The once-booming sector has seen a double-digit drop in growth to November, ministry officials say, as pullouts and layoffs are reported across the sector
Construction workers on a site in Phnom Penh. Investment in the sector is declining, leading to job losses and stalled projects.
THE global property crisis is taking its toll on Cambodia's construction sector, with the latest government figures showing new investment down 12.5 percent in the first 11 months of 2008, compared with the same period last year.
Construction investment fell to US$2.8 billion for the first 11 months of 2008 - down from $3.2 billion in 2007, according to the Ministry of Land Management, Urban Planning and Construction.
The decline is part of a global recession in the construction industry fuelled by plummeting property prices and a worsening global economy.
The international construction industry has been hit especially hard by the downturn, with the Dow Jones Construction and Materials Index - a broad measure of the industry - down 44 percent this year, or about two percent more than the Dow Jones Industrial Average.
In Cambodia, more than 30 percent of construction jobs have evaporated as projects are cancelled or scaled back, unions said. At its peak in mid-2008, the construction sector employed 45,000 to 50,000 people nationwide, earning $60 to $1,200 per month, according to the Ministry of Land Management's Department of Land and Construction.
Minister of Land Management Im Chhun Lim said Wednesday the drops are sharpest in projects funded by foreign direct investment, with more declines expected next year.
"I think FDI in the construction sector may drop further if the financial crisis worsens," he said.
"All major construction sites, such as Camko City, Gold Tower 42 and IFC Tower, are progressing, but at a slower speed," he said.
Cambodia had 1,869 construction projects countrywide in the first 11 months of 2008, compared with 1,942 in 2007, according to ministry figures.
Chan Sophal, president of the Cambodian Economic Association, said Thursday that construction investment from the second half of 2008 until early next year will be hard-hit by the economic slump.
I think FDI in the construction sector may drop further if the crisis worsens.
"I think it will be hard for Cambodia to maintain its construction boom because the world is facing difficulties and the local real estate market has remained stagnant," Chan Sophal said.
He said the government's restrictions on bank loans for construction have added pressure to the already battered sector, and he urged the government to reconsider the rules.
"I still think that investment in construction will be lower than 2008," he said.
The declines come despite falling construction materials prices that have significantly cut building costs.
Building companies report that materials costs have dropped by 30 percent to 40 percent since their peak in June, with steel selling for about $650 per tonne, down from about $1,100.
But lower feedstock prices do not compensate for a market with fewer investors to finance projects or buyers looking to mop up excess supply, industry players say.
Sung Bonna, president and CEO of Bonna Realty and president of the National Valuers Association of Cambodia, said the construction sector's health depends largely on government policy.
"I think that investment in construction can be strong as long as the government relieves the bank loan restrictions and the prakas on housing development and foreigners are given the right to own condominiums and apartments," Sung Bonna said.
"What I see at the moment is that the investment in construction is no longer strong, including local and foreign direct investment, because they have lost their financial power and confidence," he said.
Yun Hong, project manager of Kang Meng City, told the Post that construction has slowed down because of a fall in speculator capital.
"We are just finishing our old construction projects at the moment," Yun Hong said.
"If the situation of the property market stays like this, we will stop all construction."
ADDITIONAL REPORTING BY GEORGE MCLEOD