The backers of the Kampong Chhnang airport project can't be accused of being under-ambitious.

They aim to turn the long-abandoned Khmer Rouge-built airport, which boasts the largest

runway in Cambodia, into a regional hub for air freight. Added perks include a nature

reserve, meditation center, restaurants and hotels. Hurley Scroggins reports.

ATTRACTING foreign investment into a proposed duty-free $3.4 billion cargo airport

in Kampong Chhnang poses a daunting task, given the country's perceived political

risks. But the director of the 12,500 hectare investment zone points out that Cambodia

is ideally located, security in the area has improved, both Prime Ministers are behind

it and the principal runway is already in place.

"The project sells itself, but they say investment follows harmony," says

TransGlobal Ltd chairman Dr Iain Gray. "We have had a lot of interest despite

political concerns, as the project is located north of the capital in a virtually

autonomous zone with its own security provided by us and the Royal Air Force."

If Gray is successful, Kampong Chhnang will be the first dedicated air cargo hub

in the world and the largest foreign investment project in the country. "We

are doing what Jardines and Raffles did [with sea cargo] in Hong Kong and Singapore,"

he says. "We are leap-frogging into the 21st century, when air cargo will be

the preferred means of transport."

"Cambodia lies under one of the world's busiest flight corridors. We are within

two hours of Vietnam, Burma, Malaysia, Taiwan, Kunming and Jakarta," he says.

"The airports in Hong Kong and Singapore are already at full capacity. We will

free them up."

He says that neither of Asia's two principal transportation hubs have shown interest

in upgrading their freight-handling capabilities, as passenger services are a greater

income-generator per unit. "Cargo plays second fiddle. If a plane misses its

slot, it has to divert to another airfield."

Gray claims that he has had a high degree of interest from companies wanting to locate

operations at the airport. "We have had inquiries from manufacturers, electronics

and logistics firms and courier companies," he says. "I have full confidence

that the project will succeed."

Transferring cargoes between long-haul aircraft to smaller aircraft plying regional

routes is at the core of the venture. An 'open-skies policy' agreed to by both ruling

political parties in December allows pilots from any country to land at the site

without special certification to fly in Cambodia. This would let aircraft from Taiwan,

for example, to land and reload onto Europe-bound long-haul planes when it would

not be permitted for the pilots to fly directly without proper accreditation.

He predicts that in 10 years there will be 30,000 workers employed around the site.

"The airport is only one aspect of the project," he says. Plans include

providing sites for: aircraft service, maintenance and refitting operations; wholesale

merchants on an international scale; third-party logistics, warehouse and distribution

facilities; just-in-time industries and even possibly an area to quarantine race

horses in transit.

"The Kampong Chhnang project will become the city of the future," he boasts.

"It will be a teleport - a multi-media super corridor. Every building will be

linked by fiber optics, which will be connected to ASEAN and the rest of the world."

Of the 12,500 hectares, some will be set aside for a nature reserve and a meditation

center. Plans include a fisherman's wharf restaurant and hotel complex on the banks

of the Tonle Sap river.

While some ideas may sound fanciful, there is a sizable price differential between

what food providers charge in Cambodia and what consumers are willing to spend two

hours away by air. "We will encourage forming agricultural cooperatives in the

area and offer predetermined pricing for produce." He says that rapid international

transportation will add sizable added value to fresh vegetables, fruit and fish.

"If you want live fish in Kuala Lumpur, expect to pay between $20-30 per kilo.

People tell me that fish from the Tonle Sap only sells for about $2.80 a kilo here.

And that is after it has been dried."

The government and DragonGold of Malaysia signed a joint venture agreement Dec 16,

1996, with the latter retaining a 70 percent share. The new company is called TransGlobal

Ltd. "The Royal government provides the airport and land and we provide the

financing, expertise and management," he says, declining to state how much his

company has already invested.

Including contractors, there are about 200 workers on the complex at the moment.

Principal projects include basic infrastructure rehabilitation and general clearing

of the area. "We could wait," he says. "But we want to show that we

are seriously interested in the future of the plan."

The 2.5 km landing strip and ancillary roads linking rail, road and waterway gateways

were built by Chinese engineers using Khmer Rouge forced labor in the late 70s. Untold

numbers died building the massive project to bolster the country's air defense from

its recently consolidated eastern neighbor.

Vietnamese troops overran Phnom Penh before it was fully utilized. When UNTAC entered

the country the site was used as a logistics base for the peace-keeping mission.

The upgrade of the facilities is slated for three phases. At first the airport is

to offer daylight landings only. The second phase will allow 24-hour landings of

737s and the third will allow round-the-clock long-haul aircraft. Gray says that

his company will need to invest less than $100m over an 18-month period to provide

radar, lengthen the runway to 3.5 km and build taxi-ways.

The area has been designated by the government as a free-enterprise zone, in which

movements of landed goods and components for storage, processing and subsequent distribution

to other countries are free of any customs procedures and import or export duties.

It is also slated to become a transfer hub and investment park with customs facilities

for goods destined for the interior. The government will offer all of the usual foreign-investment

incentives, such as tax holidays of up to eight years.

As far as political risks, Gray

stresses that both Prime Ministers agreed to the project last May. He dismisses the

prospect of the project going the same way as several other large infrastructure

projects which have been approved in the Kingdom but which are now stalled due to

a variety of political reasons. He says the Kampong Chhnang project team has devoted

equal time to both political parties.

Gray emphasizes the positive aspects of locating such an operation here, saying that

the costs outweigh the benefits of setting up in neighboring countries.

The Scotsman says that he initially considered Vung Tau in Vietnam and a site in

northern Thailand, but decided on Cambodia. "There is less bureaucracy here,"

he says. "Thailand changes its governments like underwear and Hanoi would give

us problems if we located in the south."

He plays down the the torrid relationship between the ruling parties without a hint

of skepticism. "This is a long-term project. Common sense will eventually prevail.

The Prime Ministers will realize that economic influence will become the decisive

factor in keeping them in power."