DEMOCRACY IN CAMBODIA HAS NOT looked healthy of late. Last week government radio reported that King Norodom Sihanouk's half brother, Prince Norodom Sirivuth, a quiet critic of the government, had been placed under house arrest in connection with a plot to kill co-Prime Minister Hun Sen.

The arrest was only the latest of several worrisome developments. Journalists who write critically about the country's co-Prime Ministers, Hun Sen and Norodom Ranariddh, have been jailed and had their offices trashed or their newspapers shut down. The last time an opposition politician tried to hold a rally, someone lobbed grenades into the crowd, injuring 34 people. So when the government warned that it would not be responsible if violence struck the launch of Cambodia's first new opposition party, its organizer, former Finance Minister Sam Rainsy, was duly cautious. The inaugural rally of his Khmer Nation party, a noisy affair held in Phnom Penh with 1,000 charter members in attendance, was peaceful, it turned out. But last week Rainsy claimed a party activist had been murdered by police while gathering signatures in rural Takeo province.

Four years ago, Cambodia was limping out of two decades of anarchy and civil war. Today, thanks to a $2.7 billion international rescue effort that brought 375,000 refugees home and restored just enough order for United Nations-sponsored elections in 1993, Cambodia is relatively tranquil. The country is run by an elected coalition government, which allows the publication--most of the time--of more than 40 independent newspapers. Scores of nongovernmental organizations operate freely, including several that specifically monitor human rights. "Things have gone right," says U.S. Ambassador Charles Twining. "The [1991] peace agreement worked, the government has basically kept the country moving forward, and the Khmer Rouge are like a deflating balloon."

The problem is that when one end of the balloon is squeezed, the other bulges. The violence of recent months reflects a pattern of intimidation that has been on the rise since last December, when National Assembly members like Rainsy were ordered by top government ministers not to debate controversial issues, including the national budget. For his criticism of the government, Rainsy was tossed out of both Parliament and the ruling FUNCINPEC party this summer. Threats against the press and legislation restricting judicial independence have prompted international human-rights groups to complain that democracy is in retreat. But co-Prime Ministers Ranariddh and Hun Sen assert that stability is more important than pluralism. As Ranariddh told Time, "We can talk about democracy when people's stomachs are full, not empty."

That kind of comment makes U.S. officials cringe. They see Cambodia--like Mongolia, Haiti and Russia--as a laudable stab at post-cold war democracy. In Phnom Penh last August, Secretary of State Warren Christopher proudly pointed out that the U.S. had spent nearly $1 billion to put Cambodia back together. In 1992, as part of a burgeoning global effort to promote political pluralism, the U.S. Agency for International Development (USAID) earmarked $30 million for social and political "institution-building" programs in Cambodia. But for all the hoopla, the effort has been undermined by poor management and a lack of priorities. Now, with local elections set for early 1997, Cambodia's leaders are weighing their longevity in office against their 1991 commitment to establish a "liberal democracy."

"Cambodia has become a battlefield between Western and Asian values," says Lao Mong Hay, director of the Khmer Institute of Democracy. The Asian argument: you can't become an economic tiger without the stability of authoritarian rule. The Western response: both democracy and development are necessary, and they must be achieved simultaneously. In pursuit of that goal, the Western effort to help rebuild Cambodia's shattered judicial system has been a moderate success. The Washington-based International Human Rights Law Group has begun an ambitious program to train public defenders and judges. (Cambodia has only eight judges with any legal background.) Now, in a land where the accused have traditionally been considered guilty until proved innocent, cases are being thrown out of court on evidence of a forced confession.

The U.S. Agency for International Development has shown itself in Cambodia to be more proficient at road building than institution building. Surprisingly, its first obstacle came from another Western country, France. In 1993, when an American nonprofit organization tried to use USAID money to start a legal and business program at Phnom Penh's Faculty of Law, French embassy officials removed all the desks and chairs and stomped out with half the school's instructors. The problem: France wanted its former colonial charges to learn the ways of Western democracy en francais.

Even in English, USAID-funded programs have faltered. In 1992 the Asia Foundation and three other American nonprofits received a $15 million grant to give structural advice to Cambodia's nascent political parties. After the election an American lawyer was assigned to the new Parliament's human-rights committee as an adviser. Last year the Phnom Penh USAID office decided not to continue funding for either project. Ambassador Twining contends that the Cambodians had no interest in political-party building between elections. But politicians in all parties were angry that the programs were cut. Says Kem Sokha, an M.P. and chairman of the human-rights commission: "The Americans have not shown enough support for democracy in Cambodia."

Inconsistency has deepened that perception. For all the millions spent on democracy and governance, neither of the two USAID staff members in charge of making grants has any background in law. "They've tried to micromanage everything," says a Western lawyer, "and they don't have a clue what they're doing, so they change signals on us every three or four months." Often the Americans seem awash in self-contradiction. Last month--just days after U.S. protests over several newspaper closures--State Department adviser Robert Boorstin delivered a speech denouncing press freedom, which he said "increases the leverage of terrorist groups and outlaw nations."

Top USAID officials concede that the business of democracy building is more complicated than they suspected. "This is an experiment," admits Margaret Carpenter, the deputy director in charge of Asia. "We tried a lot of things, and some things didn't work." Lately, American officials have tried to be sensitive to Cambodian needs, emphasizing dialogue, not lectures on human rights. But while the dialogue may appease some Cambodians, it just leaves others confused. "So far, when we meet with Mr. Twining, we don't really get encouragement," says Son Chhay, an M.P. who is a strong advocate of human rights. "He always seems to be saying yes when he is really saying no."

SUCH MURKINESS HAS PROMPTED charges that the U.S. is more interested in stability than democracy. That would be fine with Cambodia's Asian neighbors. Officials from Malaysia, Indonesia and Singapore in particular often insist to their Cambodian and Western counterparts that prosperity comes faster without the complications of a free press. Malaysia, for one, has backed up its advice with $1 billion worth of private investment in the Cambodian economy. Last spring, when Western protest erupted over Hun Sen's suggestion that the U.N. Human Rights Center be closed, several Asian ambassadors argued that such a center was an "infringement of Cambodia's sovereign rights." Sam Rainsy has a problem with that. "Democratic principles are universal," he says. "The so-called Asian way of democracy is just an attempt to justify some kind of authoritarian rule and protect entrenched interests."

For now Rainsy's new party remains in business, and he has even enjoyed a public show of support by ambassadors from Australia, Canada and the U.S. But local elections are scheduled for next year, national elections not until 1998--and the U.S. remains uncertain about how to push. "If I've come to any conclusion," says Twining, "it's that Cambodians will have to figure out what kind of democracy they're comfortable with."

Political analysts in the capital say the reason for the recent authoritarian bent is, as one top ministerial aide puts it, "the two Prime Ministers are saying you're either with us or get out." Prime Ministers Ranariddh and Hun Sen, whose troops fought each other until 1993, recently announced that they intend to make their coalition last through the year 2010. But Rainsy and his new party want a fair chance to compete with the coalition. Now the question is whether the West, which paid to lay a foundation for Cambodian democracy, can put its mouth where its money is.

--With reporting by Matthew Lee/Phnom Penh