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Sung Bonna: Investing in the future of Cambodia

Sung Bonna is a man with plans. Not content with being one of the most powerful players in Cambodia’s property market, he wants to take his company regional, covering all aspects of the property business.

Talking to Post Property in his bustling offices in BKK1, the genial Bonna is softly-spoken, but his steely-eyed ambition quickly becomes apperent.

Starting from a small office space in 1999 with only a desk and an old motorbike, Bonna is now the president of the National Valuers’ Association of Cambodia and vice president of Real Estate Developers Association of Cambodia.

“At the moment we have business as property investors, developers, management and real estate and property agents and property valuation, so anything related to the property business, we cover. We develop residential, we develop offices, we develop commercial. We do it all,” he says proudly.  

Over the years, Bonna has seen ups and downs in Cambodia’s property market, which he blames on inconsistent investment from overseas, which is now changing. “In 2006 and 2007, the investors were mostly Korean and Chinese. The Koreans were the main players. At the moment now things are going in a different direction. The Koreans are very slightly here. Most are Chinese, Vietnamese and Malaysian. Singaporeans and also the Japanese are coming as well at the moment this is a good sign that the Japanese are coming to Cambodia. But foreign investors now make up about 30 per cent of the total transactions, and 70 per cent are Cambodians.”

Bonna says that local investors are starting to look around the country and not just at Phnom Penh. “The local market is divided into two: one is the Cambodians from overseas, the second is Cambodian Cambodians  - the majority being real locals. They are starting to look at the provinces, and the other major cities, like Siem Reap, Sihanoukville, Battambang, and some of the Special Economic Zones near the borders with Siem Reap and Battambang.”

However Bonna says that Phnom Penh is still the best place for serious property investment: “After the crisis of 2008 and 2009 property prices dropped, almost 50 or 60 per cent in some locations across the whole country. In Phnom Penh is just fell by 30 or 40 per cent.”

He says that Phnom Penh has weathered the storm well, and is continuing to prosper. “Phnom Penh reached the bottom early, in 2010, and flattened out and started to be stable until 2011, but in the provinces it still continued to slide down and down until 2011. Those values are still flat, and some provinces are still down a little bit because the demand and supply isn’t there. But in general Phnom Penh is the best, especially in the city centre and areas where the government is,” he says.

“Starting from 2011,” he continues, “the number of transactions increased almost 20-30 per cent, and it makes the prices stable and pick up a little bit: comparing 2011 and now, we’ve just finished the first half of 2012, and year-on-year the number of transactions has almost doubled. But the prices have also increased, about 10 per cent on average. Especially in BKK1 and Daun Penh and along the main commercial boulevards.”

However, Bonna thinks some of the more visible stalled projects that dot the Phnom Penh skyline need to dealt with. “If there is a huge project in the middle of the city which is stuck, it makes other investors feel concerned. Sometimes they don’t think it’s a company’s internal problems, they think maybe its the country that has problems, so they think maybe the economy is not too good.   Sometimes, if possible, the ministry needs to keep an eye of supply and demand, and take care of investors.”

He rejects the idea that Phnom Penh could be facing another property bubble. “I don’t think with residential there will be a bubble, the buyers at this stage are not like the buyers before. The buyers at this stage are more concerned with real demand and real investment, not like the investors in 2006 and 2007,” he says.

With commercial and office space, he is slightly less sanguine. “There is some concern that there could be some oversupply in the future but in terms of the reality, it will be a challenge to stimulate demand … the market will find a solution. In the next three years, it’s not a concern. This is good for the country, it’s good for customers and good for demand, because of the competition.”

Bonna’s plans include listing his company on the Cambodia

Securities Exchange, the country’s nascent stock market. “Now I’m preparing the company, moving it, because it was at first a family company for the first five years, then the next five years it was a local entity, and now we’re aiming to become international so we’re changing a lot of our corporate governance policy, systems and structure, we are changing, and also our accounting and tax and everything, and we hope we’ll be ready by the end of next year or early in 2014.”

I ask him why he thinks listing would be useful for him, and what the company would do with the funds raised. “We are planning to invest in Cambodia. My personal nationalism means I would prefer to develop my country, and I would prefer to invest in this country. We want to expand the brand to cover the whole country, that’s what I’m planning, to be in every province, everywhere there will be a retail office.”

His plans of rolling out the brand nationally are already well underway: “We’ve already started, in Siahanoukville, and in Siem Reap, which is opening this week, and we’ll be in Battambang by the end of this year. We want to expand to make it easy for customers and for investors, so they can just walk in, and it looks like a retail bank.”

But Bonna’s plans extend overseas as well: “We want to jump in to ASEAN as a network, so we’re planning to open branches in ASEAN countries, Next year we’re planning to have one branch somewhere, my thinking is Myanmar, and Laos, and in Vietnam, trying to bring in investors into Cambodia. We want to list to get funds to expand overseas and encourage more investors to Cambodia.”

Bonna feels that this is a good time to invest in the Kingdom. “Cambodia still has a lot of advantages, interesting things, there are only some negative things in terms of its reputation, but its culture and environment has more or less changed a lot, it has developed a lot in terms of the law, regulations. We know that it hasn’t reached the levels that everyone needs yet, but at least it’s changing and there are still positive signs.”

He still feels that more changes are needed before the country becomes truly competitive, however.

“We hope that the government changes more things, especially as we’re preparing to join the ASEAN Free Trade Area, so to be competitive we have to change ourselves more: the most important is the law: regulation and enforcement and culture, so this is important, so I think we still need to change, compared to most other ASEAN countries, we have more potential, and we can attract investors from around the world to Cambodia.”

Bonna says that the country’s recent history has made it harder for it to compete internationally. “Cambodia is very young, in terms of the government, in terms of the private sector, education, experience, business, human resources, things like that, it’s very young. So it’s very hard. We’re not complaining about the government but we are complaining, I suppose, about the history of our country, so everything is difficult and it’s not easy to compete with other ASEAN countries.”

Finally, I bring up the subject of the Bonna Tower, a long-mooted project to build a grand office building in Phnom Penh. “At the moment we don’t have the budget or the funds,” he tells me,  “but this is our dream. As businessmen, if you don’t have a dream you cannot move, we have to build a dream to make ourselves move faster and forward to what we are dreaming, but we hope it will be coming.”



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