T WENTY-FOUR private foreign investors have reportedly balked on proposed deals to
sink millions of dollars into Cambodia, and a major Western investor is reconsidering
its plans, because of Cambodia's political strife.
As a result of perceived risks, the lucrative deals have been put on-hold, according
to various sources.
The deals include mining concessions to exploit gems in Pailin, some 20 contracts
worth up to $20m from Asean countries, and a $500,000 Thai-backed endeavor to promote
handicraft skills-training for Cambodian women.
By one Asian diplomat's reading, the stalling on the deals reflects concern at growing
tension within the government coalition in the aftermath of the Khmer Rouge split.
In particular, investors were alarmed at recent military scuffles in Battambang between
Funcinpec and the Cambodian People's Party (CPP).
Investors who were once counting on political stability - particularly on what was
seen as the increasing dominance of the CPP and Second Prime Minister Hun Sen - were
now having second thoughts, the diplomat said.
While both Funcinpec and CPP are widely believed to be negotiating deals to reap
the gems of Pailin, some contracts arranged by Hun Sen have been delayed, the diplomat
said.
"I have reliable information that when Hun Sen went to Kuala Lumpur and Hong
Kong in mid-November, he went there to conclude leases with three Malaysian companies
and a Hong Kong company to prospect for gems in-and-around Pailin.
"But when he came back to Cambodia, and access from Battambang to Pailin was
unexpectedly cut off by Funcinpec deputy-governor Serei Kosal, those investors thought
twice and decided to hold-off."
The diplomat added that investors, who till recently were confident of getting Hun
Sen's backing, were now revising their views given Funcinpec's apparent attempts
to even up the balance of power.
"The absolute power [Hun Sen] wielded since the attempted coup of 1994 is no
longer there, and business people are beginning to wonder how long he will last.
"
According to one foreign investor with fixed assets of around $1 million, some 20
Asean investors, representing a cross-section of industries, are holding-back because
the political in-fighting has led to congestion in investment applications passing
through the Council for the Development of Cambodia (CDC).
"The real problem is the red tape which has become worse since the KR split
and tensions flared between the ruling parties," he said.
"Both parties are now trying to score points off each other in terms who will
win foreign contracts, and the applications sent through CDC have become snagged
and have practically ground to a halt," he added.
Meanwhile, a Cambodian woman associated with an NGO drive to boost training and job
opportunities for women, said the disintegrating political situation was not only
jeopardizing valuable foreign revenue for the economy, but having a negative social
fallout as well.
She said two of the NGO's Thai backers had been planning to finance a half-million
dollar project for Phnom Penh women, but had pulled out following the Nov 19 assassination
of Kov Samuth, Hun Sen's brother-in-law.
"Politics is so closely tied to the development of the country that Cambodian
leaders should weigh the consequences of their actions," she added. "These
disputes between leaders have a negative impact on the daily lives of the people."
While political unrest is a current concern, said one international corporate lawyer,
a longstanding concern of investors is the lack of a level playing field for foreign
investments.
"Despite the rhetoric, the rule of law does not exist in Cambodia, nor does
the political will to create an environment in which it might emerge and flourish,"
he said. "Its absence and that of a commercial and legal framework has created
an inertia which is deterring serious investors.
"It is clear that quality investors are not here," he added.
"The investment situation here is quite bleak. What else can I think of apart
from the Tiger brewery which represents a long-term commitment. Since the coalition
government got underway, I can't think of any other successful investments in the
past 15 months to two years."
The lawyer alluded to a Western company which is "not yielding a satisfactory
return on its investment", and is on the verge, he said, of "walking away"
from its multi-million dollar deal here.
"They are unhappy with the lack of business acumen, and the realistic commercial
approach of the Royal Government," he added.
"The government has demanded too much and been exceptionally greedy, in seeking
a larger slice of the cake than originally agreed... the Cambodian side simply want
to take get-rich-quick short term profits which are not in the interest of this serious
investor."
Asked to comment on the postponement of foreign investments at press time, CDC director
Sun Chanthol said he had no information available.
But Thai and Malaysian diplomats in Phnom Penh were up-beat about private investments
from their countries into Cambodia.
Pisanu Suvanajata, the Thai Embassy's, said he was not aware of Hong Kong and Malaysian
firms encroaching on Thai gem-mining interests in Pailin.
"As far as we're concerned, the second prime minister has advised Thai investors
that gem-mining contracts with the Royal Cambodian Government will be renewed,"
he said. "He has assured them there will be no problems in terms of their property
in the Pailin area and their access there."
Kamal Ismaun, the new Malaysian Ambassador, was optimistic about the safety of Malaysia's
$1.45 billion investments - the largest slice of Cambodia's foreign investment pie
- but he sounded a note of caution.
"Stability is the key if Cambodia is ever to develop," he said. "It
is important, therefore, that both PMs be treated equally and that the coalition
government remains intact."
