Starting a construction project without knowing the facts can be very risky – DOM Reang

Central Development Engineering company was officially founded in 2012, trusted by many Japanese owners, companies and construction businesses. They are involved in some projects at AEON MALL 1&2. We interviewed the CEO, Mr. Dom about the construction industry in Cambodia. (Interviewed at: October, 2017)

Interviewee Profile

DOM Reang: CEO of Central Development Engineering .

Involved in projects at AEON MALL 1 and 2

Could you tell us about you and your company’s profile?

Our company, Central Development Engineering company is engaged in construction, interior, mechanical work (air-cond and ventilation), electricity work, plumbing and fire protection work. Prior to the official establishment of the company, we worked as a team, we felt that we had enough capacity to run the company, and founded this company in 2012.

We have 300 Cambodian staffs, and they are all very professional. We have many construction projects, from condominiums, hotel, office building, factories, casino, villa, renovation, restaurant, shop, furniture, decoration …

30% of our clients are Cambodian and 70% are foreign clients, companies and investors. We have had many Japanese clients and we have been involved in construction projects at AEON Mall 1 and 2. We have done about twenty tenant construction projects at AEON MALL 1 and we had done some parts of structure work and have signed contracts with nine tenants and other bidding tenants in the AEON MALL 2 which is under construction.
I studied civil engineering for five year and electrical engineering for four years at ITC (Institute of Technology Cambodia). I thought I need to know everything in technical skill to be in the construction business. Because of this, we are capable to control at civil work, mechanical work, electrical work, plumbing work, and fire protection work.


Could you tell us about the projects you are involved in?

We focus on complete set of constructing project and maintenance project in the field Construction, air-cond (VRV, VRF, air-cool and water cool chiller), Electricity, fire protection and plumbing (water system) for the project of factories, condominiums, hotel, office building, interior, decoration, casino, villa, renovation, restaurant, shop, furniture, and advertising production.

We have been involved in many projects such as construction for tenants (shop and restaurant) at AEON mall, condominiums, apartments, factories, shops, renovation and commercial developments, rice mills, SEZ Water Treatment facility, schools, gas stations, hotels, and casino…


Where do you source your materials from?

We have our own big warehouse “Central Warehouse” and “own Workshop” for whole sale and retail all kind of product for construction, mechanical, electrical, plumbing and fire protection that is available to delivering product on site.

Our main supplier is in Cambodia and we also import materials directly from Thailand, China, Vietnam and Malaysia. Sometimes when there are special requirements of Japanese products from our clients, we will also source them from Japan. However, the import cost and prices from Japan are higher compared to other countries, although the quality is assured.


Condominiums are not in oversupply yet

What is the current trend in this industry?

Cambodia is a developing country and the construction industry is progressing quickly. There are more projects and foreign investments entering Cambodia. The most popular type of construction is borey. Flat constructions and factory constructions are growing strongly too.

Before we had only a few condominiums but now we can see many condominium projects going on in the city. This is because there are more foreigners buying as investment, because they cannot own the ground floor and land in Cambodia. Ownership of condominiums are allowed from the first floor above.

Phnom Penh is the most popular area for constructions, followed by Seam Reap, Sihanoukville and Battambang province. In Phnom Penh, condominiums are constructed in the central area, factories along National road 4 are increasing, in the suburbs borey projects are popular because there is a lot of free land and the land prices are still cheap.
Regarding design, we are after contemporary design influenced by Europe or Japan, this is what the local Cambodians are after too. Cambodian designers create their designs based on their client’s request, I feel that designs from various countries such as Western and Japan are introduced and popular in Cambodia.


Condominium is said to be oversupply. How do you think about it?

I don’t think condominiums are in oversupply yet, we need more time. A condominium project we designed in Toul Kork was released in 2015, 60% of the units were sold out in two months even before the construction had begun, and now that 18 months have passed, 95% of the units are sold out. Another condominium project we are constructing in BKK 1 is also 80% sold already even though the constructions are not finished. However, I think that condominiums must be in a good location and have good design to be able to sell out, another important issue is how to gather enough parking area.


