What advice would you give to first-time investors?
Usually what I would suggest would be to put it in a bank. Now you have two choices, an MFI [microfinance institution] such as Prasac or commercial banks. The general knowledge here is that all of the banks, regardless of the form, are doing relatively good in Cambodia. So Prasac can be your best bet in terms of building your money [with an interest rate of] 8% per annum.
Unfortunately, you cannot take a large amount of money from Cambodia and invest it in another country. There’s a limitation as to those other investments they can go into. On a personal basis, if you are really a risk-taker – and some years I am – you do online trading. There’s E-Trade, an electronic trading platform, and basically you can buy any stocks around the world. So I signed up for E-Trade, and during times that I feel I want to take a lot of risk, I buy US stocks through online trading. I have a US bank account, so it’s easy for me to do that.
Now if you have longer patience, some of my foreigner friends are investing in real estate. They buy a condominium or other real estate through a nominee, and then wait for appreciation. Right now the hot item is the land near Sihanoukville, where all the Chinese investment is coming in. That’s hot property now.
What are the advantages of investing in real estate?
The returns are higher because in a matter of days, you can recover your costs. Why? Because there is an active buyer and an active seller, and that is what makes a good market. Of course there is a risk there, because if no one wants to buy your property, then you’re stuck with the land, whereas in a traditional financial investment, whatever you do every year, you get a fixed amount of interest. So it depends on the risk appetite of the person.
A lot of [common mistakes] involve real estate. They don’t know the process, so what they do is they trust somebody wholeheartedly in real estate, and then they give them the money. And then this person suddenly disappears. Because they have to have a nominee – they don’t know the language, they don’t know the process. That’s why some people fall into the trap – someone befriends you, and you can trust them for six months. And then if you give them the money, suddenly they don’t appear anymore. So that’s the biggest mistake, not knowing what the process is.
Buying the land per se is not an issue, because as I’ve said – depending on the location – it will appreciate in value, so there’s no problem with the value of the land. It’s the person that you’ve dealt with that is usually the problem. That’s why a lot of foreigners now are taking the safer way: they put up a company just for holding the land titles.
Are there any other common investment routes here?
I think what you’re discussing is physical wealth, physical money. There is another wealth that can be had here in Cambodia, but it doesn’t concern money. It’s the intellectual wealth. I see that a lot of young Cambodians really are interested in learning a lot of things. So if you’re a young Cambodian, obviously you don’t have a lot of money, you invest into the language, the English language, some people learn Chinese, they take on accounting subjects. That’s what I’m seeing in the younger population: they invest in their knowledge.