>From Pol Pot to pot of gold

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Kith Meng on the cover of the Forbes magazine.

Courtesy of the Sydney Morning Herald

Kith Meng grew up in Australia as an orphan and a refugee from Cambodia’s genocide. He tells of washing dishes and mowing lawns to make ends meet while living in Canberra. Being a poor oUSder made him stronger, he says, and unusually driven.

Now, back in Cambodia since 1991, the 39-year-old has built his Royal Group into an empire that owns Cambodia’s biggest mobile phone company and television network and is developing a $US2 billion ($2.3 billion) resort and casino on a fishermen’s island on Cambodia’s coast. The country’s most successful businessman, he supports Prime Minister Hun Sen and benefits from his ties to the government, which granted the 99-year lease on the island for his resort. He is a Neak Oknha, an honor the royal family confers on a few of the wealthiest members of society.

Thousands of former refugees, with their own harrowing stories, have returned to Cambodia, and now investors hoping to profit in the next frontier market — a term Standard & Poor’s coined for economies smaller or less developed than traditional emerging markets — are coming to the country, too.

The entrepreneurial drive and technical skills the returnees bring with them from overseas are breathing life into the economy. Three decades after Pol Pot exterminated the country’s educated classes and emptied its cities, Cambodia’s gross domestic product is just $US8 billion a year.

”Suffering is my mentor,” says Kith Meng, who fled the terror, first to a refugee camp in Thailand and then, in 1981, to Australia. Black-and-white photographs of his parents adorn one wall of his office in the capital city of Phnom Penh. They starved to death during Pol Pot’s reign, when Cambodia’s fertile countryside became the killing fields. They were two victims among the 1.7 million, or 20% of the population, who perished.

Political and business leaders are grappling with poverty, inadequate health care, poor education and a lack of roads in this nation of 14 million. Corruption is slowing progress, says Joseph MUSmeli, the US ambassador.

“The trick with a frontier market is getting the timing right,” says Douglas Clayton, who founded Leopard Cambodia Fund LP last year and is raising $US100 million to invest in real estate, banking and agribusiness. ”Cambodia is really a discovery story — and it’s being discovered.”

Growth spurt

Cambodia grew 9.5% a year from 2000 to 2007, the fastest pace in Asia after China, which expanded 9.9% a year. Political stability under the administration of Hun Sen, 56, has helped the Cambodian economy take off, says Bretton Sciaroni, chairman of the American Cambodian Business Council in Phnom Penh.
Hun Sen has run the country since 1985. He came to prominence as a communist while the Vietnamese occupied the country, having pushed Pol Pot’s Khmer Rouge from the capital. He strengthened his grip with a landslide victory for his Cambodian People’s Party in July’s parliamentary elections. An opposition leader has alleged manipulation of voter rolls, and the royalist party that shared power in the 1990s has been reduced to two seats in the legislature.

Clothing exports and tourism have buoyed the tiny economy, though the revenue of any of the world’s 500 largest companies would still dwarf Cambodia’s annual economic output.

A 1994 law to open the country to foreign investors has encouraged some to put money in. Approved foreign direct investment rose to a record $US4.4 billion in 2006, according to the Cambodian Investment Board. Investors can own 100% of a company, and they face no restrictions on taking money in and out of the country — in contrast to China or Vietnam.

Still, the business council’s Sciaroni, a former lawyer at the White House under President Ronald Reagan, says perceptions of Cambodia have not caught up to the changes. In May, a US State Department official inquired on behalf of an executive if it would be safe to visit Siem Reap, home to Angkor Wat, the five-towered archaeological wonder.

”He wanted to know about bandits and land mines,” he says. ”I said this is ancient history.”

Risk perceptions

If Cambodia is about to take off on the same trajectory as Vietnam to its east or Thailand on its western border, the time to get in is now, says Robert Ash, a former executive at the asset management arm of insurer American International Group Inc.

”Where the perceived risks are greater than actual risks, investment opportunities are the result,” Ash says. “Such is the case of Cambodia.”

Investors familiar with Thailand and Vietnam have been among the first to spot the changes taking place in Cambodia.

”In the past, when you went to a dinner party here, everybody would be talking about politics,” says Leopard’s Clayton, 47, who used to run the Thailand office of CLSA Securities, a Hong Kong- based brokerage. “Last year, when I came, nobody was talking about politics. Everyone was talking about property, investments, deals, like everywhere else in the world.”

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