 10 countries opened to liberalisation, with less restriction and no business boundaries. Investors from Japan, China, Taiwan, Singapore, Malaysia, Thailand and even overseas Cambodians flocked to the country.

The difference this time is that they have come with big projects. Between 2012-2014 most real estate transactions involved land. Investors from China, Taiwan, Hong Kong, and Macau came to buy land and they began construction in 2015, said Kim Keang.

By law, foreigners cannot buy land but there are many ways to buy land in Cambodia. Most foreigners set up a joint-venture company with a 49:51 partnership. Some people buy citizenship; Thais for instance can seek citizenship easily for $50,000-$60,000.

But that is not the single factor luring investors to build in Phnom Penh. Cambodia is no longer a war zone. The kingdom borders Thailand, Vietnam and Laos as well as the Gulf of Thailand, and has enjoyed a high growth rate over the past decade with GDP rising on average by 7-8 per cent annually.

Cambodia has a demography very supportive of new development. The numbers of the middle class are increasing from very poor, poor to lower middle class and middle class. While neighbouring Thailand is entering ageing society rapidly, Cambodia is relatively young. Of the 16 million population, 70 per cent are under 38, numbering more than 10 million.

Politics is perhaps more stable than in many other countries in the region. Political fighting is still going on like in many other countries but the atmosphere is relatively calm, according to a diplomat. Fighting was reported only by the media but behind the scenes, strongman Hun Sen can now can make a deal with many factions and rivals. “Cambodian politics is very stable because only one guy has power, while the rest do not,” a diplomat said, and noted political stability is a desirable environment for investment.

Living in Phnom Penh is wonderful, said one expat. As it is a multi-currency city. visitors don’t need to change money on arrival. It is more open than others in Asean, more than Thailand, Singapore or Malaysia in term of currency. Some people say Cambodia is the second Las Vegas as they can pay for everything – taxi, meal and even company salary in US dollars.

Cambodian lifestyles have changed a lot to keep pace with the new developments in the city. Ten years ago, there were only about a dozen high-rise buildings in Phnom Penh. As of the end of last year, there were 901 new projects including a number of high-rise buildings requesting permission for construction, with investment of $3.1 billion. A report filed by Ministry of Land Management, Urban Planning and Construction showed that the number of high-rise buildings 10- to 40-storeys high numbered 313, together with 134 residential areas.

However high-rise buildings might fit only some parts of the city lifestyle. Housewife Cheng Sotha said she lives with her family in a house and Cambodian people mostly prefer houses to city high-rises. She visits high-rise buildings occasionally for dining or parties but her husband, a financial auditor, works in a Phnom Penh tower.

“I understand that only some people can afford the price to live there, but in the future – five to 10 years from now – there will be more people who can afford it,” she said.

Kim Kaeng agreed that having space in a high-rise building is a kind of status symbol of the rich.

“In Cambodia, it is normal for the rich to have three to five houses, plots of land, many cars, but if you have three condo units, people will regard you as really rich,” he said, noting that developers raised the price for that reason. Condominiums are expensive, perhaps even more so than in some parts of Bangkok.

The number of rich Cambodians is increasing. In Phnom Penh, 5-10 per cent of the 3-million population are rich, 10-20 per cent are middle class and more than 70 per cent are low-income groups, he said, adding the lower-income groups are slowly upgrading to lower middle-class.

In Cambodia, lower income means people who earn $200-$300 per month; the average salary is $250 while the lower middle class earn about $500-$700 a month.

Though construction cost is only $700, they sell at $2,500-$3,000 per square metre, making two to three times profit, he said. “It’s too expensive for local people to afford, so more than 80 per cent of condo buyers are foreigners.”

Many condo projects are now under construction and there is likely to be oversupply when they finish by the end of this year, he said.

“What we have now might be enough for local demand and for foreigners who live and work in Cambodia, but the current supply is more than adequate. If Cambodia can bring more foreign investors, that would be good for that sector,” he said.

Since 2015, land developers have invested in high-rise condos and shopping malls, focusing on middle- to high-end customers but now the market is changing because the rich have enough properties, houses, condos and lands, and they don’t need to buy more.

Investors looking for opportunities should focus on residences and shopping malls, Kim Kaeng said, adding the Japanese brand Aeon Mall is quite successful, boasting a Japanese name and Bangkok quality.

But the time has not arrived yet for high-end and luxury outfits as the rich would not buy at home.

(The Daily Star)