Lenders look to Cambodian market

Blogger note: Cambodia's size is 181,035 squate kilometers NOT 181,000 squate kilometers

Shinhan Khmer Bank, right, opened in October 2007, while Kookmin Bank Cambodia opened in May 2009. Both banks have been working hard to attract more Cambodian customers instead of members of the Korean expat community - the traditional clientele of Korean banks operating abroad. By Kim Joon-hyun

January 19, 2010
JoonAng Daily (South Korea)

Until about 10 years ago, few Korean companies imagined that Cambodia - an impoverished Southeast Asian country ravaged by decades of internal conflicts - would become one of the top destinations for local banks looking to step onto the global stage.

But the situation has radically changed since then, and a growing number of Korean financial companies are starting to view the country as a promised land with vast growth potential.

With competition becoming increasingly cutthroat and even self-predatory in Cambodia, Korean firms are finding that localization is the key to survival and success in a market that some optimistic experts hail as the next Vietnam.

Kookmin Bank, Korea’s largest lender by assets, is one of most aggressive foreign firms in Cambodia and has been beefing up its localization efforts since it took a foothold in the country last year. The bank set up a locally incorporated unit, called Kookmin Bank Cambodia, last year and has been working hard to increase the bank’s brand awareness among locals.

At 5 p.m. on a recent Friday, some 20 Cambodian employees gathered at the branch office in downtown Phnom Penh to attend a seminar led by Kim Eung-nam, vice chief of the Cambodian unit. Kim holds the weekly seminars to train local employees about basic and advance-level banking operations.

“This is not a mandatory event, but everyone attends it every week regardless,” Kim said. “They are so eager to learn.”

The weekly seminar has an important long-term goal: help local employees learn enough about the company and the industry so that they can become senior managers one day.

“We have emphasized repeatedly that the bank, though formed by Koreans, is a Cambodian company,” said Jang Ki-sung, the head of Kookmin Bank Cambodia.

Jang said he plans to let one of the Cambodian employees head the bank’s second branch in the country, which Kookmin plans to open next year. He also promised a fat bonus for everyone if the bank produces profits this year, hoping it will serve as an incentive to work harder.

In another effort to nurture leadership among local employees, Kookmin in 2007 hired a handful of locals in several countries it wanted to enter in the future - including Cambodia - before it set up operations in those nations. The company brought the employees to the bank’s headquarters in Seoul to participate in training programs that lasted over a year.

Fast-forward three years, and two of those initial hires are working at Kookmin Bank Cambodia’s private banking division as managers.

Among the 1,226 banking accounts that have been opened via the Cambodian unit through last November, 663 of them - or about 55 percent - belong to locals as opposed to Korean expats and businessmen operating in the country.

About 70 percent of the bank’s total loans also were made to Cambodians, a rarity for a foreign unit of a Korean bank that has long catered to expats.

“It is premature to judge whether or not we have been successful here since this bank was officially established in May of last year,” Jang said. “But at least we have a good start.”

Other Korean banks are tapping the market as well. Shinhan Bank, for instance, was one of the pioneers in Cambodia, setting up a unit in the country called Shinhan Khmer Bank in October 2007. Lee Jae-joon, the head of Shinhan Khmer, boasts that 80 percent of the unit’s loan borrowers are local Cambodians.

That’s not to say everything is rosy for these companies: The industry is still relatively new, corruption in the country is rampant and there’s a severe lack of relevant funding options. Also, most of deposits are of the short-term nature, posing a big challenge for banks when it comes to managing their deposit pool.

“Corporate balance sheets are considered very unreliable, meaning we can’t lend on a non-collateral basis,” said Lee of Shinhan Khmer.

Jang echoed that sentiment, saying such lingering uncertainties are the reason why global banking giants like HSBC and Citibank have yet established a presence in Cambodia.

Scholar Touts 'Made-in-Korea' Democracy for Emerging Nations

01-18-2010
By Kang Hyun-kyung
Staff Reporter
The Korea Times (South Korea)

Youn Jung-suk, president of the Korean Legislative Studies Institute, speaks in an interview with The Korea Times at his office in Seoul, last Tuesday. He said that now is the time for the National Assembly to find its role in helping what he called the emerging democracies. (Korea Times Photo/Shim Hyun-chul)


Youn pointed out that strengthening parliaments to make them work better was one of the sustainable ways to help people live in better conditions.

Officials in some developing Asian countries, including Vietnam and Mongolia, have begun taking a closer look at the development of Korea's legislature as a model, said a political scientist.

Youn Jung-suk, president of the Korean Legislative Studies Institute (KLSI), said that now is the time for the National Assembly to define its role in helping emerging democracies.

"I think the Korean model of democracy-building works better in nations where top-down decision-making is predominant, such as former communist states, those under authoritarian governments or nations that have been under dictatorship," Youn said in an interview with The Korea Times last Tuesday.

Since 1945, when Korea was liberated from Japan, the pro-democracy movement here has survived turbulent periods of military dictatorship and authoritarian control.

The decades-long effort finally bore fruit in the late 1980s. The rising demand for democracy from the people led the government to give in and let the people choose a president through direct voting.

