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.
