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09PHNOMPENH71 2009 INVESTMENT CLIMATE STATEMENT – CAMBODIA

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“189147”,”1/28/2009 10:02″,”09PHNOMPENH71″,

“Embassy Phnom Penh”,”UNCLASSIFIED”,

“08STATE123907|09HONGKONG48|09SINGAPORE12|09SINGAPORE194”,

“VZCZCXRO6699

PP RUEHCHI RUEHDT RUEHHM RUEHNH

DE RUEHPF #0071/01 0281002

ZNR UUUUU ZZH

P 281002Z JAN 09

FM AMEMBASSY PHNOM PENH

TO RUEHC/SECSTATE WASHDC PRIORITY 0338

INFO RUCNASE/ASEAN MEMBER COLLECTIVE

RUCPDOC/USDOC WASHDC

RUCPCIM/CIMS NTDB WASHDC

RUEATRS/DEPT OF TREASURY WASHINGTON DC 0779

RUEHRC/DEPT OF AGRICULTURE WASHINGTON DC”,”UNCLAS SECTION 01 OF 16 PHNOM PENH 000071

 

STATE FOR EAP/MLS, EB/IFD/OIA, EB/TPP/ABT, EEB/TPP/MTA, EEB/TPP/BTA

STATE PASS TO USTR/BISBEE AND WEISEL

STATE PASS TO USTDA/ROSSITER

BANGKOK FOR USAID/KISSINGER, FCS/MEYER

HANOI FOR FAS/REIDEL

HO CHI MINH CITY FOR FCS/LE

 

SIPDIS

 

E.O. 12958:N/A

TAGS: ECON, EFIN, EINV, ELAB, ETRD, KIPR, OPIC, KTDB, USTR, CB

SUBJECT: 2009 Investment Climate Statement – Cambodia

 

REF: 08 STATE 123907

 

1. Cambodia, a developing country, began the transformation from a

command economy to the free market in the late 1980s. It is now

integrating into the regional and world trading framework. In 1999,

Cambodia joined the Association of Southeast Asian Nations (ASEAN)

and in September 2004, became a member of the World Trade

Organization (WTO). On December 15, 2008 the entry into force of

the ASEAN Charter brought Cambodia and other member states into a

new regional legal framework. Cambodia has shown interest in

participating in other international trading arrangements, including

the Asia-Pacific Economic Cooperation forum (APEC).

 

2. As part of its WTO commitments to strengthen the investment

climate for both foreign and domestic businesses, Cambodia committed

to enact 46 new laws or regulations to address areas where existing

law did not meet WTO requirements. Cambodia has been behind

schedule in fulfilling its WTO commitments to pass necessary

business legislation. However, the country has made progress

recently, passing several significant laws in 2008, including a Law

on Plant Breeder Rights and Law on Civil Aviation. In 2007, the

government promulgated a Customs Law, Law on Water Resources

Management, Law on Land Traffic, Law on Insolvency, and Secured

Transactions Law. The government has either completed drafts of

most of the remaining required laws or is waiting for their approval

by the legislature. According to the Economic Institute of

Cambodia, an independent think tank, the government must promulgate

an additional 17 laws required by WTO accession.

 

3. Since the re-establishment of a constitutional monarchy in 1993,

the economy has grown steadily. Real GDP growth averaged 8.8

percent during the 1994-2008 period. Despite dire predictions

surrounding the expiration of the Multi-Fiber Agreement on January

1, 2005, through which Cambodia obtained limited duty-free access to

the U.S. market for garments, the economy grew at 13.4 percent in

2005 — the highest rate in a decade — and in 2007 expanded by 10.2

percent. During the same period, per capita GDP grew from USD 440

to USD 590. Success in the garment, construction, and tourism

sectors and good weather for agriculture generated the high growth.

For 2008, the growth rate decreased to an estimated 6.7 percent,

mainly as a result of decreasing garment orders, constrution

projects, and tourist arrivals due to the global economic slowdown

and political instability in Thailand. Per capita GDP for 2008 was

USD 625.

 

4. Inflation increased sharply in 2008, as it did in many countries

throughout Asia. According to the Economic Institute of Cambodia,

in 2008 the inflation rate reached an estimated 22.7 percent. The

rising price of fuel, depreciation of the dollar, and dramatic

increase in food prices contributed to the dramatic spike. Apart

from the CPI, land prices retreated from record levels achieved at

the beginning of the year, with the price of residential property in

Phnom Penh decreasing by 25 percent from earlier highs, after rising

by 100 percent in 2007.

 

5. Foreign Direct Investment (FDI) approved by the Council for the

Development of Cambodia (CDC), Cambodia\’s investment approval body,

has dramatically increased in recent years, with approved proposals

reaching nearly USD 11 billion in 2008, compared with USD 201

million in 2004. The CDC does not have a functional mechanism to

monitor implementation of projects, so it is not clear how many

proposed projects are fully implemented. Nonetheless, the increase

in investor interest may be attributed to increased political and

macroeconomic stability, and ongoing government reforms designed to

integrate Cambodia into the regional and global marketplace.

Corruption has been singled out as one of the most serious

deterrents to further private investment. Given inadequate private

investment and poor revenue collection, Cambodia remains dependent

largely on foreign donor funding for budget assistance, capital

expenditure, and social services.

 

6. Since early 1999, the Cambodian government has intensified its

economic reform program, a process the international financial

institutions and donors encourage, participate in, and monitor

closely. In recent years the government has publicly committed

itself on numerous occasions to fighting corruption, pursuing good

governance, and increasing transparency and predictability. This

strategy is set out in phase II of the government\’s latest public

reform effort called the \”Rectangular Strategy for Growth,

Employment, Equity, and Efficiency.\”

 

7. The government has initiated specific measures to promote

 

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business, especially small and medium-sized businesses, by reducing

costs and the time required for business registration and by

establishing a number of committees for business promotion and trade

facilitation.

 

Openness to Foreign Investment

——————————-

 

8. Cambodia officially welcomes foreign direct investment.

Cambodia\’s 1994 Law on Investment established an open and liberal

foreign investment regime. All sectors of the economy are open to

foreign investment and 100 percent foreign ownership is permitted in

most sectors. Article 44 of the Constitution provides that only

Cambodian citizens and legal entities have the right to own land.

Aside from this, there is little or no discrimination against

foreign investors either at the time of initial investment or after

investment. However, some foreign businesses have reported that

they are at a disadvantage vis-a-vis Cambodia or other foreign

rivals, who engage in acts of corruption or tax evasion, or take

advantage of Cambodia\’s poor enforcement of legal regulations.

 

9. In addition, there are a few sectors open to foreign investors

which are subject to conditions, local equity participation, or

prior authorization from relevant authorities. These sectors

include manufacture of cigarettes, movie production, rice milling,

exploitation of gemstones, publishing and printing, radio and

television, manufacturing wood and stone carvings, and silk weaving.

The government has issued a sub-decree restricting foreign

ownership of hospitals and clinics and forbidding the employment of

non-Cambodian doctors in any specialty in which the Ministry of

Health considers there to be an adequate number of Cambodian

practitioners.

 

10. Under a sub-decree dated September 2005, Cambodia prohibits

certain investment activities, including investment in production or

processing of psychotropic and narcotic substances, poisonous

chemicals, agricultural pesticides and insecticides, and other goods

that use chemical substances prohibited by international regulations

or the World Health Organization that affect public health and the

environment. Production of electric power by using waste imported

from foreign countries is prohibited, as is forestry exploitation.

