AMCHAM SINGAPORE MISSION SPURS CORPORATE INTEREST

UNCLAS SECTION 01 OF 02 PHNOM PENH 000348

SIPDIS

SIPDIS
STATE PASS USTR - BISBEE
BANGKOK PASS FCS - BACHER
SINGAPORE PASS FCS

E.O. 12958: N/A
TAGS: ETRD EINV CB
SUBJECT: AMCHAM SINGAPORE MISSION SPURS CORPORATE INTEREST

PHNOM PENH 00000348 001.2 OF 002



1. (U) Summary: An 18-member delegation from the American Chamber
of Commerce in Singapore led by Ambassador Herbold recently
concluded a successful three-day trip to Phnom Penh. Through
meetings with government, private sector, and U.S. Embassy
officials, mission delegates learned about Cambodia's strong
economic growth, political stability, and legal reforms as well as
the challenges of widespread corruption, weak rule of law, and poor
infrastructure. Several companies came away from the mission with a
positive impression and took further steps to establish a presence
in Cambodia. The trip and follow-up actions of companies such as
Dupont, United Technologies, and General Electric demonstrate
growing American investor interest in Cambodia, a rapidly developing
country dominated by Asian investors, and highlight the need to help
facilitate a more business-friendly environment. End Summary.

Bluechip Companies Explore Cambodian Opportunities
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2. (U) U.S. Ambassador to Singapore Patricia Herbold recently led a
delegation of nine companies on a business mission to Cambodia. The
delegation, sponsored by the American Chamber of Commerce in
Singapore (AmCham Singapore),consisted of American companies in the
chemical, agriculture, energy, finance, technology, and consulting
industries including Dupont, United Technologies, General Electric,
Central Asia Development Group, Pioneer Hi-Bred, P.A.E. Group,
Insight InterAsia, and L.E.K. Consulting. Mitsui, a diversified
Japanese company, was also included in the delegation by virtue of
its AmCham Singapore membership.

Government Touts Growth, Stability, Reforms, and Incentives as
Reason for Investment
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3. (U) In separate meetings with the AmCham Singapore delegation,
officials from the Ministry of Commerce, the Council for the
Development of Cambodia (CDC),and the Ministry of Economy and
Finance identified sustained economic growth as one reason for
growing investor interest in Cambodia. The Cambodian economy grew
at 9.8 percent in 2007, and has grown at an average rate of 11
percent since 2004. According to Sok Chenda Sophea, Secretary
General of the CDC, economic growth has led to increased investment
from Asian countries, but U.S. and other Western investors have
lagged behind the trend, accounting for a small fraction of total
investment in Cambodia. He said "now is the time" for companies
involved in services to come to Cambodia, and that in three to five
years many current opportunities will already have been taken. He
highlighted projects in agriculture, tourism, infrastructure, and
mining as examples of potential investments.


4. (U) Government officials echoed members of the
American-Cambodian Business Council -- the local version of the
American Chamber of Commerce -- in also highlighting political
stability, the relatively liberal investment regime, and government
support for investors as reason for investment in Cambodia. During
a luncheon, Commerce Minister Cham Prasidh highlighted the openness
of virtually all sectors of the economy to 100 percent foreign
ownership. Sitting across from the Ambassador, the minister
furthered his point by commenting that the legal profession had been
steered in the "right direction," referring to action taken by the
Commerce Minister, following intervention by the U.S. Embassy, in a
recent dispute wherein the Bar Association of Cambodia apparently
tried to restrict participation of foreign lawyers in the local
market. Sok Chenda also highlighted the liberal investment regime
and noted that the only non-national treatment of foreign investors
is that they cannot own land.

Corruption a Major Concern for Investors
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5. (SBU) Local private sector participants identified corruption as
among the biggest obstacles to doing business in Cambodia, and the
AmCham Singapore delegation noted their strict adherence to the
Foreign Corrupt Practices Act as a factor which influences their
ability to invest overseas. Firth Griffin, Senior Advisor to
Mitsui, asked the Minister of Commerce how the government intends to
address the corruption issue. In his response, Prasidh identified
actions within his ministry to combat corruption by limiting the
number of interactions government officials have with businesses
through e-services systems, such as the streamlining of customs with
the web-based ASYCUDA system. He did not refer to the long-stalled
draft anti-corruption legislation which the U.S. and other donors
have been pushing for several years. Furthering his points about
reforms and the Cambodian investment climate, Prasidh suggested that
the delegates read the recently concluded USAID-funded Southeast
Asia Commercial, Legal, and Institutional Reform - Trade Diagnostics
(SEA CLIR-Trade) report which assesses the current commercial,
legal, regulatory, and institutional framework for trade in Cambodia
as part of a regional program encompassing five ASEAN countries.

PHNOM PENH 00000348 002.2 OF 002




6. (U) Jean-Boris Roux, General Manager of RM Asia, an
American-owned Cambodian company which manages brands such as Ford,
John Deere, 3M, and Swensen's, reported that his company had its
"best year ever" in Cambodia but echoed comments of the business
community in identifying risks which affect their businesses such as
weak rule of law, excessive bureaucracy, undeveloped legal system,
poor infrastructure, and undeveloped human resources.

Companies Moving Ahead on Investment Plans
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7. (SBU) Despite the institutional obstacles, in the end, several
AmCham delegates appeared optimistic about Cambodia, and were taking
steps to further their interests.
-- Dupont Singapore Director of Finance Cher Tong Lim told Econ
Assistant that during the mission his team interviewed and hired
staff for a new Cambodia representative office;
-- Central Asia Development Group Business Manager Michael Lambert
told Econ Assistant that his local business partner was close to
securing 6,000 hectares of agricultural land while he was working
with a delegate from Dupont on potentially financing part of the
plantation project;
-- United Technologies (UT) President for South Asia and the
Pacific Kristin Paulson joined Otis Elevator Managing Director for
Vietnam and Cambodia Michael Griffin on a follow-up mission in March
to prepare to convert Otis Elevator's representative office into a
branch office;
-- General Electric's recently hired Cambodian Market Development
Director is exploring opportunities discovered through the mission.

Comment:


8. (U) This business mission conforms to a broader trend of
accelerated investor interest in Cambodia, a market currently
dominated by Asian investors. U.S. investors are finally becoming
aware of opportunities in the Cambodian marketplace. U.S. agencies
attuned to this emerging interest are beginning work with the
Cambodian government to address obstacles to U.S. investors such as
weak rule of law, corruption, excessive bureaucracy, undeveloped
legal system, poor infrastructure, and undeveloped human resources.

MUSSOMELI