This month marks the one year anniversary of the integration of the ASEAN Economic Community (AEC).
Inaugurated in December 2015, the open economy initiative among the 10 ASEAN countries aims to strip away trade and tariff barriers, and facilitate a more free flow of services, goods, skilled labour, and also capital.
Such a feat involving these various nations of different political and economical stances could take years to show progress. One year on, Cambodia’s real estate insiders disclose their opinions on how the AEC has yet to show any remarkable impact on the real estate market.
This, however, is expected, according to a report by Swiss Re – a global risk transfer analysis company – which noted that “the establishment of the AEC is another step to closer ties, but progress to deeper integration and associated liberalisation of markets will likely take many years yet.”
Contrary to Cambodians’ initial expectations, Kim Heang, president of Cambodian Valuers and Estate Agents Association, said he has not seen any fruitful contributions to the real estate industry since the integration.
“I’ve observed and have seen that foreigners have continued to buy more condo units than before,” he said.
“This integration has two faces. The advantage would be Cambodia being able to boast to the world that we are not just a country of 15 million people but part of a community of over 600 million. Nevertheless, the drawback is that we are mostly consumers instead of manufacturers.”
Heang also noted that the initial influx at the beginning of the year from Chinese and foreign investors took a turn for the quiet side towards the end of 2016.
“However, we’ve seen quite numerous changes in terms of job scopes as workers from overseas in the real estate sector are either mostly skilled or take over in managerial positions, as opposed to our own people who hold lower skill roles.”
Thida Ann, director of CBRE Cambodia, also highlighted that, after one year of the integration, not much has progressed on the frontline.
A concern she singled out was that of residential oversupply, leading to investors taking more caution before bankrolling in property projects here.
“What’s important right now would be that the government invest more in improving the country’s infrastructure, create more income sources for its people, and tighten law enforcement across all sectors.”
On a more optimistic note, Century21 Cambodia’s CEO, Kuy Vat said that since the AEC integration, Cambodia has seen a fair number of changes in terms of the increase in employment and number of jobs thanks to a variety of foreign investors.
Traditionally, Korean investors had held the baton, but times now see many more Singaporean, Japanese, and Chinese financiers.
“It, of course, has been more competitive when some companies come to partner with [Cambodian companies] while some others come to stand on their own feet,” noted Vat.
Sear Rithy, chairman of Worldbridge Land, who recently attended an international press conference event which focused on land market value growth since the AEC initiative, said that researchers speaking at the event had found that Cambodia, which is still trekking slowly behind Thailand, has more advantages to draw from the integration in terms of land and property.
The conference concluded that Cambodia’s real estate market will engage and maintain more sustainability in the next few years.
“From what I’ve seen, more investment companies are coming to Cambodia after the integration. And when they are here, they will naturally need more office space and residence. I can’t find any big change yet, but there are a lot of positive aspects with more and more international investors keeping a watchful eye on Cambodia to open branch offices here,” Rithy explained.
Economist at the state-run Royal Academy of Cambodia, Ki Sereyvath, voiced that expectations of the AEC have fallen short within this first year. He drew parallels to the 2008 global financial crisis, with the observation of many more buy-to-let property investors now – which could consequently lead to a jammed market when they are unable to resell their homes, thus urging investors to suspend or scrap any prospective or ongoing projects.
“There are many investment companies from Thailand, Malaysia and Vietnam. The Vietnamese companies do not require much labour force, while Thai and Malaysian companies need our local workers and some skilled workers from their countries.
Simultaneously, Cambodian workers are flowing into Thailand to find jobs as there are many more opportunities there,” Sereyvath said.
While this migration to Thailand has eased up financial issues for Cambodian workers there, the hitch could be that the overflow of labour forces would cause investors to hesitate injecting funds into projects in Cambodia, as they realise the inverse decline of labour forces and production rate compared to neighbouring countries.
Mey Kalyan, senior advisor to the Supreme National Economic Council, said that Cambodia has been an open country for trade and business for a long time, therefore, opening the gate for the ASEAN Integration is not as big of a change as some commentators hyped it to be.
At this stage, Kalyan said the Kingdom needed to go the extra mile in advocating human resources to pave the way for more investments.
“Today, competition is based on knowledge. The biggest matter that needs resolvement is human resources because we need them to compete with other countries.”