Investment in construction crumbles under pandemic

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Just $7.8 billion in new construction projects were approved in 2020, down 32.1 per cent on a yearly basis. Hean Rangsey

The global health crisis caused by the Covid-19 outbreak has dragged down investment in the Cambodian construction sector, which had shown positive signs for several years in a row.

Last year, the Ministry of Land Management, Urban Planning and Construction approved just $7.8 billion in new construction projects – down by 32.1 per cent from $11.4 billion in 2019, covering 17 million square metres, down by 26.9 per cent, the National Bank of Cambodia’s said in its latest Financial Stability Review 2020 (FSR 2020) released on May 31.

The residential, commercial and industrial segments made up the largest share of new projects, accounting for 46.1 per cent, 31.8 per cent and 14.6 per cent, respectively, the central bank said, adding that foreign direct investment (FDI) inflows to construction and real estate fell by 10.6 per cent, accounting for 17 per cent of FDI stock.

On the other hand, the number of new construction projects grew by one per cent last year, with 4,841 projects receiving the green light. That rate was 45.5 per cent in 2019.

Cambodia Constructors Association general manager Chiv Sivpheng told The Post on June 2 that the main reason for the decline in investment value was the restrictions imposed on cross-border travel to prevent the spread of Covid-19. Travel constraints have stalled moves to attract foreign investment to the Kingdom.

He said that steering the construction sector out of prolonged Covid-induced rut – especially projects involving foreign developers and contractors – will hinge on the state of the global epidemic.

“The value of investment in the construction sector fell last year due to stagnation, and delays by foreign investors in Cambodia,” he said, voicing hopes for a prompt rebound “as cross-border travel becomes easier, as Cambodia and most countries across the world now put vaccine-related measures in place”.

Rubbing salt in the wound created by 2020’s investment slump, construction at large, foreign-invested sites was logged far less activity last year, he said.

However, he noted, last year witnessed a significant uptick in domestic investment in apartment and borey gated-community residence projects.

CBRE Cambodia managing director Ann Sothida speculated that investment in construction would fare even worse this year than in 2020, on lacklustre progress in the Covid fight and fewer government infrastructure construction plans set in motion that in pre-pandemic days.

Even the real estate sector is on a less-than-satisfactory recovery course, she said.

“The value of investment in 2021 will continue to fall because there are not as many large investment projects, or new infrastructure construction projects driven by the government as there were before, and the number of construction sites, condominiums and borey are also on the decline,” Sothida said.

According to the FSR 2020, imports of construction materials and equipment also booked notable declines, coinciding with increasing domestic cement production.

In 2020, cement and steel imports dropped by 48.3 per cent and 43.3 per cent, respectively.