Royal Group Seeks $2 Billion to Build Cambodian Island Resort

Kith Meng on the cover of the Forbes magazine.

By Netty Ismail

July 10 (Bloomberg) -- Royal Group, which owns Cambodia's biggest mobile-phone operator, plans to raise as much as $2 billion with Hong Kong-based Millennium Group to build resorts, casinos and an airport on an island off the coast of Cambodia.

Royal Group and the Millennium real-estate investment firm are seeking investors and partners for resorts, apartments, casinos, golf courses, polo fields and an airport on Koh Rong island, according to a financing investment document obtained by Bloomberg News. The island is the largest of 22 off the coast of the southern port city and beach resort town of Sihanoukville.

``This is a place that people haven't discovered yet,'' said Royal Group Chairman Kith Meng in an interview in Phnom Penh. ``It's like the Maldives,'' an island country in the Indian Ocean southwest of Sri Lanka, he said.

Cambodia, the second-poorest of 10 Southeast Asian nations, is relying on tourism to fuel economic growth as garment exports slow. The country attracted about $400 million of tourism-related investments in the first half of 2008, mostly for resorts, Commerce Minister Cham Prasidh said. Visitors to Cambodia exceeded 2 million for the first time last year, up from 118,183 in 1993 when Cambodia emerged from a two-decade civil war.

``Our dream is to transform our costal line into the next Riviera of Asia,'' Cham Prasidh said in a July 4 interview. ``There'll be plenty of resorts appearing on the islands and all along the coast of Cambodia. There will be billions of dollars of investment in that sector this year and next year.''

Angkor Wat

The companies will raise funds from investors in London and the Middle East, and it will take 10 years to 15 years to develop the island, said Kith Meng on July 4.

Cambodia wants to develop tourism beyond the key destination of Angkor Wat, known for its ancient temples. The island project may face competition with beach resorts also being developed in Vietnam and Thailand.

``The tourism industry is overwhelmingly concentrated on Angkor Wat because of the unique attraction you can't find elsewhere in the world,'' said Agost Benard, associate director at Standard & Poor's in Singapore. ``As far as developing a beach resort, you'll be competing with a lot of countries because it's a generic product.''

Royal Group and Millennium are raising funds as record oil prices prompt airlines to cut flights. Cathay Pacific Airways Ltd., Hong Kong's largest airline, said July 2 that earnings would be ``disappointing'' because of record fuel costs.

``I don't know if the current oil prices will affect air travel and if it's going to be a booming sector in the near term,'' Benard said.

Turquoise Waters

The companies are trying to get resort and hotel operators, including Singapore-based Banyan Tree Holdings Ltd., to participate in the project, Kith Meng said.

Royal Group and Millennium plan to develop the 76 square- kilometer (29 square-mile) Koh Rong island, now inhabited by fishermen, into a ``luxury resort destination,'' according to the document. The island has 28 white sand beaches, including the 6.1 kilometer Snowdrift Beach, surrounded by shallow turquoise waters.

Kith Meng, who was educated in Australia, declined to say how much Royal Group is paying the government for a 99-year lease to the island.

Royal Group also is planning to build a resort in Siem Reap, near the temples of Angkor Wat, with India's Oberoi Group. Royal Group already has a telecommunications venture, MobiTel, with Luxembourg-based Millicom International Cellular SA, and another partnership in Cambodia with Australia & New Zealand Banking Group Ltd., Australia's third-largest bank, called ANZ Royal Bank.

To contact the reporter on this story: Netty Ismail in Singapore nismail3@bloomberg.net.