Gov’t Should Do Better For Investors, PM Says

Hun Sen Vows to Crack Down on Illegal Port Fees at Ports

Cambodia’s economy continues to grow but new investment remains low and more needs to be done to curb smuggling and illegal fees paid by investors, Prime Minister Hun Sen said Wednesday.

Speaking to a room full of private investors and high-ranking government officials at the bi-annual investors’ meeting, the prime minister said the economy grew by about 5.25 percent in the first half of this year while inflation has remained low, despite a “weak external environment.”

Over the next six months, he said, the government and private investors will have to “work even harder” to make Cambodia an enticing destination for investors.

That will involve strengthening the infrastructure to lower the costs of transportation for manufacturers, and especially eliminating the high number of kickbacks businesses have to pay to operate.

“I have taken a personal interest in this matter,” Hun Sen said, encouraging private business operators to take steps to keep the government well-informed on kickbacks.

An ad hoc committee established through the government and private investors provided the prime minister with a survey of the costs of doing business, especially regarding Cambodia’s ports.

The committee reported at least 27 different points where investors had to pay illegal charges at Sihanoukville port. Businesses had to pay as much as $155 in illegal fees to pass a 40-foot container through customs, Hun Sen said.

Investors have long complained over the “high costs of doing business” in Cambodia, including high costs for electricity and water, worker inefficiency as well as kickbacks for port officials, customs, police and other officials.

“Hidden costs contribute a good deal for transportation costs,” said Minister of Economy and Finance Keat Chhon, who also encouraged investors to report any illegal charges.

The prime minister said the government was “worried” to see only a slight increase in foreign direct investment for the first half of 2002. Investments improved by the Council for the Development of Cambodia rose just 17 percent to $60 million, he said.

And even though those new investments are expected to produce 20,000 jobs, “we want to see more employment,” Hun Sen said.

The government will continue to look toward the garment and tourism sectors as a source of economic and job growth by seeking ways to accelerate their growth, he said.

Improvements to roads, bridges, airports, ports, water supplies and telecommunications were all necessary for Cambodia to reap the benefits of its “tremendous potential.”

“We believe we can, and should, do much better,” he said.

The garment industry is facing continued pressure to compete with countries like China and Vietnam, both of whom have become more competitive in the past year.

The government must consider reducing the wages paid to worker on night shifts if Cambodia is to stay competitive, said Van Sou Ieng, president of the Garment Manufacturers Association of Cambodia.

Instead of having to double the normal wage for night shift work, factories should only be required to pay 130 percent of normal wages, he said.

Hun Sen also said the government was spending more money and time toward preventing disasters such as droughts and flooding. Agriculture makes up about 40 percent of the country’s gross domestic product, he said, making the control of natural disasters important.

Keat Chhon also addressed investors Wednesday, assuring them that the government had taken “enormous steps” to improve Cambodia’s investment climate. More investment was likely with the creation of export processing zones near the Thai border and upgrades to the infrastructure along a “growth corridor” stretching from Phnom Penh to Sihanoukville and up to Koh Kong, Keat Chhon said.

For agriculture, the government-private sector working group has made efforts to help farmers and manufacturers export “semi-processed” goods, and the government would like to see more processing factories in the future for goods like cashews, soy beans, corn and coffee.

The tourism working group has made progress in establishing an effective tourism police force, while the group for manufacturing and distribution has put the Phnom Penh Chamber of Commerce in charge of standardizing bar codes for export goods, Keat Chhon said.

New customs codes are being drafted by the working group on law, taxation, governance and small- and medium-enterprises, he said.

The group on banking and finance has established a 15 percent withholding tax on savings accounts, he said.

Overall, the working groups were increasingly cooperating, said Deepak Khanna, country manager for the International Finance Corporation, which is the World Bank’s arm for private investment and helps coordinate the investors’ meeting.

The bi-annual investors meeting is designed to give Hun Sen, government officials and private sector leaders a forum to discuss problems and solutions in an effort to improve the investment environment. Wednesday’s meeting was the sixth of its kind.


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