In recent years, the term ‘satellite city’ seems to have become synonymous with the Phnom Penh property market. The peri-urban projects have been designed to put Cambodia’s capital on the map as an economically progressive city. However, scandals, delays and controversies have marred many of these developments, casting doubt on how beneficial, or even necessary they actually are.
Since ground was broken at the US$2 billion Camko City, back in 2005, four similar projects have followed totalling $4 billion. Yet it’s the inaugural mega-project which has possibly fared worst, with construction at the site still at a standstill after almost 18 months.
One of the key factors behind South Korean developer World City Co’s inability to continue construction at the Russei Keo district site was the loss of major investor Busan Savings Bank Group, last year.
The bank, which faced a high-profile corruption probe that ensnared top executives, was found to have created a series of shell companies that poured a reported $459 million into the project, the Post previously reported.
The bank is subsequently no longer in business and its assets transferred to government owned Korea Deposit Insurance Corporation’s saving bank, Yenaraebank.
The closure of Busan Savings Bank does, however, increase Camko City’s chances of welcoming a new backer, according Ernst Lee, with Korea’s Financial Services Commission
“It’s up to new buyers to take over these projects. We don’t have any intention of reprocessing them,” he said, adding that the assets will be bundled together with other toxic asset and sold to the market.
The project was initially slated to be finished by 2018, but with the delays ongoing a revised completion date has not been set, Kheng Ser, assistant to the World City project management team told the Post this week.
“Time will tell [when construction restarts], let’s just wait and see what happens next,” he said, adding that World City Co is still undergoing a “financial restructuring period”.
About 80 per cent of the 1,009 units in the first phase of the 119 hectare site have been sold, according to Kheng Ser, however, this figure remains unchanged from one he gave the Post in October 2010.
Among other contentious projects in the works is Boeung Kak Lake Development, which has come under condemnation from the international community in recent years.
Some 4,000 families have been evicted from the site since Shukaku Inc, owned by government senator Leng Meng Khin, and Chinese partners Erdos Hong Jun Investment Co were granted a 99 year lease to develop a mixed use development on the lake in 2007.
Very little is known about the $1.5 billion project, however, on site security personnel told the Post this week that construction is set to begin in March. This was not confirmed, as representatives at Erdos declined to comment.
While the impact of the planned projects, which upon completion are expected to cover a combined area of 1,000 hectares, is still up in the air, some experts in the Kingdom remain positive.
“Although we experienced the global economic crisis, I expect the satellite city projects to fulfill Cambodian people’s demand. They can live there without think about rich or poor Cambodian People,” Lao Tip Seiha, construction department director at the Ministry of Land Management Urban Planning and Construction said, adding that the satellite cities will help facilitate the movement of the people entering the city and reduce poverty among the population.
However, with the Kingdom’s current GDP per capita standing at $911, according to the International Monetary Fund, it is difficult to see how most Cambodian nationals could afford a home in any of these suburban developments.
“I don’t think there is much demand at all for these projects,” ANZ Bank CEO Stephen Higgins said. “As the properties tend to be priced at the upper end, most people that can afford those properties will want to live closer to the city. Plus, I don’t think it is human nature to want to live in a house that looks the same as 300 other houses.”
Considering the lack of demand and, in some cases, forced land evictions, the construction of the satellite cities is not worthwhile, he added.
“[These factors] are why most of them don’t work. As for cases where there are forced evictions, such as Boeung Kak Lake, it creates such a stain on the project that as a reputable bank, we would never want to be involved.”
Higgins added that apart from the satellite cities, “which are flops”, Phnom Penh’s housing market is positively progressing, with the construction of quality, affordable apartments and improvements in the hosing stock from both individual and smaller developers.
Other projects in the pipeline include the relatively successful $500 million Grand Phnom Penh International City, a joint-venture between the Cambodian YLP Group Co and Indonesia’s Ciputra Group. Upon completion, the 260 hectare site will house an 18-hole golf course, according to senior marketing manager Andri Witjaksomo.
“We are the only development to include a golf course. It is our Angkor Wat and will help to attract high-end customers,” he said, adding that about 100 units were currently occupied.
Overseas Cambodia Investment Company, the company behind Canadia Tower, is developing the $300 million Koh Pich development and the recently unveiled Prek Leap satellite city.
The Koh Pich project is ongoing, with 30 per cent complete, and is set for completion in six to seven years, project manager Touch Samnang told the Post, adding that difficulties remained at the 387 hectare Prek Leap site.
“We are still waiting for government and local authorities to agree compensation deals with current residents before construction cans start,” he said, adding that he was unable to provide estimated start date for construction.
Despite the obvious problems that hamper the progression of these mega-projects, developers, industry experts and agents alike hark on about the ever-pending return of demand to the market, usually citing the Kingdom’s bourgeoning economy, favourable investment climate and political stability as key factors. At present, however, it seems highly unlikely that these satellite cities will thrive in the near future, but developers continue to have faith. The question remains whether or not it is just blind faith.
“These satellite city projects continue to run smoothly and we don’t see any problems because developers have confidence in Cambodia’s economy,” according to Lao Tip Seiha.