As Cambodia erupted into civil war on July 5, many countries rushed to evacuate their citizens. The ROC began evacuating its nationals on the 10th, but the evacuation effort received heavy criticism. The civil war in Cambodia has highlighted the impact of political conditions on the investment environment, proving to be a trial for the ROC government's southward economic policy and overall foreign investment planning. Now that fighting has tapered off, many Taiwanese businessmen have returned to Cambodia . Nevertheless, because the new government organized by Hun Sen is close to the Chinese Communists, they demanded that the Taipei Economic and Cultural Representative Office be closed down. The Ministry of Foreign Affairs (MOFA), in the interests of protecting national pride and interests, closed the representative office in Cambodia on July 28. The Ministry has also decided to close down Cambodia's Phnom Penh Economic and Cultural Office in Taipei, which will create new uncertainty for Taiwanese investors.

Cambodian Second Premier Hun Sen staged a coup on July 5, successfully ousting First Premier Ranariddh. Thus, despite the formation of a coalition government in the 1993 UN-sponsored elections, the Cambodian capital of Phnom Penh was again rocked by war. The MOFA immediately arranged the rental of three airliners from Viet Air, which were flown to Phnom Penh to evacuate Taiwanese nationals to Vietnam for transit to Taiwan. In all, six airliners from China Airlines, Eva Air and Viet Air were used to carry over 470 Taiwanese businessmen and tourists from Cambodia to Taiwan by stages. However, a few Taiwanese businessmen opted to stay in Cambodia.

In order to expedite the evacuation operation, the ROC government established an interdepartmental crisis team. However, the civil war was already in its fifth day when the ROC government made the decision to evacuate, and Taiwanese citizens were unable to contact the ROC representative office in Phnom Penh during that time. While watching the successful efforts of the US, Japan, Thailand, Singapore and Australia in contacting their citizens through newspapers and television, and evacuating them with military transport aircraft, Taiwanese nationals in Cambodia became increasingly uneasy.

Approximately 200 of the Taiwanese businessmen and tourists stranded in Cambodia made their own way to the Vietnamese border by land and sea routes. A tourism and fact-finding group organized by an elected representative from Hsiluo Township in Taiwan arranged their own departure by purchasing Phnom Penh-to-Bangkok plane tickets for US$350 a piece (3 times their market price) through the Thai embassy. Some Taiwanese businessmen took refuge in their residences, hiring security troops or taking up arms to protect themselves. The Taipei Association of Travel Agents also established an aid team after the outbreak of the war, requesting that companies which handle tours to peninsular Southeast Asia help the ROC representative offices by providing vehicles, blankets, food, translation and other assistance to Taiwanese businessmen and tourists leaving Cambodia by land routes.

At the same time that Taiwanese businessmen and private organizations have done their best to find solutions, personnel at the mainland Chinese embassy have also lent a helping hand to Taiwanese stranded in Cambodia, establishing emergency contact with them, and requesting that the Cambodian government protect the lives and property of Taiwan, Hong Kong and Macao's citizens still in Cambodia. A Taiwanese businessman who entered the mainland Chinese embassy seeking protection said that he was not a traitor to Taiwan, but that he simply could not locate anyone from the ROC representative office, and had no choice but to approach the mainland Chinese embassy.

The MOFA has stated that because Taiwanese businessmen investing in Cambodia were granted visas upon arrival, there is usually no need for them to contact the ROC representative office, and that because they cannot be forced to register with the office, it is impossible to keep track of their whereabouts. Chu Che-chuan, ROC representative in Cambodia, says that because there were only four employees in the ROC representative office, and the fighting hampered communication, it was extremely difficult to look after the over 1000 ROC citizens dispersed across the country.

Aside from the fact that the ROC government has received criticism for the tardiness of its evacuation operation, because formal relations between Taiwan and Cambodia were established through Prince Ranariddh, Hun Sen accused Taiwan of providing Ranariddh with weapons and military training, and demanded that the ROC representative office be closed down by July 29th. This was done on July 28th. Affairs related to Cambodia will be temporarily handled by the ROC trade offices in Hanoi and Ho Chi Minh City.

Up to the present, Taiwanese businessmen have not taken steps to remove their investments, and some even returned to Cambodia on July 13th, when the fighting had tapered off slightly. According to Cambodian government statistics, Taiwan invested US$106.4 million in Cambodia during 1996, making it the top foreign investor. Hun Sen also says that Taiwan is an important trading partner to Cambodia. While many Taiwanese businessmen actually have good relations with Hun Sen, he not only demanded the closure of the ROC office, he held an investment conference for "Chinese businessmen" that was heavily attended by mainland Chinese; many Taiwanese businessmen stayed away to express their dissatisfaction.

In discussing Taiwanese investment in Cambodia, Board of Foreign Trade Director-General Lin Yi-fu, who had just made a trip to Cambodia in March 1997, states that the Board will work to expedite a Taiwan-Cambodia investment protection agreement, which is already under discussion. However, the Ministry of Economic Affairs is considering excluding Cambodia from its southward economic policy.

In terms of the overall foreign investment picture, Executive Yuan Premier Lien Chan called on the MOFA to conduct evaluations of investment and travel risks in unstable regions in the future. Lin Neng-jong, director-general of the Industrial Development and Investment Center, stated that the Center would step up foreign political risk analysis.