7 Reasons to Not Buy a Business in CambodiaMay 18, 2018
According to the World Bank, Cambodia has the following scores out of 190 countries with regards to doing business:
Over all ease of doing business rank: 135
Paying taxes: 136
Starting a business: 183
Dealing with construction permits: 179
Enforcing contracts: 179
This leaves 65 countries which are worse to do business in, admittedly, such as the DRC, South Sudan and Yemen, which may not be the best places to open a vegan café or Elvis themed dive bar in. Yet fools keep hopping on the carousel of certain financial ruin, going round and round until they feel dizzy and sick, then passing the seat on to the next white man with a wedge and poorly thought out business model.
Running a successful business in a place where you speak the language, understand the culture and can nurture a loyal customer base is tricky enough, but trying it in a place where there are several thousand ‘generals’ and a population which still believes in magic scarecrows and burns witches, means you gotta be crazy.
Cambodia itself is detrimental to your health, and working in Cambodia is even more severely detrimental. Owning a business in Cambodia is the equivalent of smoking 5 packs of Marlboro Reds and drinking 5 pints of whisky a day (also known as ‘breakfast’ for some expat barkeepers). Holidays are an impossible dream, as staff and customers are ready to load up unsecured stock into a tuk tuk as soon as your taxi leaves for the airport. In short, the stress of running a business can lead to alcoholism, peptic ulcers, cardiovascular problems, strokes and insanity. Thus the main reason for selling ‘profitable, turnkey’ operations is due to poor health.
But before you get sucked in by the idea of shelling out $30k on a shop unit in Kampot with 2 years 8 months left on the lease, here is a quickly complied 7 point list of why you should never open a business in Cambodia. None of this is fiction, but hard stone cold facts from real people and real businesses over the past few years.
1) Return on investment.
If you have money to burn, save yourself the hassle of doing business in Cambodia, and just burn it. Use it to light a Barbie or warm the house, or something actually useful. It is hard enough to make a profit, let alone see any returns on the outlay for setting up the project, especially in the hospitality racket.
Either you pay over the odds for somebody else’s dream, along with the stock and furnishings, or you face the nightmare of local contractors fitting out an empty space to look fashionable and hip enough to draw in paying punters.
When the reality of working 15 hour days just to pay bills and eat finally dawns, then it’s time to get out. The best thing is to do is to get down on your bended knees and pray to your god to deliver a sucker who will reply to your ad for a ‘turnkey operation’. Then practice your best shit eating grin and smother down on a greasy salesman charm offensive until the sap wires through the cash. If luck is on your side, then perhaps breaking even is a possibility. 9/10 you lose.
2) Landlords can be assholes.
Khmer landlords have a reputation for not really playing by Queensbury rules. Contracts are routinely broken, rents are hiked up by 100% and more at the end of a 5 year lease, and deposits are rarely returned. Plus clauses state properties must be in ‘original condition’, which, although means ‘shit hole condition’ actually allows them to keep as many fittings paid for and installed by the tenant as possible, and retaining the deposit as the flaking walls have been repainted and the leaking ceiling patched up. Landlords would often rather lose rental income than face.
If the building owners strike gold and are approached by legitimate businessmen from China, who offer silly money to take over the premises to build a hotel-casino complex, you’ll be turfed out on your ear quicker than you can say egg foo-yung. Just ask the guys down in Little Macao.
3) Partners can be assholes.
Choosing a business partner can be tricky anywhere in the world, with the first rule being ‘trust’. However, in the Kingdom of Wonder there are exactly zero trustworthy characters. Zilch, nada, not one.
It doesn’t matter if you team up with a high flying European investor with cash to burn, a fellow restauranteur who wants to go halves on a pizza parlor and jazz club or a meth addict recently washed up from Pattaya, they’ll all end up doing the dirty somehow.
Legal threats, visits from top brass officials, digging up dirt and slanderous half-truths being leaked on the internet right down to selling the business for cash without consultation, or simply robbing as much as can be carried before legging it across the border are just a few ways those you trust will bend you over and sodomise you with a red hot sledgehammer.
