Investigators from South Korea’s state-run deposit insurer have announced that they will open a dedicated branch office in Phnom Penh next month to advance efforts to recover Cambodian property assets linked to bankrupt Korean savings banks.

This will be the first overseas branch office operated by the Korean Deposit Insurance Corporation (KDIC), a government body tasked with diluting the investments of Korean banks that indulged in risky real estate bets.

According to a Korean media report yesterday, the new branch will attempt to retrieve the property assets of seven Korean savings banks, including Prime Savings Bank, Jeil Savings Bank and Tomato Savings Bank, that were suspended in 2011 after grappling with deteriorating construction loans and bad assets. Some of the shuttered savings banks had invested heavily in Cambodia’s property sector.

Cambodia accounts for about 76 percent, or $562 million, of bad debt that KDIC took on following a wave of Korean bank insolvencies that began in 2008, according to the report.

Kim Doo-yoon, a former KDIC investigator who serves as CEO of Tomato Specialised Bank, confirmed yesterday that KDIC officials would arrive on March 9 to formally open the dedicated branch.

While he declined to elaborate on Tomato Specialised Bank’s standing with the KDIC, he said the state-run body was still facing problems offloading Camko Specialised Bank, whose fortunes were mired by the collapse of its largest shareholder.

Camko Specialized Bank, which provided home loans for the troubled Camko City satellite city project on the outskirts of Phnom Penh, was 50 percent owned by South Korea-based Busan Mutual Savings Bank, which filed for bankruptcy in 2011. KDIC was entrusted with liquidating Busan’s share in the bank, but has struggled for nearly six years to find a buyer.

Last February, KDIC announced that it had identified prospective buyers to purchase the bank and its $12.6 billion in assets. The deal, however, fell through.

“Camko is still in the hands of the KDIC,” Kim confirmed.

While KDIC officials could not be reached yesterday, the media report said Cambodia’s construction boom and continually rising land prices were the main reason for KDIC’s renewed push for asset collection. The agency’s efforts have also reportedly been hindered by a lack of Cambodian government cooperation.

“After setting up the office, we expect to speed up the process of recovering the assets by strengthening cooperation with relevant authorities,” a KDIC official was quoted as saying.

Seo Jeong-ah, public relations manager for the Korea Trade Investment Promotion Agency (KOTRA), said KDIC has struggled to recover bad debts and a dedicated office able to facilitate asset recovery would lower the risk for depositors in future cases.

However, she played down reports that uncooperative Cambodian government officials were blocking KDIC’s efforts to recover assets.“Most of the project financing was linked to projects with the Cambodian government, so it is kind of sensitive to deeply investigate,” she said.

“Sometimes the local partners were uncooperative or reluctant because they couldn’t sell the assets. It’s not a Cambodian bureaucracy [problem].” Stephen Higgins, managing partner of investment firm Mekong Strategic Partners, said Korean banks racked up huge losses by making large investments into problematic projects such as Camko City and Gold Tower 42.

“These Korean losses ultimately resulted from ill-conceived cross-border lending into ill-conceived projects, and shouldn’t in any way reflect on FDI more broadly,” he said.

“The booming property market may help resolve problems like Gold Tower, but the problems with projects like that run much deeper than property prices not being high enough.”

Despite difficulties, KDIC has made progress in recovering assets in the Kingdom. In late 2015, the agency announced its largest overseas haul to date, recovering $8 million worth of fraudulently acquired property after it launched an elaborate scheme to lure out a local Korean businessman attempting to sell it.