T WENTY-FOUR private foreign investors have reportedly balked on proposed deals to

sink millions of dollars into Cambodia, and a major Western investor is reconsidering

its plans, because of Cambodia's political strife.

As a result of perceived risks, the lucrative deals have been put on-hold, according

to various sources.

The deals include mining concessions to exploit gems in Pailin, some 20 contracts

worth up to $20m from Asean countries, and a $500,000 Thai-backed endeavor to promote

handicraft skills-training for Cambodian women.

By one Asian diplomat's reading, the stalling on the deals reflects concern at growing

tension within the government coalition in the aftermath of the Khmer Rouge split.

In particular, investors were alarmed at recent military scuffles in Battambang between

Funcinpec and the Cambodian People's Party (CPP).

Investors who were once counting on political stability - particularly on what was

seen as the increasing dominance of the CPP and Second Prime Minister Hun Sen - were

now having second thoughts, the diplomat said.

While both Funcinpec and CPP are widely believed to be negotiating deals to reap

the gems of Pailin, some contracts arranged by Hun Sen have been delayed, the diplomat

said.

"I have reliable information that when Hun Sen went to Kuala Lumpur and Hong

Kong in mid-November, he went there to conclude leases with three Malaysian companies

and a Hong Kong company to prospect for gems in-and-around Pailin.

"But when he came back to Cambodia, and access from Battambang to Pailin was

unexpectedly cut off by Funcinpec deputy-governor Serei Kosal, those investors thought

twice and decided to hold-off."

The diplomat added that investors, who till recently were confident of getting Hun

Sen's backing, were now revising their views given Funcinpec's apparent attempts

to even up the balance of power.

"The absolute power [Hun Sen] wielded since the attempted coup of 1994 is no

longer there, and business people are beginning to wonder how long he will last.

"

According to one foreign investor with fixed assets of around $1 million, some 20

Asean investors, representing a cross-section of industries, are holding-back because

the political in-fighting has led to congestion in investment applications passing

through the Council for the Development of Cambodia (CDC).

"The real problem is the red tape which has become worse since the KR split

and tensions flared between the ruling parties," he said.

"Both parties are now trying to score points off each other in terms who will

win foreign contracts, and the applications sent through CDC have become snagged

and have practically ground to a halt," he added.

Meanwhile, a Cambodian woman associated with an NGO drive to boost training and job

opportunities for women, said the disintegrating political situation was not only

jeopardizing valuable foreign revenue for the economy, but having a negative social

fallout as well.

She said two of the NGO's Thai backers had been planning to finance a half-million

dollar project for Phnom Penh women, but had pulled out following the Nov 19 assassination

of Kov Samuth, Hun Sen's brother-in-law.

"Politics is so closely tied to the development of the country that Cambodian

leaders should weigh the consequences of their actions," she added. "These

disputes between leaders have a negative impact on the daily lives of the people."

While political unrest is a current concern, said one international corporate lawyer,

a longstanding concern of investors is the lack of a level playing field for foreign

investments.

"Despite the rhetoric, the rule of law does not exist in Cambodia, nor does

the political will to create an environment in which it might emerge and flourish,"

he said. "Its absence and that of a commercial and legal framework has created

an inertia which is deterring serious investors.

"It is clear that quality investors are not here," he added.

"The investment situation here is quite bleak. What else can I think of apart

from the Tiger brewery which represents a long-term commitment. Since the coalition

government got underway, I can't think of any other successful investments in the

past 15 months to two years."

The lawyer alluded to a Western company which is "not yielding a satisfactory

return on its investment", and is on the verge, he said, of "walking away"

from its multi-million dollar deal here.

"They are unhappy with the lack of business acumen, and the realistic commercial

approach of the Royal Government," he added.

"The government has demanded too much and been exceptionally greedy, in seeking

a larger slice of the cake than originally agreed... the Cambodian side simply want

to take get-rich-quick short term profits which are not in the interest of this serious

investor."

Asked to comment on the postponement of foreign investments at press time, CDC director

Sun Chanthol said he had no information available.

But Thai and Malaysian diplomats in Phnom Penh were up-beat about private investments

from their countries into Cambodia.

Pisanu Suvanajata, the Thai Embassy's, said he was not aware of Hong Kong and Malaysian

firms encroaching on Thai gem-mining interests in Pailin.

"As far as we're concerned, the second prime minister has advised Thai investors

that gem-mining contracts with the Royal Cambodian Government will be renewed,"

he said. "He has assured them there will be no problems in terms of their property

in the Pailin area and their access there."

Kamal Ismaun, the new Malaysian Ambassador, was optimistic about the safety of Malaysia's

$1.45 billion investments - the largest slice of Cambodia's foreign investment pie

- but he sounded a note of caution.

"Stability is the key if Cambodia is ever to develop," he said. "It

is important, therefore, that both PMs be treated equally and that the coalition

government remains intact."