 

11. The privatization of state enterprises and transactions

involving state property has not always been carried out in a

transparent manner. In several instances, the public learned that

enterprises were for sale or swap only after the government

announced a sale or deal to a particular buyer.

 

12. Investor rights (investment guarantees) provided for in the Law

on Investment include:

 

— Foreign investors shall not be treated in a discriminatory

manner by reason of being a foreign entity, except in respect to

land ownership as provided for in the Constitution of the Kingdom of

Cambodia.

— The Royal Government of Cambodia shall not undertake a

nationalization policy that adversely affects the private property

of investors.

— The Royal Government of Cambodia shall not fix the price of

products or fees for services.

— The Royal Government of Cambodia, in accordance with relevant

laws and regulations, shall permit investors to purchase foreign

currencies through the banking system and to remit abroad those

currencies as payments for imports, repayments on loans, payments of

royalties and management fees, profit remittances and repatriation

of capital.

 

Conversion and Transfer Policies

———————————

 

13. There are no restrictions on the conversion of capital for

investors. The Foreign Exchange Law allows the National Bank of

Cambodia (the central bank) to implement exchange controls in the

event of a crisis; the law does not define what would constitute a

crisis. The U.S. Embassy is not aware of any cases in which

investors have encountered obstacles in converting local to foreign

currency or in sending capital out of the country.

 

14. The U.S. dollar is widely used and circulated in the economy.

The 2008 exchange rate was stable, although slightly depreciated

compared to 2007. At the end of 2008, the exchange rate was USD 1 =

4,049 riel. The government is committed to maintaining exchange

 

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rate stability.

 

Expropriation and Compensation

——————————-

 

15. Article 44 of the Cambodian Constitution, which restricts land

ownership to Cambodian nationals, also states that \”the (state\’s)

right to confiscate properties from any person shall be exercised

only in the public interest as provided for under the law and shall

require fair and just compensation in advance.\” Article 58 states

that \”the control and use of state properties shall be determined by

law.\” The Law on Investment provides that \”the Royal Government of

Cambodia shall not undertake a nationalization policy which

adversely affects the private property of investors.\”

 

16. In spite of various legal protections, protection of immovable

property rights is complicated by the fact that most property

holders do not have legal documentation of their ownership rights.

Numerous cases have been reported of influential individuals or

groups acquiring property through means not entirely in keeping with

the Constitution or laws. These actions are usually directed at

poor people and those unable to protect their rights. Human rights

NGO ADHOC reported receiving 195 land-related cases from January to

August 2008. During the same period, another NGO received 51

land-related cases in Phnom Penh and 13 other provinces affecting a

total of 3,275 families. If granted at all, compensation in these

types of cases is usually less than the market value of the property

being taken.

 

17. The Ministry of Economy and Finance is drafting a law on

expropriation which will set broad guidelines on land-taking

procedures for public interest purposes and define public interest

activities such as construction of infrastructure projects,

development of buildings for national protection and civil security,

construction of facilities for research and exploitation of natural

resources, and construction of oil pipeline and gas networks.

 

18. To date, there are no known investment disputes involving

government expropriation of property belonging to U.S. citizens. Up

to 17 Thai businesses sustained varying degrees of damage during

anti-Thai rioting in Phnom Penh on January 29, 2003. The Cambodian

government pledged to compensate Thai business owners, and all of

claims have been resolved.

 

Dispute Settlement

——————-

 

19. Cambodia\’s legal system is a mosaic of pre-1975 statutes

modeled on French law, communist-era legislation dating from

1979-1991, statutes put in place by the UN Transitional Authority in

Cambodia (UNTAC) during the period 1991-93, and legislation passed

by the Royal Government of Cambodia since 1993.

 

20. Cambodian culture and its legal system have traditionally

favored negotiation and conciliation over adversarial conflict and

adjudication. Thus, compromise solutions are the norm, even in

cases where the law clearly favors one party in a dispute. In civil

cases, courts will often try conciliation before proceeding with a

trial. The Ministry of Commerce is currently finalizing draft

legislation to create a Commercial Court that will likely include a

pre-trial mediation component. A number of draft bills are slated

to be considered by the National Assembly during its fourth term

(2008-2013); no date has been set for consideration of Commercial

Court legislation.

 

21. Cambodia\’s court system is generally seen as non-transparent

and subject to outside influence. Judges, who have been trained

either for a short period in Cambodia or under other systems of law,

have little access to published Cambodian statutes. Judges can be

inexperienced and courts are often understaffed with little

experience, particularly in adjudicating commercial disputes. The

local and foreign business community reports frequent problems with

inconsistent judicial rulings as well as outright corruption.

 

22. The Cambodian judiciary system is beginning to undergo reform.

To provide the necessary background knowledge, judges and court

staff from around the country are being trained by the Royal Academy

for Judges and Prosecutors, which was created in 2002. In an effort

to clean up the court system, the Prime Minister has announced ad

hoc anti-corruption measures, including the dismissal, replacement,

and transfer of judges and prosecutors. The Supreme Council of

Magistracy, comprised of a president (the King) and 8 other members,

 

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is responsible for the appointment and conduct of judges and

prosecutors.

 

23. To handle specific disputes with regard to labor, the Ministry

of Labor and Vocational Training established an Arbitration Council

in May 2003. Basing its decision on the provisions of the Labor

Law, the Council has 30 arbitrators. The Council is an independent

body whose function is to resolve collective labor disputes that the

Ministry is unable to solve by conciliation. The Council\’s

decisions are non-binding but it has been very successful in

reducing the number of industrial actions in the garment sector.

The Council plays a vital role in contributing to the development of

healthy industrial relations in Cambodia. The Council\’s success in

the garment industry has prompted unions in other sectors, e.g., the

hospitality and tourism sectors, to seek the Council\’s arbitration

and mediation services.

 

24. Under the 2006 Law on Commercial Arbitration, a National

Arbitration Center (NAC) will be established in the Ministry of

Commerce. When active, parties involved in a commercial dispute

that have a written arbitration agreement will be able to settle

commercial disputes by means of quasi-judicial methods without

involvement of the Cambodian courts. Parties will be able to select

arbitrators without direct government interference. The law also

allows the Cambodia Chamber of Commerce to establish its own

arbitration center for disputes between members or between members

and third parties. Neither of these proposed arbitration centers

has been established to date. However a sub-decree on the

establishment of the National Arbitration Center is currently

awaiting approval by the Council of Ministers. The Law on

Commercial Arbitration also mandates recognition of arbitral awards

made outside of Cambodia. Arbitration awards can be appealed to the

Appellate and Supreme Court of Cambodia based on limited grounds.

 

25. Although party to the Convention for the Settlement of

Investment Disputes between States and Nationals of Other States

since 2005, Cambodia has not yet had any cases taken to the

International Center for the Settlement of Investment Disputes.

 

Performance Requirements and Incentives

—————————————–

 

26. The Council for the Development of Cambodia (CDC), Cambodia\’s

foreign investment approval body, administers a package of

investment incentives. The CDC was created as a one-stop shop to

facilitate foreign direct investment.

