Cambodia Investment Review
Mekong Strategic Capital has celebrated its 10th anniversary, marking a decade of impact on the country’s financial and economic landscape. Founded in 2014 by seasoned bankers John McGinley and Stephen Higgins, the firm has evolved into a major player in corporate advisory, investment management, and climate finance. The celebration was held at the prestigious Rosewood Hotel, with 150 VIP guests in attendance, underscoring the firm’s significant role in Cambodia’s economic development.
Reflecting on the journey of Mekong Strategic Capital, co-founder John McGinley acknowledged the early challenges the firm faced. “Like any start-up, the first few years are tough. You don’t have a lot of revenue coming in, and even though Stephen and I had been in the business sector for years, there’s still a lot that you don’t know when it’s your own startup,” McGinley said.
Stephen Higgins, co-founder and partner, shared his insights on the firm’s evolution. “Our original plan was actually to be a fund that invests in Cambodian SMEs. We’d been banking SMEs for years and thought we knew them pretty well. But we ended up working on a number of M&A transactions instead, and Corporate Advisory soon became our main focus,” Higgins explained.
Extensive Banking Experience To Invest In Cambodian SMEs
Initially, Mekong Strategic Capital aimed to leverage the founders’ extensive banking experience to invest in Cambodian SMEs. However, the firm soon found itself engaged in larger transactions, prompting a shift in focus toward corporate advisory services. One of their early successes was becoming the anchor investor in the Phnom Penh Autonomous Port IPO, with the fund proving highly successful for its investors.
Read More: Leader Talks – Stephen Higgins on the Evolution of Foreign Direct Investment in Cambodia
Another key milestone was the establishment of the Smart Axiata Digital Innovation Fund (SADIF), which has played a critical role in supporting Cambodia’s burgeoning startup ecosystem. “We had the opportunity to work with Smart on creating SADIF, which has also been incredibly successful, investing in start-ups like Nham24. I think that fund really helped energize the start-up scene in Cambodia, at least until COVID hit,” Higgins noted.
In 2019, Mekong Strategic Capital expanded its operations to include a dedicated Climate Finance division, a move driven by the founders’ commitment to sustainable business practices. McGinley elaborated on this development: “About the same time as we were starting SADIF, we started to push a lot harder on climate finance. We conceptualized the idea of a ‘green bank,’ which eventually became the $100m Cambodian Climate Finance Facility housed within ARDB. Along with work we’ve been doing with the likes of USAID, IFC, ADB, AFD, and CAPRED, Climate Finance became the third leg of our business alongside Corporate Advisory and Investments.”
Strong Corporate Advisory Capability
Looking forward, Mekong Strategic Capital aims to build on its successes in corporate advisory, climate finance, and investments. “We’ll continue to have a strong Corporate Advisory capability, mainly focused on M&A. We’ve worked on most of the big deals over the past few years, and we want that to continue,” McGinley stated.
Higgins echoed this sentiment, emphasizing the firm’s long-term commitment to climate finance. “While getting the CCFF up and running is a priority, there’s going to be a huge amount of work in climate finance over the next couple of decades given climate change is the dominant challenge the world faces,” he said.
Despite the firm’s achievements, McGinley acknowledged the challenges posed by Cambodia’s underdeveloped capital markets. “While we’ve had some great success so far, which makes us one of the few investors here with a strong track record, it’s still a relatively small business reflecting the under-developed capital markets. Our hope is that capital markets really start to take off, and that will provide more opportunity,” he added.
Higgins also provided a candid assessment of Cambodia’s economic outlook, noting the country is emerging from the sharpest economic slowdown in more than two decades. “Cambodia is coming off the sharpest economic slowdown in more than 20 years, and you can ignore the official number of 5% growth in 2023, that just didn’t happen. But we think that the economy has now bottomed. Exports are actually booming, but domestic demand is still a little soft. We’re not sure if growth will reach the forecast of 6%, although it will certainly be a better number than in 2023,” he observed.
Regional Economic Challenges
Higgins highlighted the regional economic challenges, particularly those faced by neighboring countries such as Thailand and Laos. “Thailand is not doing great, and Laos isn’t too far off being a basket case due to their level of debt. One of the key drivers of Laos’ debt problem is a huge white elephant infrastructure project funded with debt, similar to what happened in Sri Lanka” he noted.
Read More: Mekong Strategic Capital Expects More Challenging Outcome for Cambodia’s Economy
“As for Vietnam, they’re llikely to benefit from US sourcing rules that target China, and Cambodia will need to think a lot more about how it responds to this” he said.
However, Higgins expressed confidence in Cambodia’s debt position, describing it as “remarkably good, probably amongst the best globally.” He suggested that the Royal Government of Cambodia (RGC) has the capacity to borrow more to support the economy and national development.
Looking ahead, both McGinley and Higgins remain optimistic about Cambodia’s economic prospects. “Over the next decade, we think Cambodia will be a fundamentally high-growth economy. That’s going to provide plenty of M&A opportunities, while development of the capital markets will support our investments business. And as for Climate Finance, that’s only going to get bigger and more important,” McGinley concluded.
As Mekong Strategic Capital embarks on its next decade, the firm is poised to continue playing a significant role in shaping Cambodia’s financial landscape, with a strong emphasis on sustainable and responsible investment practices, supported by a dynamic and increasingly diverse team.
