Cambodia’s Business Rating Remains Low

Cambodia’s rank in a World Bank-International Finance Corpo­ra­tion study measuring the ease of doing business around the world remained the same this year with the country languishing at lowly 145 out of 178 surveyed countries.

Singapore retained its number one ranking in the World Bank and IFC’s “Doing Business 2008,” with New Zealand and the US placing second and third. Hong Kong and Denmark rounded out the top five.

The Democratic Republic of the Congo finished in last place and Cambodia was placed 145, just be­hind Gabon (144) and just ahead of Djibouti (146).

Even war-ravaged Iraq weighed in at a somewhat healthier 141.

The rankings were based on business regulations in 10 different areas: starting a business, dealing with licenses, employing workers, registering property, getting credit, protecting investors, paying taxes, trading across borders, enforcing contracts and closing a business.

“In recent years, Cambodia has passed a number of key business environment reforms, however some have not yet been fully im­plemented,” the World Bank and the IFC, the private sector arm of the World Bank Group, said in a statement Wednesday.

“Also, because other countries are reforming more quickly, Cam­bodia’s comparative ranking re­mains low (145 out of 178),” it said.

Stephane Guimbert, a senior economist at the World Bank office in Cambodia, which was not in­volved in the study, said Thursday that Cambodia remained relatively stable in most of the Doing Busi­ness categories.

However, scores in some categories gave a good indication of how difficult it can be to do business here.

When starting a business, the World Bank found that in Cambo­dia an average of 10 procedures were required to complete the pro­cess, which took an average of 86 days to complete.

In Singapore, starting a business required five procedures, which took five days.

Despite the low score, Tim Smyth, managing director of Indo­china Research, said it is still relatively quick and inexpensive to get a business off the ground in Cambodia.

“The proof is in the pudding. There are more companies coming in,” Smyth said. “It’s very cheap and quick [to set up a business] in Cambodia, compared to other countries.”

Guimbert said that Cambodia has made several improvements to the business climate, which have not yet registered in the annual study and he predicted that Cam­bodia’s business climate would im­prove, so long as the country was diligent about reform.

“Improvement will require sustained effort to implement the measures already decided and keep the momentum on reform,” he said.

The easiest way for Cambodia to improve its score, Guimbert added, is to improve the categories where it ranks worst, such as improving access to credit.

“The government should look at what makes most sense to ensure firms can be created, can grow, and can generate jobs,” he said.

As for Cambodia faring worse than Iraq on the report card, Smyth said that’s not necessarily a surprise.

“On the face of it, it is a bit odd and counterintuitive. But if, on the other hand, Iraq is a complete free-for-all, Iraq probably would rank well,” he said.

“But if the risk of getting blown up is one of the indicators, it’s probably not going to rank very high,” he added.

Thon Virak, deputy director of the foreign trade department at the Commerce Ministry, agreed that Cambodia needed to improve the business climate, but such change doesn’t happen over night.

“There are a lot of things that need reform, but the country needs time,” he said.

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