 

27. Seeking to increase government revenue, the international

financial institutions recommended that the Cambodian government

scale back its investment incentives. Consequently, the Cambodian

government amended the Law on Investment in 2003. The law creates

regimes for profit (20 percent), salary (5 to 20 percent),

withholding (4 to 15 percent), value-added (10 percent) and excise

taxes (rates vary). While some incentives have been eliminated, the

law provides a simplified, more transparent, and faster mechanism

for investment approval.

 

28. Under the amended Law on Investment, the profit tax exemption

is allocated automatically on the basis of activity and minimum

investment amounts as set out in the sub-decree. To maintain the

incentives under the law, qualified investment projects (QIP) are

required to obtain an annual Certificate of Compliance from the CDC

and file this with the annual tax return.

 

29. The amended Law on Investment includes the following

provisions, which include the exemption, in whole or in part, of

customs duties and taxes, for QIPs:

— An exemption from the tax on profit imposed under the Law on

Taxation for a set period. The tax exemption period is composed of

a trigger period + three years + n years (a number of years

determined according to the Financial Management Law and depending

on the economic sector). The maximum allowable trigger period is to

be the first year of profit or three years after the QIP earns its

first revenue, whichever is sooner.

— 100 percent exemption from import duties for construction

material, production equipment and production input materials for

export QIPs and supporting industry QIPs in accordance with the

provisions of the sub-decree on the Implementation of the Amendment

to the Law on Investment

— Transfer of incentives by merger or acquisition.

— Renewable land leases of up to 99 years on concession land for

agricultural purposes and land ownership permitted to joint ventures

 

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with over 50 percent equity owned by Cambodians.

— No price controls on goods produced or services rendered by

investors.

— No discrimination between foreign and local investors.

— 100 percent exemption from export tax or duty, except for

activities specifically mentioned in the Law on Customs.

— Employment of foreign expatriates where no qualified Cambodians

are available. QIPs are entitled to obtain visas and work permits.

— A QIP that is located in a designated special economic zone

(SEZ) is entitled to the same incentives and privileges as other

QIPs as stipulated in the law.

 

30. The September 2005 sub-decree on the Implementation of the

Amendment to the Law on Investment also details investment

activities that are not eligible for incentives, although investment

is permitted. They include the following sectors: retail,

wholesale, and duty-free stores; entertainment (including

restaurants, bars, nightclubs, massage parlors, and casinos);

tourism service providers; currency and financial services; press

and media related activities; professional services; and production

and processing of tobacco and wood products.

 

31. Incentives are also not available for production of certain

products with an investment of less than USD 500,000 such as food

and beverages; textiles, garments and footwear; and plastic, rubber,

and paper products. Investors are encouraged to refer to the

sub-decree for details of other investment activities that are not

eligible for incentives.

 

32. Investment activities that are eligible for customs duty

exemption, but not eligible for the profit tax exemption, are

telecommunication basic services; exploration of gas and oil,

including supply bases for gas and oil activities; and mining.

 

33. Cambodia allows foreign lawyers to supply legal services with

regard to foreign law and international law, and allows them to

supply certain legal services with regard to Cambodian law in

\”commercial association\” with Cambodian law firms. Cambodia\’s WTO

General Agreement on Trade in Services (GATS) commitment defines

\”commercial association\” as any type of commercial arrangement,

without any requirement as to corporate form. Thus, there are no

equity limitations on the practice of foreign and international law

by foreign enterprises and there are no equity limitations on the

formation of \”commercial associations\” under which foreigners may

practice certain legal services with regard to Cambodian law.

 

34. Investors who wish to take advantage of investment incentives

must submit an application to the Cambodian Investment Board (CIB),

the division of the CDC charged with reviewing investment

applications. Investors not wishing to apply for investment

incentives, or who are ineligible, may establish their company

simply by registering corporate documents with the Department of

Legal Affairs of the Ministry of Commerce. Once an investor\’s

application is submitted, the CDC will issue to the applicant either

a Conditional Registration Certificate or a Letter of Non-Compliance

within three workdays. The Conditional Registration Certificate

will set out the terms, such as approvals, authorization,

clearances, permits or registrations required. If the CDC fails to

issue the Conditional Registration Certificate or Letter of

Non-Compliance within three workdays, then the Conditional

Registration Certificate will be considered approved.

 

35. The CDC has the responsibility to obtain all of the licenses

from relevant government agencies on behalf of the applicants. The

relevant government agencies must issue the required documents no

later than 28 workdays from the date of the Conditional Registration

Certificate. At the end of the 28 days, the CDC will issue a Final

Registration Certificate.

 

36. The Sub-decree on the Implementation of the Amendment of the

Law on Investment adopted on September 27, 2005 does not require

investors to place a deposit guaranteeing their investment except in

cases in which the deposit is required in a concession contract.

Investors who wish to apply are required to pay an application fee

of seven million riel (approx. USD 1,750) representing the

administration fees for securing the approvals, authorizations,

licenses, or registrations from all relevant ministries and entities

including stamp duty.

 

37. Under a 2008 sub-decree, the CDC is required to submit

investment proposals to the Council of Ministers for approval with

an investment capital of USD 50 million or more; involve

 

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politically sensitive issues; involve the exploration and the

exploitation of mineral or natural resources; may have a negative

impact on the environment; have long-term strategy; or, involve

infrastructure concessions.

 

38. After receiving several billion dollars of real estate

development proposals, the Ministry of Economy and Finance (MoEF)

proposed new regulations in July 2008 to protect consumers from

fraud. The proposed rules require all developers to obtain licenses

from an Inter-Ministerial Task Force, purchase construction site

insurance, and deposit two percent of total project costs in a

non-interest bearing MoEF account at the National Bank of Cambodia.

License fees and the period of the license would be determined by

the type and size of development. It also requires developers to

create a housing development account at a commercial bank into which

buyers can make down payments on units. Developers would need

approval from an inter-ministrerial working group to access the

account, and the working group can intervene if the company fails to

honor its contracts. The rule was originally slated to take effect

from September 30, 2008 but was postponed amid complaints from

international developers. After receiving support from the Prime

Minister at the Government-Private Sector Forum in November 2008,

the MoEF intends to reintroduce the regulations in early 2009.

 

Right to Private Ownership and Establishment

———————————————

 

39. There are no limits on the rights of foreign and domestic

entities to establish and own business enterprises or to compete

with public enterprises. However, the Constitution provides that

only Cambodian citizens or legal entities have the right to own

land. A legal entity is considered to be Cambodian when at least 51

percent of its shares are owned by Cambodian citizen(s) or by

Cambodian legal entities. Investment incentives vary depending on

the nature of the investment project.

 

40. Under the 2001 Land Law, foreign investors may secure control

over land through concessions, long-term leases, or renewable

short-term leases. If investors intend to take a long-term lease

interest in land or ownership interest through a 51 percent

Cambodian company, it is essential that caution be exercised to

ensure that clear and unencumbered ownership of the land is

verified.

 

41. The Land Law establishes a comprehensive legal framework for

long-term leasing. The leaseholder has a contractual interest in

the land, which means the lease can be sold or transferred through

succession and can be pledged as security in order to raise

financing. It is also important to make sure that the land

ownership is clearly and legally established before entering into

any leasing agreement.

