Khmer Times, Opinion, 2 August 2023 (Link)
This is a dream.
We have been waiting for the Japanese to come for so long but their investment is still not significant.
Japanese companies often complain that they have difficulties in finding trustworthy Oknhas (tycoons) that they could work with. They can raise all the problems when they don’t want to come to Cambodia, like lack of skilled labor, electricity, middle management, small market, informal fee, etc.
So, the idea is that if the Japanese does not come, why don’t we go and bring them to Cambodia by buying their technologies or companies?
Technologies are not for free. Technology transfer is just a nice word to say but it is never a charity.
It does not have to be Japanese. It can be European, Korean, Chinese or Thai.
There are technologies and companies that investors can buy to expand the horizon of their investment.
It is a risky business, not fun and not easy like speculative real estate business. But one way or another, Cambodian Oknhas will need to move away from the following three business patterns.
Firstly, the tendency to do “me-too business”. Beer industry is the most visible example. Many Oknhas have beer factories, and they are competing in a small Cambodian market. Cambodia is often raised as a country with leading alcohol consumption in the region but this ranking is not a number that we should be proud of because this trend would create future burden for the health sector, and most important of all it weakens the active power of the Cambodian young labor force, especially male. Whenever there is a long holiday, parents in the countryside often complain that they need to take care of the leftover debts from their children’s drinking after a few days of their home visit. This is not a good sign at all for Cambodian society.
Secondly, the tendency to focus on speculative real estate business.
Thirdly, the tendency of “waiting for the return of the Chinese investment”.
The second and third tendencies are partially interconnected.
Real estate business was lucrative during the overwhelming flow of Chinese investment in between 2016 to 2019. We heard a lot of conflicts between Oknhas on land disputes, and some Okhnas have created social controversies on their land dealings.
The huge flow of Chinese investment came to a standstill just before the Covid-19 pandemic broke out at the end of 2019.
Now it has been one and a half year already since Cambodia reopened the country at the end of 2021, and laid a red carpet to welcome the return of the Chinese. But at the point of writing, there is no hopeful sign that the great flow of Chinese money will make a return to Cambodia.
Many property owners cannot rent their estates in an exorbitant and unbelievable rate like they used to have during the golden time of flooded Chinese money. The rents of real estate need to readjust to adapt to new realities, and to allow domestic business activities to gain ground.
Everyone was waiting for the return of Chinese investment like rice farmers waiting for the rain.
But what if the Chinese do not come?
With the above three business patterns, Cambodian Oknhas are becoming like big whales in a small pond, who cannot avoid clashing with each other. The big whales should swim in the sea, or find the “blue oceans” of opportunities so that they can enjoy freedom to breathe and grow.
Cambodian Okhnas cannot just sit and wait for the Chinese to come back like farmers waiting for rainfall because no one can make a business planning based on rainfalls.
So, big whales Oknhas need to go out and find the “blue ocean” which lies in investment in technologies and innovation.
There are two ways of getting technologies. One way is that you send your students abroad and then build the desired technologies when they return. But this approach can take decades. And we are not sure if those students would return home.
Cambodia is exactly the case in point. We have many good human capital studying in Japan in science and technologies but most of them have not returned. They don’t have much choice at home because they cannot find a career that fit with their educational qualification and beside Japan is more than happy to offer them exciting benefit packages as Japan is also in great need of technological human resources.
Now, another way of getting technologies is to buy them.
When Japan’s economy was booming, in the 1980s, the Samurais were on a buying spree, from American factories, to banks, office towers, stocks, bonds, and masterpiece paintings. Some American were afraid that the Japanese would buy the whole America.
In the 2010s, Europe was afraid that China was buying out Europe. Chinese were buying automobile, manufacturing and high-tech companies, and even French Bordeaux wineries.
China’s second largest tractor maker Yto has acquired McCormick; it is using the French firm’s know-how to make low-end and mid-range models in China, and has re-launched manufacturing in France.
Ford sold Volvo to privately held Chinese company Geely in 2010.
A British car MG was saved in 2005 by the Nanjing Automobile Group, and later by Chinese state-owned SAIC Motor.
The Italian tyre manufacturer Pirelli is currently majority owned by Chinese state-owned chemical company ChemChina.
In 2016, Chinese companies invested about $12.6 billion in Germany which was more than the previous 10 years combined. 68 German companies were bought by Chinese operations that year; and in 2017, the number was 57, mainly in engineering sector.
Indeed, the above headlines are in billion dollars price tag. But not all investment needs to be that expensive.
In 2021, Chinese state-backed conglomerate Wingtech Technology was taking full control of the UK’s largest semiconductor foundry, Newport Wafer Fab (NWF), for £63 million (or $87 million).
There is a famous episode about Japanese investor Son Masayoshi, founder of Softbank Group, who decided to invest $20 million in Jack Ma’s Alibaba in 2000 after meeting with Jack Ma for less than 20 minutes. The Chinese firm later has become one of the world’s biggest e-commerce companies with billions of dollars-worth of business.
It was reported that Korean and Chinese companies had paid Japanese university professors to acquire technologies from their researches.
So, the idea here is that Cambodian Okhnas should look to acquire more foreign technologies to expand their scope of business beyond internal competition and waiting for the Chinese.
Technologies are not only about automobile. It can be agricultural machineries or production, manufacturing, pharmaceutical and chemical industries, Artificial Intelligence (AI), digital technology or other technologies that support future emerging industries.
It takes a lot of courage, and money, to navigate in these uncharted territories.
But the first step needs to be taken.
In the future, Japan External Trade Organization (JETRO) will not only work on bringing reluctant Japanese companies to Cambodia, but they would probably need to develop new strategy by introducing to Cambodian Okhnas the kinds of Japanese technologies the latter can buy to industrialize Cambodian economy.
There is no short cut to adopting technologies. There is no charity for technology transfer.
What if Cambodian Okhnas aboard Cambodian Prime Minister’s airplane for overseas trips do not go there to shop for Hermes bags but instead shop for foreign technologies and companies?
Maybe this is not a dream.
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