Cambodia Calls

MONDAY, JULY 27, 2009
By LESLIE P. NORTON
Barron's (USA)

Checking out Cambodia's nascent economy.

REMEMBER FRONTIER MARKETS? Those in Pakistan and Vietnam, the high-octane sector of the developing world, promising even swifter growth than the more mature emerging markets?

They've been left in the dust this year as investors swarmed to so-called BRIC funds -- those that trade in shares of Brazilian, Russian, Indian and Chinese companies -- as well as to emerging-markets funds. The MSCI BRICs index has returned 53% in 2009, while emerging markets have returned 43%, and the corresponding frontier markets index, just 4.8%. (The Templeton Frontier Markets Fund is up 23%.)

Says Michael Hartnett, Merrill Lynch's global equity strategist: "Interest in frontier markets has lagged because of liquidity issues." But if enthusiasm about growth in China and almost anywhere outside the developed world gathers steam, expect new interest in frontier markets to jump.

David Wilton, chief investment officer of the International Finance Corp.'s private-equity and investment-funds department, thinks a change is already under way: "The mood has shifted noticeably from February. Now the listed equity markets have recovered, and they're thinking about investing."

The latest market to get attention is Cambodia, where a handful of investors familiar with Vietnam and Thailand are trying to set up funds. Cambodia is very poor, with rampant corruption and crony capitalism. But economic growth is robust, even if the economy is just $8 billion. Douglas Clayton, managing partner of Phnom Penh-based Leopard Capital, has raised just under $30 million and is trying to raise more; sitting on his board is markets commentator and Barron's Roundtable contributor Marc Faber.

Cambodia doesn't have a stock market yet, but Clayton believes it could by year's end. There are numerous foreign-sponsored companies, including banks and cell phone operators, though the economy is largely agricultural. The median age in Cambodia is 21, the lowest in Asia. Clayton reckons that about 70% of the population, which numbers 14 million, wasn't yet born during the horrific regime of the Khmer Rouge, estimated to have killed two million Cambodians.

"Cambodia is back open for business," says Clayton, who is applying for citizenship. "This is a failed state that's back on its feet."

Conservative investors aren't impressed. Says Peter Newell, managing director of Vontobel Asset Management: "We look for a $50 million bottom line, low leverage, high ROA [return on assets]. Can you find that in a frontier market? No. Not even in China, not easily."

David Wilton of the International Finance Corp. agrees: Investing in Cambodia may be, as he delicately puts it, "a wee bit nascent," and there are few deals to support private-equity funds. Still, Wilton concedes that the IFC is very close to seeding a fund to invest there.

If DPJ wins, legal age may be pared to 18

Kyodo News

Saturday, July 25, 2009

The number of adults in the nation might suddenly jump if the Democratic Party of Japan comes to power in the Aug. 30 general election, as DPJ members said Friday they may try to lower the age of majority from 20 to 18.

The party also plans to seek a lifting of the ban on election campaigning over the Internet.

The age change, which could come as early as May, would swell the ranks of eligible voters. It would also mean people could marry without their parents' permission two years earlier than is currently permitted.

The change will probably be part of the main opposition party's policy platform for the House of Representatives election, and be pursued through legislative steps in the extra Diet session to convene after the poll, the members said.

While the Liberal Democratic Party is reluctant to lower the voting age, believing it would work to its rival's advantage, the DPJ has yet to prove it can attract younger voters.

A Kyodo News poll conducted earlier this month revealed that only 10 percent of respondents in their 20s backed the DPJ, while 33 percent supported the LDP.

The DPJ aims to submit to the Diet session in the fall bills to revise the Civil Code, the Public Offices Election Law and other related laws to lower the age of adulthood at the same time the national referendum law takes effect next May. This would give people aged 18 and over the right to vote in the event a referendum is held on revising the Constitution, DPJ officials said.

The DPJ will also call for lifting the ban on campaigning via the Internet and the introduction of touch-screen electronic voting, according to the party members.

