Cambodia Construction Soars Following 2018 Major Slump

Cambodia construction
Labourers work at a construction site in Phnom Penh, Cambodia, June 3, 2019. (Photo: REUTERS/Samrang Pring)

Following a major drop in the first four months of 2018, Cambodia's construction sector strengthened in the first quarter of this year. Industry experts believe strong figures were driven largely by commercial projects.

According to the Phnom Penh Post, Cambodia's investment capital in the construction industry increased by 67.37 percent compared to the same period in 2018, amounting to $2.742 billion in capital funds.

The Ministry of Land Management, Urban Planning and Construction revealed on Thursday that the hike was driven mostly by projects involving commercial buildings and shared accommodation schemes. Analysts noted that the sector is expected to grow further all throughout 2019.

Ministry Secretary of State Lao Tip Seiha said Cambodia has transitioned to become a favorable investment destination for foreign investors. The investments helped initiate the construction of new commercial centers and residential buildings.

"The current high growth of investment capital now [in the construction sector] is mostly due to large projects such as commercial centers, offices buildings, condominiums, and hotels," Tip Seiha pointed out.

The emergence of multiple high-rise projects also helped improve Cambodia's construction figures. Even in some provinces such as Preah Sihanouk, high-rise buildings have started popping up.

It is worth noting that a significant chunk of the investments in the Cambodian construction industry is still flowing from China. Many Chinese investors are betting on the booming infrastructure drive in the Kingdom.

Meanwhile, some economists are still worried about Cambodia's economy as a whole despite improving construction figures. Some analysts believe the construction industry's rise isn't enough to drive economic growth.

Among the major issues that Cambodia is faced with is the potential suspension of the Everything But Arms (EBA) trade the Kingdom shares with the European Union (EU). The proposal was initiated after human rights concerns about the country emerged.

Economic experts noted that the EBA suspension threat could push down employment rates, slow down the inflow of foreign investments, and potentially hamper other sectors from expanding.

It remains to be seen if the construction industry can drive all other Cambodian sectors forward, including the garment segment. The segment has helped propel the economy over the last years but labor issues could take a toll on growth targets.

Aside from other sectors not showing as much fervor as the construction industry, construction workers have also started calling on the government for a minimum wage policy for laborers in infrastructure.

Some experts noted that a minimum wage may not be the solution to the crisis. Instead, there are bigger issues that Cambodia's construction circle has to resolve including worker safety and compensation for injured laborers.

Industry analysts said the Cambodian government should seek to implement reforms to help make the construction sector an even better choice for foreign investors who support the fight for human rights and labor safety.

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