The Pandemic's Effect on Cambodia's Economy
How Pandemic Modified the Business Models of Economic Sectors in Cambodia
With less cases and deaths in Asia, Cambodia has emerged as one of the earliest to pull up its economy ahead of other ASEAN nations in the midst of a pandemic. But as with any countries in the world, Cambodia was not spared from the pandemic’s highs and lows impact on the economy.
Early this year (2021), Cambodia has seen a spike in its Covid-19 cases starting from February up to date. The government placed Phnom Penh and Takhmao, most affected cities, under lockdown in April 15 which was followed by other local regions in the country.
Businesses closed down and business owners were once again starting to see very low figures. Nevertheless, these situations shouldn’t be a source of fear but a source of opportunity. Even as uncertainty abounds, there are varied opportunities in every industry in the economy.
Similar to other crises in history, outbreaks and economic recessions have always made, if not immense, a slight change to businesses, economies, and governments’ approach. For instance, the underlying fear of traveling and human contact during SARS 2002-2004 catalyzed small companies and gave birth to e-commerce.
With Covid-19, there are already significant changes in consumers behavior and how businesses adapt to the pandemic situation. As Cambodia eases its movement restrictions (yet with certain conditions) and reopens its economy, businesses in different sectors are re-operating not by business-as-usual but certainly business-unusual, for continuous operations in spite of lockdowns and travel restrictions.
Targeting Local Market
When the pandemic started to hobble Cambodia, it harshly took a toll on many sectors especially its economy is majorly driven by tourists and foreign investors. There are no tourists to transport, no vacationers to check-in hotels, no foreign investors to drive sales and economic growth.
Clearly, no one knows when this pandemic will end but do businesses really have to wait for it to be able to move forward? Looking on the brighter side, there’s actually a new market to eye, the local market and domestic flights.
According to David Dodger, a tourism expert at Oxford Economics, “Cambodia’s tourism recovery process can be aided by increasing market support for domestic and short-haul travel.” Real estate firms, on the other hand, are modifying their business model by targeting non-Chinese Asean investors such as Japan, Hong Kong and Singapore. In fact, the first online property sale in Cambodia, held in June 2020, attracted multinational viewers whereas 50% were Cambodians, 30% were Chinese, and 20% were mixed nationalities. And in the first five months of 2020, in the wake of Covid-19, Cambodia unexpectedly recorded 3.7 million domestic tourist movements – 60% of which are Cambodian and 40% are foreigners. This brand new approach will not completely recover the economy, but it will definitely “accelerate some growth,” Dodger said.
Based on the statement of Dr. Alexander Evergroen, managing director of Asean Realtor Inc. and CEO of UK Condo & Property Co Ltd, the pandemic opens a new approach to greatly involve local investors, entrepreneurs and the general public as a whole. In addition, it is an opportunity for Cambodia to build an economy that doesn’t rely on foreign investors and developers.
“Foreign investment should only complement the local economy and industry, not be the driving force,” Evergreen said. In the long run, this approach is one that Cambodian economy can hold on to in case a crisis like this occurs again.
Shifting to Online Channels
According to the World Bank, in order for Cambodia to facilitate its recovery in the midst of Covid-19, the government must adapt rapidly to digitalisation. Among all Asean countries, Cambodia has a less developed eCommerce market because of many factors.
During a webinar series, Chandy Mann, the country head of Juwai IQI Cambodia noted that digital transactions and marketing efforts should be the new ways of doing business, especially in the real estate field. Given that countries have yet to flatten the curves, businesses will need to adapt to transactions being done online, primarily if they want to still attract international clients or customers.
Some shopping centers and restaurants have already adapted to this change and other forms of businesses eventually. Startup businesses, with the help of delivery services, are also booming with its effort to go online. In the light of staying at home during this pandemic, online orders in Cambodia skyrocketed by over 180 percent.
In the real estate sector, technology also played a vital role in successfully running the online property sale event and marketing the properties to investors outside the country.
Offering Relevant Products and Services
Since Cambodia closed its country, most of the real estate agencies have outcry as their sales start to decline. Meanwhile, rental and property management remain to be doing well. The popular properties sold during the 4-hour online property sale were mid-tier condominiums and serviced apartments, and boreys.
It’s worth noting that property consumers may still be in fear of acquiring or atleast running a commercial property. In an interview with Cambodia’s CBRE director, he stated that the hospitality and retail sectors have felt the hardest impact due to the reduction of tourist arrivals. Many offices and commercial spaces have also closed due to low revenue and implementation of remote work. From that, residential properties, whether it’d be for rent or for sale, are probably the best products to offer at this time of pandemic.
As e-commerce sales dominate the market, this opens a very big room for industrial or production sites to grow. Despite the numerous constructions across the country, vacancy rates are at all-time lows which attracts a lot of capital for investment. On the retail side, as campaigns on healthy and hygienic lifestyle arise, the products under the said categories are highly in-demand.
With businesses reopening during this pandemic, it might be worth considering to shift to a Corporate Social Responsibility (CSR) that is timely and relevant at this time. Based on Sinclair’s “Covid-19 Recovery Planning for Brands,” customers expect more compassion, care, and actions to address concerns and ease fear to make them feel that everyone is uniting to fight this uncertainty.
Other Economic Activities
Other construction projects were put on halt due to the threat of pandemic to the health of construction workers, but there are significant number of projects which were pursued. Among these are developments on energy, bridges, highways, railroads, tunnels, and other civil engineering projects.
From the report of the Ministry of Land Management, and Urban Planning and Construction, over 2,500 construction projects were approved just for the first half of 2020. This converts to $4 billion of the country’s total construction investment and an increase of 13 percent from the same period in 2019.
After the pandemic, the real estate industry will be driven by the approved 2,000 housing projects out of the total projects approved. There are approximately 6,500 homes to be developed coming from the 36 borey projects.
As the pandemic continues to restrain many sectors, the Kingdom is hopeful that it will not result in a downfall of the entire economy. Throughout history, Cambodia was one of the poorest countries that survived with rice and fish. Because of this, Prime Minister Hun Sen asked authorities to improve agricultural productivity. “Cambodia’s economy does not depend on only tourism or transportation services or industry, but agriculture is a core pillar, the pulse of the Cambodian economy,” he said.
According to World Bank, Cambodia’s Economic Growth is projected to recover 4% in 2021, after contracting by 2% in 2020. If all businesses continue to adapt to these changes instead of being in panic and fear, then Cambodia’s economy can bounce back sooner than we expect.