When countries join the World Trade Organization, analysts often wonder how opening up their economies to the outside world will affect local businesses. But in Cambodia, economists, government officials and business leaders view WTO membership more as a way to put a legal straitjacket on an already open economy.
How the balancing act between trade liberalization and regulation plays out in Cambodia may go a long way toward assuring that the country’s fledgling domestic business sector benefits from the government’s commitments made under the WTO’s General Agreement on Trade in Services.
Sok Hach, the director of the Economic Institute of Cambodia, said during a recent discussion on the implications of GATS that most of the country’s services are already liberalized in practice, and that the government’s commitments under GATS are meant more to regulate service sectors.
“We already jumped in the water,” he said. “Now we need to learn how to swim.”
EIC statistics show the service sector, which includes tourism, communications and health, accounted for 46 percent of the gross domestic product in 2003, and employed 1.2 million people—20 percent of the work force. In WTO talks, the government worked to protect service sector jobs, said Sok Sopheak, Commerce Ministry’s Asean department director and WTO negotiator. “Companies can’t just come in here and invest and do whatever they want,” he said. GATS aims to open up the country’s service sector to international competition. Of the 155 subsectors covered under GATS, so far the country has made commitments in only about half, Sok Sopheak said.
“We are limited because legislation is not yet in place and research has not been done to see if we can benefit,” he said. He could not release a comprehensive list of the country’s commitments under GATS because the National Assembly has yet to ratify the country’s accession to the WTO.
One immediate implication of GATS is that Camnet, the Internet provider run by the Ministry of Posts and Telecommunications, must be separated from the ministry’s control, although not necessarily privatized, Sok Sopheak said.
“You cannot be referee and play volleyball at the same time,” Sok Sopheak said, referring to the ministry’s control of Camnet.
Five opposition lawmakers recently made similar conflict of interest, alleging So Khun, Posts and Telecommunications minister, accepted a $2,500 monthly salary to act as an adviser to Mobitel, the nation’s leading mobile phone company. Both So Khun and Mobitel director Kith Meng deny wrongdoing.
Proponents of service liberalization say it helps improve efficiency and transfers technology from foreign firms to local ones. Some cautioned that government oversight is needed to ensure foreign firms don’t leech off the country.
“I’m afraid Cambodia will be exploited,” said a law student who attended the seminar. “Most foreign specialists don’t want to transfer knowledge but just want Cambodians to do the simple work.”
When a foreign company invests, Sok Sopheak said, it can bring an executive and four managers. The managers can stay in the country up to five years.
Foreign business leaders saw GATS as one of many reforms that come with WTO membership. Bretton Sciaroni, a US lawyer and head of the American Cambodian Business Council, said Thursday, the country still needs a regulatory framework. “The more laws, the more predictability, transparency and investment,” he said.
“Clearly this is a fairly open economy already, but it doesn’t have the legal and regulatory framework in place,”