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Wednesday, May 14, 2008

Cambodia Draws Interest of Jim Rogers, Private Equity (Update1)

By Netty Ismail


May 14 (Bloomberg) -- Private-equity investors are venturing into Cambodia, as the nation that three decades ago abolished money under the Khmer Rouge seeks more than $6 billion to rebuild itself.

Leopard Capital and Cambodia Investment & Development Fund are among those planning to put more than $450 million in the second-poorest of 10 Southeast Asian nations. Cambodia Investment is getting advice from Jim Rogers, who predicted the start of the commodities boom in 1999, and Marc Faber, who forecast Asian assets would decline before the regional financial crisis in 1997.

``It's a country that's changed a lot and investors are finally waking up to that,'' said Douglas Clayton, founder of Leopard Capital, who is based in Phnom Penh and is seeking to raise $100 million. ``Most people have an outdated perception of Cambodia; clearly the country has made significant progress.''

Prime Minister Hun Sen is relying on the country's oil and mineral resources to attract foreign investments and reduce Cambodia's dependence on clothing exports and tourism for growth as he prepares for an election in July. The funds will move money into banks, office buildings, luxury hotels, ports and other projects.

``Cambodia does have a lot of natural resources, it does have an ambitious population, and it does have some assets,'' said Singapore-based Rogers, who co-founded the Quantum hedge fund with George Soros during the 1970s, and is now chairman of Rogers Holdings. ``Most countries that come out of something like they have are inclined to be pretty safe for a while because they're trying to get money in.''

Economic Growth

Leopard Capital's first planned investment, a housing project in Siem Reap, probably will generate a return of more than 60 percent a year, about three times the internal target for private-equity investments, said Clayton, who moved to Phnom Penh from Bangkok last June.

Clayton was a hedge fund manager at Knight Asia Group and head of CLSA Securities in Thailand before setting up Leopard Capital in 2007. Faber, publisher of the Gloom, Boom & Doom report, is a director at Leopard Capital.

Peter Brimble and Bradley Gordon, Clayton's former partners at Leopard Capital, are starting the $100 million Cambodia Emerald fund this year to invest in tourism, agriculture, financial institutions, infrastructure and real estate.

The fund plans to close at least one deal before the end of the year, said Brimble, who's based in Phnom Penh. LR Global Partners in New York and London-based Kazimir Partners are investors in Cambodia Emerald, he said.

`Growth Era'

Cambodia's economy expanded 9.6 percent in 2007, after growing by at least 10 percent during the previous three years, according to data compiled by the World Bank. About a third of the population live on less than 50 cents a day and 90 percent are in rural areas.

``Cambodia's in the beginning of a growth era,'' said Julien Kinic, investment officer at Proparco, the private financing arm of the French Development Agency in Paris. ``It's like Bangkok 20 years ago or Ho Chi Minh City 10 years ago,'' he said, adding that Proparco plans to invest in one of the funds.

More than $6 billion may be invested in Cambodia in the next three years mainly in oil and natural gas, infrastructure projects, real-estate development and agriculture, according to Cambodia Investment, which is run by Frontier Investment & Development Partners. Melbourne-based BHP Billiton Ltd., the world's largest miner, is among companies vying for exploration rights for iron ore, gold and other minerals.

`Seriously Lacking'

``Cambodia is seriously lacking in human and investment capital,'' said Marvin Yeo, co-founder of Frontier Investment, who will oversee the fund from Phnom Penh and Bangkok.

Yeo left his job as a financing specialist at the Manila- based Asian Development Bank this month to set up the fund, which plans to invest as much as $100 million in hospitality, telecommunications, infrastructure, banks and agriculture in the next three months.

The nation has pitfalls, according to Transparency International, a private monitoring agency based in Berlin, which ranked Cambodia 162nd of 179 countries in its annual report on perceptions of corruption last year. Cambodia also doesn't have a stock exchange, though one is planned to open in 2009.

July Elections

The funds will need to compensate investors for the risks, said Kelvin Chan, a Singapore-based senior vice president at Partners Group, a manager of private equity and hedge funds. Private-equity investors in Asia made a return of about 67.5 percent last year, according to the Centre for Asia Private Equity Research in Hong Kong.

``Cambodia is too early for most investors,'' said Chan, who declined invitations to invest in the funds. ``Political stability, the rules and regulations must be in place.''

Cambodia has a non-investment grade rating of B+ from Standard & Poor's, two levels below neighboring Vietnam.

``I don't believe private equity will take off rapidly in Cambodia until there are very strong indications that private equity is a bankable model in Vietnam, which holds the key to investors' confidence in the Indochina region,'' said Kathleen Ng, managing director at the Centre for Asia Private Equity Research in Hong Kong.

