Until last December, Canadia Bank and its property investment offshoot Overseas Cambodian Investment Corporation (OCIC) weren’t having a good run.
After over-exposing itself to the property sector, which had entered a full-blown slump by the second half of 2008, the bank recorded non-performing loans of US$45.5 million for the year – more than 11 per cent of its total portfolio.
Although the number of bad loans reportedly halved in 2009, OCIC’s flagship Can-adia Tower reportedly lost its bid to house Cambodia’s first stock exchange to South Korean development Camko City as work on Phnom Penh’s tallest building suffered a ser-ies of delays.
Then OCIC’s Diamond Island was the scene of the grim stampede in November last year that resulted in more than 350 Cambodians losing their lives and subsequent payouts to the families of the dead and injured.
A month later, however, things began to turn around.
Although representatives of World City Co Ltd, Canadia Bank and the Securities and Exchange Commission of Cambodia (SECC) have declined to attribute the reassignment of the stock exchange to Canadia Tower to the recent problems at Camko City, suspension of building activity at the South Kor-ean development in October left the government with few other options.
Two months later, Canadia Tower was given back the stock exchange, resulting in a significant impact on occupancy at Phnom Penh’s only Grade A office space.
“After the SECC came to our place, we got a lot of clients to rent here. We also . . . confirmed a lot of clients [wanting] to book the space,” Pen Phyrun, marketing manager of Mega Asset Management Co, the property unit of Canadia Tower owner OCIC, told the Post in March.
But Canadia’s gain represents a loss for most of the companies and private individuals associated with the recent corruption scandal that has engulfed senior executives at South Korea’s Busan Bank, reportedly the primary financial backer of the Camko City project.
Because Camko’s developer, World City Co, was unable to fund continuation of the project after October last year, contractors such as Hanil Engineering and Construction say they have not been paid in full.
There are also question marks over the status of Camko Bank, which provides loans to customers buying property in the stalled Camko City.
What, exactly, are the bank’s links to the project? And will the South Korean government step in to guarantee Camko City’s development (which was scheduled to continue until 2018)?
Then there are the residents of the satellite city and the wider property market, which has just begun to recover from a downturn in sales, rentals and construction prompted by the economic crisis.
This latest stalled project and ensuing scandal hardly bodes well for house prices in Camko City itself or confidence in the Phnom Penh property market.
Whether or not the Camko City project can be rescued almost certainly depends on whether the South Korean government will be prepared to bail out Busan Bank and its investments.
In the meantime, Canadia Tower is set to house Cambodia’s first stock exchange – and if Camko goes down, Canadia will surely keep it.