"I like Cambodia, I understand it." How an entrepreneur from Russia went to Asia to grow Kampot pepper

Marat Koterev told what you need to know when starting a business in Cambodia, and how a record number of Rolls-Royces appeared in the poorest country in just a few years.

Marat Koterev came to Cambodia in 2014 as a tourist and discovered that this country has cheap land and a promising direction — cultivation of Kampot pepper. The entrepreneur gained experience in creating his own production back in the 1990s, so he understood how this process works. He bought a one-way ticket and flew off to do business.

Koterev had to wait three years before the pepper yielded a full harvest. During this time, he settled down on Cambodian soil, adapted to the local way of life and negotiated sales with the first Russian retailers. However, due to the coronavirus pandemic, cooperation was suspended. Koterev told BFM.ru how Cambodia has changed over the past few years, what areas in this country are promising from a business point of view, and what the Khmer and Russian mentality have in common.

I studied at the institute when it was the 1990s. The time was difficult, so in parallel with my studies at the Moscow Aviation Institute, I worked in the field of trade. Over time, I realized that I can produce something myself. I opened a company for the production of vacuum packaging equipment, it was a very relevant thing at that time. But the crisis of 1998 did not allow all this to develop as I wanted.

After that, I worked for a friend in a bank in the securities department for a long time. The work was boring, and I began to look for a project that would be understandable and interesting to me. I understood that our country is exposed to risks. There were situations in my life when all bank accounts were destroyed at once. I wanted to find an opportunity to do a fairly sustainable business.

I have always traveled a lot. My mother lived with a Frenchman for 25 years, I know France well, I lived in Germany for two and a half years. I have always been interested in the development of the local mentality. Everywhere I was, I asked the locals how everything works here, what niches there are.

The first time I went to Cambodia was in 2014 as a tourist. There I had a close talk with the locals and they told me about the basic figures for entering various areas of local business. When I realized that the payback period for a business in Cambodia could be three or four years, not ten years, interest arose. In the mid-1990s, it was literally a country of one dollar. All their salaries were 20-30 dollars. Such an asset as land was very much undervalued. This can be seen in the resort town of Sihanoukville. Ten years ago, the land there cost about $50 per square meter, and this summer — 4 thousand dollars. The jump happened quickly. But when I arrived there, I found the old prices.

When you come to any country, the locals always tell you what their most famous and delicious products are. In Cambodia, this is Kampot pepper (name from the province of Kampot in southern Cambodia), which has the status of PGI and PDO — protected geographical name and protected geographical origin. This status is assigned to special products in the world, such as Roquefort and Parmesan cheeses, champagne, cognac. This pepper is much tastier and more aromatic than usual.

I figured that given the value of the land at the time, growing peppers could be a good business. In Moscow, I created a detailed business plan, bought a one-way ticket, and in 2016 flew to Cambodia to implement my plan. I rented a car, rented a house for two months, hired an interpreter, found the right people among the Khmers (the main population of Cambodia. — Business FM). I have two partners in this business. But they stayed in Russia, and I was interested in developing a business directly in Cambodia.

At the start, we invested about 700 thousand dollars. These were our savings with partners. The minimum entry threshold for such a business, according to my calculations, could be $500,000. But keep in mind that this is only an initial investment. Pepper grows three years before the first harvest, and all this time investments are also needed — salaries, full maintenance of the farm, construction of a production base, purchase of equipment for the harvest, and so on.

In this situation, the most difficult part was making the decision to fly to Cambodia and start a business there. Purely technically, it was not difficult for me — I understood well what production was, and the first steps were obvious. When we found land, I realized that everything is real. The process of registering a company took a month and a half or two. It cost us 3.2 thousand dollars with all notarizations. It is impossible to register land for a foreigner there, the company's share of 51% must belong to the local. We have found such a person. We also hired a local lawyer who accompanied our transactions in all instances.

I have only hired local staff. We communicate with them in English. Production requires permanent and temporary workers. We have 12-13 people in the state, during the planting of pepper it reaches 40 due to temporary employees. Cambodia has a Department of Labor and Employment. They have a European legal basis, as Cambodia was a French colony for a long time. All our employees have work books and medical insurance.

In 2016, the minimum wage in Cambodia was $50. Now he leaves $182 — more than in Russia, if converted into rubles (at the time of publication of the material, 182 dollars equaled 12.5 thousand rubles, and the minimum wage in Russia is 12,130 rubles. — BFM.ru). My employees receive from 250 to 1000 dollars depending on the position.

The tax system in Cambodia is very simple. There is VAT (10%), income tax (20%), payroll tax and a couple more taxes. Their tax code takes three pages, it is simple, but it is observed very strictly. Much, of course, depends on the province, but here everything is developing at a frantic pace. When I arrived, there were three tax inspectors in my town, now there are 33.

People in Cambodia have a very difficult fate. Education in our understanding of the Khmer is practically absent. But at the same time, they have a very developed ingenuity. If something needs to be fixed, they fix it. For example, the engine on my excavator broke down. The person who was responsible for it said: we need to go to the capital, buy another engine, tomorrow it will be ready. I did not believe him, but he took the money, and in a day everything was already working.

