Killing Fields legacy threatens boom times;
Cambodia is being held back by the lack of an educated elite

Cambodia's record economic growth is under attack from an old enemy, the Khmer Rouge, writes Anne Hyland in Phnom Penh

Cambodia's economy is booming. This year it is expected to expand 10 per cent, according to the World Bank, a rate that will just lag China's, Asia's fastest growing economy.

Cambodia's impressive growth has been driven by strong foreign investment inflows, record tourism arrivals, and a solid increase in garment and agricultural exports. There is ample evidence of this economic boom in the capital, Phnom Penh.

Expensive new cars choke the city's streets - the car of the day is the Toyota Lexus; new condominiums are under construction, as is the country's first skyscraper; and house and land prices have increased at least one-third in the past year.

The road along Phnom Penh's popular riverfront, where a mishmash of street beggars, cheap restaurants, hotels and a coffin shop can be found, is a Millionaire's Row. Land is being sold there for $2US,000 ($15HK,572) a square metre.

"The price of land has gone up tremendously in the past 12 months," said Rory Hunter, chief executive of developer Brocon Group, which is based in Phnom Penh.

Cambodia's economy - average economic growth for the past decade has been 7 per cent - has drawn the interest of international hedge funds and private equity firms.

But those who come are late to the party. A group of South Korean companies is building a $2US billion commercial and residential complex on the outskirts of Phnom Penh. And some of the world's biggest companies, such as General Electric and BHP Billiton, have established offices in the capital. At the beginning of November, 600 mostly foreign businessmen attended an investment seminar in the capital hosted by the government.

Foreign investment into Cambodia amounted to $3US billion last year. It is set to rise dramatically when the government begins developing offshore oil and gas deposits in the next few years. A joint Harvard and United Nations Development Programme report estimated that the revenues from the deposits could be worth as much as $150US billion.

Cambodia's stellar economic growth is lifting many of its citizens out of poverty, albeit slowly. The World Bank estimates that half of the country's 15 million people survives on less than $2US a day. It also notes that while the living standards of the poorest citizens rose 8 per cent in the decade to 2004, the living standards of the richest rose 45 per cent.

While Cambodia's economic future looks bright, the country is held back by its small size - its population is the equivalent of Beijing's. Poor infrastructure and, most importantly, a lack of educated people are also drawbacks to its development.

"Perhaps the biggest challenge facing Cambodia, and the biggest constraint to a boom, is the lack of human resources, with so much of the professional class wiped out 30 years ago," said Christopher Wood, chief strategist at CLSA.

The Khmer Rouge terrorised Cambodia from 1975 to 1979. During that period 1.7 million people died. Most of these were from the educated classes, who would have been at the forefront of Cambodia's development today.

According to the Economic Institute of Cambodia, only 100,000 Cambodians are in higher education.

The Khmer Rouge killed many of Cambodia's elite, abolished the currency and failed to develop any sustainable industry. This is in contrast to the governments of China and Vietnam that ruled during the same period. They developed state-owned companies, some of which are still in business and are being privatised and listed on stock markets.

Cambodia may face a shortage of large domestic companies to list on its own stock market when it is launched in 2009.

The hearing into a bail application by accused Khmer Rouge jailer Kaing Guek Eav, better known as Duch, has been adjourned.

The five judges of the UN-backed tribunal have not given a date on which they will release their decision on whether his rights have been violated and if he should be released ahead of a trial, expected next year.

Duch, 66, has been in detention for almost nine years awaiting trial. His lawyers have called his detention, well in excess of the three-year limit in Cambodia, a violation of his human rights.

This week's bail hearings for Duch - who ran the S-21 security prison in the capital, where almost 16,000 people were tortured and killed - was considered a landmark event because it was the first time any Khmer Rouge official had faced a court.