CAMBODIA has dropped out of a $1.4 billion fiber optic

project whose completion early next year will propel the

telecommunications infrastructure of nine Asian countries

into the 21st century, government officials and industry

sources confirmed this week.

According to sources close to the project, several

reasons lay behind the decision to postpone Cambodian

participation including jittery investors spooked by last

year's military coup and the resulting dissolution of the

country's coalition government.

Cambodia has one of the lowest telephone densities in

the world, yet charges among the highest telephone and

data rates.

Officials at the Ministry of Post and

Telecommunications said Cambodia was unable to afford its

share of the Sea-Me-We3 project which started earlier

this month.

Begun in 1994, Sea-Me-We3, an abbreviation for the

South East Asian, Middle Eastern and Western European

regions that it will link up, is considered one of the

most extensive and complex underwater fiber optic systems

in the world.

Cable laying operations to get Australia connected are

ongoing, while Indonesia and Taiwan are also expected to

be patched into the grid within the next 12 months.

When completed the Sea-Me-We3 will comprise a

40,000-kms global fiber optic link utilizing the latest

in technical innovation.

Managing Director of Siemens (Cambodia), Wolfgang

Kitz, described as a "big setback" Cambodia's

decision to postpone joining in the project.

Kitz said besides Sea-Me-We3, other investment

projects for Cambodia were being held up because of the

current deadlock in the formation of a new government.

However, Kitz said, despite missing out on Sea-Me-We3,

Cambodia would benefit from another fiber optic project

linking Thailand with Vietnam.

This project, worth some 30 million Deutsche marks and

funded by the German government, involves the laying of

fibre optic cable down the Mekong River.

"They've already done a couple of hundred

kilometers from the Thai border. It should be finished

before the end of 1999," he said.

Unlike major power generating projects, big

telecommunications projects were difficult to finance

without access to international funding, Kitz said.

The Asian leg of Sea-Me-We3 - called Segment 2 - will

cover 7,100 kms of main trunk underwater cable with

branch links to Singapore, Malaysia, Vietnam,

Philippines, Brunei, Hong Kong, Macau and mainland China.

It is the branch link to Cambodia that Phnom Penh has

decided to forgo. Tele-Danmark was contracted by French

communications giant Alcatel to lay more than 1,700 kms

of the project which will use $75 million worth of cable

manufactured at Alcatel Submarine Network's Port Botany

plant in Australia.

"[Sea-Me-We3] will provide a big increase in

communications possibilities between these countries

while linking them to mainline truck traffic to

Europe," said Thorsten Gregersen, project manager

for Tele-Danmark International.

Socialist Vietnam is one good example. Barely a decade

ago all outgoing overseas calls were routed through a

creaky exchange connection in Moscow. Now, state-owned

Vietnam Post and Telecommunications Corporation (VNPT)

has underwritten a $30m loan for building its leg of the

fiber optic project as part of its massive upgrade into

telecommunications.

The Segment 2 extension follows an enthusiastic

response by major telecommunications providers buoyed by

the success of the project's first phase, which saw a

main fiber optic trunk originating in Germany and passing

through the Mediterranean into the Red Sea, Indian Ocean,

Malacca Straits and South China Sea off Singapore.

Segment 2 has been seemingly unaffected by Asia's

currency turmoil. Gregersen said the region is pressing

for more digital traffic and data circuits, while a big

growth in Internet use has also added pressure for a

better system.

Tel-Danmark expect Segment 2, which will unofficially

cost investor countries $250 million, to be completed by

late December and running by early 1999.

In a telephone interview from Copenhagen, Tele-Danmark

senior sales manager Ove Smidt said: "Most people

believe satellites are connecting the world. They are

not. The quality of fiber optics is much superior, and

you have so much more capacity in one system."