12:15 pm # 50 Alternative Investments' New Landscape (Issues Facing

Hedge Funds, Private Equity & Commercial Real Estate)

R.L. Stevenson 1
Until 2010, I was on the Advisory Board of Leopard Cambodia, a private equity firm.
Opportunities abound for higher returns, but with higher returns come risks. Who
wants to make 1% return on their savings? Emerging markets like Cambodia, which
saw close to 10% GDP growth in the first decade of 2000 are seeing the introduction
of stock markets. Three stocks will be listed. Much work still remains, to be sure.
Often times, you are making deals with unsavory businessmen, it may not be your
cup of tea. You might go with a tycoon the US Embassy has called Mr. Rough Stuff.
He owns one of the largest mobile phone companies in Cambodia and has a 45%
share of one of its leading banks. Hes also cozy with the Prime Minister who is a
former Khmer Rouge cadre.
Advantageous location
o Sandwiched between two larger, more developed economies (Thailand
and Vietnam) : inevitable economic spillover
o Midway between China and India the most important growth areas of
the next century
o Not landlocked so not dependent on any single country
Favorable investment climate
o Foreigners can own 100% of most businesses; 99 year land leases
o Attractive investment incentives
o Open capital account; easy repatriation of profits
o Government-Private Sector Forum helps reduce obstacles and
inefficiencies
Largely dollarized economy
o Minimal foreign exchange risks
o Stable monetary policy and fiscal responsibility
Increasing trade integration
o WTO member since 2004
o ASEAN membership offers regional trade benefits
o Duty free or preferential export access to most developed economies
Advantageous labor conditions
o Among Asias lowest-cost workforces
o Abundance of willing, trainable factory workers
o Rising literacy rate now surpasses 75%
Improving transport connectivity
o All key road and bridge links with neighboring countries have been or
will soon be upgraded
o Railroad system is being rehabilitated
o Container sea port in Sihanoukville has been modernized and expanded
o River port in Phnom Penh is being relocated and enlarged to better
access Vietnams new deep sea ports
o Three international airports have been opened
Lower costs in telecoms and internet; power next
o Hyper-competition in mobile and internet sectors has cut user costs
o New hydropower and coal-fired power plants underway will replace oil-
based generation, cutting costs
Unused natural resources and land
o Production and processing of agricultural commodities
o Aquaculture and livestock farming and processing
o Abundant mineral deposits await mining
o Potentially significant off-shore oil and gas reserves
o Virgin tourism sites (beaches, islands, history, culture, nature)
Underpenetrated, growing domestic consumer market
o Exceptionally youthful demographics ensures rising domestic demand
(61% of Cambodians under 25 years old; median age: 21)
o Workforce participation, household formation, and urbanization will all
show robust growth over the next decade
o Per capita GDP and purchasing power has more than doubled over past
decade and will continue to rise
Unleveraged financial position
o Relatively low levels of sovereign, corporate, and consumer debt
o Well capitalized, conservative banking system
o No tradition of government bailouts and subsidies (capitalisms last
bastion)