Foreign investors and businessmen, scared off by the political turbulence that surrounded

last month's election, have began streaming back into Cambodia following an agreement

on June 18 among the political parties to form a joint interim administration.

"This is what everybody was waiting for. As Prince Sihanouk said, the Gordian

knot has been cut," said Georges Loubeyre, manager of Banque Indosuez in Phnom

Penh.

The alliance eased four weeks of uncertainty over the future of the country.

Soon after the first election results showed FUNCINPEC leading, CPP officials began

balking at surrendering power, and a short-lived secessionist movement threatened

to plunge the war-shattered country into renewed conflict.

But the coalition agreement will see the bitter rivals guide the country for the

next three months as a newly-elected constituent assembly formulates a constitution

and the powerful national army is restructured.

In the 24 hours after the announcement of the coalition, the riel doubled in value

against the U.S. dollar, rising from 4,800 to 2,400 before stabilizing at around

2,700 in the following days.

"People are beginning to open letters of credit again, and people are returning

from overseas. It is not a gallop but I'd say people have decided to come and get

on with life," said John Janes, manager of the Standard Chartered Bank office

in Phnom Penh.

Gopi Bala, Phnom Penh manager of Silk Air said incoming flights in the five days

after the announcement had been heavily booked, mostly by businessmen from Singapore

and Malaysia.

"We're expecting business to pick up, probably two to three months from now,"

said Paul Johnson, sales manager of trading firm R.M. Asia.

"As the elections approuched more and more of the business was strictly non-governmental

agencies which have always been steady. Now we are seeing the private companies coming

back," he said.

Before the elections many foreign investors had privately expressed the hope that

the CPP would win a strong majority in the U.N.-organized election because of fears

the former Phnom Penh-based administration would rather go to war than surrender

power.

There were also suspicions about the economic direction of FUNCINPEC.

FUNCINPEC, which will control the Finance Ministry, has yet to elaborate its economic

policy although is has pledged to a follow basic liberal market principles and honor

contracts signed with any of the four factions.

''Before the election people were very concerned about the prospect of FUNCINPEC

winning because they were being very enclosed about their future policies on foreign

investment," said Jules Thomas manager of investment consultancy firm IMIC.

"As it turns out the situation we have at the moment could well prove to be

the stable starting point which is critical if the country is going to pick itself

up," he said.

The FUNICINPEC-led coalition will inherit a bankrupt administration to run and the

three-month interim period promises to be a troublesome one for the new government

and businessmen. Large parts of Phnom Penh have been blacked out for the last two

weeks because of lack of fuel to run the city's aged generators. Civil servants who

have not been paid for months are abandoning their offices, making it difficult for

businessmen to obtain licenses or conduct any form of official business.

Diplomats meeting in Phnom Penh last week agreed that $30 million in foreign aid

would be needed to prop up the interim government but have yet to come to a formula

on how to share the costs.

A larger financial aid package of $880 million was pledged by the international community

at a conference in Tokyo last year but the bulk of it is not expected to be released

until a legitimate government is installed in three months.

The United States has also threatened to withhold any aid to the new government should

it include the Maoist Khmer Rouge faction, who were allied with FUNCINPEC in their

13-year long war aginst the State of Cambodia administration.

Cambodia's war-ravaged economy represents a minefield for investors. The country's

infrastructure is woefully inadequate, there is a lack of skilled labor and banditry

is widespread. Corruption is rampant at all levels of government although businessmen

are hopeful it will improve under a Funcinpec-led administration.

"They came to power with a mandate that said they would re-evaluate anything

which they consider to have been corruption in the past and I hope they stick to

it," IMIC's Thomas said.

But foreign aid officials who have worked with FUNCINPEC officials said they expect

little improvement .

"If their record in their zones or refugee camps is anything to go by, FUNCINPEC

won't be any better than SOC," said one UN official who asked not to be identified.

Most of the large international trading companies which have a presence in Cambodia

maintain only representative offices.

The executive of one large European trading firm said his company, which employs

19 local staff, could still pull out within 12 hours if the situation deteriorated.

Despite the problems businessmen remain confident.

Janes said he has gone from being cautiously confident to simply confident as more

and more big investors return to do business.

"The big thing will be what kind of constitution they form. Businessmen like

to know what the rules are," he said.

Johnson said a lot of the mystification that surrounds doing business in Cambodia

was unwarranted.

"People say it is unpredictable but I think if you look closely, the business

climate has always been predictable. We always thought that there would be some kind

of peace in Cambodia," he said.