Reporting: Kampong Thom, Cambodia

Years ago, I grew up reading about Cambodia, building a much different image than what actually exists. Reading – rather than experiencing – can make us feel like we know what’s going on when the real situation is really much different.

From a glance, Cambodia’s appeal to money launderers and those seeking non-extradition countries might make it seem a bit sketchy. Millions of landmines are believed to still exist in random rural locations – America’s cultural contribution to the place.

And being among the poorest twenty-two countries in the world doesn’t exactly paint the rosiest of pictures.

I spent the day traveling through the provincial countryside today. I wanted to take my time seeing the “real Cambodia” on my way to a few days of R&R in Siem Reap.

The images are far from what you might expect. It’s not shady or even that depressing, but actually encouraging. Children gleefully chasing each other by bicycle down halfway decent country roads was a prevalent sight.

Eighty percent of Cambodia’s small population lives in rural areas. There hasn’t been the epic rush to the cities that’s so well documented in other east Asian countries like China. Agriculture is still a very real industry here, although nowhere near its potential.

Over time, I believe some larger players will continue to acquire and assemble larger tracts of land here. Many farmers have very small farms, so small in some cases they resort to seeking employment on larger rice fields during the off-season.

Many of these farms are held under what’s called a “soft title”, which means a title not recorded at the national level. Thanks to the nationwide land grab during Pol Pot’s “Year Zero” project, local governments have had to establish a system for determining land ownership at a local level.

And irrigation isn’t entirely a thing here yet. Those that have it are seeing their property values rise.

That’s the thing about emerging frontier markets: there’s big money to be had in correcting simple inefficiencies.

On my last day in Phnom Penh, I happened to stumble through a training meeting for a large auto finance company that’s loaning out money for people to buy motorbikes. That’s an entire industry that’s never really existed before.

Yet access to credit is still minimal, and banks are nearly impossible to do business with if you need to expand your operation. They want lots of hard assets that many local businesses don’t have, or can’t produce sufficient documentation on.

That has created a lot of opportunities for people with some savvy to come in and help business owners grow. Microfinance has long been a staple here and has helped very small “entrepreneurs of necessity” get $100 or $200 to purchase tools or simple equipment. One group I found made loans denominated in rice and charged 25% interest.

(As I wrote recently, microfinance institutions in Cambodia pay as much as 10-11% annual interest on Cambodian riel-denominated deposits, an opportunity I didn’t get too excited about. However, two of my private equity friends here believe otherwise, saying the rural poor have a much better track record of repaying their loans. I’m still calling it a bit of a gamble.)

There are, however, larger enterprises outside of the capital city that need to expand, and a few hundred bucks from some lender working with the village president won’t cut it.

One private equity firm I spoke to invested a relatively small sum in a waste management company in the Siem Reap province. After investing a minimal amount of money, they were able to take a good chunk of equity along with some operational control. It didn’t take long for them to find easy, common-sense improvements to improve the already promising performance of the company.

For example, by allowing each truck to dump waste at any of the disposal sites, they shaved away a significant amount of fuel costs and labor hours. Doing so just made sense.

I do believe that there are ways for almost anyone to make some money being in business here in Cambodia. Despite a huge number of restaurants opening up and a crowded food and beverage sector, it’s still possible for people who are willing to understand the culture and customize their business to it to be successful.

That’s what many foreign businesses don’t get: they bring the same cookie-cutter formula they use in the west and expect it to work in Cambodia without any tweaks. A few of them have already left, hat in hand. Cambodians aren’t as demanding a consumer market as, say, the Chinese, but they still have demands.

I believe those with a boots-on-the-ground, non-dogmatic business style can be successful in almost anything here. I might even go so far as to say that Cambodia offers the best overall business conditions in all of southeast Asia today.

But by stepping outside the “big city” and out into where most Cambodians live, you pick up on things most visitors don’t. I’m a big believer that going against the grain and doing something a bit “unsexy” is often the best business philosophy.

When I started my broadcasting business at age 19, I wanted to produce transformational content and compete with huge players in the radio syndication business. While I had some mild successes, it wasn’t until I did about the most unsexy thing you could do – building a market for improving distribution of radio infomercials – that I attracted multi-million dollar contracts and blue-chip clients.

People laughed when I invested in a company that cleaned swimming pools, saying no one who spent their time in Hong Kong, Vienna, and elsewhere should be taking phone calls from some manager about how many filter cleans he sold that week. But that business turned out to be a great investment.

Outside of the “sexy” money in Phnom Penh lies the rest of Cambodia and the intriguing opportunities that lie on the provincial roads that connect the country’s villages and small cities.

Also, consider that half of the world’s population lives within a short flight from where I’m at right now. As populations in Asia continue to grow, agricultural land will look like a better bet. Too bad foreigners can’t own it.

The concept of “import substitution” in particular is a very interesting one I believe will grow, as Cambodians can learn to grow other foods besides rice and increase trade in more meaningful ways.

Like anything other business in Cambodia, these are not opportunities you should invest in and then drop in on a few days a year. The cultural differences in the big city aren’t, of course, nearly as noticeable as they are here in the provinces where American fever hasn’t caught on with the youth.

That said, those with some knowledge of how business is done here, and likely a Khmer -speaking companion, could find ground-level opportunities here and effectively front-run larger companies that haven’t gotten around to doing business in Cambodia yet.

Andrew Henderson
Last updated: Dec 30, 2019 at 4:06PM