Whether the United Nations (U.N.) succeeds or fails in its task to bring peace to

Cambodia, the May elections will likely mark the beginning of the end for the "hot

money" economy spawned by the U.N.'s $2 billion mission.

"The Cambodian situation is totally artificial," said Robin Davies a visiting

economics professor at Phnom Penh University."

"What investment that has taken place has been in a bubble type economic boom

in Phnom Penh that has had very little spin off in to the country side where most

Cambodians live," he said.

During their first eight months, U.N. staff and peacekeepers spent an estimated $200

million in Cambodia, fueling a burst of commercial activity that lifted the country's

war-shattered economy into the ranks of the world's fastest growing.

But with the 21,000-man mission due to begin winding down after the election, Cambodia

is likely to witness a changing pattern of investment.

"I would speculate there will be switch to more productive investment directly

correlated to how quickly the international community helps rebuild the infrastructure

of Cambodia which is essential for backstopping private investment," Davies

said.

The signing of the Paris Peace Accords in October 1991 ended a crippling trade embargo

imposed after the Vietnamese invasion in 1979.

However businessmen looking to make long term investments have for he most part stayed

on the sidelines, waiting for outcome of the election and formation of a new constitution.

"The fundamental thing is to see who is coming in and whether there is going

to be any form of struggle after the elections," said Jules Thomas, general

manager of IMIC, an investment consultancy firm.

"If they see that things are becoming clearer, that there is a clearly defined

constitution, then I think we will see people trying to come in at this stage,"

Thomas said.

While most businessmen are unwilling to state publicly which party they would like

to see win the election, privately most say they would prefer to see the State of

Cambodia (SOC) faction maintain its control over much of the country.

"Because of the security situation we need a strong government. I think this

one would be the best," said an executive at one Asian-owned hotel.

"By and large business is looking for a clear victory on the part of the SOC

," Davies said.

"If you look closely at the SOC, they have performed something bordering on

an economic miracle of bringing this country, which was literally in a terminal ward

in 1979 to a position where you can start talking about possible continued development

of Cambodia," he said.

The economist said any government wishing to carry on Cambo-dia's transition from

a command to market econo-my would also need a "strong hand on the helm to avoid

the process coming off the rails."

Many businessmen believe the State of Cambo-dia's 14-year control of the state bureaucracy

would raise a large question mark over the ability of any other faction to rule effectively.

But whichever faction does assume power after the election, most observers expect

it to be essentially pro-business.

"Whoever wins will be fundamentally broke. I think that certainly the key players

in the political situation are very aware of the need to attract foreign investment

and of the need to encourage business to develop here," Thomas said.

Multilateral aid agencies and donor countries are expected to turn on the money taps

for much needed infrastructure projects after the withdrawal of the U.N. mission

but many businessmen expect the long-term investment climate to remain sober.

"When UNTAC pulls out you will see a huge drop in business. I estimate 50%,"

said Poul Leineweber, the representative for EAC which provides marketing services

for Marlboro cigarettes and M&M chocolates in Cambodia.

"You are not going to hit a gold mine, that is over," he said.

Competition from other countries such as Vietnam, which recently opened Chinese-styled

special economic zones to lure investors, will make things tough for Cambodia which

has a population of only eight million people, many of whom are impoverished and

unskilled.

"There are so many countries crying out for investment and businessmen are not

going to invest in Cambodia because they have a conscience," Davies said.

The first three months of any new government are expected to critical in developing

confidence of investors in Cambodia.

"If the government falls down in reinforcing a positive perception then business

will be in absolutely the same position they are in now and that is hold and using

the hot money approach of where you can maximize your profits in the shortest period

possible," Davies said.

Foreign businessmen said the among the first things they would want to see will be

a legal framework to protect their investment, guaranteed property rights and a law

to allow for repatriation of profits.

"The current foreign investment law has so many loopholes that it is really

scaring more investors away rather than attracting them," said Leineweber.

"[A new government's] main task will be to say why people should come and invest

in Cambodia, what do they have to offer. At the moment they have only very little

to offer," he said.

In the long term observers differ over the prospects of Cambodia.

"I can't see Cambodia being a viable economic entity unless it is seen in the

context of a wider economic trade zone because the domestic market is too small in

terms of purchasing power of the people and it is too small in terms of the apparent

effective demand which very low in Cambodia and is likely to stay that way for sometime,"

Davies said.

EAC's Leineweber said he believed Cambodia would probably have to wait for a spill-over

effect from Vietnam's economy but was more openly optimistic about the country's

prospects.

"We certainly believe in this country but there are a lot of changes that need

to be made before we go into a long term investment such as manufacturing and building

factories.

"You can't change a country that has been at war for 20 years within a year,"

he said

Somsak Sowapark, general manager of the Thai Farmer Bank's Phnom Penh branch said

most businessmen were still taking a wait and see approach.

"A lot depends on the new government and if they allow businessmen in and factories

to open so the people can increase their purchasing power."

IMIC's Thomas said Cambo-dia's prospects were good if businessmen realized that Cambodia

was not another extension of Thailand, Malaysia or Indochina.

"Companies that have taken that approach have found life extremely difficult.

Cambodia has market characteristics which are different to the rest of Indochina.

"There are certain practical problems to overcome (but)...I think we will see

a fairly rapid economic development of Cambodia and national rehabilitation of the

country," he said.