Optimism in the air

THERE is a mood of optimism in Cambodia following the signing of a constitution by the new Government and the restoration of King Norodom Sihanouk.

Although the stage is set for a climate of political stability, no one, least of all the Cambodians, expects any immediate rush of overseas investors.

Australian Trade Commission (Austrade) manager Seng Lo said there was ''huge potential'' in Cambodia once the Government set up the revised foreign investment law and was able to offer investors assurances and guarantees.

''I think it's still early to invest in Cambodia because to talk about investment there needs to be security and protection by the law and stable government policy,'' Mr Lo said.

Cambodian Finance Minister Sam Rainsy has promised to revamp and update the country's foreign investment law and hopes to attract big-league investors with tax holidays, cost incentives and government-backed guarantees.

Mr Rainsy said there was potential for foreign investors to help restore and build infrastructure, establish a tourism industry or invest in agricultural and aquaculture, two of Cambodia's biggest natural resources.

He said: ''We have only a population of nine million potential consumers but we are in a very low state of development and need everything from the basic staples to sophisticated goods which could be imported or produced locally.

''We are starting from a very low level so the pace of growth is going to be very strong and very rapid.'' After months of debate and uncertainty, the 120-member elected assembly of the Cambodian Government, which gained power through the United Nations-run election in May, finally agreed to adopt the constitution.

Meanwhile, the 25,000-strong UN Transitional Authority (UNTAC) is shutting down operations and leaving the people of Cambodia free to govern themselves.

The withdrawal is already taking its toll - the UN had helped to buoy the economy with per-diem budgets of more than US$100.

There are rows of restored villas, rented by UNTAC administration and overseas companies, standing vacant and the many restaurants and hotels which opened to cater to the UN become emptier by the day.

The Government is hoping to fill the gap with investors prepared to make long-term commitments with enticements under the foreign investment law.

The business community, which regards the Funcinpec faction of the Government as sophisticated and exposed to international business, agrees that these measures are needed to gain the confidence of foreign investors.

Mr Lo said most investors had concentrated on short-term contracts with UNTAC and there were few companies committed to joint-venture agreements in long-term projects.

Mr Lo said consulting projects would be ripe for foreign investors as Cambodia had few quality people able to transact business and put together contracts.

In the forefront are several Singaporean, Thai and Australian companies involved in telecommunications.

The Thais have also invested heavily in a 70-30 joint venture with the Government on Cambodia Airways.

But according to Cambodia Asia Bank director Lau Yin Leong, the situation in Cambodia is still quite uncertain.

Mr Leong said many overseas companies, in particular Singaporean, which had invested were now holding back and not putting any more money into the country.

Despite the lack of development, more than 20 foreign banks have set up, with Maybank (Malaysian Bank) the latest to open its doors.

Mr Leong said many banks had opened because licences were available but few were actually pursuing business aggressively.

He said many banks might close after lending to clients - especially for property investment - who now might be unable to repay loans.