Fresh Cambodian violence sparks investor jitters

By Phelim Kyne

PHNOM PENH (Reuters): Garment factory gates smashed by striking workers. Regular after-dark armed robberies. A Taiwanese business leader murdered outside his home in a daring daylight shooting.

Cambodia once again seems like a risky place to do business.

"Everybody in the Taiwanese business community is scared to death," Phnom Penh-based Taiwan entrepreneur K.C. Chen told Reuters following the June 29 murder of Lee Chim Hsin, president of the Taiwan Business Association in Cambodia

"Everybody thinks that they might be the next to get shot."

The arrest of a Taiwan man charged with hiring gunmen to kill Chen over a business dispute has done little to calm fears.

"If a business dispute is being resolved through assassination, how are lesser conflicts being resolved?" asked Phnom Penh-based investment lawyer David Doran.

"Even though five years ago the security situation in Cambodia was much worse, recent events could certainly have a negative effect on investor confidence," Doran told Reuters.

Cambodia's investors have long been a hardy lot.

For years they have treated armed robberies, Khmer Rouge rebels in the countryside and occasional street battles between rival political factions as part of the price of doing business.

With the country enjoying peace for the first time in 25 years following the surrender of the last Khmer Rouge fighters in late 1998 and the formation of a working coalition government at the same time, hopes were high the dark days were over.

But recent events have shocked investors.

Representatives of Cambodia's garment industry, the country's largest source of foreign exchange through its 178 factories that employ more than 100,000 workers, are increasingly vocal about perceived threats to their security.

Those concerns arose from a series of strikes and demonstrations in late June that on several occasions erupted into violent confrontations.

On one occasion rampaging workers smashed through the gates of a factory and the next day a striking worker was shot and wounded by factory security guards.

"The general consensus is that we can't depend on the Cambodian government 100 percent for our security," the secretary general of the Garment Manufacturers' Association of Cambodia, Roger Tan, told Reuters.

More worker violence, Tan warns, could prompt garment factory owners to ship out to safer locations.

"This country can be forgotten very easily ... Violent labour unrest can make decision-makers give it a pass," he said.

But Senaka Fernando, president of the Cambodian International Business Club, a group of representatives of 34 multinational companies, dismissed suggestions that recent events has caused foreign investors to reassess security risks.

"This is just a recent phenomenon ... two months ago the situation was much better," Fernando said. "People are not afraid to go out ... the restaurants are still full every evening."

But at the office of MPA Security, Cambodia's largest security firm employing more than 600 guards, country manager Christian Berger offers a more pessimistic assessment.

"This country is dangerous," said Berger, who shares the dubious distinction of being robbed at gunpoint on the same night in November 1999 that American Ambassador Kent Weidemann suffered the same fate.

"Investors are coming into a country with high unemployment, serious poverty and a lot of young men with guns."

Even more worrisome for some investors than gun-wielding thugs on the streets after dark is what some observers describe as a dangerously anarchic legal system.

"The court system just doesn't work ... we're seeing more business disputes being resolved in antagonistic and adversarial ways than ever," said an investor who declined to be identified.

"Resolutions of disputes are lawless, it's law of the jungle ... investors end up having to pay-off judges, get some police involved and flail and push people around to resolve even simple business disputes."

While the government tries to confiscate illegal guns and plans legal reform, Berger says the near-future could hold even more daunting security challenges.

"Over the next three years the government plans to demobilize more than 35,000 soldiers," he said. "If those people are released into society with no jobs and no prospects, this place is going to get rough."