 

42. Qualified investors approved by the Council for the Development

of Cambodia have the right to own buildings built on leased

property. However the law is unclear as to whether buildings from

qualified projects can be transferred between foreign investors or

whether foreign investors can own buildings built through projects

not approved by the CDC. To remove the ambiguity, several real

estate developers and members of the legal community are urging the

government to issue formal regulations for foreign ownership rights

on buildings such as apartments and condominiums.

 

Protection of Property Rights

——————————

 

43. Cambodia has adopted legislation concerning the protection of

property rights, including the Land Law and the Law on Copyrights

and Law on Patent and Industrial Design. Cambodia is a member of

the World Intellectual Property Organization (WIPO) and the Paris

Convention for the Protection of Industrial Property.

 

44. Chattel and real property: The 2001 Land Law provides a

framework for real property security and a system for recording

titles and ownership. Land titles issued prior to the end of the

Khmer Rouge regime in 1979 are not recognized due to the severe

dislocations that occurred during the Khmer Rouge period. The

government is making efforts to accelerate the issuance of land

titles, but in practice, the titling system is cumbersome,

expensive, and subject to corruption. The majority of property

owners lack documentation proving ownership. Even where title

records exist, recognition of legal title to land has been a problem

in some court cases where judges have sought additional proof of

 

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ownership. Although foreigners are constitutionally forbidden to

own land, the 2001 law allows long or short-term leases to

foreigners.

 

45. Intellectual property rights (IPR): As a WTO member,

Cambodia\’s IPR regime is in compliance with its WTO commitments;

however, comprehensive enforcement remains problematic. The 1996

U.S.-Cambodia Trade Agreement contained a broad range of IPR

protections, but given Cambodia\’s very limited experience with IPR,

the WTO agreement granted phase-in periods for the Cambodian

government to fully implement IPR protections. On November 9, 2005,

the WTO granted a deadline extension until 2013 for Cambodia and

other least developed countries to enforce copyright laws and begin

accepting patents.

 

46. In a significant step toward consolidating IPR policy-making,

enforcement and technical assistance, the Council of Ministers

created the National Committee for Intellectual Property Management

on September 18, 2008 with its secretariat within the Ministry of

Commerce. Once operational, this committee will develop national

policy on intellectual property, strengthen interagency cooperation,

prepare and disseminate new laws and regulations, and act as a

clearinghouse for technical assistance relating to the intellectual

property sector. This new interagency IPR committee chaired by the

Minister of Commerce includes a broad range of IPR actors including

representatives from the Council of Ministers and the Ministries of

Industry Mines and Energy; Culture and Fine Arts; Interior; Economy

and Finance; Posts and Telecommunications; Health; Agriculture,

Forestry and Fisheries; Environment; Justice; Education; and

Tourism.

 

47. Trademarks: The Cambodian National Assembly approved the Law

Concerning Marks, Trade Names and Acts of Unfair Competition to

comply with Cambodia\’s WTO obligations under the Agreement on

Trade-Related Aspects of Intellectual Property Rights (TRIPS).

Signed in February 2002, the law outlines specific penalties for

trademark violations, including jail sentences and fines for

counterfeiting registered marks. It also contains detailed

procedures for registering trademarks, invalidation and removal,

licensing of marks, and infringement and remedies.

 

48. Despite lacking clear legal authority to conduct enforcement

activities, the Ministry of Commerce has taken effective action

against trademark infringement in several cases since 1998. The

Ministry has ordered local firms to stop using well-known U.S.

marks, including Pizza Hut, McDonalds, Nike, Scotties, Marlboro,

Seven Eleven, and Pringles. In 2008, the Ministry of Commerce

resolved 12 cases of trademark infringements.

 

49. Since 1991, the Ministry of Commerce has maintained an

effective trademark registration system, registering more than

30,000 trademarks (nearly 6,000 for U.S. companies) under the terms

of a 1991 sub-decree, and has proven cooperative in preventing

unauthorized individuals from registering U.S. trademarks in

Cambodia.

 

50. Copyrights: Copyrights are governed by the Law on Copyrights

and Related Rights, which was enacted in January 2003.

Responsibility for copyrights is split between the Ministry of

Culture and Fine Arts, which handles phonograms, CDs, DVDs, and

other recordings, and the Ministry of Information, which deals with

printed materials. Pirated CDs, videos, textbooks, and other

copyrighted materials are widely available in Cambodian markets and

used throughout the country. Before the adoption of the law, there

were no provisions for enforcement of copyrights.

 

51. To protect and manage their economic rights, authors and

related rights holders are allowed by law to establish a collective

management organization (CMO). The creation of the CMO requires

authorization from either the Ministry of Culture and Fine Arts or

the Ministry of Information, depending on the nature of their work.

The Ministry of Culture and Fine Arts hopes to draft a sub-decree on

collective management in 2009. In mid-2007, the Ministry of Culture

and Fine Arts created a Copyright Department which is gradually

building capacity.

 

52. Patents and industrial designs: Cambodia has a very small

industrial base, and infringement on patents and industrial designs

is not yet commercially significant. With assistance from WIPO, the

Ministry of Industry, Mines, and Energy (MIME) prepared a

comprehensive law on the protection of patents and industrial

designs which went into force in January 2003. The law provides for

 

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the filing, registration, and protection of patents, utility model

certificates and industrial designs. The MIME issued a declaration

in June 2006 on granting patents and registering industrial

designs.

 

53. Encrypted satellite signals, semiconductor layout designs, and

trade secrets: The Ministry of Commerce is preparing a draft law

for trade secrets while the Ministry of Industry, Mines, and Energy

is drafting a law on integrated circuit protection. Cambodia has

not yet made significant progress toward enacting required

legislation on encrypted satellite signals, although it obtained a

model law on encrypted satellite signals and semiconductor layout

designs from WIPO in March 1999. Cambodia has committed to the WTO

to promulgate a law by 2009 but is unlikely to meet this goal.

 

54. IPR enforcement: With the exception of the trademark

enforcement, the Cambodian government has taken few significant

actions to enforce its IPR obligations. However, in January 2008,

at the annual conference of the Ministry of Culture and Fine Arts,

the government suggested it would increase prosecutions for

copyright violations on domestically produced products before

expanding prosecutions for foreign products. Cambodian copyright

law allows IPR owners to file a complaint with the authorities to

take action. Law enforcement action taken at the request of owners

is directed against the piracy of domestically produced music or

video products, but not against piracy of foreign optical media.

The owners requesting crackdowns must pay support costs to the

authorities for conducting the operation. Crackdowns on such IPR

violations are not conducted on a consistent basis.

 

55. Infringement of IPR is pervasive, ranging from software,

compact discs, and music, to photocopied books and the sale of

counterfeit products, including cigarettes, alcohol, and

pharmaceuticals. The Business Software Alliance recently estimated

a 95 percent software piracy rate in Cambodia which cost the

industry USD 47 million in 2007. Although Cambodia is not a major

center for the production and export of pirated CDs, videos, and

other copyrighted materials, local businesses report Cambodia is

becoming an increasingly popular source of pirated material due to

weak enforcement. The Ministry of Commerce has plans to put in

place measures to stop IPR-violated products at borders, as

post-inspection mechanisms are unlikely to be effective. During the

TIFA discussions in November 2007, Cambodia requested technical

assistance for a draft Sub-decree on Border Measures detailing

procedures at the borders allowing IPR owners to file an application

with customs to suspend clearance of suspected counterfeit goods.

