GUARDED optimism underscored the mood of corporate jetsetters who descended on Phnom

Penh last week for high-level talks with government officials about Cambodia's investment

potential.

Representing 80 companies from a broad base of industries, 120 delegates met behind

closed doors at the Hotel Sofitel Cambodiana June 5-7 in what was billed as a "frank

discussion".

The conference, organized by The Economist Group - best known for its weekly news

magazine - generated a positive yet conservative response from participants, who

voiced concern about the country's inherent risks.

"All the delegates recognized that Cambodia does have very significant opportunities,"

said Chris Bruton, Mekong Region Associate for The Economist Conferences.

He cautioned that large-scale foreign investment, designed to steer Cambodia into

the 21st century, would take two or three years.

"The uncertainty of the political situation is on the minds of the people who

may invest here," he noted.

An Asian diplomat who attended, meanwhile, pointed to the looming 1998 general election

as being critical.

"Investors do not want to be dealing with ministries which at present have two

faces. They would rather wait till 1998," he said of the current coalition government.

Many delegates were fresh to Cambodia, and said they had been sent on general "fact-finding"

missions by their companies.

"Most of the participants have come here for the first time," said Donald

Noonan, vice president and general manager of General Electric International's airplane

engine manufacturing division in Singapore.

"They're here much the same as I am, to get a feel for what's going on here.

They are asking themselves basic questions like 'Are people shooting each other in

the street?'"

Roundtable participants were courted by Cambodian leaders from both sides of the

political divide, and pitched a package of investment incentives including duty-free

imports, export tax waivers, 70-year land leases, and tax holidays of up to eight

years.

In a show of bi-partisan solidarity, Funcinpec and CPP bookended the conference with

speeches by First Prime Minister Prince Norodom Ranariddh and Deputy Prime Minister

Sar Kheng.

Both played down reports about the two ruling parties' power-sharing dispute, and

assured that Cambodia was a safe investment prospect.

"In any family there is problems between husband and wife," Ranariddh said.

"The political differences can be and will be resolved through negotiation and

without resorting to force."

In their speeches, the two leaders also attacked local coverage of the current political

situation.

Kheng urged delegates not to listen to the "sensationalist media" which

overemphasized "isolated negative incidents."

Ranariddh dismissed a Phnom Penh Post report that the Council for the Development

of Cambodia (CDC), the "one-stop service" for investment, was actually

"a full-stop service", with many investment proposals stalled for months.

Ranariddh - who himself recently complained of government ministries demanding bribes

to advance CDC-endorsed projects - reassured delegates that the future symbol of

the CDC would be "a green light, not green paper".

CDC head Chantol Sun, along with Vichit Ith of its investment arm the Cambodian Investment

Board - who tendered his resignation in February but has yet to leave his post -

also delivered reassurances to investors.

Many who attended were impressed by the concerted efforts of Cambodian officials

to win the hearts and minds of foreign investors, saying they understood that the

country's reconstruction would not be without a few hitches.

"Whenever you criticize institutions in Cambodia, you have to remember that

they are young institutions," Bruton said at the official press conference.

"You have to realize that this investment authority [CIB and CDC] is the youngest

of its kind in Asia, not to mention one of the youngest in the world. What they have

been able to achieve in such a short period of time is truly remarkable."

But some delegates said government officials had painted too rosy a picture about

the situation in Cambodia, making them uneasy about the true political and economic

climate of the country.

"I'm sure there will be some downsides, but we haven't heard any," said

Fanny Reed, vice president and area manager for Winterthur Swiss Insurance. "There

are still many things that must be achieved in this country before foreign companies

will feel comfortable coming in."

Richard Cromwell, CEO of Hongkong Bank in Thailand, said he liked what he heard in

the conference, but still said "the jury is going to be out" on whether

his company would come to Cambodia.

He ticked off a list of concerns - including money laundering and a lack of banking

regulation - scaring off reputable firms that have strict internal regulations.

"There is a major concern in the international banking arena that there are

several local commercial financial institutions operating in Cambodia that are engaged

in money laundering," he said. "For a large bank like mine, we want to

have confidence that it is a well-regulated market."

Cromwell said Hongkong Bank's entrance into Cambodia would most likely depend on

whether any of its multi-national clients came here.

"If one or two of our clients were to set themselves up in Cambodia, then we

would come in...we would be a follower rather than a leader."

Cromwell added that the safety of Westerners was a matter his bank would not take

lightly.

"When you hear gunshots from this hotel - and there have been gunshots on both

nights I've been here so far - that does not fill me with great confidence.

"There's a big market out there. You've got Burma, Vietnam, Southern China,

Thailand, Malaysia. They are all very attractive areas in which to do business, but

in those places, there are no gunshots at night." Although blue chip companies

such as Hongkong Bank appear to be cautious about Cambodia, more and more regional

"pioneer" businesses are already spending money here.

Intan Cornell, coordinator of Cambodian projects for YTL Corporation in Malaysia,

said the firm has committed more than $21 million to the renovation and construction

of two hotels in Siem Reap and Sihanoukville.

YTL was pleased with its dealings with the Cambodian government, Cornell said, and

the company is progressing with other projects including a $20 million power station

and a controversial sound-and-light show at Angkor Wat.

Cornell said a negative backlash over the sound-and-light show was misdirected at

YTL.

"It's important for everyone to understand that it was the Prime Ministers who

approached us with the idea," she said, adding that the government was still

keen on the project.

"His excellency [Minister of Tourism Veng Sereyvuth] was quite strong in defending

our power plant and the sound-and-light show, but we'll just have to sit back and

wait."

Other foreign firms, such as conference sponsors Caltex and British American Tobacco,

who have returned to Cambodia after being forced out by the turmoil of the 1970s,

say the time is ripe for investment.

"The mood is quite optimistic for well-researched and value-added investments,"

BAT Corporate Affairs Manager Martin Riordan said. "Even though there is a unique

political system in Cambodia, both sides have an equal desire for economic openness."

Although no concrete deals were made at the conference, the high turn-out reveals

a genuine interest in Cambodia. One indicator of future foreign investment was the

presence of Northbridge Communities Limited, a Western-style housing company which

caters for expatriates in rapidly growing countries.

Northbridge has already begun work on a 150-acre Phnom Penh site. By August 1998,

the company hopes to open an American-style school to help meet the needs of the

children of the foreign elite expected to flock to the new economic promised land

of the Kingdom of Cambodia.