Regional Outlook : Cambodian Peace Pact Having Domino Effect : * The region’s political map is being redrawn, and it has a capitalist look.

Prince Norodom Sihanouk, who waged a decade-long guerrilla war against the Cambodian government, now calls Prime Minister Hun Sen his “second son.” Vietnam and China, which have feuded for 2,000 years, have publicly patched up their differences.

Devoted Marxists are now confirmed capitalists. Vietnam sought business advice from Singapore’s staunchly anti-Communist former leader, Lee Kuan Yew. A beleaguered Russian diplomat even tried to sell the Soviet Cultural Center here to the United States.

The political map of Asia has been redrawn in recent weeks as a peace settlement has taken form in Cambodia. While most analysts agree that the Cambodian peace is a symbol of the “new world order” rather than the cause, a lot of changes have fallen into place as a result.

Formerly a hermit state recognized only by a handful of pro-Soviet satellite countries and India, Cambodia is back on the world stage as a result of the 19-nation international peace agreement signed in Paris on Oct. 23. Since Sihanouk returned to Phnom Penh 10 days ago, Western countries such as France, Australia and the United States have rushed to recognize the new coalition government here.

The agreement was brought about by an extraordinary degree of cooperation by the five permanent members of the U.N. Security Council: the United States, Britain, France, China and the Soviet Union. The agreement by the permanent five on Cambodia, which was worked out in early 1990, even predated the worldwide coalition against Iraq.

Even Japan has been affected politically by the Cambodian settlement. Barred since World War II from sending its troops overseas, the Japanese Parliament is currently engaged in a painful debate over legislation that would allow Japanese soldiers to take part in the Cambodian peacekeeping operation. It would be the first time since World War II that Japanese troops served on something other than Japanese soil.

In addition, Japanese officials have told the United Nations that Tokyo is willing to pay double its normal share to help support the Cambodian peacekeeping force. The money will help compensate for the fact that the Soviet Union is bankrupt and will likely offer no assistance.

The end of the U.S.-led trade embargo against Phnom Penh has opened the country to investment by Thailand and Japan, which have been straining at the bit to gain access to Cambodia’s virgin forests, gem mines and rubber plantations.

Significantly, among those presenting their credentials to Sihanouk last week was Thai Maj. Gen. Naves Na Nongkhai, who was billed as a special representative of Thailand’s armed forces. Following Vietnam’s invasion of Cambodia in 1979, which installed a pro-Hanoi government in Phnom Penh, Thailand grew alarmed that the Vietnamese would not stop at the Thai frontier. In response, the Thai armed forces grew rapidly to 283,000 men, with 158 combat aircraft, a navy and several armored divisions that it stationed near the border. The Thai military supported the Cambodian insurgents.

But in September, 1989, the Vietnamese withdrew their forces. An in-place cease-fire will now be monitored in Cambodia by U.N. troops.

“You have to wonder how the Thai military will justify their huge budget requests now that their only real enemy has withdrawn and Thailand is on good terms with Cambodia,” said one diplomat.

The Vietnamese occupation of Cambodia had also provided the mortar that held together the Assn. of Southeast Asian Nations, which drew together Thailand, Malaysia, Singapore, Brunei, Indonesia and the Philippines in an anti-Vietnam coalition.

“Paradoxically, the peace is a threat to the cohesion of ASEAN,” said one Western diplomat based in Bangkok. “The Vietnamese ‘menace’ held together these disparate countries. Now, the region faces all sorts of potential disputes.”

Without the perceived Vietnamese threat, the diplomat added, governments will begin to focus on potentially divisive bilateral issues, like disputes over fishing grounds in the South China Sea and an ownership struggle for the Spratly Islands, which are claimed by China, Taiwan, Malaysia, Brunei, the Philippines and Vietnam.