If we talk about the general features of the mentality, all Khmer — as children. They are very emotional, but at the same time patient. They accumulate resentment in themselves for a long time, and then they explode. Religion also leaves its mark. They have a huge number of holidays — 28 days a year, they love and celebrate them.

I had a funny incident that characterizes the locals very well. The pepper that we grow has a thin trunk, it is a vine, it needs support. Mahogany is traditionally used for supports. They have this business controlled by officials, because this tree — disappearing look. I went to a special farm, which is located 350 kilometers from ours, to select suitable plants. We chose, and then realized that we could not take the trees away due to official bans. But the locals found a way. They have a small tractor that travels at a speed of 10 kilometers per hour. He can only take 150 trees at a time, and I had to move more than 7,000. And they carried these trees on these tractors — they were not touched as small businesses. They rode for three days on this walk-behind tractor, sleeping somewhere on the road. It was a shock for me that you can drive at a speed of 10 kilometers per hour for three days, and then back again. And there were a lot of such moves. But for them it turned out to be the norm. The measured pace of life is generally very characteristic of Cambodia.

You will never be left in trouble again. This is their national trait. Once, a sensor broke in my car in the middle of a remote village. The car would not start, but the locals fixed it in half an hour. We went somewhere, brought the details and did everything.

At the same time, in Cambodia, any white person is associated with money. Crime is still rampant there. But the maximum that can be done with a white man late at night on the street, — is to rip the bag. Everyone rides bikes there. If your bag is torn off while you are riding a bike, it can be traumatic.

Cambodia has changed a lot in the last few years since the Chinese came here. They began to rebuild casinos and invested a lot in the country's economy. Salaries have risen sharply here, crime has decreased. I traveled almost all over Cambodia — I was in all provinces, villages and saw everything with my own eyes. The Chinese expansion brought in a huge amount of money. And few people live there — only 16 million people. They have a family way of life, that is, if one person in the family opens a business and earns money, the family is no longer in poverty. Where in 2012 there was a wooden house where they caught frogs for food, most now have a brick house with a Lexus parked next to it. The number of Rolls-Royces in Cambodia is one of the highest per capita in the world. Prices for cars there are two and a half times higher than in Russia. When I arrived, the road from Phnom Penh to Sihanoukville took three hours, but in recent years it takes six hours due to the explosive increase in the number of cars.

The economic growth of Cambodia is similar to what happened here in the 1990s. There are generally a lot of moments similar to Russia. They follow the same path. A very good example is with car traffic. If earlier a driver got drunk behind the wheel and was stopped by a policeman, then he checked whether the driver could go or not. If he can, then he's not drunk, and if he can't, he was fined $5. Now for driving without a license — $300 fine. If the driver is drunk and has an accident, he faces a prison sentence. Speed cameras installed on the roads — I've come across this a few times.

Last August, the government decided to shut down online casinos. In two months, almost 500,000 Chinese left Cambodia. Now the city of Sihanoukville stands unfinished and abandoned. Wages have fallen, and, probably, some negative criminal clashes will begin.

Now we are actually selling the first harvest. It increases gradually. In the first year it is necessary to cut off all the flowers on the trees, in the second year 80% is cut off, in the third — 50%. Harvest is sold mainly in bulk. One advantage is that peppers have a shelf life — three years, it is not a perishable product. That was one of the reasons why I started doing it, — there are no serious risks, except for the weather. Cambodia has two seasons: wet and dry. The problem is that the climate has changed. This year the season was drier than usual. For many farmers, the trees simply died. When the season is too wet — too bad. We have to dig channels around so that there is a drain. This is not much money, you just need to know and control it.

We are now starting to work with Russian distributors, we go to spice shops, a number of restaurants. But some networks behave strangely. For example, they refuse me, but agree to a deal with my partner, to whom I sell goods in bulk.

A lot of processes have stalled because of the virus. We can say that we have suffered because of the pandemic. Nevertheless, with the first harvest, we entered the market. In addition to dry peppers, we have fresh salted peppers, and they were all sold out. The return of money in this business has not yet begun. But as far as operations are concerned, we already have money for it, earned from the first sales.

There are many areas in Cambodia where you can start a business. But you need to know the nuances. I would not advise climbing into the construction — there you will not be able to compete with the Chinese. They work like a machine. As for small business — car service, restaurants, hotels — it's no problem. In addition to factories that sew cheap clothes and shoes, as well as agriculture, there is nothing else here. There is no gas, oil, electricity in Cambodia — they buy it. Their electricity is five to seven times more expensive than in Moscow. Due to the lack of resources, they cannot build energy-intensive projects themselves. They have very low-skilled labor.

So far, not all of the purchased land has been planted with us. Plans — expand and continue planting peppers. We are also looking towards Europe. It would be interesting to enter the Baltic and Chinese markets. I fly to Russia quite often — Now we need to improve the sales process. But I do not think about selling land in Cambodia, although it has increased in price and you can make decent money on it. I will develop a business on pepper, because it is interesting to me. And I like Cambodia, I understand it.