EXPATRIATE business

managers - American, British, Australian, Thai - are all

bullish on Cambodia's post-election economic prospects.

UPBEAT ATTITUDE

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

of Cambodia."

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

Sihanoukville.

"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

nearbyvillages.

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

military threat."

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

increased

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

elections?

"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

elections."

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."