Articles

Bank officials express calm amid crises elsewhere

In Business, Financial Crisis, Real Estate on September 23, 2008 by viCheth

PPP, Written by Kay Kimsong   
Monday, 22 September 2008
But local real estate broker seeks govt reassurances

REAL estate brokers in Cambodia worry that current economic instability in the United States and other international markets could affect foreign business investment at home.

“I think the economic slow-down in the US has made some potential investors wary of putting money into land or property,” said Sung Bonna, CEO of Bonna Realty.

He said the government needs to reassure investors over stability in Cambodia in light of the bankruptcy of the US financial services firm Lehman Bros, announced last week, and the government bailout of AIG, formerly one of the US’s largest insurance and financial management firms.

Sung Bonna said a new government must be announced as soon as possible and policies should be implemented to encourage greater investment in the banking and real estate sectors.

Fewer property deals
Government measures to curb inflation by increasing capital reserves requirements for banks have led to a 50 percent drop in new real estate loans, Sung Bonna said.

“The government needs to encourage investment and demonstrate that the economy and political situation here is stable,” he said.

Meanwhile, some in the banking sector say Cambodia remains largely insulated from economic turmoil abroad.

“We’ve weathered this kind of crisis before, and I don’t see any problem for our banking sector,” Nguon Sokha, deputy director of the Research Department at the National Bank of Cambodia, told the Post.
She added that Cambodia, unlike Thailand, has few direct stakes in US financial firms.

In Channy, president and CEO of Acleda Bank, said he has seen no impact on commercial banks in Cambodia because they don’t have substantial stakes in the US stock market.

Overheated real estate

He added that anti-inflationary measures such as the hike in capital reserves was intended to stabilise a booming real estate market that saw rampant over-valuation in market prices since 2007.

“The problem with Lehman was a drop in share prices on the stock market,” In Channy said. “We don’t have a stock market, so the direct impact is minimal.”

But Cambodia does have significant investments from Korea, China and the European Union that could be subject to market fluctuations in some international indexes, said Hing Thoraxy, senior research fellow for Cambodia International Corporation for Peace.

The problem with real estate, for Hing Thoraxy, is not the global crisis but local speculation.

“We are trying to protect our economy, and we will not allow a real estate bubble due to speculation,” he said.
The prospect of a housing crisis in Cambodia could further shake foreign investors’ confidence.
“If speculators artificially drive up prices on land in Cambodia, no one will risk investing here,” he said.

http://www.phnompenhpost.com/index.php/2008092221773/Business/Bank-officials-express-calm-amid-crises-elsewhere.html

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