Taiwanese flags may have been banned by prime ministerial diktat last weekend, but Taiwanese investors appear happy to heed his accompanying call for investment from the island state.
A joint venture between Kith Meng’s sprawling conglomerate Royal Group and Taiwanese finance firm Chailease—worth more than $2 billion on the Taiwan Stock Exchange, according to Reuters—was announced in Phnom Penh on Tuesday, promising tailor-made financing for small- and medium-sized enterprises (SMEs).
“We are very impressed to see the liberal business, investment and trade environment in Cambodia,” said Chailease Holding’s chairman Albert Chen. “Cambodia has one of the fastest-growing economies in Asia and is expected to keep up that pace for years to come.”
Taipei-based Chailease’s expansion into Cambodia comes three days after Prime Minister Hun Sen banned the Taiwanese flag from being raised in Cambodia, saying, “We should not do anything that affects the respect of China’s sovereignty and independence.”
China considers Taiwan’s government illegitimate under its “One China” policy.
The new joint venture, Chailease Royal Leasing, will offer financial leasing services for vehicles, machinery and equipment for industries such as manufacturing, tourism, retail, real estate and construction, according to a media release.
Mr. Meng, who is behind hydropower projects that have come under fire for being potentially devastating for the Mekong River’s ecology, said the goal was to help SMEs build an economy for the future.
“Cambodia’s economy will upgrade from low-cost, labor-intensive products and services to higher-value ones over the coming years,” Mr. Meng said. “We anticipate that SMEs have a strong demand for purchasing moveable assets.”
Chou Ngeth, a senior consultant at regional firm Emerging Markets Consulting, said the arrangement was relatively new in the microfinance and banking industry. Rather than putting up collateral and taking out a loan, SMEs apply to have Chailease buy the specific equipment they need from suppliers. The SMEs then lease the equipment from Chailease in return for regular rental payments.
“Some SMEs are most likely not willing to make big investments upfront. Therefore, absorbing slightly higher operating costs—and thus leasing—makes a lot of sense for them,” Mr. Chou said.
Dennis Cheng, Chailease Royal Leasing’s new CEO, said the criteria for vetting lessees would be similar to banks evaluating borrowers’ credit risk.
“We will base the criteria according to their level of income, repayment ability and cost of living,” he said.