Youn hinted that the top-down style in managing the nation facilitated economic growth during the nation's industrialization.

He observed that in the political arena, the practice prompted bottom-up democracy, as activists stood up against the repressive regime in the post-industrialization era.

Youn argued that as Korea has achieved democracy and prosperity through this unique path, it can give informed guidance to nations facing similar challenges.

The professor emeritus, who majored in Japanese studies at the University of Chicago in the 1960s, now teaches at Sogang University.

Before assuming the KLSI presidency, Youn served as president of Chung Ang University.

Founded in 1981, the KLSI has performed mainly academic and research activities in the fields of the parliamentary system, comparative studies of foreign legislatures and major legislative agendas.

Permanent Good

Youn called on policymakers mapping out aid strategy and policies to consider the Korean model of building democracy as one of the major areas where the country can assist less developed nations.

"As a donor, I think, Korea should think seriously about how it can help poor nations achieve permanent positive change. We need to look beyond one-off assistance measures and try to focus on helping their systems work better," he said.

His observation was in line with the message that the recent crisis in Haiti is sending the world.

In the wake of the magnitude 7 earthquake that pounded Haiti ― the poorest nation in the Western Hemisphere ― last week, local experts and government officials are forecasting that the death toll may rise to 200,000.

Help is on the way from all around the world. Rescue workers and medical teams rushed to Haiti to save the lives of as many of those trapped under rubble as they could. Donations of medical products, water and other necessary items followed.

Korea joined the international rescue efforts by sending a team consisting of medical experts and rescue workers last Friday.

Meanwhile, the crisis in Haiti sheds light on a lesser-known consequence of calamities on poor nations ― poor infrastructure makes it difficult for them to rise from the ashes as they have almost nothing to begin with.

An American television journalist who was dispatched to cover the crisis said that he was told many times by locals that they need better construction of housing and other infrastructures to move forward in a sustainable manner.

Haitians want the world to help them in a manner that promotes sustainability, instead of simply one-off relief assistance.

Role of National Assembly

Among others, Youn pointed out that strengthening parliaments to make them work better was one of the sustainable ways to help people live in better conditions.

He called on the National Assembly to play a role in helping developing nations that are based on the relatively poor legislative representation system.

He said officials from Vietnam, Mongolia, Laos, Cambodia and Myanmar had expressed deep interest in learning from Korea's experience in establishing a parliamentary representation system.

"They do have parliaments but their legislative bodies do not work properly in the parliamentary oversight of executive bodies and legislative assistance," the scholar said.

"In particular, they want to know how standing committees here work and to explore parliamentary think tanks, such as the National Assembly Research Service, that help lawmakers with expertise and policy recommendations."

Youn argued that the balance of power between legislature and the executive body is one of the areas that strengthened in emerging Asian nations.

Last year, Youn sat down with Speaker Kim Hyong-o to address the need for exchange programs with those nations. Kim was quite moved by his presentation, and directed his staff to find a role that the legislature could play in this regard.

"As Kim's term at the key post ends in May, his hands are tied. But I will keep trying to address the matter with the incoming speaker after that," he said.

"I assume that we can draw up a road map for the plan by next year."

Parliamentary Strengthening

When it comes to aid policy, the strengthening of democracy and parliamentary systems has been one of the major focuses of major donors such as the United States, Canada and the United Kingdom.

The U.S. Agency for International Development (USAID) has had a program to help poor nations develop their democracies since the 1970s.

But the agency said it was not until the late '80s or early '90s that agency's program started in earnest.

Since the agency chose the promotion of democracy as one of its principal goals in 1994, it remains particularly active in Africa. USAID produced technical assistance guidelines to help nations establish systems for legislation, oversight and representation.

The Canadian Development Agency and the Swedish International Development Cooperation Agency have also worked with developing nations to make their parliaments work better.

International institutions, including the World Bank, the United Nations Development Program, and non-profit groups are also active in governance building in developing or poor nations to help them escape the past.

Dos and Don'ts

After Korea joined the OECD's Development Assistance Committee, a club of donors, intellectuals, such as former Prime Minister Lee Hong-koo, advised policymakers to follow a set of strict guidelines when charting aid strategy.

The guidelines warn not to try to use development assistance as a tool to show off Korea's standing in the world economy; not to try to lecture to other countries; and not to link aid to overseas business deals such as energy diplomacy.

"If Korea ignores the guidelines, the recipient governments will feel insulted. If this happens, Korea will end up a self-serving nation trying to take advantage of aid for its own sake," the former prime minister said.

Lee called on policymakers to keep their eyes on recipients' needs and then include their requests in aid packages.

"Recipient nations will come to expect Korea, the only recipient-turned-donor in the world, to become a donor that has a deeper understanding of their circumstances than other advanced nations, as it shares the experience of poverty in its past.

"They don't want us to feel pity for them but want us to be a thoughtful donor that has gone through similar experiences," Lee said.

Youn shared a similar view with Lee regarding the principles of Korea's aid policy, saying policymakers and aid workers need to take a close look at the unique circumstances facing recipients and come up with a country-specific aid strategy.

