Stability Concerns Are Mixed

As government officials take steps to show they are in control of the country in the aftermath of Friday’s assaults on government offices, economic observers and others are divided on how the attack will affect investment, stability and the country as a whole.

Friday’s attack on the Defense Ministry and other government offices was the worst violence in Phnom Penh since the July 1997 factional fighting be­tween CPP and Funcinpec forces. Last year was the first year of relative peace for Cambodia in more than two decades, which government leaders held up as proof that stability has returned to the country.

Diplomats expressed caution in judging the assault as a return to instability and said it’s too early to conclude whether the attack will have a long-term impact.

“The prime minister just came back Saturday night,” Canadian Ambassador Normand Mailhot said. “We will have to wait and see what the other developments are.”

British Ambassador George Edgar said it’s still not clear what exactly happened and who is responsible. “It’s possible that this is a one-time incident,” he said. “The fact this happened doesn’t necessarily mean it affects the underlying stability, which has improved considerably.”

But, Ang Eng Thong, president of the Bar Association of the Kingdom of Cambodia, said the fighting will scare people off.

“This will make the country unstable again, affecting the economic situation and political stability,” he said.

Urooj Malik, country representative for the Asian Development Bank, said he hopes the fighting is an isolated incident, but it may have an affect on outsiders’ perceptions of Cambodia, which could negatively affect investment.

“The perceptions are still rather negative concerning Cambodia,” Malik said. “Even if what happened Friday is a red herring and an isolated incident, it’s very easy for the private sector and the media to make a big splash out of this and ring the alarm bells.”

Many businessmen and observers from Asian countries, which account for the majority of investors operating in Cambodia, said the raid would not discourage investors.

“I don’t think it will have an impact on investment,” said Roger Tan, secretary-general for the Garment Manufactures Association in Cambodia, the largest business association with about 200 members.

He said similar incidents are happening in many countries in the world and the armed attack allegedly by the Cambodian Freedom Fighters shouldn’t be singled out.

“Every country has some people who are not happy with the government,” Tan said. “If it were long-term fighting, it would’ve had some negative impact. But it was not.”

Preap Ruth, senior marketing executive with Asia Insurance, said developing countries tend to have similar incidents as the fighting on Friday. “People outside might think Cambodia is dangerous, but there’s no need to afraid of doing business here,” he said.

Jimmy Gao, secretary-general for the Chinese Chamber of Commerce and owner of a travel agency, praised the government’s quick reaction to the attack and noted that even the sensitive tourism industry has not yet felt any negative impact.

“Usually tourism easily gets affected by these kinds of incidents,” Gao said. “But fortunately we have not seen any cancellation on tours.”

Lem Kep, office manager of Jupiter Power Cambodia, was here during the 1997 factional fighting, and said experience has shown that investors here have nothing to worry about.

“If there is any impact, it would be a small affect,” he said. “It’s not something that would cause investors to pack up and go away.”

Western economic observers and investors, however, took the worst assaults since the factional fighting more seriously than those from Asian countries.

David Doran, a commercial legal expert, said investors from developed countries will not consider Cambodia safe enough to do business after Friday’s fighting.

“It would certainly make people careful to invest in Cambodia,” he said.

Tim Smyth, president of the Australian Business Association, said the incident would certainly send a negative message to the world that discourages potential investors, although businessmen who are already here will view the fighting as an isolated incident.

“From an external point of view, it sent a message that Cambodia has not changed so much—it’s still a dangerous country,” Smyth said. “[But] given that Prime Minister Hun Sen didn’t change his schedule to return from Singapore, he sent a strong signal to everybody that it was not a really major concern.”

Government officials downplayed the attack and said it would not affect the country.

“It is not true that this will discourage investors,” Labor Minister Ith Sam Heng. “This is a small event.”

Sok Siphana, secretary of state for the Commerce Ministry, called the attack a trivial mischief.

“One should not fall in a trap,” Sok Siphana said, “Investment society here is mature enough to see differences between a        trivial mischief and a full-blown insurgency.”



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