managers - American, British, Australian, Thai - are all
bullish on Cambodia's post-election economic prospects.
Investors are saying "Hun Sen is the man" since the CPP scored a resounding electoral victory. Along with fostering political stability, they hope Hun Sen will curtail corruption.
Their thinking goes: Hun Sen won. Let him get on with the
business of running the country.
"It's amazing that Hun Sen pulled off this
election," says Kevin Whitcraft, managing director
of RM Asia, one of Cambodia's largest trading companies.
"I respect him for what he did. If he runs the
country, it will be good for business. Having won the
election, basically free and fair, he should have the
confidence and power now to bring security to the
country. That's the number one factor for foreign
investment, and Cambodian investment too. How many
Chinese Cambodians are sitting on their cash? Indonesian
Chinese could also invest here. Cambodia has always been
friendly to the Chinese. A new government can make this a
safe place to invest."
In Cambodia since 1989, Whitcraft oversees RM Asia's
varied interests: Chrysler Jeeps, Ford pickups,
engineering and construction equipment, generators,
compressors, steel, cement, soybeans, tobacco and 3M
stationery products. His company was hit hard by the July
coup, suffering a half million dollar loss when its Jeep
service center was looted. Company employees have shrunk
from 110 to 58. Yet Whitcraft remains upbeat.
"There is a free market here," he says.
"Investors can enter most sectors and are pretty
much left alone. I see an opportunity for Cambodia to
have stability with a strong government under a CPP
majority. On the other hand, since the Asian disaster, we
won't see the same growth as before. There are great
deals in Asia now, better than in Cambodia. New projects
face the problem that there is nothing here. You have to
provide your own infrastructure, power, new equipment.
But in Thailand, you can pick up a company for 10 cents
on the dollar, everything in place, earning a cash flow
from day one."
He cites other lingering problems. Fifteen months ago,
the government slapped a 100% import duty on his Jeeps
while turning a blind eye to rampant car smuggling from
Thailand. "A new government will have to enforce
regulations that are already on the books," he says.
The government also charges a 20% annual profit tax, even
should there have been no profits if, say, your company
has lost $500,000 to looting. In August, RM Asia's
general manager was beaten up and his car stolen.
"Since last July, security is better," comments
Whitcraft. "But still every Chinese businessman is
looking over his shoulder for kidnappers."
With the elections, however, Cambodia is finally getting
some good publicity. "All our suppliers called me up
with congratulations on the elections," Whitcraft
says. "Investors will come here and businessmen will
tell them that the situation is getting better. The point
now is to earn foreign exchange, switching from an aid
economy to agriculture, tourism, light industry. Hun Sen
has some good people around him, helping him make
decisions. Remember he was the architect of the Paris
Peace Accords. He gave up absolute power to go into
something unknown. In this election, he played his cards
right, and he could go down in history as a great ruler
John Raeside, general manager of Caltex Cambodia, is in
charge of the largest American investment in Cambodia,
some $30 million in 19 service stations, convenience
stores, a truck tanker fleet and a marine depot in
"I'm fairly bullish on Cambodia's prospects,"
he says. "I see a return of investor confidence with
the elections, a catalyst for aid money coming back. And
tourism should pick up tremendously."
Caltex also took a hit with the July coup. One service
station burned down and a convenience store was looted.
Yet Raeside, who opened the Caltex office in 1995 and has
seen his staff grow from five to 450, remains optimistic.
"It's true that investors have been sitting on the
sidelines," he admits. "They will come but not
overnight. Just the process of investment takessix months
to a year. I see a big increase next year. The deterrent
is the small market and limited spending power here. The
biggest problem is smuggling; 30% of the petroleum here
is smuggled from Thailand. The government needs to summon
up the willpower and the mindset to combat smuggling and
ignore pressure groups."
Unfair taxation is another vexing problem. "There's
a need for a level playing field," Raeside says.
"Some people simply don't pay duties and taxes. And
those who do are targeted for more. The more taxes you
pay, the more you are expected to... There is the need
for the rule of law, reform of the judicial system.
"What gets me mad is petty extortion by some
government bodies. We had a safe stolen from one of our
stations and employees tied up. This was never
investigated, The attitude is, 'You pay us, we'll
investigate.' I told them to jump in the Mekong. And if
someone hits the back of one of your tankers, it's always
your fault. They'll put your tanker in a compound, return
it in pieces - blackmail pure and simple. There's no
sense of right and wrong. There's a lack of trained
experienced people. We need new people to bring Cambodia
into the 20th century, never mind the 21st."
Still, Raeside maintains that Cambodia's big advantage is
that the free market concept is still going strong, an
environment better than in Vietnam.
"If they keep to market principles and maintain
stability, they can't lose but only win... The elections
were very impressive, an amazing display of democracy in
the streets. All those truckloads of CPP and Sam Rainsy
supporters and no violence. This is encouraging. I think
that Cambodia is held to higher standards than
neighboring countries because of their awful publicity
and the UNTAC billions.
"But signs are growing for increased aid and
investment. What's lacking is the quality of investment.
There are too many casinos and nightclubs. What's needed
is more investment in agriculture."
One such investor is Ray Wallace, Director of Kirirom
Agriculture Developments, which has planted 355 hectares
in bananas, paw-paws, jackfruit, mango, sugar cane and
cashews. Located 80km south of Phnom Penh, his farm
employs 12 permanent staff and seasonal labor from
In Phnom Penh, his Weldmesh Cambodia employs amputees to
weld custom-ordered steel reinforcing mesh. His first
venture, three years ago, was the Riverside Restaurant.
He kept it open throughout the July coup.
"It's easy to set up a company here," he says.
