I n a move that will bolster the Thai private sector's

confidence in investing in Cambodia but leaves a French company out in the cold,

the Ministry of Tourism signed a Memorandum of Understanding (MOU) with

Bangkok-based Eastern Dragon Group for the renovation and management of Phnom

Penh's historic Royal Hotel.

The MOU, signed on Feb. 16, commits Eastern

Dragon (EDG) to an estimated U.S. $30 million overhaul of the once grand, now

dilapidated Royal Hotel, which was constructed in the 1930s and served for

decades as the grand dame of Cambodian hotels.

EDG Chairman Eric Lai told

the Post he expects a final contract will be signed "within several weeks,"

which once finalized will give the developer a 30 year lease on the Royal with

an option to renew for another 30 years.

Negotiations between the

Ministry and EDG have been underway since late last year. According to Lai, EDG

came in late to the bidding process but was encouraged to get involved by

Ministry officials.

"There were certain hiccups in the process," said Lai

"but we were very encouraged with the opportunity."

Lai admitted that

there were certain risks with the current investment climate in Cambodia. "In

the coming few months [the investment climate] is a bit shaky, but over the

medium term I feel very confident," he said.

Phase I of the Royal rehab

will entail a complete overhaul of the existing 52 rooms as well as the addition

of two small wings with a ballroom on the sides of the existing facility, which

architects say is still structurally sound. EDG expects work to begin this

October with a soft opening slated for July 1995.

Phase II of the plan

would add two more wings with an additional 160 rooms in the back of the hotel

and a new swimming pool.

An earlier contract for the rehab of the Royal

was signed with the French company FEAL last year before the formation of a new

government. The contract was subsequently scrapped by incoming Ministry of

Tourism officials from the FUNCINPEC party.