 

Transparency of the Regulatory System

————————————–

 

56. There is no pattern of discrimination against foreign investors

in Cambodia through a regulatory regime. Numerous issues of

transparency in the regulatory regime arise, however, from the lack

of legislation and the weakness of key institutions. Investors

often complain that the decisions of Cambodian regulatory agencies

are inconsistent, irrational, or corrupt.

 

57. The Cambodian government is still in the process of drafting

laws and regulations that establish the framework for the market

economy. In addition to existing laws and regulations, in 2008, the

government adopted the Law on Civil Aviation and the Law on Plant

Breeder Rights. A commercial contract law and other important

business-related laws such as commercial court, e-commerce,

telecommunications, and personal property leasing laws are in draft

or still pending promulgation.

 

58. Cambodia currently has no anti-monopoly or anti-trust statutes.

On a practical level, Cambodia has indicated a desire to discourage

monopolistic trading arrangements in most sectors.

 

59. Cambodia is currently working on the establishment of standards

and other technical measures based on international practice,

guidelines, and recommendations. Under the Law on Standards in

Cambodia, passed in 2007, the Institute of Standards in Cambodia

(ISC) was created within the Ministry of Industry, Mines, and Energy

(MIME) as a central authority to develop and certify national

standards for products, commodities, materials, services, and

practices and operations. When fully functional, the ISC will serve

as the secretariat of the National Standards Council which will

consist of representatives from various government ministries,

state-controlled academic/research institutions, the private sector,

and a consumer representative created to advise as well as approve

 

PHNOM PENH 00000071 009 OF 016

 

standards.

 

60. The responsibility for establishing industrial standards and

certifications currently resides with the Department of Industrial

Standards of Cambodia of MIME which will become part of the

Institute of Standards of Cambodia in the future. The ISC has been

assigned as the focal point for technical barriers to trade (TBT)

and as the agency responsible for notifications and publications

required by the WTO TBT Agreement. The Ministry of Health is

charged with prescribing standards, quality control, distribution

and labeling requirement for medicines, but this responsibility will

be brought under the ISC in the future.

 

61. Quality control of foodstuffs, plant and animal products is

currently under the Department of Inspection and Fraud Repression

(CamControl) of the Ministry of Commerce. Cambodia is a member of

the Codex Alimentarius Commission. Currently CamControl is the

national contact point for Codex Alimentarius. Its primary

responsibility is the enforcement of quality and safety of products

and services relating to sanitary and phytosanitary (SPS) measures.

 

62. The Cambodian Constitution and the 1997 Labor Code provide for

compliance with internationally recognized core labor standards.

The law authorizes the Ministry of Labor and Vocational Training to

set health, safety and other conditions for the workplace. (The

\”Labor\” Section of this report discusses the labor situation in more

detail.)

 

63. The National Bank of Cambodia supervises Cambodia\’s banks and

financial institutions while the Ministry of Economy and Finance

regulates the insurance industry. The insurance market in Cambodia

is relatively new, but has recently begun to gain credibility and

expand its scope. Currently, there are a few major insurance

companies operating here such as Asia Insurance, the state-owned

insurance company Caminco, Forte Insurance, and Infinity Insurance.

 

64. To help Cambodian businesses stay competitive in the world

market, the government introduced specific measures to facilitate

business, in particular exports, by attempting to reduce informal

costs and streamline bureaucratic hurdles. Measures included: (1)

introduction of a joint inspection by CamControl and the Customs and

Excise Department and issuance of a common inspection report valid

for both agencies and the \”Federal Office\” in order to reduce the

amount of time spent applying for goods inspection; (2) based on

this common report, MIME and the Ministry of Commerce will issue the

Certificate of Processing (CP) and the Certificate of Origin (CO),

respectively; (3) reduction of the costs of registration from USD

615 to USD 177 and of the time limit for Cambodian government

issuance of registration from 30 days to ten and a half working

days; and (4) reduction of time required to acquire documents

related to the CO and exports and for goods inspection.

 

65. Cambodia has renewed its commitment to creating a favorable

environment for investment and trade. During the Trade and

Investment Framework Agreement (TIFA) discussions in November 2007,

the government further committed to reducing unofficial fees and

costs related to imports and exports.

 

Efficient Capital Markets and Portfolio Investment

——————————————— —–

 

66. Cambodia is moving to address the need for capital markets. In

November 2006, the National Assembly passed legislation to permit

the government to issue bonds and use the capital to make up budget

deficits. The Budget Law for 2007 permitted the government to issue

bonds worth USD 250,000. However no 2007 bonds were sold to

investors and Prime Minister Hun Sen mentioned in 2008 that the

government does not plan to issue bonds in the near future. In

2007, the government also passed the Law on the Issuance and Trading

of Non-government Securities, and, in partnership with the Korean

Stock Exchange, plans to establish a stock market by the end of

2009.

 

67. The Cambodian government does not use regulation of capital

markets to restrict foreign investment. Domestic financing is

difficult to obtain at competitive interest rates. A new law

addressing secured transactions, which includes a system for

registering such secured interests, was promulgated in May 2007.

Most loans are secured by real property mortgages or deposits of

cash or other liquid assets, as provided for in the existing

contract law and land law.

 

PHNOM PENH 00000071 010 OF 016

 

68. The total assets of Cambodia\’s banking system as of July 2008

were approximately USD 4 billion, an increase of nearly 50 percent

from the end of 2005. Loans account for about 56 percent of the

banking system\’s assets. Nonperforming loans have fallen to

historic lows, between 2 – 4 percent, likely due to dramatic

increases in property values through mid-2008, but banking experts

predict an increase in future nonperforming loans as property prices

decline. As of July 2008, credit granted by the commercial banks

amounted to USD 2.2 billion. Loans made to services and the

wholesale and retail sectors accounted for over 50 percent of total

loans.

 

69. The banking sector has shown significant improvement, but

requires continued progress to gain international confidence. Under

the amended Law on Banking and Financial Institutions, all of

Cambodia\’s commercial banks had to reapply for licenses from the NBC

and meet new, stricter capital and prudential requirements by the

end of 2001. As a result, there was a significant shakeout and

consolidation within the banking sector with the closure and

liquidation of 12 banks. Since the shakeout, Cambodian banks have

gradually increased in number with 25 commercial banks in operation

as of January 2009. As a supplement to commercial banking, six

specialized banks and seventeen microfinance institutions also offer

financial services to the public. In September 2008, the National

Bank of Cambodia moved to slow the rapid growth in the number of

commercial banks, which increased by more than 20 percent in the

first nine months of 2008, giving commercial banks without an

investment grade shareholder until the end of 2010 to triple minimum

capital from USD 12.5 million to USD 37.5 million. In January 2008,

Cambodia\’s banks were given their first-ever risk assessment from

Standard & Poor\’s. Their placement was alongside that of banks in

Venezuela, Bolivia, Ukraine, and Jamaica.

 

Political Violence

——————-

 

70. Cambodia is relatively peaceful compared to its pre-UNTAC

history. Election-related violence has decreased in each national

election held at five-year intervals since 1993. Cambodia\’s 2007

commune council elections followed by the July 2008 National

Assembly election had little of the pre-election violence or

intimidation that preceded the 2002 and 2003 elections. The 2007

and 2008 polls resulted in clear victories for the Cambodian

People\’s Party, with the Sam Rainsy Party emerging as the main

opposition party.

