In Cambodia, Foreigners Cannot Own Land. Or Can They?

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In Cambodia, Foreigners Cannot Own Land. Or Can They?

There are signs of growing tensions between the country’s private sector and its rentier political elite.

In Cambodia, Foreigners Cannot Own Land. Or Can They?

An aerial view of the Cambodian capital Phnom Penh.

Credit: Depositphotos

It’s unclear what reform Prime Minister Hun Manet announced – or whether there was an announcement at all. He’s adamant on what hasn’t happened: his government isn’t about to start selling land to foreigners. But it sounds a lot like that’s exactly what is happening.

As things stand, the Constitution doesn’t allow non-Cambodian nationals to own land or ground-floor property. Foreigners can buy condominium apartments as long as less than 70 percent of the units aren’t foreign-owned, and many do actually “own” land by putting it in the name of a trusted Cambodian but then signing a side contract that guarantees them rights to re-sale and possession. There are Cambodians who own dozens of properties on behalf of foreigners. It pays to be trustworthy. Or foreigners can purchase land or property through a trust, again using a Cambodian as a frontman and, while the trust formally owns the property, it cannot be sold without the permission of the foreign investor.

But speaking after the Government-Private Sector Forum earlier this month, Hun Manet noted that foreigners can also lease land or ground-floor villas and houses for up to 50 years. “This long-term leasing mechanism is a strategic move by the government, designed for stability and growth, eliminating the need for constitutional amendments,” Hun Manet reportedly said, insinuating that it’s a new policy.

But give ear to what Seng Loth, a spokesman for the Ministry of Land Management, Urban Planning and Construction, said last month: “Instead of giving foreigners the right to own real estate, the ministry is considering pushing for the implementation of permanent leasehold rights. In fact, the implementation of this permanent lease is an existing law, it’s just rarely enforced.” (This was a translation, so one assumes he meant “rarely used,” not “rarely enforced.”)

Regardless of what’s new or not, you could argue that Hun Manet is dancing on the end of the needle with the semantics. If a foreigner can buy land through a trust or a Cambodian representative, doesn’t the foreigner de facto own that land? After all, what is ownership: you cannot be forced off it, and you can decide when to sell. And if a foreigner can lease land off the government for 50 years, isn’t that really ownership, too? Indeed, this long-term lease scheme sounds a lot like a build-operate-transfer model for the property sector.

The government had spent some time preparing for the Government-Private Sector Forum, and there was pressure on Manet to change the law. I pointed out the problems in Cambodia’s property sector in a previous column. Lest to say, property prices have declined considerably since the COVID-19 pandemic. The middle classes, and even some low-earners, are now struggling financially, sitting on mortgages they cannot afford repayments on, and which are sometimes worth more than the property itself. Private debt is now around 182 percent of GDP, one of the highest rates in Asia. What all these people want is for property prices to surge again. Allowing foreigners to buy more types of property, thus driving up demand, would do just that.

It’s obviously what the private sector wants. “The private sector has requested that the government allow foreigners to lawfully purchase and own housing, including both land and [structures],” Hun Manet told the audience of the Forum during a four-hour speech. (A distaste for brevity is something he’s inherited from his father, Hun Sen, who was prime minister from 1985 until making way for his son in August.) One of the main advocates for such a change is the Housing Development Association, run by Ly Hour, a prominent tycoon who runs a vast construction and property empire. One hears that the foreign chambers of commerce, which had come together as a united front going into the Forum, are also lobbying for this legal change.

The problem, however, is that this would be unpopular with the masses who do not own property and who probably wouldn’t look too well on a new wave of foreign (read: Chinese) speculation, especially given ongoing perceptions that Hun Manet’s father turned parts of Cambodia into a “Chinese colony.” Foreign ownership is a policy for the rich. If foreigners are allowed to buy land and more types of property, the poor and non-property owners will be the losers again. Indeed, the whole purpose is to jack up property prices to save the indebted middle classes, so, naturally, it will put homeownership further out of reach of most people while leading to the same rights violations that the last great land speculation event caused in the 2010s: we’ll see more forced evictions, more speculation, and more corruption. Yet, Hun Manet doesn’t want to be seen as unpatriotic or, worse, as being a lackey of foreign business groups.

Also at hand is a delicate power dynamic between the government and the private sector. Writing this month in Radio Free Asia, I argued that tensions between Cambodia’s “political nobility” and its “financiers” will grow under Manet’s administration. Any authoritarian government worth its salt needs to be good at just one thing: denying space for any political alternative. But the private sector is now wealthy and confident, yet still expected to pay for the lifestyles of a rentier political elite. It senses that it can now demand certain things that the ruling Cambodian People’s Party doesn’t want to give away and which wouldn’t give away under Hun Sen. Things like independent courts, predictable rule of law, and foreign ownership of land.

Hun Manet’s government has staked its legitimacy on economic growth more than his father’s regime did. And, clearly, he wants to give the private sector more representation in government policy. Sok Chenda Sophea, the previous head of the investment board, has been brought in as foreign minister. Aun Pornmoniroth, the incumbent finance minister, now has expanded powers and is probably the person who really pulls the strings in the cabinet. Several people from the business sector have been brought in as ministers.

But Hun Manet is in a bind. He will need to be far more conciliatory with the private sector than his father was. Yet he won’t want to be seen by ordinary Cambodians as a lackey of the wealthy and Chinese investors. But if push comes to shove, he’ll side with the financiers. His government needs ever-greater tax revenue to meet its spending plans and Panglossian economic strategy. His inchoate government needs to hasten economic recovery, so it needs the private sector on board. The lifestyles of the political nobility are now too extravagant to do without the patronage of the real money-makers in Cambodia.

Perhaps Hun Manet is, as his father advised him to do last month over a tax furor, binding his time over the foreign ownership of land question. Announce a few new policies that aren’t really new to test the waters to see how the Cambodian people react. Perhaps, at some point, he’ll do what the Housing Development Association has advocated and allow foreigners to buy property in boreys, the gated communities where much of the housing sector’s toxic debt is located. Consider his statement: “I think that the current challenges in the real estate sector do not require a constitutional amendment.” “Current” might be the operative word here. Maybe he will budge a few months down the line. If he does, it will be a big concession to the private sector and the Cambodian middle classes.

But how far can the private sector push it? Will companies, especially foreign ones, get more of a say on the planned judicial reforms? What about transparency over where their taxes are going? What happens when they demand something that threatens the ruling party’s monopoly of power?