The land of heroes
Our heroes
Our land
Cambodia Kingdom


Friday, May 30, 2008

Former Khmer Rouge hail Pailin SEZ


'Hot battlefield' to become 2,000-hectare industrial zone

A massive special economic zone (SEZ) being carved out of jungle near Pailin on the Thai border will help create jobs for former Khmer Rouge soldiers living at the one-time rebel stronghold, local officials said.

A signboard went up in mid-May on the outskirts of the partially cleared Pailin SEZ, which at 2,000 hectares dwarfs similar zones designed to lure foreign investment in neighboring provinces.

Thai firms are eager to set up at the Pailin zone, about 15 kilometers inland from the border town in Steung Kach commune, Salakrao district, according to Pailin Municipality deputy governor Ich Sarou.

Sarou said he and other local officials have met several times in recent months with a group of about 50 Thai businessmen who are cooperating to open a biodiesel production plant as well as garment and electronics factories at the zone.
.
"They wanted to launch their operations two months ago by sending machinery in to clear land but we refused their request because it's a big investment worth more than $2 million, which means they have to get permission from the CDC (Council for the Development of Cambodia)," Sarou said.

Keut Sothea, another deputy governor of Pailin Municipality and a former Khmer Rouge commander, said the special economic zone will go a long way to improving the lives of the region's ex-rebels.

"It will encourage investors to open factories here and will provide work for our former Khmer Rouge soldiers and other people," Sothea said, adding that the jungle from which the zone is currently being created used to be "a hot battlefield for the Khmer Rouge, Vietnamese soldiers and government forces."

"Before, we used to shoot and shell each other there; now we are fighting to make business and a profit," he said.

"It is good news and it shows that Cambodia is completely peaceful.... We are forgetting the past and turning the land into a developed area for people's wellbeing," he added.

Sarou said the SEZ had been in the pipeline for several years and was part of a plan outlined by Prime Minister Hun Sen to establish five special economic zones in Pailin and Banteay Meanchey, Koh Kong, Kandal and Svay Rieng provinces. It is hoped the zones will lure foreign investors through tax breaks and the prospect of cheap Cambodian labor.

"We hope companies and factories will invest here next year," Sarou told the Post in Pailin. "We have a lot of land for their investments."

However, the deputy secretary general of the CDC's Special Economic Zone Board, Chea Vuthy, said on May 20 he had not received any requests from businesses seeking to start operations at the Pailin SEZ.

He also said that while the CDC welcomed foreign investment in the area, the council had not received a request for the Pailin zone to be formed.

"The special economic zone in Pailin has not been officially requested and registered. They (Pailin Municipality officials) should request approval for it from the CDC," he said, indicating that its approval was a mere formality.

Former Khmer Rouge soldiers in the area contacted by the Post welcomed news that work was progressing on the Pailin SEZ. "I am very happy to hear this special economic zone is being created here. I hope it will help many Cambodian people find work and stop them from having to go to Thailand," said Soeun Say, a farmer who was previously a fighter for the hardline communist movement.

"We need investors to come here - we have a lot of land to produce crops for factories," he said.

Lath Nhoung, another former Khmer Rouge soldier, said the SEZ would benefit the agricultural sector as well as provide industrial jobs.

"When we have more factories we are encouraged to farm because it means we have a market for our crops," he said.
Read more!

US donates military trucks to Cambodia

PHNOM PENH, Cambodia (AP) — The United States will deliver 31 used trucks to Cambodia, its first direct supply of military hardware there since Washington lifted an embargo three years ago.

The U.S. Embassy said Friday that the 31 GMC cargo trucks — part of a group of 60 the U.S. military has agreed to give to Cambodia — will be handed over at a ceremony Monday.

The U.S. halted military assistance to Cambodia following a 1997 coup in which Hun Sen grabbed full power after ousting his co-premier, Prince Norodom Ranariddh. Hun Sen remains prime minister.

In August 2005, President Bush waived the ban, citing Phnom Penh's agreement to exempt Americans in Cambodia from prosecution by the Netherlands-based International Criminal Court.