Of course any hint of scandal is eagerly lapped up by the circling gossip-vultures who make up the majority of fellow expats, who like nothing more than to wallow in schadenfreude and revel in the failings of others.
4) Local staff can be assholes.
Labor is cheap in Cambodia. Work ethics can be equally low. Not only do workers receive 27 public holidays a year under National Labor Law, but will also require further days off for:
7/100/365+day funeral ceremonies
Good luck ceremonies
General ‘stomach-aitch’ and ‘head-aitch’.
Much of the working day will be spent glued to a smartphone anyway, with clientele being treated as an inconvenience whenever they have the ill manners to ask for something. Many will have their hands in the till or skim off as many Riel as possible when buying stock from the market.
Staffing problems can be further exasperated by taking on members of the same family, who will close ranks in the event of any dispute, or cover each other’s hides when cash and stock go missing.
Females with a bit of sass may run off with the first white customer to charm his way under her safety shorts, leaving the business understaffed again. Others will relish the provided training, progress well with a great eye for detail before putting all the experience gained into great use by negotiating a local price on a property across the street, bring in the family as helpers and start knocking out the same products at a substantially cheaper rate.
5) Customers are assholes.
Foreigners with cash want good quality and good service, which don’t always skip merrily hand in hand together. Poor teachers, general pond scum and backpackers want everything free. All will use your free wi-fi to leave terrible reviews on Tripadvisor, just for the hell of it. Others will argue the bill or skip it all together. Customers from certain Asian countries may very well use every floor space and furnishing as an ashtray/spittoon and shout a lot. In addition, even not so rarely, somebody might walk in off the street and decide to die on the premises.
6) The ‘Man’ is on your back.
There is a reason for Cambodia being so low down on the whole starting a business thing. Back in the day a hand-painted sign, a few crates of drinks and some furniture in a lakeside shack were all the credentials needed to set up shop. Nowadays it’s a murky world of taxes, business licenses, registrations, staff quotas, work permits, NSSF contributions and other stuff men in uniform seem to make up and enforce at a whim. Shakedowns from various departments are not unheard of, nor are requests for gifts around public holidays. The best thing about these rules and regulations is that nobody actually seems to know anything about them, until they suddenly become a thing, and thus liability is backdated to 1993.
The powers that be might suddenly decide all signage must be in yellow with a flower on, or that everything beginning with the letter P is immoral and has a detrimental effect on the youth, thus illegal to sell. After a national clampdown on pizza and pasta, the law gets forgotten about until the next time a big player’s daughter gets engaged, or when he loses a five figure sum at Naga world.
No matter what you do, if it works well and others notice you making money, then a string of copycats will pop up in the neighborhood, ripping off everything from your logo down to the color of the staff uniforms. They will change at least one vowel of your registered business name to avoid any confusion over intellectual property rights.
This competition will also pull in the support from family or grab a few teenagers from Prey Veng in a debt bondage scheme, allowing lower overheads to cut costs. The average white tourist knows nothing of this, and would rather buy from a local business than a carpet bagging neo-colonialist who sleeps on a mattress stuffed with dollars made from exploiting the poor natives.
Any complaints will be met with screeching in the streets and a visit from another family member, who just happens to be a high ranking police officer.
Before the various expat ‘winners’ and Chamber of Commerce members chime in, it is acknowledged that some foreigners have done well for themselves, despite the difficulties mentioned. Yet the great majority does not.
Now, want to buy a bar? Great location, walk in trade, loyal customer base. 3 years left on the lease ($1200 a month), staff (like family) willing to stay on. $33,000, reason for selling- health.
Conservative staff salary: $16,200
Conservative bills: $7200
Tax and ‘extras’: $?000
That’s at least $100,000 outgoings over the 3 years, without paying yourself a wage. A hell of a lot of beers need to be sold to make a profit. What’ll go first – Your health or your cash?