Doing Business in Cambodia Becoming More Difficult

Cambodia ranked 137 out of 189 countries in the World Bank’s Doing Business 2014 report released Tuesday, the first drop in at least two years that shows conducting business in the country is becoming more difficult.

The report ranks countries in 10 categories, including starting a business, dealing with construction permits, getting electricity, registering property, access to credit, protecting investors, paying taxes, trading across borders, enforcing contracts and resolving insolvency.

“Cambodia made starting a business more difficult by introducing a requirement for a company name check at the Department of Intellectual Property and by increasing the costs both for getting registration documents approved and stamped by the Phnom Penh Tax Department and for completing incorporation with the commercial registrar,” the report states.

“Starting a business [in Cambodia] requires 11 procedures, takes 104 days, costs 150.6% of income per capita and requires paid-in minimum capital of 27.5% of income per capita,” it adds.

World Bank communications officer in Cambodia Bou Saroeun said Tuesday that compared to the 2013 report, “it required two more procedures, took 19 more days, and cost 50.1 percent more.”

Out of 10 categories in the report, Cambodia dropped down the ladder on four—starting a business, dealing with construction permits, registering property and resolving insolvency. But it also improved in four categories—getting credit, paying taxes, trading across borders and enforcing contracts. Two categories, getting electricity and protecting investors, remained unchanged.

The report points out that Cambodia’s most significant drop was in the category of starting a business. In 2013, the country placed 181 when it came to starting a business, now it is at 184, which is the sixth-to-last spot ahead of countries including the Democratic Republic of the Congo, Eritrea and Burma.

The country also dropped in registering property, 112 to 118; dealing with construction permits, 157 to 161; and resolving insolvency, 161 to 163. In the four categories that it improved, the largest increase was in getting credit, which jumped from 52 for 2013 to 42 for 2014, according to the report.

The other three improvements increased only one point each—paying taxes, 66 to 65; trading across borders, 115 to 114; and enforcing contracts, 163 to 162.

Getting electricity stayed the same at 134 and protecting investors also stayed the same at 80.

According to the report, Cambodia still lags far behind some of its Southeast Asian neighbors—Malaysia ranked 6 in the report; Thailand ranked 18; and Vietnam ranked 99. Laos, however, fell behind Cambodia at 159.

Though none of the measures on which the country was judged were based on the political environment, Mao Thora, secretary of state at the Ministry of Commerce, on Tuesday blamed the country’s poor showing on the opposition CNRP’s ongoing protests and political uncertainty following July’s national election.

“We recognize with the report because the activity of garment factories has been reduced, which causes the business in Cambodia to drop…because of the [election] demonstrations. Businessmen lose confidence and they hesitate to buy goods or products because CNRP has demonstrations,” he said.

The World Bank report also did not measure business confidence or sales.

Srey Chanthy, interim president of the Cambodian Economic Association, said he hoped the slide back was just a hiccup, as the country has plenty to offer investors, including land and labor.

“Cambodia still has a lot of re­sources they can invest in…the opportunity is still there,” he said.

The report comes on the heels of another report by the World Bank released earlier this month that states Cambodia’s economy would remain stable over the next few years with a gross domestic product of 7 percent as a result of the country’s strong agricultural, construction and tourism sectors, as well as exports.

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