 

71. Cambodian political activities have turned violent in the past,

and the possibility for politically motivated violence remains. In

November 2000, an anti-government group based in the U.S. led an

attack against government buildings in Phnom Penh. During the

anti-Thai riots in 2003, the Royal Embassy of Thailand and

Thai-owned commercial establishments were attacked. In November

2006, police arrested six people for allegedly plotting to conduct

bomb attacks in Phnom Penh during the Water Festival.

 

72. On July 29, 2007, three improvised explosive devices (IEDs)

were planted at the Vietnam-Cambodia Friendship Monument in Phnom

Penh. One of the IEDs partially exploded, but the others failed to

detonate and were recovered by Cambodian authorities. No one was

injured. On January 2, 2009, two undetonated IEDs were found near

the Ministry of National Defense and state-owned TV3. While there

is no indication these incidents were directed at U.S. or other

Western interests, the possibility remains that further attacks

could be carried out.

 

73. Following the July 2008 UNESCO World Heritage Site listing of

the Preah Vihear Temple, thousands of Thai and Cambodian soldiers

amassed in various areas along the Thai-Cambodian border,

particularly near the disputed Preah Vihear temple area. Soldiers

clashed October 15, 2008 near the temple resulting in deaths on both

sides, but the outbreak of violence was isolated and lasted only a

few hours.

 

Corruption

———–

 

74. Despite increasing investor interest, Cambodia continues to

rank poorly on global surveys of competitiveness and corruption.

The World Economic Forum\’s 2008 competitiveness survey ranked

Cambodia 109 out of 134 countries surveyed, slightly better than its

2007 rating of 110 out of 131. The World Bank also ranked Cambodia

in the lower half of the list, 134 of 181, on business climate. The

 

PHNOM PENH 00000071 011 OF 016

 

2007 Transparency International Global Corruption Barometer ranked

Cambodia second-worst in corruption with 72 percent of those

surveyed reporting that they paid a bribe to receive a service in

the previous 12 months.

 

75. Business people, both local and foreign, have identified

corruption, particularly within the judiciary, as the single biggest

deterrent to investment in Cambodia. Corruption was cited by a

plurality of respondents to the World Economic Forum survey as the

most problematic factor for doing business in Cambodia. A 2007

USAID-funded survey of the Phnom Penh Chamber of Commerce also found

that corruption is considered to be the main obstacle for doing

business.

 

76. Public sector salaries range from USD 25-60 per month for

working level officials, and around USD 2000 per month for

high-ranking officials. Although there has been a recent salary

increase of 15 percent for some officials, these wages are far below

the level required to maintain a suitable quality of life in

Cambodia, and as a result, public employees are susceptible to

corruption and conflicts of interest. Local and foreign businesses

report that they must often pay extra facilitation fees to expedite

any business transaction. Additionally, for those seeking to enter

the Cambodian market, the process for awarding government contracts

is not transparent and is subject to major irregularities.

 

77. Current Cambodian laws and regulations and their application

are insufficient to address the problem of corruption. Laws dating

from the UNTAC period (1991-93) against embezzlement, extortion, and

bribing public officials exist, but are enforced rarely, often for

political reasons.

 

78. Cambodia is not a signatory to the OECD Anti-Bribery

Convention, but has endorsed the ADB/OECD Anti-Corruption Action

Plan for Asia and the Pacific. In 2007, the government signed a

regional anti-corruption pact with eight other ASEAN countries, and

in September of the same year, also signed the UN Convention Against

Corruption. Cambodia is considering joining the Extractive

Industries Transparency Initiative governing the oil sector.

 

79. After a draft national anti-corruption law was sent to the

National Assembly but not voted on in 2003, the Cambodian government

undertook to revise the draft with cooperation from local and

international NGOs, and international donors. The draft, which is

still pending, falls short of international standards due to limited

independence of the proposed anti-corruption body and weak

declaration of assets provisions.

 

80. Cambodia is under increasing pressure from donors to address

the issue of good governance in general, and corruption in

particular. In a draft action plan on good governance presented to

donors in May 2000, Cambodia promised to pass anti-corruption

legislation by late 2001. After missing the first deadline, the

government again promised to pass anti-corruption legislation by

July 2003. In the December 2004 Consultative Group (CG) meeting of

development assistance agencies, donors established a benchmark to

have a new anti-corruption law submitted to the National Assembly

before the next CG meeting, which was held June, 2006. However,

this deadline was not met and donors have become increasingly

frustrated with the government\’s failure to act. The passage of new

anti-corruption legislation is reportedly a high priority for the

fourth mandate government.

 

81. The Ministry of National Assembly-Senate Relations and

Inspection (MONASRI) has an anti-corruption mandate, but is largely

inactive. In 2007, however, MONASRI, with technical assistance from

USAID, created a draft Access to Information Policy. The draft has

yet to be forwarded to the Council of Ministers. The government

also created an anti-corruption commission within the cabinet in

late 1999, which has undertaken a few investigations, one of which

resulted in the dismissal of a mid-level official in late 2001.

Also in 2001, the government established a National Audit Authority,

which has been ineffective because of its secrecy and lack of

independence.

 

82. Ignoring the existing anti-corruption commission, the

government established the Anti-Corruption Unit (ACU) in August

2006, a temporary body designed to address corruption until the

anti-corruption legislation is passed. The mission of the ACU is to

focus on preventing corruption, strengthening law enforcement, and

obtaining public support for combating corruption. The first

investigation of ACU resulted in the arrest of five illegal car

 

PHNOM PENH 00000071 012 OF 016

 

importers and 39 officials; 10 mid-level officials have been removed

from their positions. Other investigations are underway. However

the ACU is considered to be ineffective because of its lack of

independence and capacity.

 

83. In its most comprehensive reform strategy, the Rectangular

Strategy Phase II, adopted as the government platform in 2008 after

phase I in 2004, the Cambodian government once again renewed its

commitment to fight corruption and make good governance the

centerpiece of reform. The strategy acknowledges the importance of

taking action against corruption, but the challenge remains a

daunting and long-term one that will require political will at the

highest levels of the government.

 

Bilateral Investment Agreements

——————————-

 

84. Cambodia has signed bilateral investment agreements with China,

Croatia, Cuba, the Czech Republic, France, Germany, Indonesia,

Kuwait, Japan, Laos, Malaysia, the Netherlands, North Korea, the

Organization of the Petroleum Exporting Countries (OPEC), Pakistan,

the Philippines, Singapore, South Korea, Switzerland, Thailand, and

Vietnam. Future agreements with Algeria, Burma, Egypt, Russia, the

United Kingdom, and Ukraine are planned. The agreements provide

recprocal national treatment to investors, excluding benefits

deriving from membership in future customs unions or free trade

areas and agreements relating to taxation. The agreements preclude

expropriations except those that are undertaken for a lawful or

public purpose, are non-discriminatory, and are accompanied by

prompt, adequate and effective compensation at the fair market value

of the property prior to expropriation. The agreements also

guarantee repatriation of investments and provide for settlement of

investment disputes via arbitration.

 

85. In addition, in July 2006, Cambodia signed a Trade and

Investment Framework Agreement (TIFA) with the United States, which

will promote greater trade and investment in both countries and

provide a forum to address bilateral trade and investment issues.

