While many people flock to make a fortune from the local property market, Oknha Yum Sui Sang, chairman of Union Commercial Bank PLC (UCB), chooses not to invest in this sector until Cambodia’s mortgage law system is better developed.

“Whether the property market is blooming or not depends on how you see it,” said Yum, a Hong Kong native. “Both investors and buyers in the local property market are mainly from overseas. Local people have a weak consuming power in terms of buying property, and many of them can only afford apartments priced at the range of several tens of thousands.”

In a country with a population of more than 15 million, there is always a need for housing. Yum, however, thinks the problem with the local property market is due to the vast disparity in wealth and the dearth of middle-class buyers.

“The market cannot be developed simply with the rich and the poor only, while the poor cannot afford the housing, not many are actually catering to the rich,” said Yum.

Still, according to the bank’s latest financial report, the construction sector remained the main borrower of the bank in 2014. It accounts for more than $90 million in loans, compared to about $41 million in lending to the manufacturing sector.

Yum explains these huge sums of money were borrowed by the construction sector for turnover in buying lands, not to develop projects, which can bring even more business to the bank.

“We wish we could diversify our business into the property sector, as it can be a lucrative business to banks like those in Hong Kong. But it is a different story here due to many factors,” said Yum.

In Hong Kong, Yum said there is a mortgage law in place to protect the banks’ interests by allowing them to take possession of a mortgaged property if the mortgagor fails to repay his debt. However, Cambodia has no such law and banks have to go through a complicated process with the court in order to get back their loans.

Nevertheless, Yum was still willing to set up his bank, UCB, in Cambodia in 1994.

After spending 20 years in the Hong Kong banking industry, Yum saw the potential in developing Cambodia’s banking industry. “In addition to the free economy here, the economy has to be rebuilt after the war, and the competition was not stiff as the small community then was not appealing to big banks.”

After setting up his business, Yum faced the additional challenge of building local people’s trust in banks. “After many years of civil war, people, at that time, did not believe in banks. They would rather put their money under pillows than keep it at banks,” he said.

However, his experience in Hong Kong’s banking industry was instrumental in helping him to succeed. “I did not need people’s savings. Instead I gave them money by offering loans,” Yum said.

It took Yum nearly five years to earn people’s trust in the banking system, but with that trust came competition. Currently there are more than 30 banks in Cambodia. “Back in that time, the loan interest rate was 24 per cent per annum. The bank could easily make money by providing $10 million to $20 million in loans,” Yum said. “But now the rate drops to around eight to 10 per cent in the industry due to the competition.”

Currently UCB provides commercial banking services, ranging from financial trading for both import and export to offering loans to turnover. They also issue bid and performance bonds to the construction sector.

UCB’s business portfolio reflects the keen interest of Chinese investors in manufacturing in Cambodia due to its cheap labour force and its duty-free and quota-free entry for certain products.

But Yum does not think this is enough to stop foreign investors from turning to the country’s rivals, such as Vietnam.

Yum, also the chairman of The China Hong Kong & Macau Expatriate & Business Association in Cambodia, said many Chinese have had reservations about investing in Cambodia.

“Investors would hold back when they see there are strikes here all the time, as they cannot guarantee to finish the products on time,” Yum said. “Otherwise, there would be more investors coming, especially from China.”

Having many customers from the manufacturing industry, Yum said the garment industry can currently only make around 10 per cent profit, compared to the 30 to 40 per cent profit they used to make. Losing $1 to $2 million in compensation is significant to the manufacturers if there is any strike.

According to Yum, unlike the old days, it is now the buyer, not the manufacturer, who makes the call. Overseas buyers quote the price to other developing countries in an attempt to bargain for a lower price, putting pressure on the manufacturers.

According to a recent report published by The World Bank, the country’s GDP growth is predicted to decrease to 6.9 per cent this year. This is largely due to the underperformance of rice production and the pressure that competitive pricing is putting on the garment industry.

However, the good news is that no matter how unpredictable the overseas business environment is, Chinese investors are still eager to ‘go out’. “China’s economy is very bad now. There is a Chinese saying that it is doomed if staying in China, but it could delay the doom if going out,” said Yum.

Even the Chinese government encourages enterprises to ‘go out’ with the ‘one belt, one road’ initiative. In reality, as many Chinese investors told Yum, it is not that easy for them to liquefy their assets in China for overseas investment.

“The problem of China’s economy is that the government only helps state-owned enterprises,” said Yum. “Other small enterprises cannot get loans and are left on their own.”