In spite of strong incentives for foreign direct investment (FDI), an unholy trinity of poor infrastructure, corruption and lack of judicial transparency continues to dampen the enthusiasm of Cambodia's potential foreign investors.

This was the message of a December 2-3 conference on investment opportunities organized by the Council for the Development of Cambodia (CDC) and the Friedrich Ebert Stiftung at CDC headquarters in Phnom Penh.

During the two-day conference, participants from both the Ministries of Finance and Commerce as well as representatives of foreign investors in the Kingdom produced a mixed report card on the status and future prospects of FDI in Cambodia, culminating in Finance Minister's Keat Chhon's description of the Kingdom's current investment climate as "a 'casino economy' where investors come quickly and leave quickly."

"The bottom line is that Cambodia has to date not been able to attract many serious, long term investors," conceded Kao Kim Hourn, Executive Director of the Cambodian Institute for Cooperation and Peace. "You just don't see the big players like Toyota or GMC setting up shop here."

Such frank assessments of Cambodia's current investment situation were tempered by conference speakers from both the public and private sector that repeatedly stressed the strengths that Cambodia possesses to build on its nascent FDI base.

"Cambodia's economy is almost completely open to foreign investors in a manner that rivals only that of Singapore," said David Doran of DFDL Legal Advisors. "When you combine that factor with Cambodia's foreign exchange regulations and significantly lower levels of official red tape, this is a very attractive place to invest."

Doran's comments are echoed by Kim Hourn, who emphasized the "new realities" of Cambodian society and economy.

"Cambodia now has peace and stability and relative economic stability," Kim Hourn said. "Cambodia's entry into Asean earlier this year made it part of the wider regional economy...

We're no longer in isolation."

In spite of such investment advantages, conference delegates universally bemoaned the formidable handicaps to boosting FDI, singling out corruption, chronically poor infrastructure and a need for judicial reform and transparency as major impediments to increased foreign investor confidence in Cambodia.

Sok Hach, an Economic Advisor at the Cambodian Development Resources Institute cited essential flaws in Cambodia's rule of law as a major factor limiting foreign investment.

"The government still has to prepare a compatible [legal] environment for investment," Hatch explained. "If a potential investor tries to find two or three hectares of land for a factory, can they depend on Cambodian law that there won't be disputes over the land's ownership?"

According to former Minister of Finance and current National Assembly member Sam Rainsy, the Cambodian government's traditional tolerance for economic players "on the periphery of legality" has been a deterrent to legitimate investors.

"Bad investment chases away good investment," Rainsy told the Post. "What can we expect when Cambodia's biggest industries are logging, prostitution, garments, drug trafficking and money laundering?"

Compounding the difficulties in attracting new investment is what Doran describes as "deep dissatisfaction" among the Kingdom's long-suffering current investors.

"The government shouldn't just focus on getting new investment, they should also be keeping existing investors happy," Doran said. "Satisfied current investors are invaluable in attracting new investment."

Doran also warns that the government is faced with a rapidly closing "window of opportunity" to capitalize on what he describes as "new international enthusiasm" about Cambodia's investment environment.

"Since about April or May there's been a perception amongst investors that the worst of the Asian Financial Crisis is over and that Cambodia offers a lot of opportunity," Doran explained. "The government has to act within six months to a maybe a year to capitalize on this enthusiasm or investors will get tired and go elsewhere."

Doran lists a series of measures including the publication of laws and draft laws and the ratification of a foreign arbitration treaty for disputes involving foreign investors in Cambodia as "relatively easily implemented" pro-investment moves available to the government.

The opinions and suggestions raised in the conference will be taken up at a planned Dec 21 workshop for government officials and private investors.

"The government's attitude is very pro business, but we haven't been serious enough to knock on doors of investors," Kim Hourn said. "In the past the government's focus was on foreign aid rather than foreign investment, but now we have to become more aggressive in attracting investors."

However, Kim Hourn stresses that problems of corruption, infrastructure and judicial reform "won't be solved overnight" and that investors must also be flexible and patient in dealing with the limitations of Cambodia's war-shattered economy.

"There's a limit to what the government can do [to attract foreign investment] and investors have to keep in mind that this is still a young country," Kim Hourn said. "If investors wait around until everything is perfect in Cambodia, they're going to miss out on some major opportunities."