Since direct military ties between the two countries were restored in 2006, the U.S. has pledged nearly $3.2 million in military aid to Cambodia, the embassy said in a statement.

It said the 31 trucks are "the first deliverables" under a U.S. program for "assisting Cambodia in its efforts to improve" its border security, mobility and peacekeeping operations.

It added that the U.S. military is spending $413,000 on processing, packaging and shipping all 60 vehicles — "excess defense articles no longer needed by the U.S. armed forces."
Read more!

Cambodia to send 139 mine sweeping soldiers to Sudan under UN mission

PHNOM PENH, May 30 (Xinhua) -- Cambodia will send 139 soldiers to clean mines in Sudan under the UN mission, Cambodian National Defense Minister Tea Banh announced here on Friday.

"We will send 15 of them firstly on June 2 and the rest on June10 according to the schedule," Tea Banh told the national conference of the government's rectangular policy.

"Our K-315 group will return from Sudan on June 8," he said, adding that the new group of soldiers will replace them.

Cambodia has already sent two groups of mine sweeping soldiers to Sudan under UN humanitarian mission and each group had over 130soldiers, he said. Read more!

For investors, Cambodia could be the next Vietnam


By Erika Kinetz


If private equity interest is the bellwether for the hot investments of the future, consider this: At least four new private equity funds, backed by brand-name investors, are aiming to bring $475 million of foreign investment into Cambodia.

"Eventually, Vietnam worked out well," Marc Faber, a fund manager and investment adviser known for his "Gloom, Boom, & Doom Report," said by telephone from Switzerland. "I think the same may happen to Cambodia."

Faber, who is on the boards of two of the new private equity firms in Cambodia - Frontier Investment & Development Partners and Leopard Capital - is not the only one who thinks so.

Jim Rogers, a commodities specialist who founded the profitable Quantum Fund with George Soros in the 1970s, and Robert Ash, former chief executive of AIG Asset Management Services, are also on the board of Frontier.

Heinrich Looser, the retired chief of private banking at Bank Julius Baer in Zurich, and Jim Walker, a former director and chief economist of CLSA Securities, are on the Leopard board as well.

The surge in interest is part of a general turn toward so-called frontier markets as investors seek shelter from the global credit crisis and diminishing returns in developed markets. It is also one more sign that aid-dependent Cambodia, with a gross domestic product of just $8.4 billion last year, could finally be inching out of the shadow of its chaotic past.

For many in the West, Cambodia remains tainted by the communist crackdown after the end of the Indochina wars. Yet China, South Korea and Malaysia have been pouring in investment. In 2006, foreign direct investment totaled $2.6 billion, up from just $340 million in 2004, according to the International Monetary Fund.

A rising segment of Cambodians - a third of whom still live on the equivalent of less than $1 a day - are snapping up Honda Dream motorbikes and KFC chicken drumsticks. Cambodia, which plans to open stock and bond exchanges next year, also has the potential to produce two things the world now craves: more rice and oil.

But take a drive out of the capital, Phnom Penh, where the first skyscrapers are rising in the country, and you return quickly to a landscape of water buffalo and thatch huts, governed by the rhythm of the rains.

That looks like opportunity to Marvin Yeo, who recently quit as a syndicate manager at the Asian Development Bank to co-found Frontier, which manages the Cambodia Investment and Development Fund, with a Singaporean economist, Kim Song Tan. They hope to raise $250 million by the end of the year.

Cambodia, Yeo said, "is where Vietnam was some 8 to 10 years ago." He likes a lot about Cambodia: its location in a fast-growing region, a young and inexpensive work force, rising productivity, a pro-business government, stable politics and strong GDP growth, which peaked at 13.5 percent in 2005 but was expected to mellow to 7 percent or 8 percent in coming years.

Thirty years of an isolating war, he added, have made Cambodia "one of the best investor diversification plays around."

But as Han Kyung Tae, the chief Cambodia representative of Tong Yang Investment, part of the South Korean Tong Yang Group, points out, promise and pretty macroeconomics are one thing; closing good deals on the ground are quite another.