In 2013, many construction projects were affected by the national election

While many projects with investments from overseas capitals, some projects are stopped or delayed. Please tell about issues that company are facing to, and points that they should keep in mind when overseas companies doing construction business in Cambodia.

In 2013, many construction projects by local and overseas capital were suspended and postponed, this was due to the results of the national election. The concerns of consumers rose, and their purchasing willingness continued to decline until the political situation was stabilized. Due to revised and applied of law of tax and increase of transport tax, material prices rose by between 30% and 100% and the transportations were delayed too. At that time, 80% of our projects were suspended or delayed, and some projects were canceled too. This was a difficult time for our company losing a lot of money, now we are stable, but we do have the national elections next July, 2018. Based on our experience from 2013, we are aiming all our projects to be completed by that time next year. I do think that overseas businessmen who conduct business in Cambodia should also keep the political stability in mind.

Overseas companies should keep in mind to study the Cambodian market carefully. If in construction, then the location and design is especially important, I have seen some overseas investment projects failing because of the lack of consideration. They should know deeply about the environment related with business too. For example, if you want to build a factory along National Road 4, it is perfect because there is enough access to water and electricity, there are enough workers and transportation is easy too. However, there are many areas which lack these functions. Without electricity, they will have to prepare their own power supply including a backup generator plan. Without water, they will have to build a water system by themselves. The land may be cheap but such investment for infrastructure is costly.

When starting up a business in Cambodia, you must be careful on the selection of consultant agencies too. I know a Japanese owner who was charged ten times of the regular fees for legal documents, this was a foreign consultant agency by the way.


Training workers at their own training center

What is lacking for the development of this industry?

We need to attract more investors from overseas, but political stability and less corruption is a must for this to be possible. In Cambodia, there is still corruption, which can be a factor for overseas investors to avoid business in Cambodia.


Cambodia is lacking education of construction workers. How do you gather experienced and skilled staff at your company?

We have many skilled staff in design, construction and operation, but this is because we are training our staffs. We conduct workshops for our staff. Regarding engineering personnel, we sometimes recruit qualified people as engineering workers, we also have a training center “the Engineering Center”, where our staff and myself teach, we educate personnel for engineering level. We have three or four courses a year and train technicians, we provide training at minimum cost on the condition that they work for our company when they complete the course starting as interns.

If they do not have enough funds to pay for the course, they can sign a contract stating that they will pay out of their salary after they complete the course. We do not have enough technician in Cambodia, we need to train them to gain skills. In many companies, staffs are training on the job, however our company is different. We do the training before they work on the sites. If each company does training for their staff, we can compete with overseas technicians.

Japanese should be more flexible

Do you have a message for Japanese companies and overseas companies?

For overseas businesses in constructions who are considering entering Cambodia, they need to learn by checking construction projects that have been carried out and completed by foreign companies such as Japanese. This is because the local standards are very low compared with them. Our company has been a part of many projects ordered by Japanese clients, because of this I can understand and agree on the requirements and standards that they require. Companies should always study on the successful cases in Cambodia. Foreign investors should also know the situation in Cambodia related to their businesses, what products and services are sold in Cambodia, whether the target is local or foreigners etc. They need to know the needs, requirement and attitude of their target customers. Sometimes, there is a big difference between your country and Cambodia, this can be true even amongst Cambodian.

I think in the recent years, about 70% of Japanese businesses have failed because they rush to get success. I always advise them to study the market well and not to rush. In addition to that, they should also be more flexible. They have strong minds and their ideas can be fixed, doing business in Cambodia, you must be flexible. If the situation changes, you must change too. Many of their ideas are based on Japanese standards and situation, and if this is not possible here, you must change.

In construction work, sometimes we cannot source the materials they require, and it can cause major problems during constructions. Therefore, we are trying to communicate about the local standards and situations with our clients, so we do not face issues later and we can find a solution before it is too late.