Construction in Cambodia: A tense situation since the coronavirus pandemic

Output in the Cambodian construction sector fell massively in 2021, also as a result of the corona pandemic. Good cash flow and procurement management is important to mitigate the impact on businesses. The Ecovis experts explain how this can work.

According to the Ministry of Information, the construction industry in Cambodia has boomed. From 2000 to November 2018, Cambodia’s Ministry of Land Management, Urban Planning and Construction approved 43,136 construction projects representing an estimated investment capital of more than USD 43.3 billion.

While most of the money going into construction is locally sourced, China, South Korea and Japan have been considered as the top foreign investors in the country’s construction and real estate sector.

Unfortunately, in 2021 due to the impact of several issues including COVID-19 related slowdowns, Cambodia’s construction sector has fallen considerably year-on-year. This has had a significant impact on the country’s overall performance as together with clothing manufacturing, tourism and agriculture, construction is one of the four key sectors supporting Cambodia’s economic expansion.

Companies in the construction sector must pay attention to good cash flow management during the crisis.

Murray Macmillan, Director of Financial Advisory, ECOVIS VSDK & Partners, Phnom Penh, Cambodia

Cash flow management and shortages

Construction is a business completely reliant on managing cash flow and many companies are experiencing the same problems as in Cambodia.

So how can cash flow be improved in a construction business? The Ecovis experts recommend that their clients and affected companies

• ensure that the original quotation is realistic
• ask for an advance
• ensure that major costs are index linked
• ensure that ERP systems can handle multi line project budgeting
• ensure that any contract amendments are properly recorded
• set strict monthly payment deadlines
• ensure a clear division between cash flow in different projects

For further information please contact:

Murray Macmillan, Director of Financial Advisory, ECOVIS VSDK & Partners, Phnom Penh, Cambodia
Email: murray.macmillan@ecovis.com.kh