"There are good opportunities and a safe
environment. The election was the Miracle on the Mekong,
as [former US congressmen Stephan] Solarz said. It was
nothing short of impressive, given the short period of
time. The NEC was as professional as anyone. People voted
with their feet, demonstrated what they want to see
happen in Cambodia.
"Hun Sen is the man. In my view, he could possibly
go down in history as the greatest leader of a
third-world country. He has the skills and he's built up
his power base. He's recruited overseas Khmers educated
in France, the US, Australia. They're streetwise and have
the commercial acumen from doing business in the West. In
business or in politics, you're only as good as the
people around you.
"The historic challenge now is to bring Cambodia to
the next step level. Hun Sen's pet hobby is agriculture.
Primary industries will kick Cambodia into the next
stage. Just down the road from our farm there's a 11,000
hectare palm oil project."
Wallace points to the central importance of rice, citing
Vietnam as an example that became a major rice exporter
in just a few years. A million tons of rice exports is a
$100 million in foreign exchange. "Cambodia is
almost unique in the region, having an immense amount of
land and a relatively small population. The land is flat
too, user friendly... But Cambodia is also a place to
come for sex, drugs, guns, money laundering - the
downside of the free market."
Wallace adds: "The elections proved that Cambodians
can do something constructive for themselves. The media
doesn't give Hun Sen a break. Since April 1997, banditry
is way down. You don't see military checkpoints or
convoys. You should give Hun Sen credit for the
beautification of Phnom Penh too, roads being built one
by one, water and electricity supplies, and no more
Sounding a more cautionary note on Cambodia's future is
Mark Henderson of the Price Waterhouse Cooper accounting
and legal firm. He has been in Cambodia for six years,
beginning at the Sofitel Cambodiana hotel. "The
effects of the election are not easy to say," he
cautions. "Unlike the international observers, three
weeks later and I can't say. Maybe we'll see an effect in
three or six months."
Since the election, however, his volume of business has
five times over. "Important, big organizations have
been holding back on decisions until after the
elections," he says. "The organizations that
have contacted me are ones that are already here - small
local businesses, NGOs, international lending agencies -
rather than new investors."
"Things are better than before. I'm more optimistic.
I've stopped trying to predict things in this country.
Expect only the unexpected. I mean, who could have
expected the July coup, the elimination of the Khmer
Rouge, and the return of Rainsy and Ranariddh for fair
"At least as important as the new government is the
regional picture, which looks bad: Thailand, Malaysia,
Indonesia, Korea. I don't expect new investment from
them. In fact, I expect some to pull out."
Looking forward to the new government, Henderson cites
the following factors that would encourage new investors.
"Rule of law across the board: income tax, contract
law, dispute resolution. Elimination of smuggling and tax
avoidance. A level playing field."
Offering a Thai perspective on the post-election Cambodia
is Worasit Uchai, General Manager of Cambodia Shinawatra.
Since taking up his post in March 1995, the Thai
telecommunications company has grown from 70 to 120
employees with a $10 million investment.
"The election results were no surprise,"
Worasit says. "We knew it would be like this. The
results are good for political stability, to get the
country going again. Foreign investors will come back...
In terms of business, not of politics, one prime minister
is better than two. So far, Hun Sen has pushed hard to
attract foreign investment. The long term prospects are
good. Cambodia will join Asean now. The world is getting
smaller and Cambodia can't stand alone.
"The problem is the enforcement of laws and the tax
system. We were supposed to have tax-free privileges but
we still have to pay. It's more convenient if you don't
want to wait too long a time for shipments. Kind of a
double tax, a gray area."
In terms of the Asian crisis, Cambodia compares favorably
to Thailand, Worasit says. As an emerging market,
Cambodia is on a different level. "In Thailand, the
economy was like a tall building falling down. Here there
was nothing to fall down."
Surin Pitsuwan, Thailand's Foreign Minister, has proposed
a policy of "flexible engagement" toward Asean
countries that abuse human rights. "This does not
apply to Cambodia," Worasit says. "Cambodia is
better than Burma. This is a free country. They just had
Offering a long view on Cambodia's development is Manuel
Kargas, finance manager of the Australian Building Center
and owner of the Ettamogah Pub. Kargas first came to
Cambodia in early 1992 with CARE Australia.
"I have a positive perception of economic pickup,
signs of forward movement," Kargas says. "I'm
neutral politically, but since last July stability and
security have led to confidence in prosperity. We see a
proper government in place as sufficient to encourage
both Cambodian and foreign investors. You need someone
strong enough to put in place laws, rules and
regulations. A good start will be the seat in the UN,
Asean membership, recognition of the government.
"A lot of Cambodia's neighbors are in the process of
restructuring. Cambodia is still in the construction
phase, and this is to its advantage. Hopefully wiser
heads will learn lessons from what happened to other
countries' economies. Cambodia awaits a generation of
educated technocrats committed not to self but to
Cambodia and the people of Cambodia.
"I don't know Hun Sen. He doesn't come to tea or
anything. But I see him as moving to another stage of
development, becoming a person for the people, a
benevolent ruler like Lee Kwan Yew.
"If you're in for a long haul here, you have to be
patient and positive,"Kargas says. "Otherwise
I'd retire to Sihanoukville and buy a fishing boat."
Perhaps dampening a wave of business optimism is a joint
statement issued by Prince Ranariddh and Sam Rainsy,
issued on Aug 18: "Any contract signed between
foreign investors and the current Cambodian authorities
after July 6, 1997 and before the formation of a legal
government under the Constitution of Cambodia following
elections in 1998 is subject to revision and possible
annulment," the opposition leaders wrote.
"We advise all investors or potential investors to
ensure that they consider carefully the legal
ramifications of entering into contracts with the present
illegal Phnom Penh government."