The existing Siem Reap airport, owned by Cambodia Airports, has been expanded to cater to the tourist boom.
Image: Kanokratnok / Shutterstock
The future of Cambodia’s economy, as Tekreth Samrach, chairman of the government-controlled flagship airline, sees it, is in tourism. And thanks to China, tourism, like many sectors in the economy, is surging. “To be frank, everyone goes to China to make money,” he says from his office decked with pilot caps and model planes. “So we have to go to China to make money, too.”
Following that logic, the government appears to be making a sharp break from its long-standing partnership with French infrastructure conglomerate Vinci. It’s drafting plans and starting work on two new airports backed by mainland money, despite granting an exclusive, 45-year concession on international airports to a company majority-owned by Vinci. That concession isn’t supposed to end until 2040. The government’s move is meant to address the rapid rise in tourism, but it also reflects Cambodia’s increasingly enthusiastic embrace of booming Chinese investment.
One of the new airports will serve tourism centre Siem Reap and the nearby 1,000-year-old temples. The government signed an agreement in 2016 with Chinese company Yunnan Investment Group and two others from Yunnan Province to invest in and build the project. Since March they have been prepping 750 hectares to the southeast of the Unesco World Heritage site. On the company’s website, the group’s chairman, Sun Yun, called it “a benchmark project for the Belt and Road Initiative”, referring to China’s development strategy to connect Eurasia in trade and transportation, with president Xi Jinping at the helm.
The plan for the second airport, in Phnom Penh, is more audacious. Announced in January, this project will be a joint venture between Cambodian developer Overseas Cambodia Investment Corp, or OCIC, and the State Secretariat of Civil Aviation, and built on 2,600 hectares of open land. The airport itself will cover 700 hectares and the rest will become an “airport city,” with a special economic zone, industrial area and housing developments, according to the secretariat’s deputy director-general, Sinn Chanserey Vutha. OCIC will invest $280 million, but the bulk of the funding, $1.1 billion, will come from the Bank of China, he says.
Both Sinn and Tekreth say they have few details about the Phnom Penh plans because the airport was directly ordered and arranged by prime minister Hun Sen. OCIC representatives declined to comment; the company is owned by Pung Kheav Se, a local tycoon and chairman of the country’s second-largest commercial bank, Canadia.
As of now, the company holding the airport concession, Cambodia Airports, 70 percent of which is owned by Vinci and the rest by two Cambodian tycoons and a Malaysian company, won’t be involved in either of the new airports. But Eric Delobel, Cambodia Airports chief executive, exudes confidence, saying his company will “accelerate and intensify” investment and development at its three airports regardless of whether the concession ends. He says negotiations are under way but won’t reveal details.
Though Cambodia’s aviation market is far smaller than Vinci’s largest markets in Japan and elsewhere, it’s important because it’s growing so quickly. Vinci, which generated $48 billion in revenue last year, enjoyed a 25 percent jump in traffic to 8.8 million passengers at its Cambodian airports, the fastest growth of any of its markets.
Cambodia Airports is counting on more traffic. It just spent $130 million to expand its Phnom Penh and Siem Reap airports so they can each handle at least 5 million passengers a year. At the company’s headquarters on Phnom Penh’s outskirts, now painted a light, clean grey as part of the upgrade, Delobel outlined the company’s efforts to train the workforce, add connecting flights and pursue other ways to bring in more passengers. “We are very open to discussing with [the government] the future development of those airports,” he says. “What has to be stressed to them is that today, in terms of capacity, we just achieved in 2016 and 2017 a vast development programme.”
The expansion doubled capacity at the two airports, but the number of passengers coming through Cambodia’s international airports has grown by at least 10 percent annually for the last seven years. “There will be some limitations at some point, so [within the government] there’s a desire to transition to a new airport sooner,” says Capa Centre for Aviation chief analyst Brendan Sobie.
He’s not sure, however, that Phnom Penh and Siem Reap can each support two airports, if the two China-backed airports are built. One way would be for an airport to emerge as a regional hub, but Cambodia’s small population and the lack of a major flagship carrier works against that. Southeast Asia’s primary airports are swiftly reaching capacity as tourism and investment continue to skyrocket. But even if one of their airlines decided to set up a secondary hub outside its country, there would be plenty of competition for that business around the region. “[Competing airports] work in places like Bangkok, but maybe Phnom Penh isn’t a city that could support that,” he says.
The new airports face other obstacles. Phnom Penh’s airport could stall amid a fresh dispute over the land between local villagers and rice growers and the government. Sinn, the civil aviation official, maintains that the land is owned by OCIC. Even if the conflict is resolved, says Sobie, the airport’s construction could take a decade, allowing time to resolve Cambodia Airports’ concession.
The concession always included a stipulation to build a new airport in Siem Reap, according to Tekreth, the chairman of Cambodia Angkor Air and also the secretary of state of the government’s council of ministers. But Sobie says the government is not sending a good message to investors by seemingly ending a concession with no evidence that the public-private partnership failed.
Cambodia Airports just spent $130 million on its Phnom Penh and Siem Reap airports to handle at least 5 million passengers a year
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(This story appears in the 28 September, 2018 issue of Forbes India. To visit our Archives, click here.)