Stuck in Cambodia’s ‘Casino Capital’

One day in July, in the coastal city of Cambodia, once regarded as the promised land, a group of Chinese investors sat around a coffee table and told stories of Sihanoukville land that was at an impasse over stalled projects and a long-standing legal dispute with its owners.

“Everyone is greedy,” said Zhang Jiewei, president of the Sihanoukville Chinese Business Association. “Businessmen want to make money, even if they know land prices or rents are too high. This is a bubble that everyone knew would burst, but no one thought it was going to happen to them.”

August marked three years after the bust of the construction and property market bubble in Sihanoukville. Fiery, uncontrolled development has turned a once-dream destination popular with tourists into a chaotic area with countless casinos, condos, hotels and shopping malls.

The city, once known as the “Casino Capital of Cambodia” or “Macau of Southeast Asia,” has grown largely on the back of an online gaming industry established in 2017. The POGO industry attracts hundreds and thousands of workers ahead of the explosive demand for real estate.

“It was great at the time,” recalls Gong, a property developer from Sichuan, of that time in October 2019. “No one needs to think too much. Market demands keep pushing them to keep making decisions.”

In August 2019, the Cambodian government banned online gambling, leading to a wave of workers fleeing the field. A year later, the Covid-19 outbreak exacerbated the city’s recession.

Office space once rented by online gambling companies is now vacant and is gradually becoming the “headquarters” of a criminal gang specializing in global online fraud and human trafficking, Cambodia’s forced labor.

Officially, the city currently has 1,155 unfinished buildings, most of which have stopped. The only major changes to the urban landscape after the housing bubble were new streets, wide sidewalks, and the synchronized drainage the government was forced to build after the real estate industry overheated, water levels that destroyed much of the city’s old infrastructure.

To find a way out, some Chinese property developers met with representatives of the Sihanoukville provincial government in early July, who want the government to cut taxes and develop land value tables to help developers negotiate leases with investors. Chinese investors also want the government to help resolve disputes with landowners and persuade them to become shareholders in real estate projects.

Qiu, who arrived in Sihanoukville in 2017, was one of many in a legal dispute with Cambodian landowners. Qiu invested US$3 million to build a high-rise hotel on Independence Avenue, which took 18 months to complete in February 2020. But the landowner then wanted full control of the project and sued Qiu.

“I have made many good investment decisions in China, such as building a clothing wholesale center, and made a lot of money,” Qiu said. “I saw an opportunity in Sihanoukville, but now look what happened. I’m very unlucky.”

The Cambodian government has authorized the Shenzhen Institute of Urban Planning and Design to complete a master plan to transform Sihanoukville into a commercial, service and logistics center. But there is little discussion of what to do with the hundreds of unfinished real estate projects.

A slowdown in China’s economy does not bode well for Cambodia’s construction industry, which contributes more than 30 percent of the country’s GDP growth.

According to the World Bank’s (WB) June economic report, approved foreign direct investment in Cambodia’s real estate sector has plummeted from US$1.7 billion in 2019 to US$142 million in 2020.

According to the World Bank, the construction industry remains “sluggish” even after the pandemic has subsided. In the first three months of this year, the value of approved construction permits fell by 66%, the approved area fell by 67.9%, and the import volume of steel and cement fell by 37.5%. The World Bank has warned that the recession could have a bigger impact on the Cambodian economy.

Zhang, who has invested more than $15 million in a string of hotel projects in Sihanoukville, five of which are currently occupied by landowners due to disputes, remains cautiously optimistic. He said Sihanoukville still had a “bright future” with many opportunities.

“If China opens up, more people will come to invest. Even if someone invests at a loss, someone will come,” he said. “It’s tough right now, but we have to live and tomorrow will be fine.”

Hong Han (follow foot)