Faber Sees a Holiday in Cambodia for Investors

Extracted from Commentary by William Pesek

Bullish

"Cambodia offers an enormous potential for future capital gains,'' says Faber, the Hong Kong-based investor and publisher of the Gloom, Boom & Doom report. "It may take some time, as was the case for Vietnam and India, where stocks languished for a number of years before huge upward trends in asset prices developed. But patience was amply rewarded.''

Contrarian Bet

Cambodia is a contrarian investment with a capital "C.'' For every positive trend cited in this column, one can find a reason, or two, to avoid the place. While Cambodia has great promise, says Simon Ogus, chief executive of DSG Asia, it has a long, long way to go before many investors are willing even to consider putting money there. For one thing, he says, "the monetary system is 95 percent dollarized'' and the country lacks a bond market.

P0verty and Potential

Cambodia's challenges run deeper. Crushing poverty means all too many aren't being educated to compete globally. Good roads, bridges, and power systems are in short supply. The export-dependent economy is vulnerable to a U.S. slowdown and rising fuel costs.
Corruption means double-digit growth doesn't get very far anyway. In Transparency International's 2007 Corruption Perceptions Index, Cambodia ranked 162nd -- behind Bangladesh, Zimbabwe and Tajikistan.
Cambodia also is sitting on a discovery that will either attract investors or have them aggressively avoiding the country: oil. While deposits are still being estimated, the potential of Cambodia's petroleum industry is attracting interest from BHP and Chevron.

Yet investors are searching for the next generation of developing-market stars now that the "BRIC'' economies- Brazil, Russia, India and China- and Vietnam have been discovered. Watching neighboring Vietnam thrive also may inspire Cambodia's government.
If oil profits are used to improve education, reduce poverty and upgrade infrastructure, investors who took a chance on Cambodia will be, in Faber's words, amply rewarded.