After years of peace, the resurgent and ambitious nation is gradually emerging as a regional business destination for foreign investors Cambodia, after a decade of peace and rebuilding, is following the fiscal lead set by neighbouring Vietnam and is shaping-up for its turn as a destination for high-risk venture capital. Its ambitious plans are backed by a booming banking sector, and include a stock market which officials insist will open within 18 months, and construction projects that are reshaping Phnom Penh and the provincial cities. Following the July polls, when Prime Minister Hun Sen and his ruling Cambodian People's Party (CPP) won another five-year term, most expect the economy and development to stay the course with returns on investments continuing to improve. John Brinsden, vice-chairman of Acleda Bank, says the biggest factor behind economic growth is a government-friendly attitude to business. A dollarised economy, extremely low debt levels - total deposits remain greater than loans outstanding in the banking system - a negotiable tax regime and low labour costs are key planks in attracting offshore capital. 'Big firms, small firms, family-run firms, firms from all over Asia have been building up their cash positions over the past few years and are now pouring it into Cambodia,' he says. South Korean, Chinese and Japanese investors feature prominently while the United States, Australia, Britain and France - who contributed heavily to the rebuilding process in the aftermath of war - have significantly bolstered their business presence. Russian capital is also finding a home, particularly in coastal developments outside of Sihanoukville in the country's south. Mr Brinsden, with 47 years of banking behind him, says powerful decision makers in big corporates began coming to Cambodia in 2005. Some received tax holidays on the use of electricity, a perennial sore point for its high cost and unreliability. Others were attracted because they could establish wholly owned subsidiaries. 'Unless you want to own land there is no need to forge a joint venture with a local partner. Many of the banks, for example, are 100 per cent foreign owned. The government attitude to business makes this one of the easiest places to set-up,' he says. More than three decades of war shattered the Cambodian economy. Its people were left destitute as their leaders were repeatedly caught up in the grip of cold war brinkmanship played out by world and regional powers. It is believed that about 1.7 million people died from 1975 to 1979 when the Khmer Rouge attempted to turn the nation into an agrarian utopia. Pol Pot and his lieutenants even abandoned money. But, as the horrors of war are being pushed further into the past, a new fresh-faced Cambodia is emerging. This includes a maturing business culture and home grown companies wanting to list on a stock market. Kao Thach, from the Ministry of Economy and Finance, says South Korea's second stock exchange, the Kosdaq, which caters for start-ups, and small and medium-sized firms, is a potential model for Cambodia. He has been working closely with Korea Exchange and says shares and bonds will be traded in Cambodian riel or the greenback, and this may prove attractive for investors seeking to reduce their exposure to sharp fluctuations in foreign exchange. However, analysts say the government must improve its legal and accounting systems, while forcing companies to comply with financial audits to improve transparency, necessary for a stock market to function properly. In its 2007 annual report on perceptions of corruption, Berlin-based Transparency International ranked Cambodia 162 of 179 countries. Mr Kao is confident a stock market operating by the final quarter of 2009 will help overcome Cambodia's shortcomings and says that last year the government ordered 400 companies to audit their financial statements. 'With a stock market there will be a lot of benefits,' he says. 'Companies cannot hide information, otherwise they will be punished, and this will improve corporate governance and the ability of local companies to raise capital.' Up to 10 companies, providing a market capitalisation of US$200million to US$400million, are being touted for listing in the first 12 months of index operations. These include Acleda Bank, Canadia Bank, Union Commercial Bank, the petroleum firm Sokimex Group, and the widely diversified company Mong Rithy Group. The country's largest mobile-phone operator Royal Group, which has partnered Melbourne-based ANZ Banking Group in Cambodia, has been cited as a potential listing. The Phnom Penh Post has also indicated it may be interested in making a public share offer. Phnom Penh Post publisher Ross Dunkley says: 'There is a high possibility of a listing in future, that's an option for our investors'. Dunkley's Post Media brought the newspaper from founder Michael Hayes this year with plans to take it daily from fortnightly, and expand the company as a specialist publishing house, possibly launching into radio and television. He agrees with Mr Brinsden. 'I hear the stories about corruption but it's been smooth sailing for us. No one has put out their hands from the government and asked us for money. In just over four months our staff numbers went from 12 to over 100, we found and renovated state of the art offices, found and fitted out our factory, and we're ready to go in less than six months. 'It's a great achievement and proves that in Cambodia you can get things done,' Dunkley, who has experience running publications in Vietnam and Myanmar, says. Signs of increasing wealth are being seen across the country from Sihanoukville and Kampot in the south to Siem Reap in the west, which has taken on boomtown proportions as its famed Angkor temples, the best known of which is Angkor Wat, welcome tourists. Cars are replacing motorcycles as Phnom Penh's once atrocious roads are paved over, construction cranes dot the horizon, the capital's first skyscrapers are being built and living standards are rising with an annual growth rate of about 10 per cent for the past three years. The garment and tourism industries are thriving as property prices soar, and analysts say the discovery of oil is promising and Cambodia has a non-investment grade rating that is two notches below Vietnam at B plus, according to Standard & Poor's. 'They know they are coming from a long way behind countries such as Vietnam,' Mr Brinsden says, adding present day Cambodia is comparable with the Vietnam of 1990 to 1993. Of the private equity investors heading into Cambodia, Phnom Penh-based Leopard Capital is seeking to raise US$100 million while Frontier Investments & Development Partners (FIDP) plans to spend US$100 million in the short term on projects including telecommunications and agriculture. Douglas Clayton, a managing partner at Leopard, says Cambodia is attracting pioneer investors. 'They are the types of people who got in and out of Vietnam early, or who piled into commodities before they took off. Also, investors who are bearish on the world economy find Cambodia a pretty attractive safe haven, given that it is in so early a stage of development and is resource rich.' Mr Clayton says the July polls are taking the country another step forward. 'After years of negative media coverage, most investors misperceive Cambodia as fundamentally politically unstable, but this election demonstrates it's actually much more stable and predictable than more accepted investment destinations Thailand, Malaysia, Indonesia or the Philippines. Cambodia's political risk will now have to be reassessed, and this will be positive for foreign investment flows,' he says. Marvin Yeo, chartered financial analyst at FIDP, says the election result ensures political stability. The CPP won 58 per cent of the vote. 'The fact that the elections were peaceful and well managed also demonstrated great progress for a frontier emerging market country. All this bodes well for the future of Cambodia and we expect to see a period of sustained high growth going forward,' he says.