Graft Risk Leads FedEx to Limit Local Business

The US logistics giant FedEx has stopped accepting inbound shipments to Cambodia valued at more than $300 in order to comply with recent legislation that prohibits the payment of bribes to public officials.

FedEx representatives said yesterday that the company had made the decision to limit operations in Cambodia to ensure “its agent and its agent’s customs broker are all in full compliance” with Cambodian law and that no so-called “facilitation” payments are given to officials at Cambodian customs.

Such fees are “regularly im­posed by Customs and CamCon­trol officials to cover the costs of clearance of high-value shipments,” FedEx said.

FedEx, which announced the policy internally in February, also said it would only resume service for high-value shipments once Cambodian authorities modernize the clearance process by publishing rates and charges to cover the cost of customs clearance and properly invoice and receipt payments.

Pen Siman, director of the general department of customs and excise, could not be reached for comment yesterday.

Mey Vann, director of the finance and industry department in the Ministry of Finance, which the general department of customs and excise answers to, declined to comment as he was unaware of FedEx’s decision.

Several other officials at the Finance Ministry and customs department could not be reached.

Under Cambodia’s anticorruption statute adopted last year, paying facilitation fees to government officials is punishable by between five and ten years in jail.

The new law also makes foreign companies operating here liable under foreign bribery laws in their own countries.

As Cambodia tries to attract more investors and capital inflows, corruption laws both domestically and abroad are placing new rules on how foreign companies do business.

US law holds that facilitation payments in foreign countries are legal as long as they are not declared illegal in the country where they are paid.

Kevin Kee, country manager for DHL, an international logistics company owned by Germany’s Deutsch Post, said that tougher laws on bribery of public officials were an issue for many companies with international operations here.

To make sure that bribery is not on the company’s conscience, he said, DHL avoids dealing directly with customs officials when clearing goods.

“We don’t get involved in clearance ourselves because we outsource with a licensed broker,” he said, adding that similar practices were common in many countries in the region.

Mr Kee said, however, that DHL was in Cambodia for the “long run” and that work was being done to go through clearance in a proper and legal way.

Peter Hooi, general manager at CTSI Logistics Inc, the local representative of the courier service UPS, said companies liable under corruption laws needed Cambodian authorities to issue receipts as proof that payments are formal.

“There’s no receipt. Now that’s the only problem. There’s no receipt,” he said.

Mr Hooi also said that the practice of giving facilitation fees to customs officials was being reduced by companies who insisted they could not continue paying them.

In January the issue of corruption was high on the agenda here when the American Cambodian Business Council held a seminar with the Anticorruption Unit about recent laws adopted in developed economies likely to affect how foreign companies operate here.

Experts say that recent changes to the law could radically change the way foreign businesses view the risk of operating in Cambodia.

“It’s a culture and these kind of payments can impact the competitiveness of our companies and this is really severe for the development of business,” said Key Kak, chairman of Morison Kak & Associes, an accountancy.

In April 2010, the UK adopted a law penalizing the bribing of foreign officials. Thirty-eight countries are party to the Anti-Bribery Convention of the Organization for Economic Co-operation and Development.

(Additional reporting by Kuch Naren)


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