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As Cambodia Courts US Business, Old Problems Remain

As a delegation of US business owners prepares to travel to Cambodia with US Secretary of State Hillary Clinton, analysts say they will be tough to court, given Cambodia’s lack of law enforcement.

“Investors don’t bring guns, they don’t bring bodyguards—they bring money to invest,” said Sok Touch dean of Khemarak University in Phnom Penh. “So what protects them is not guns, not nuclear weapons, but laws. When laws are firm, investors have confidence.”

Cambodia’s economy continues to grow, with an estimated rate of about 6.5 percent forecast for this year. Per capita incomes have improved, to about $1,000 per year. But there are few prospects for new jobs, leading perhaps 200,000 people to seek work in neighboring countries. The idea, Sok Touch said, is to have more jobs stay in the country.

“Vietnam is a communist country, so why has the US put IT construction and automobile construction in Vietnam?” he said. “First, stability, and second, rule of law.”

Cambodia must also move away from short-term investment in its future, such as the sale of gold mines to Chinese companies, or the leasing of islands for real estate development. Such investors leave quickly and leave little in the country, he said.

About 100 US investors are expected to travel with Clinton when she comes to Cambodia next week for an Asean forum in Phnom Penh. A business forum will be held July 13 in Siem Reap.

“They really look forward to having a chance both to work on business-to-business relationships, but also to participate in government-to-government exchanges,” Anthony Nelson, a spokesman for the US Asean Business Council, said.

But Cambodia must strengthen the rule of law if it is to attract the kind of investment it is looking for from the US, analysts say. Corruption and quick changes of policies also make it hard for investors, they said.

“If we have rule of law, they’ll come to invest in Cambodia more than ever,” said Ou Virak, head of the Cambodian Center for Human Rights.

US businesses may not be interested in investing in Cambodia, he said, but they will be impressed by the Asean market of some 600 million people. That could leave Cambodia behind in a regional competition for outside investment.

However, Cambodia’s ambassador to the US, Hem Heng, said he is optimistic the businesses can find something appealing in Cambodia. And Cheam Yiep, a ruling party lawmaker, said Cambodia’s laws are up to international standards and meet World Trade Organization requirements.

Critics, however, say enforcement is the problem, and that may be the crux of the matter for Cambodia and Asean.

“Private investors are mainly looking for two things,” said John Ciorciari, a public policy professor at the University of Michigan. “They are looking for profit, and they are looking for safety. So, in addition to showing Secretary Clinton and US business investors sound economic fundamentals, I think the best things that Cambodia and Asean neighbors can demonstrate are signs of genuine commitment to enforcing property rights, to fairly enforcing contracts and otherwise building the rule of law that will be conducive to the security and investment in the region.”