Cambodia Takes to the Roads in Building Spree

The New York Times
By THOMAS FULLER
Published: January 18, 2010

SIEM REAP, CAMBODIA — Bullet by bullet, workers removed the detritus of Cambodia’s past. They pulled 300 land mines and 30,000 rounds of ammunition from the red dirt and then laid down a thick layer of asphalt. Today, what would pass for a very ordinary road in wealthier parts of the world is precious pavement for a country motoring toward prosperity and trying to leave its bloody past behind.

Last month, the government inaugurated the newly refurbished Routes 5 and 6, both built during the French colonial era to connect the capital, Phnom Penh, with the Thai border.

Western Cambodia was the last holdout of the Khmer Rouge, the brutal regime toppled three decades ago. Rebel units held onto remote areas into the 1990s, skirmishing periodically with government forces and leaving the roads in total disrepair, a moonscape of potholes and mud that gave travelers sore backs and made for a crater-dodging, head-bumping ride.

Now enjoying the dividends of peace, Cambodia is halfway through a road-building spree with 10 projects totaling 1,173 kilometers, or 730 miles, of pavement still under way, said Prime Minister Hun Sen, who presided over the ceremony on Dec. 28. A further 11 major roads are under negotiation, he said.

The new roads make the storied temples of Angkor Wat a comfortable drive from the Thai border — and a short day’s drive from Bangkok. The roads also put more remote historic sites — in a country filled with them — within easy reach for tourists.

Roads are a big deal in Cambodia, and more than 5,000 villagers were summoned to attend the road’s official inauguration — farmers who arrived by bicycle, monks with freshly shaved heads, children in school uniforms. Organizers stenciled messages onto large banners strung across the canopy that gave shade from the searing sun: “Where there are bridges and roads there is hope.”

Cambodia’s road-building program is now taking “elephant steps, not mouse steps,” Mr. Hun Sen told the crowd.

Like the North-South Expressway in peninsular Malaysia, the American-built Friendship Road across Thailand’s northeast and the vast network of roads built by China over the past decade, roads are a key milestone of development in Asia.

For Cambodia, in particular, good roads help bring together a country fractured by civil war.

“This section was a very heavy battlefield,” said Pheng Sovicheano, the project manager of the road to the Thai border.

Mr. Pheng Sovicheano, who is also Cambodia’s deputy director general for public works, knows firsthand how bad the road was. During construction his driver drove into what looked like a large muddy pothole but turned out to be a small pond, flooding the car up to his chest.

Now, as a measure of Cambodia’s national reconciliation, some of the 360 workers Mr. Pheng Sovicheano hired to build the road were former Khmer Rouge soldiers.

Roads are expensive — $350,000 per kilometer for the road to the Thai border. But with many countries jockeying for influence in Cambodia the government appears to have no trouble finding financing. China is building a number of roads here, including one that passes through the former Khmer Rouge stronghold of Pailin.

Route 5 and Route 6 were financed with a low-interest, 32-year loan by the Asian Development Bank in Manila, an institution whose largest shareholders are Japan and the United States. South Korea is financing other road projects.

Mr. Hun Sen seems to enjoy playing these donors off each other. In his speech he chided the Asian Development Bank for its sluggish and bureaucratic two-year bidding process and praised the speed of Chinese projects.

“I compliment the way the Chinese companies work — very fast,” Mr. Hun Sen said, pointedly glancing over at the representative from the Asian Development Bank.

Political ties between Thailand and Cambodia have been strained by a territorial dispute near a 900-year-old mountaintop temple, Preah Vihear, but officials made no mention of the troubles.

Economic ties endure: By the end of this year western Cambodia will have three good roads leading to Thailand, connections that the government hopes will increase trade and investment. Western Cambodia gets most of its electricity from Thailand, and the company that built the road to the border, S.P.T. Civil Group, is based in Thailand. (The company has ties to Thaksin Shinawatra, the Thai prime minister deposed in the military coup of 2006 who last year was named Mr. Hun Sen’s economic adviser.)

The new roads will make it easier for Thai companies to sell more cement, instant noodles and other products across the border. For Japanese companies, the roads will link the supply chains of factories in Bangkok and in Ho Chi Minh City.

And for villagers in western Cambodia, it may help lift rock-bottom incomes.

Yong Da, a 39-year-old deliveryman in the town of Kralanh, has more than doubled his income because of the new road. “The road was bumpy, and I could not take much stuff on my motorcycle,” he said. He now makes $2.50 a day, up from a dollar a day.

The sheets of dust that enveloped the roadside are also gone, and villagers say their children no longer have trouble breathing.

Good roads and the end of the civil war have allowed villagers to take back the night. Travel after dark was discouraged two decades ago because of poor security and the perils of bad pavement.

But with modernity comes another type of danger. Mr. Pheng Sovicheano says he was driving to Phnom Penh one night recently when he came upon a road accident.

A young man had been killed on his motorcycle when he rammed into the back of a poorly lighted truck. The boy’s distraught mother blamed the good road, Mr. Pheng Sovicheano remembers.

“She said, ‘Before, when there were bad roads, he never drove this fast.”’