Prime Minister Hun Sen on Tuesday pledged to stop smuggling and corruption, especially in the customs department, in order to attract more foreign investment.
In what was billed as the government’s first forum with foreign investors operating in Cambodia, Hun Sen said that he understood many corrupt officials demand bribes at every stage of business operations and that widespread smuggling has hampered Cambodia’s economic growth.
“Mr Customs has to stop disturbing investors…Customs is the king of corruption,” the prime minister said, singling out Customs Director Pen Siman in front of about 600 foreign investors at the Hotel Inter-Continental. “Mr Customs, you only have the right to practice the law…You have the right to control and check out the number of goods…[but] you are not allowed to change the price of goods imported to Cambodia at all.”
Hun Sen pledged that customs officials who are found taking bribes will be fired.
Though revelations of corruption have struck many government ministries and agencies, the prime minister chose Tuesday to single out the customs department, which is led by Pen Siman, a close associate of Chea Sim, the CPP president who is not part of Hun Sen’s inner circle.
The five-hour forum was dominated by Hun Sen, who presided over the meeting as the chair of the Council for the Development of Cambodia. There were only a few opportunities for other top government officials or business representatives to talk.
But many investors applauded Hun Sen’s initiative to open the dialogue, and agreed with his suggestion to have similar forums every six months. And Hun Sen’s rhetoric hit a chord with many urging the government to take serious measures to stop corruption and smuggling.
A representative of the International Business Club, consisting of 32 international corporations, said that weak customs operations encouraged smuggling and could lead to economic instability.
One woman executive with the Chinese-Cambodian joint venture Pharmaceutical Enterprise pointed out the need to control the smuggling of pharmaceuticals, noting that a number of substandard products are circulating in the market.
“Some pharmeceutical drugs are imported without duties, but we’re paying duties following the regulations,” said the woman. “It reduces our competitiveness.”
And a representative of a French business club also questioned how investors who respect Cambodian regulations could compete with smugglers.
“I understand there are many finished products imported to Cambodia without paying taxes and duties,” Hun Sen acknowledged. “Smuggling—it could lead to bankruptcy for companies that pay import taxes and duties.”
After the meeting, Pen Siman said Hun Sen’s criticism of the his department would serve as motivation to improve operations and staff education.
“I taped all his speech to let my staff listen to it,” Pen Siman said. “I will immediately send the tape to all the custom offices.”
In his opening speech, Hun Sen assured the audience that the government is on the right track.
The premier noted the government is committed to improving peace and security, strengthening laws, developing investment opportunities and integrating Cambodia into regional and international markets. Such commitments will provide a favorable environment for private investors who are “an engine of economic growth and [our] development partner,” he said.
Finance Minister Keat Chhon reported that with Cambodia entering the Asean Free Trade Area, customs duties will be gradually reduced, starting on Jan 1. Procedures also will be improved, he said.
But Hun Sen dashed any hope that the government would reduce the Value Added Tax.
He said that the revenue from VAT was needed to offset the reductions in customs duties.
A member of the Cambodia Timber Industry Association complained that the timber royalty rate, which was increased from $14 to $54 per cubic meter in January 1999, threatened to cripple the commercial logging industry.
But Hun Sen said the government would not reduce the rate, maintaining that it has helped eliminate illegal logging activities.
“If my timber policy fails, I will resign from my position,” Hun Sen said. “Please take short-term pain and wait for long-term prosperity.”
During the meeting, Hun Sen also informed investors about new government strategies to promote foreign investment.
He said the CDC would provide one-stop service—conducting all the necessary paperwork and accelerating the investment approval process from 45 to 28 days.
Hun Sen also encouraged the private sector to invest in infrastructure projects such as electricity, water supply and telecommunications through “Build-Operate-Transfer” schemes. He also said the government is open to creating several free-trade zones in the country.