Under the effects of a pandemic, construction investment plummets

Cambodia Compass report, 3rd June - The global health catastrophe brought on by the Covid-19 epidemic has slowed investment in Cambodia's building sector, which had been showing signs of improvement for several years.

According to the National Bank of Cambodia's latest Financial Stability Review 2020 (FSR 2020), the Ministry of Land Management, Urban Planning, and Construction approved only $7.8 billion in new construction projects last year, down 32.1 percent from $11.4 billion in 2019, covering 17 million square meters, down 26.9%.

The residential, commercial, and industrial segments accounted for the majority of new projects, accounting for 46.1 percent, 31.8 percent, and 14.6 percent, respectively, according to the central bank. FDI inflows to construction and real estate fell by 10.6 percent, accounting for 17 percent of FDI stock.

Last year, however, the number of new construction projects increased by 1%, with 4,841 projects given the green light. In 2019, the rate was 45.5 percent.

The main cause for the drop in investment value, according to Cambodia Constructors Association general manager Chiv Sivpheng, was the limits placed on cross-border travel to avoid the spread of Covid-19. Moves to attract foreign investment to the Kingdom have been stymied by travel restrictions.

He believes that getting the building industry out of its long-term Covid-induced rut – particularly projects involving international developers and contractors – will be determined by the global epidemic's current situation.

“Last year, the value of investment in the construction sector fell due to stagnation and delays by foreign investors in Cambodia,” he said, expressing optimism for a quick recovery “as cross-border travel becomes easier, and most countries around the world now put vaccine-related measures in place.”

Construction at huge, foreign-invested sites was significantly less active last year, he said, adding salt to the wound created by 2020's investment slowdown.

However, he added that domestic investment in apartment and borey gated-community residential developments increased significantly last year.

Because of the lackluster success in the Covid fight and fewer government infrastructure construction plans in place than in pre-pandemic days, CBRE Cambodia managing director Ann Sothida predicted that construction investment would do much worse this year than in 2020. According to her, even the real estate sector is on a less-than-successful recovery path.

“The value of investment in 2021 will continue to shrink since there are fewer significant investment projects or new infrastructure building projects driven by the government than there were previously, and the number of building sites, condominiums, and borey is also declining,” Sothida added.

Imports of construction materials and equipment have also decreased, according to the FSR 2020, which coincides with rising domestic cement production.

Cement and steel imports fell by 48.3% and 43.3 percent, respectively, in 2020.

Source: Cambodia Compass comprehensive arrangement

Editor: Malinda         Chief Editor: Sunnie         General in Chief/Executive Producer: Nicole

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