ROANOKE TIMES
Copyright (c) 1996, Roanoke Times
DATE: Thursday, February 22, 1996 TAG: 9602220010
SECTION: BUSINESS PAGE: B6 EDITION: NEW RIVER VALLEY
DATELINE: PHNOM PENH, CAMBODIA
SOURCE: ASSOCIATED PRESS
THE COUNTRY'S BLOODY HISTORY may be the biggest of several obstacles it faces in the quest to build a thriving economy like its neighbors'.
Cambodia, one of the world's poorest countries, would seem to offer foreign investors little incentive to reach for their wallets.
Decades of war have left its infrastructure in tatters, and its eight million people make one of Southeast Asia's tiniest markets.
But Cambodia lies at the heart of Southeast Asia, a center of remarkable economic growth. This, together with an investment law hailed as one of the most liberal in the region, has aroused interest from a growing number of corporations.
``We understand our handicaps,'' said Commerce Minister Cham Prasidh. ``In order to attract people to invest in Cambodia, we have to ... offer better incentives than our neighbors.''
Three years ago, Cambodia was a businessman's nightmare. Socialist policies and a 13-year guerrilla war had impoverished the mostly peasant population. Khmer Rouge Communists, ruling in 1975-78, had wiped out much of the educated and commercial elite.
Now, Cambodia's leaders are promoting the country's cheap labor and proximity to the dynamic economies of Thailand, Vietnam and others.
They are also touting Cambodia's investment law, which offers foreign firms an exemption from corporate tax for up to eight years and the right to import without paying tariffs.
Still, it will take much more to turn a growing trickle of business into an economic boom. The government must allay investors' lingering fears about lawlessness, corruption and the chronic struggle against die-hard Khmer Rouge guerrillas.
Foreign investment was $98 million in May 1993, when the United Nations organized elections to cement a peace pact between guerrilla groups and a Vietnamese-backed regime. Since then, investments have increased to more than $2.2 billion, with Caltex Petroleum Corp., Automobiles Peugeot and other well-known companies blazing the trail.
``People's eyes are now on China, Vietnam and India, but if you look at the investment law that was just passed, I think the environment in Cambodia is very favorable,'' said Edgar Chua, who manages local operations for Shell International.
A Singapore brewery worth $60 million and five cigarette plants worth a combined $63 million are some of the biggest projects under way since the investment law took effect in 1994.
Taiwanese and South Korean garment makers have also shown interest. Cambodia's clothing industry, financed mostly by foreigners, has grown from two factories in 1993 to 16 this year, said Prasidh. He predicted the number to double by the end of next year.
Investors say Cambodian officials are eager to help them get started, and the government vows to assess all but the biggest infrastructure projects within 45 days.
By comparison, neighboring Vietnam - a country of 72 million people that has attracted eight times as much pledged investment - is notorious for its red tape and ambivalent attitude toward foreign businessmen.
``One thing I hear from investors who come into my office is that doing business in Cambodia is much easier than in Vietnam. I hear this over and over,'' said Brett Sciaroni, an American attorney with the Thailand-based law firm, Tilleke and Gibbins.
Cambodia expects soon to obtain low-tariff trade status with the United States, helping it attract investors keen to export to the world's biggest market.
However, widespread crime and corruption discourage many businessmen from risking their money here. Others look only for short-term profits, plundering Cambodia's forests of teak and its hills of gemstones.
In addition, political violence and the erosion of democratic freedoms since the 1993 election have created a sense of smoldering crisis.
The government has intimidated journalists and outlawed Cambodia's main opposition party. Some foreign executives, fearful of gun-toting brigands, drive only with armed security guards when they leave Phnom Penh.
LENGTH: Medium: 81 lines ILLUSTRATION: PHOTO: AP Toyota is one of Cambodia's major foreign investors,by CNBwith outlets like this dealership in Phnom Penh.