Boom time hits Cambodia, but not all are smiling

But such prestige projects are the tip of the iceberg, and foreign funding accounts for only a fraction of the boom, analysts say.

The domestic financial services industry is growing fast -- private sector lending by Cambodia's 20-odd banks grew 60 percent last year -- but remains too small to be funding projects to the tune of hundreds of millions of dollars.

Instead, analysts say, much of the funding is Cambodian cash stuffed into mattresses, locked up in gold, or squirreled away in anonymous offshore bank accounts for years.

"There are a lot of people in this town who are fantastically wealthy," said Trent Eddy, director of Phnom Penh-based Emerging Markets Consulting. "The banks are not doing mortgage lending for the sort of stuff that's driving up prices."

The most popular theory on the streets of Phnom Penh is that a global banking clean-up after the September 11, 2001 attacks smoked out billions of dirty Cambodian dollars sitting quietly in bank accounts in Singapore, which encouraged its repatriation.

With few other investment options, and a steadily improving regulatory and legal framework -- not to mention political stability under ex-Khmer Rouge strongman Hun Sen -- real estate is the obvious choice for the prodigal loot, so the theory goes.

HYPE MARKET

Even though the economy remains one of Asia's smallest, with a GDP of around $6.5 billion, the hype is such that international portfolio investors have been looking into setting up domestic real estate funds, mainly in the hotel sector.

U.S. property services firm CB Richard Ellis is also hoping to get in on the action with the opening of a Phnom Penh office in the next few months.

The prospect of revenues from off-shore oil and gas by 2010 reaffirms the view of outsiders that the economy is only heading in one direction, and that rapid urbanization and demand for better housing from Cambodia's 13 million people must follow.

The clearest example is another South Korean venture, a $2 billion "new town" called Camko City taking shape on the northern outskirts of Phnom Penh.

"They are targeting primarily the Cambodians. There's very little accommodation in Phnom Penh, but demand is growing," said Lee Sangkwang, commercial attache at the South Korean embassy. "It's kind of pioneering."

The changes, however, are not coming without costs.

The city's infrastructure, already in a dilapidated state after nearly three decades of civil war, is creaking under the weight of the expansion, with roads clogged by traffic, leaking sewers, and frequent floods and power blackouts.

Critics also point to a lack of transparency and vision in urban planning -- despite assurances from Mayor Kep Chuktema that he "listens to the views of all stakeholders."

Social tensions are also emerging, with many city centre communities living in fear of eviction and pop songs lamenting the growing obsession with property speculation and the desire to make a quick buck.

"Now, the war in Cambodia is over land," said tuk-tuk driver Ros Sopheak.

(Editing by Michael Battye and Megan Goldin)