Two very successful meetings were held under the TIFA in 2007 in

which the U.S. and Cambodian governments discussed WTO accession

requirements, trade facilitation and economic development

initiatives, and progress on intellectual property rights. In 2008,

several bilateral working level meetings were held to advance the

TIFA agenda.

 

OPIC and Other Investment Insurance Programs

——————————————–

 

86. Cambodia is eligible for the Quick Cover Program under which

the Overseas Private Investment Corporation (OPIC) offers financing

and political risk insurance coverage for projects on an expedited

basis. With most investment contracts written in U.S. dollars,

there is little exchange risk. Even for riel-denominated

transactions, there is only one exchange rate, which is fairly

stable.

 

87. Cambodia is a member of the Multilateral Investment Guarantee

Agency (MIGA) of the World Bank, which offers political-risk

insurance to foreign investors.

 

Labor

——-

 

88. The country has an economically active population (defined as

being ten years of age and older) of some 7.8 million people out of

a population of 13.4 million. According to the EIC, the labor

participation rate was 70 percent in 2008. While government

statistics are somewhat higher, they do not fully capture the

problems of unemployment and underemployment in Cambodia.

 

89. The economy is not able to generate enough jobs in the formal

sector to handle the large number of entrants to the job market.

This dilemma is likely to become more pronounced over the next

decade. Cambodia suffers from a large demographic imbalance.

According to the 2004 Intercensal Population Survey (CIPS), persons

20 years of age or younger account for 53 percent of the total

population. As a result, over the next decade at least 275,000 new

job seekers will enter the labor market each year.

 

90. Approximately 65 – 70 percent of the labor force is engaged in

subsistence agriculture. At the end of 2008, about 337,000 people,

the majority of whom are women, were employed in the garment sector,

 

PHNOM PENH 00000071 013 OF 016

 

with 300,000 Cambodians employed in the tourism sector, and a

further 50,000 people in construction.

 

91. The 2008-2009 Global Competitiveness Report of the World

Economic Forum identified an inadequately educated workforce as one

of the most serious problems in doing business in Cambodia. Given

the severe disruption to the Cambodian education system and loss of

skilled Cambodians during the 1975-79 Khmer Rouge period, workers

with higher education or specialized skills are few and in high

demand. A Cambodia Socio-Economic Survey conducted in 2004 found

that about 12 percent of the labor force has completed at least an

elementary education. Only 1.2 percent of the labor force completed

post-secondary education.

 

92. Overall literacy, for those aged fifteen and over, is 74

percent with male literacy rates considerably higher than those for

females in both urban and rural areas. Many adults and children

enroll in supplementary educational programs, including English and

computer training. Employers report that Cambodian workers are

eager to learn and, when trained, are excellent, hardworking

employees.

 

93. Cambodia\’s 1997 labor code protects the right of association

and the rights to organize and bargain collectively. The code

prohibits forced or compulsory labor, establishes 15 as the minimum

allowable age for paid work, and 18 as the minimum age for anyone

engaged in work that is hazardous, unhealthy or unsafe. The statute

also guarantees an eight-hour workday and 48-hour work week, and

provides for time-and-a-half pay for overtime or work on the

employee\’s day off. The law gives the Ministry of Labor and

Vocational Training (MOLVT) a legal mandate to set minimum wages

after consultation with the tripartite Labor Advisory Committee. In

January 2007, the minimum wage for garment and footwear workers was

officially set at USD 50 per month. In April 2008, a temporary USD

6 per month cost of living allowance was instituted to offset high

levels of inflation. There is no minimum wage for any other

industry. To increase competitiveness of garment manufacturers, the

labor code was amended in 2007 to establish a night shift wage of

130 percent of day time wages.

 

94. Acleda Bank, a local commercial bank, is currently managing

Cambodia\’s first National Social Security Fund (NSSF), which

protects workers against occupational risks and workplace accidents.

The fund was established by sub-decree in 2007 and requires

employers to contribute 0.8 percent of each employee\’s salary to the

NSSF. As of October, 2007, approximately 250,000 workers, most from

the garment sector, contribute to the fund through their employer.

A second phase of the fund, to be implemented in 2010, will focus on

health care for employees, followed by pensions in 2012.

 

95. Enforcement of many aspects of the labor code is poor, albeit

improving. Labor disputes can be problematic and may involve

workers simply demanding conditions to which they are legally

entitled. In labor disputes in which workers complain of poor or

unhealthy conditions, MOLVT and the Ministry of Commerce have

ordered the employer to take corrective measures. The U.S.

Government, the ILO, and others are working closely with Cambodia to

improve enforcement of the labor code and workers\’ rights in

general. The U.S.-Cambodia Bilateral Textile Agreement linked

Cambodian compliance with internationally recognized core labor

standards with the level of textile quota the U.S. granted to

Cambodia. While the quota regime ended on January 1, 2005, a

\”Better Factories\” program attempts to build on the labor standards

established.

 

96. For the past few years, Cambodia has enjoyed high economic

growth and low inflation of approximately 4-6 percent, keeping

inflation-driven wage increases in check. However, the early part

of 2008 saw inflation skyrocket, driven in part by high oil and food

prices. After peaking in May, inflation has slowly been declining

to about 18 percent in November, year-on-year. Experts suggest the

increase in the cost of living insufficiently compensated by the

recent USD 6 cost of living allowance has led to a recent shortage

of workers willing to work in the garment industry.

 

Foreign Trade Zones

——————-

 

97. To facilitate the country\’s development, the Cambodian

government has shown great interest in increasing exports via

geographically defined special economic zones (SEZs), with the goal

of attracting much-needed foreign direct investment.

 

PHNOM PENH 00000071 014 OF 016

 

98. Cambodia has yet to pass the Law on Industrial Zones which will

define SEZs and establish the rules under which they will operate.

The law is currently being drafted by the Council for the

Development of Cambodia and may be submitted for approval of the

Council of Ministers in 2009.

 

99. In late December 2005, the Council of Ministers passed a

sub-decree on Establishment and Management of Special Economic Zones

to speed up the creation of the zones. The sub-decree details

procedures, conditions and incentives for the investors in the

zone.

 

100. Since issuing the sub-decree, the Cambodia Special Economic

Zones Board (CSEZB) has approved 19 SEZs, located near the borders

of Thailand and Vietnam, Phnom Penh, Kampot, and at Sihanoukville.

 

Foreign Investment Statistics

——————————-

 

101. Foreign Direct Investment (FDI) proposals approved by the

Council for the Development of Cambodia (CDC) have dramatically

increased in recent years, with approved FDI reaching USD 10.9

billion in 2008, compared with USD 201 million in 2004. FDI

registered capital however, has been modest since 1995, with an

average inflow of USD 304 million in the period 1995-2008. The FDI

registered capital figures probably understate actual investment,

since they report only registered capital and not fixed assets. CDC

statistics for fixed assets, however, are based on projections, and

the CDC has no effective monitoring mechanism to determine the

veracity of the numbers. The FDI registered capital flow into

Cambodia is uneven and gradually declined from USD 135 million in

1999 to USD 30 million in 2003. FDI registered capital increased to

USD 260 million in 2008.

 

102. Total FDI registered capital flows into Cambodia for the years

1995-2008 are presented in the table below, in USD million.