On fiscal policy, the DPJ has said it will slash tax deductions for dependents and spouses and instead increase child care support, which was harshly criticized by the LDP.

The party would also consolidate policymaking powers around the prime minister by setting up a national strategy bureau under him to oversee budget compilations and foreign policy, while creating a new body to scrap wasteful government projects, according to party sources.

The strategy bureau, which would consist of government officials and private-sector experts handpicked by the prime minister, would replace the Council on Economic and Fiscal Policy, currently the government's key panel making medium- to long-term fiscal policies, the sources said.

The DPJ-led government would also create what would be called the council on administrative renovation to review central government projects, many of which are often criticized as containing too much fat.

The new panel would be given the authority to require ministries and agencies to provide information on projects, including those undertaken by quasi-governmental corporations, the sources said.

If the panel determined that money would be better spent by abolishing projects or transferring them to local governments or the private sector, it would freeze them even in the middle of a business year.

The strategy bureau would serve to carry out the DPJ's pet projects, including allowances to families with children and abolishing tolls for the nation's expressways, and would also formulate basic foreign policy, the sources said.

The DPJ would also plan to send more than 100 of its lawmakers to ministries and agencies so they can take initiatives in setting policies there.

To overhaul public works projects, the DPJ also eyes ending the construction of two controversial dam projects — the so-called Yamba dam in Gunma Prefecture and a dam on the Kawabe River in Kumamoto Prefecture — through special legislation.

In a related move, the DPJ released a set of policies Thursday in which it dropped all references to the Maritime Self-Defense Force's Indian Ocean refueling mission in support of forces fighting terrorism in and around Afghanistan.

The deletion has left it vague whether the party would oppose the mission's extension beyond January, as it had been against the deployment.

The DPJ will now also accept the MSDF antipiracy mission off Somalia.

The policy basket the DPJ aired suggests the party's readiness to be flexible in foreign policy, including the possible continuation of the current approach pursued by the government of Prime Minister Taro Aso, as the party eyes ousting his LDP-New Komeito ruling bloc from power.

"It is beyond my understanding that this party, which has opposed (the MSDF mission) so strongly, has changed its stance shortly before the election," Aso said Thursday.

Mudslide, flood toll at nine; nine missing

YAMAGUCHI (Kyodo) The bodies of three elderly people were found Wednesday in Yamaguchi Prefecture, bringing the death toll there to eight from mudslides and swollen rivers triggered by heavy downpours the day before, police said.

Dirty business: Ground Self-Defense Force members on Wednesday examine an area hit by a mudslide the previous day in Hofu, Yamaguchi Prefecture. KYODO PHOTO

Rescue workers were still searching for nine people, assisted by police officers, firefighters and personnel from the Self-Defense Forces.

Meanwhile in Kofu, Tottori Prefecture, police received an emergency call reporting that a man had fallen into the Hino River.

The prefecture later said the man was confirmed dead, bringing the death toll in the two prefectures to nine.

The Yamaguchi Prefectural Government set up nine shelters in Hofu, which was hit hardest by the disaster, to provide relief supplies such as blankets.

The central government sent in a task force led by Motoo Hayashi, state minister in charge of natural disasters, along with relief workers from the land ministry.

Hayashi said after visiting Hofu that the government would heed the needs of the people hit by the disaster and "do its utmost in rescue efforts."

At a nursing home that housed around 90 elderly people and was swamped by an avalanche of mud and rocks, around 230 rescue workers were removing tons of debris with heavy machinery and trying to take wheelchairs and beds out of the facility. The mud was 2 meters deep in some places.

Shortly after noon Tuesday, a torrent of rocks, water and mud coursed into the two-story building where more than 70 percent of the residents used wheelchairs.

"Muddy water gushed into the first floor and I was soaked up to my chest," a female employee in her 40s said. "I was trying so hard not to be swept away, holding on to the nearest handrail and pole."

Trees were ripped out and homes were inundated with muck.