Domestic Transportation Fees Hurt Business, Institute Says

The Cambodia Development Resource Institute proposed Tues­day the elimination of all fees that hamper domestic transport, which could provide a boost for Cam­bodian traders.

The proposal, given at a sem­inar at the Hotel Cam­bodi­ana, seeks to stimulate the rural economy in light of an economic downturn and de­creased foreign investment.

“If domestic investment grows, then foreign direct investment will follow,” said Kang Chandararot, an economist with the CDRI.

Rural exporters encounter many constraints on trade, including compliance with the official licensing system and high fees, according to a recent CDRI report. The CDRI found that many rural small traders travel long distances to avoid checkpoints, where they will be charged high fees.

Since the fees are arbitrary and often higher for quality goods, the CDRI noted, companies have no incentive to invest in their businesses or make improvements.

The proposal calls for eliminating the legal basis for collecting the fees. Without the ex­pense of the fees, the CDRI claimed, rural traders will increase their profits, some by as much as 69 percent.

The growth rate of Cambodia’s real GDP dropped 2.5 percent in 2002 and is down 3 percent since 2001, according to the CDRI. The decline, noted Kang Chandararot, is consistent with a global economic slowdown led by the US and European Union markets.

Further worrying CDRI economists is a declining trend of foreign investment since 1999.

The agency calculated that foreign investors spent $100 million in Cambodia in 2002, down from $146 million in 1999. Even worse, the actual amount of foreign in­vestment may be much less, Kang Chandararot said, because only about 50 percent of the approved investment is typically realized.

To reverse the trends, Kang Chandararot proposed increasing domestic investment and improving the climate for foreign in­vest­ment through gov­ernment transparency, streamlined documentation procedures and cor­ruption, titling and property laws.

The CDRI presented a case study of fresh fish exporters to show the constraints to domestic trade. Yim Chea, a CDRI re­search­er, followed a group of fish traders from the Kompong Chhnang province to the Loung Keur market in Thailand. Along the way, the traders made 24 payments to 15 institutions at 16 places. The basis for the fee collection was not clear for 10 of the payments.

“People who collect payments without a basis shouldn’t be collecting those fees,” said Bruce Mc­Kenney, CDRI program manager. “You can call that what you want.”

Others at the seminar detailed the trade constraints in several different industries. Prom Tola, a CDRI researcher, said that roughly 100,000 rural Cambodians de­pend on resin tapping. To export resin, traders need the approval of the provincial forestry offices, the Ministry of Agriculture’s Depart­ment of Forestry and Wildlife, PFO, the Ministry of Commerce and the Council of Ministers.

Besides the red tape, fees ac­count for 39 percent of resin trade expenses. Prom Tola called for the elimination of the resin transport permit and the licensing and fee requirement, saying, “It is just an excuse to take money from the resin traders.”

The CDRI presented the proposal to a meeting of governors last May. Kang Chandararot said that many governors showed interest in the proposal, but it is impossible to know when or if it will ever be implemented.

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