(Source: CDC) (Note: statistics from the National Bank of Cambodia

differ significantly from CDC\’s figures.)

 

1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008

—- —- —- —- —- —- —- —- —- —- —- —- —-

351 294 320 135 74 81 50 30 45 383 209 473 260

 

103. Figures from the CDC for registered capital of approved

projects, including domestic investment, and broken down by country

of origin and economic sector, are provided below. The FDI

registered capital figures below may overstate investment because

they include projects that have not yet been, or may never be, fully

implemented and retention of dormant or defunct projects from

earlier years makes the investment figures appear higher.

 

104. Total cumulative registered investment projects approved, by

country of origin, August 1994 to December 2008 (source: CDC)

 

Country USD million Pct.

 

Malaysia 1,736 32.79

Cambodia 1,509 28.50

China 569 10.27

Taiwan 400 7.56

Thailand 206 3.89

Singapore 194 3.67

South Korea 165 3.12

U.K. 130 2.46

USA 70 1.32

Vietnam 61 1.15

Indonesia 54 1.02

Australia 54 1.02

France 40 0.76

Japan 23 0.43

Other 82 1.55

Total 5293

 

—————————————-

 

105. Total cumulative registered investment capital by sector, from

January 1998 to December 2008 (source CDC)

 

Sector USD million No. of Projects

Industry 1,482.0 699

– Food Processing 91.5 12

 

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– Garments 449.4 401

– Petroleum 203.0 5

– Wood Processing 98.3 15

– Footwear 27.8 21

Agriculture 177.1 74

Services 338.8 78

– Construction 63.6 14

– Telecommunications 92.5 15

Tourism 434.4 88

Total 2432.4

 

106. New investment projects in USD million, by country of

origin,1998-2008(source: CDC)

 

Country 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008

——– —- —- —- —- —- —- —- —- —- —- —-

Malaysia 22.6 17 1.6 28 na 3.6 7.8 10.6 2.5 19.8 1.0

Cambodia 110 98 28 47 21 44 15 78.5 116.8 264.3 99.8

USA 2.3 4.4 3.7 5.2 na na 2.1 2.2 4.3 6.5 12.3

Taiwan 79 29 16 35.6 5 1 4.6 4.1 16.4 14 9.5

Singapore 12 2.3 3.1 na 10 3.3 1.6 5.3 3.8 1 12

China 75 36 3.9 4.2 8 14 24 38 28.3 40.4 37.9

South Korea 4.0 na 10 2 7.6 1 4.1 16 4.5 22.0 19.5

Hong Kong 48 22 4 0.7 1 1 na 0.3 1.5 0.6 na

France 0.6 0.6 3 na na 1.7 0.6 0.4 na 0.3 2.3

Thailand 53 16 17 3.1 na 3.1 2.0 15 10.0 13.8 30.6

U.K. 0.4 1.5 6.5 1.5 0.4 0.5 1.5 1 1 1.5 1

Canada 2.1 0.2 1 na 2.2 na 1.7 0.6 1.5 na 4.8

Indonesia 10 0.4 3 na na na na na na na na

Australia 1.4 0.02 0.8 na na 0.6 na 7 na 3.5 1

Japan 2 2.1 0.2 na 1.2 na 0.7 na 1 7.5 4.6

Other 8.3 2.8 1.3 1.7 13.6 na na na 8.1 78.5 4.1

——————————————— ——

Total 430 233 103 129 69 74.3 66 379 209.7 473.7 259.9

 

107. New investment projects in USD million, by sector, 1998-2008

(source: CDC)

 

Sector 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008

—— —- —- —- —- —- —- —- —- —- —- —-

Industry 298 101 48 61 22.5 41 53.5 325 173.4 269.9 90

– Food 8.0 2.4 27 1.5 na 1.6 1 na 22 24 4

Processing

– Garments 91.6 49.5 28 17 12.6 42 19 54 41.9 45.1 49

– Petroleum 1 1 na na na na 1 200 na na na

– Wood 92 na na 1 1 1.3 1 na na 2.0 na

Processing

– Mining 5 na na na na 2 na 30 1 149 4

 

Agriculture 44 31.3 8.5 1 6.2 2.0 2.0 4.0 2.0 50.1 26

 

Services 22.1 55 10 5.2 18 5.5 5 32 16.3 127.2 43

 

– Construct 1.2 16.4 na na na na 3.0 31 6.0 5 1

– Telecom 13.4 22 na na 2.9 10 na na na 42.2 2

– Infrastructure 2 na na 1.5 4.1 na na na na 65 na

 

Tourism 67 45.5 36.5 61 22 26 5.5 18 18 33.5 101

——————————————— ——

Total 430 233 103 129 69 74 66 379 210 473 261

 

108. The CDC has registered approximately USD 70 million in U.S.

investment since August 1994. Caltex has a chain of service

stations and a petroleum holding facility in Sihanoukville; Crown

Beverage Cans Cambodia Limited, a part of Crown Holdings Inc.,

produces aluminum cans; and Chevron is actively exploring offshore

petroleum deposits. There are also U.S. investors in a number of

Cambodia\’s garment factories.

 

109. In 2008, several Cambodia-focused private equity funds emerged

seeking to raise between USD 100 and USD 500 million each for

investments in infrastructure, agriculture, tourism, and real estate

development, among other sectors. However it appears the global

economic slowdown is limiting fund-raising abilities, and widespread

investments by these funds have not yet materialized.

 

110. Major non-U.S. foreign investors include Asia Pacific

Breweries (Singapore), Asia Insurance (Hong Kong), ANZ Bank

(Australia), BHP Billiton (Australia), Oxiana (Australia), Infinity

Financial Solutions (Malaysia), Total (France), Cambodia Airport

Management Services (CAMS) (France), Samart Mobil Phone (Malaysia),

Shinawatra Mobile Phone (Singapore), Thakral Cambodia Industries

 

PHNOM PENH 00000071 016 OF 016

 

(Singapore), Petronas Cambodia (Malaysia), Charoeun Pokphand

(Thailand), Siam Cement (Thailand), and Cambrew (Malaysia).

 

111. Since 2007, several well-known U.S. companies opened or

upgraded their presence in Cambodia. General Electric opened a

representative office in July 2007. In 2008, Cargill and Dupont

established representative offices. Otis Elevators, a division of

United Technologies, also upgraded to a branch office, and Mircosoft

initiated a presence through its Market Development Program.

 

112. Some major local companies and their sectors are: Sokimex

(petroleum, tourism, garment), Royal Group of Companies (mobile

phone, telecommunication, banking, insurance), AZ Distribution

(construction, telecommunication), Mong Rethy Groups (construction,

agro-industry, rubber and oil palm plantation), KT Pacific Group

(airport project, construction, tobacco, food and electronics

distribution), Hero King (cigarettes, casinos and power), Anco

Brothers (cigarettes, casinos and power), Canadia Bank (banking and

real estate), Acleda Bank (microfinance), and Men Sarun Import and

Export (agro-industry, rice and rubber export).

 

113. In January 2008, Acleda Bank announced it obtained permission

to operate in Laos, and the bank has plans for further expansion

into Vietnam and China. Statistics on Cambodian investment overseas

are not available, but such investments are likely minimal.

RODLEY

Written by thaicables

July 19, 2011 at 6:29 am

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