Han has been trying to start an Indochina investment fund for more than a year. He said he had reviewed 30 to 40 business plans, but had yet to close a single deal. Tong Yang has scaled back its venture capital aspirations and now hopes to invest $25 million in a Cambodian information technology company, as part of a Vietnam-Cambodia fund, Han said.

His search, he said, was complicated by lack of transparency in a business culture built around sealed family empires. "It's hard for us to get the information we need to invest," Han said. "It's totally new to them. Some feel offended if I ask for financial information."

Investors also say that the weak legal system, immature accounting standards and corruption in Cambodia remain challenges. An anti-corruption law has been foundering for more than a decade, and Cambodia ranks near the bottom of Transparency International's corruption perceptions index.

Kathleen Ng, the managing director of the Center for Asia Private Equity Research, which is based in Hong Kong, sees private equity interest in Cambodia as largely "spillover" from a still-emerging Vietnam.

A second wave of private equity investment in Vietnam - the Asian financial crisis of 1997 and 1998 obliterated the first - began to crest in 2006, rising to $2.0 billion in 2007, up from $166.5 million in 2005, according to the center.

The Ho Chi Minh stock exchange opened in 2000, and despite some recent trouble with expensive initial public offerings is beginning to build a track record of profitable exits, Ng said.

In December 2007, Vietnam Manufacturing & Export Processing Holdings became the first company based in Vietnam to be listed on the Hong Kong exchange; Merrill Lynch invested $22 million and realized $13.06 million through the sale of a third of its holdings, according to the private equity center.

Texas Pacific Group and Intel Capital, the venture capital arm of Intel, together invested $36.5 million in the Vietnamese Corporation for Financing and Promoting Technologies. Two months after it went public, Texas Pacific, which invested $21.5 million, sold less than a quarter of its holdings, booking a cash return of $22.17 million, according to the center.

"There's a level of confidence but Vietnam still needs to prove itself," Ng said. "You cannot just use a few divestment results to say, 'Hey, a place is doing well."'

She added that it might be too early yet for thriving private-sector equity investment in Cambodia, but that the country was ripe for development-finance institutions.

Proparco, the financing subsidiary of the French Development Agency, is "studying the possibility" of investing $5 million to $15 million in a Cambodia-focused private equity fund, according to Julien Kinic, an investment officer at Proparco. The French firm is already a shareholder in Dragon Capital, a Vietnamese asset management group, and has provided direct financing to several prominent Cambodian businesses, Kinic said. "Our interest in Cambodia is not new," he said. "What is new is the rising of the economy and the strong need for financing."

Douglas Clayton, who founded Leopard Capital last year, said that Leopard's Cambodia Fund had raised $10 million of its $100 million target since its inception in April, mostly from wealthy individuals and private banking institutions. He expects to close on Leopard's first project, a 250-unit condo project in the Cambodian tourist hub of Siem Reap, in the next few weeks.

"Cambodia needs several billion dollars of investment," said Clayton, who used to head the Thailand office of CLSA Securities. "Part of that can be private equity. The challenge will be to build the businesses. Most are early-stage investments. This is building basic industries and services."

Cambodia Emerald, which split off from Leopard in November, also aims to raise $100 million, said Peter Brimble, who directs Emerald with Bradley Gordon, a former corporate lawyer.

The funds are targeting investment in tourism, agribusiness, infrastructure, real estate, manufacturing and financial services, among other sectors.

Of course, what goes up can come tumbling down. Take Vietnam: After rising 500-fold from 2003 through the end of 2007, its stock market fell by nearly half in the first quarter.

Cham Prasidh, Cambodia's minister of commerce, said he was not worried about wading into the increasingly foreboding tides of global capital markets.

"Even if there is a world recession, if you develop the capacity to create an enabling environment for doing business and investment in Cambodia, you will survive," he said.

Besides, he added, Cambodia is ready to ride the waves: "We're surfers."

.
Read more!