Thailand and Malaysia have a running feud over their border and smuggling. Indonesia and Malaysia are fighting over two islands. Tiny Singapore warily eyes its huge Muslim neighbors in Malaysia and Indonesia. Virtually all of the members of ASEAN except oil-rich Brunei are fierce rivals for industrial investment.

Vietnam, once the nemesis of the ASEAN states, has now applied to joined the group. Although it is still officially Communist, Vietnam is looking for an economic miracle to save its economy.

Newspapers reported that Vo Van Kiet, the new Vietnamese prime minister, went so far as to ask Lee Kuan Yew, who retired as prime minister of prosperous Singapore, to serve as an economic adviser. Lee is a renowned anti-Communist who in the past has publicly attacked Vietnam’s system of government.

Perhaps the most striking change to date is the relaxation in tensions between Vietnam and China. Many analysts believed the old Asian adage that “when elephants fight, the grass gets trampled.” Vietnam and China have been feuding for centuries, and Cambodia became a battleground for their proxies in 1979.

The government of Pol Pot, the head of the notorious Khmer Rouge, was a special favorite of China’s Mao Tse-tung. When Vietnam ousted Pol Pot, China invaded Vietnam in retaliation. Vietnam hit back by expelling ethnic Chinese.

Relations began to improve three years ago as Soviet assistance to Vietnam started to wane. The economic crunch forced Vietnam to withdraw its forces from Cambodia, removing a major irritant in relations with China.

The last hurdles were finally cleared in June, when Vietnam reshuffled its government and dropped two key politicians who were regarded as particularly anti-Chinese, including the former foreign minister, Nguyen Co Thach.

On Nov. 5, just a week before Sihanouk returned to Phnom Penh, Chinese Premier Li Peng and Party Chairman Jiang Zemin met Vietnamese party leader Do Muoi and Prime Minister Vo Van Kiet in Beijing. “This is a meeting which concludes the past and opens up the future,” said the Chinese press agency, in announcing the normalization of relations.

Some political analysts have concluded that China and Vietnam realized that they had more to gain by sticking together, since they are among the world’s last socialist regimes. But both countries have financial problems and also stand to gain a lot by promoting trade rather than armed struggle.

Vietnam, in particular, is also hoping the Cambodian peace clears the way for the lifting of a U.S.-led trade embargo, which has kept the country hobbled since the end of the Vietnam War in 1975. Washington indicated that the embargo could be lifted as early as next year if Vietnam continues to cooperate on Americans MIAs.

Vietnam withdrew its ambassador from Phnom Penh, Ngo Dien, who had served as a virtual Vietnamese proconsul running the country since the 1979 invasion. He was replaced by a reformist diplomat. “Vietnam has to be concerned about the impact of a newly democratic Cambodia, particularly in southern Vietnam,” said a diplomat in Phnom Penh. “How will Hanoi react to press freedom and fair elections right next door?”

The Cambodian Communists, meanwhile, renamed their party the “People’s Party,” dropping the new taboo word revolutionary. Hang Samrin, the old party leader, was sent off into retirement because he was seen as being too close to the Vietnamese. Party leaders like Chea Sim and Hun Sen now extol the virtues of a free-market economy while their relatives make fortunes renting real estate to recently arrived foreign diplomats.

Sihanouk told his first press conference in Cambodia in 13 years that Hun Sen and Prince Norodom Ranariddh, Sihanouk’s son, had formed a political alliance to jointly contest the elections scheduled to be held under U.N. auspices. On Saturday, Sihanouk said they had agreed to form an interim coalition government as well.

Sihanouk lauded the Phnom Penh government, which he had criticized for more than a decade, for bringing economic prosperity to the people. “We even have night clubs with taxi dancers and soon will have massage,” he said.

Simmering Issues

Assn. of Southeast Asian Nations includes six countries, several with ongoing disputes:

1 Disputes over fishing grounds in the China Sea.

2 Ownership struggles for the Spratly Islands

3 Thailand and Malaysia have a running feud over their border and smuggling.

4 Indonesia and Malaysia are fighting over two islands.