BATTAMBANG - The provincial capital of Battambang has the potential to be an

important staging post along a strategic route between Bangkok and Ho Chi Minh

City. But eight months after the UN-organized elections there seems little hope

of that potential being realized, with the current economic outlook bleak and

unsettled.

Developed by the French as a regional center and educational

hub, today Battambang remains a government headquarters but is primarily a

market town. It has few outstanding tourist attractions though it is a

delightful riverside town with faded colonial architecture and attractive old

Chinese shop houses..

Several distinct strands define Battambang

economically, its proximity to the Thai border, the Pailin gem mines, the rich

agricultural areas at the head of the Tonle Sap, the Khmer Rouge controlled

timber areas and National Route 5 running to Phnom Penh.

The town also

boasts the country's only jute factory but most of the urban economy consists of

car and motorcycle repair and the retailing of hardware and simple domestic

goods. There are also a number of hotels, several of which opened during UNTAC's

tenure. All have remained open though at reduced occupancy rates and at lower

room rates.

Several NGO sources say the provincial government has been

operating in a economic policy vacuum since the May elections. One said: "the

economic situation is highly anarchic here, and most of the economy is

under-ground."

Economic experts at NGOs in town are posing two key

questions: "Is there local money available for investment and are there

incentives for local investors?"

Clear answers to these questions have

yet to emerge. But two dramatic incidents indicate there is more money around

locally than may have been thought. The incidents produced repercussions that

may have driven investment money even further underground.

The first

incident occurred late last year. A Thai businessman set up Battambang

Investment Company promising rates of interest of up to 20 per cent, which

attracted up to $2 million in deposits. He had already established a "flash"

restaurant, which attracted plenty of UNTAC customers, according to one NGO

official.

The promises of high returns proved bogus when the Thai

businessman was caught making off to the border with the money.

He now

resides in the town's jail awaiting trial and the money is tied up with the

court.

The effect of the scam on townsfolk and in particular investors

has been two-fold, observers say. Firstly, it has heightened distrust of Thai

businessmen. After the word got out about the trickster's attempted getaway,

there were anti-Thai demonstrations and a protest march on the jail had to be

halted by police. Secondly, it has driven available investment money back

underground, with people hoarding their money or buying gold.

One NGO

official said, "There is an undercurrent of resentment against Thais in any

case, but this incident certainly reinforced it."

Discussions with NGO

officials indicate that many of their workers invested savings from the UNTAC

period. "It is likely that high government officials will get their money back,

but these small investors will probably not be refunded," one NGO official

said.

The second incident occurred last month when four gold dealers from

Battambang were ambushed on their way from Battambang to Phnom Penh. A B-40

rocket is said to have struck the rear of their vehicle, killing three of the

men instantly.

Aside from lack of opportunity, and available funds,

potential investors might be most concerned about security in Battambang. One UN

official said: "There is still a state of war out here."

A recent

three-day visit to the town by this reporter indicated no obvious troop

movements and no state of tension. Aside from the busy central market place, the

town is sleepy. But there are security risks for potential investors.

An

NGO source pointed out that the United Nations Development Program office had

lost two vehicles to bandits. And though the vehicles had been recovered by the

local police "with help from UNDP", police have been unwilling to release the

vehicles without payment, UNDP officials say.

The cases have now gone to

court in Phnom Penh and Battambang. UNDP sources say that the Battambang police

still hold a dump truck that they had recovered, but are refusing its return to

UNDP without the payment of $25,000.

Entrepreneur Richard Rowat has a

different view. He set up the Rowat Computer Group in town and says that he

personally feels more secure in Battambang than in Phnom Penh. "Security inside

the city is getting better," he said, "there have been no attacks against

westerners." But he has had a car stolen.

Rowat tracked it down and found

an army general that had taken possession of it. The general offered to sell it

back for $5,500. Rowat declined the offer.

Overseas Development Agen-cy

consultant David Boyd recalls attending a lunch meeting between foreign

businessmen in the town and British Ambassador David Burns in which the

consensus was that the streets of Battambang were safer than those in

London.

Cambodians have a different outlook Boyd believes. He said,

"There is a general sense of insecurity with respect to the prospects of long

term prosperity." That is reflected in the attitude toward the riel. "Every

transaction over $50 is in gold," he said.

There are rumors of shady

financial deals being done in the town. One Westerner said that Thai money is

being laundered in Battambang, but that claim could not be substantiated. "It is

difficult to trace how money flows in and out of Thailand," a local UN official

said.

Much of the real money in the town is in the hands of government

officials and businessmen in the timber trade. Gem merchants in town also have

access to significant cash, as do the mostly Chinese rice mill owners.