The government will continue its ``market-oriented reforms'' after general elections in July, S&P said in an April 4 report. The ruling Cambodian People's Party and the main opposition Sam Rainsy Party are ``committed to the same pro-business, pro-growth policy platform,'' according to Cambodia Investment.

To contact the reporter on this story: Netty Ismail in Singapore nismail3@bloomberg.net

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Humor helps a rare bird survive in Cambodia

Conservationists’ gentle engagement with locals boosts the prospects for the Bengal Florican.

For Sum Song Zoning, a community officer with the Wildlife Conservation Society (WCS) of Cambodia, the secret to conservation is a good sense of humor.

His audience: monks and farmers, housewives with screaming babies – each with a skeptical look that deepened as the morning heat rose. His subject: the Bengal Florican, an endangered bird few have ever heard of, let alone seen. His task: to convince the lean-looking villagers that, should they ever come across the bird, a hefty five-pounder, it is better to save it than to eat it.

By all accounts, he succeeded wonderfully. There were cheers as he took playful jabs at a monk and teased two bemused old ladies, using humor to impart the value of the bird. Diagrams and posters were marshaled to explain that, as much as they look alike, Bengal Florican eggs are not duck eggs and should be left alone. During the quiz at the end, the 30 or so participants raised their hands with gleeful eagerness, suggesting that, whether or not they ever saw the bird, they were ready to protect it.

“Ten years ago, people didn’t understand the importance of the bird,” says Zoning. “Now they understand that it’s something special for Cambodia.”

Village by village, and province by province, this simple interaction is helping to save the Bengal Florican, one of the world’s rarest birds, by directly engaging the communities that dwell in the bird’s habitat. And in so doing, this approach is presenting a unique model of community-based conservation, observers and participants say.

“This is a model of conservation between communities and conservationists,” says Robert van Zalinge, a field technical adviser for the WCS. “In remote regions, protected areas are set up just based on government decisions, and that is enforced. But here, in an area of high human population, you have a much larger community interface than any other protected area in Cambodia.”

For bird enthusiasts, the Bengal Florican is prized for its rarity, being native to only three countries in the world: Cambodia, India, and Nepal. Today there are believed to be roughly 1,300 left in the world, with about 800 to 900 in the flood plains of Cambodia’s Tonle Sap Lake, the largest freshwater body in Southeast Asia, according to research conducted by WCS.

To scientists, the bird is unique for its elaborate mating ritual, or display: the otherwise secretive males make hopping loops in the sky, hoping to attract female attention with their striking presence – black bodies set against glaring white wings.

“They’re very difficult to see. But when they display, the male sort of advertises its territory, trying to attract females,” says Lotty Packman, a doctoral student from England who is assisting the WCS to track and tag the birds.

For the people in these stark grasslands, though, where scarcity is a way of life, the bird is a potential source of income or food. By the 1990s, hunting had significantly diminished its numbers.

Today the bird faces an even greater threat: the grasslands of the Tonle Sap, which used to stretch for hundreds of miles, are quickly diminishing as private companies convert land into large-scale rice-farming operations. Almost 30 percent of the grasslands were lost in 30 months from 2005 to 2007, warns a recent report by the WCS.

“At that rate, in five to 10 years, the grasslands could be gone and the Florican extinct,” says Mr. Van Zalinge.

To prevent that, conservationists worked with the provincial governments in the flood-plain area to devise a solution: an Integrated Farming and Biodiversity Area – a protected area that outlaws large-scale dry rice farming, which damages the Florican’s habitat, but allows farmers to continue traditional methods of deep-water rice farming. The latter’s use of grazing and burning supports the Florican by preventing the growth of scrub that destroy the grass patches favored by the birds.

In 2006, a provincial government decree designated 135 square miles of the flood plain a protected area, preserving roughly half of the Bengal Florican population here. So far, the provincial governments have stopped at least two large-scale dry rice projects, according the WCS, suggesting the firm commitment of local authorities.

What makes the project novel is also the level of community involvement. As many as 20 times a month, community officer Zoning and others gather several dozen people in towns throughout the Tonle Sap flood plain. Men and women, young and old: Their participation has helped the Bengal Florican return, like the rest of Cambodia, from a devastating past.

It is too early to say how successful the protected areas have been in increasing the overall population of Cambodia’s Bengal Florican. For now, project administrators say, success means reaching people like Meach Komhan, a farmer in the district of Baray, part of the flood-plain area.

“I had never heard of the bird before,” he says, after listening to Zoning’s presentation. “I really support the conservation, because the bird is useful for Cambodian people as a natural resource. We don’t want to lose it in the future.”

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