Funcinpec President Prince Norodom Ranariddh lashed out against the smuggling of goods into Cambodia Wednesday at a campaign rally in Banteay Meanchey province.
“The poor smuggle because they are poor,” Prince Ranariddh said. “But when the rich do the smuggling, it is big murder for the national economy.”
Citing a recent report by Societe Generale du Surveillance, a private Swiss import inspection company, the prince said the country loses at least $120 million per year in tariffs.
“This smuggling makes a few people rich, but the whole Khmer nation is poor,” Prince Ranariddh said. “We must stop corruption.”
According to a copy of the SGS report, importers consistently undervalue their goods and search for ways to avoid pre-shipment inspection. But importers say if their products are inspected by SGS and made subject to Cambodia’s high tariffs, they will not make a profit.
To close the loopholes in the importing process, SGS proposed minimizing the number of import exemptions, reviewing the potential volume of shipments that do not go through pre-inspection and initiating a reconciliation program to monitor the actual duties and taxes collected by the Ministry of Finance’s Customs Department.
“In many cases, it is found that the value of the goods declared by the importer, or shown on the documentation submitted, is far lower than the one determined by SGS,” the report noted.
The report listed several examples of undervaluation. A satellite transmission system from the US was declared to be valued at $8,000, while SGS valued the system at $77,247. Malaysian cigarette paper, declared at $7,821, was valued at $18,423 by SGS. And SGS said a shipment of track shoes and used vehicles from Singapore was worth $14,127, not the declared $6,944.
Importers also try to disguise their products as being on a long list of exempted goods, the SGS report said. Goods exempted from pre-shipment inspection include scrap metals, cigarettes, live animals, explosives, ammunition, weapons, artwork and precious stones, among others.
SGS, whose contract with the government expires in October, proposed that it “work with the Customs Department to identify those imports which have either been deliberately misdeclared or split in values so as to avoid pre-shipment inspection altogether.”
Perhaps the most common loophole importers rely on is a
7 percent penalty fee importers must pay customs if they avoid SGS, the report noted. Importers can undervalue their goods and pay the fine on the minimum price, thus saving money by not paying tariffs on higher valued goods. “That is where a lot of under-the-table trading takes place,” an SGS official said.
For several years, importers have cited high tariffs as hindering Cambodia’s development. As a new member of the Asean Free Trade Area, Cambodia is required to lower tariffs to between zero and 5 percent for intra-Asean trade by 2010.
Meanwhile, importers work the system to turn a profit. One importer, who asked to remain anonymous, said some tariffs are “ridiculously high.” For instance, he said, soft drinks are charged a 35 percent tariff plus a standard
10 percent Value Added Tax.
“If not for corruption, one cannot afford to buy a Coke,” the importer said. “Corruption is needed to keep prices down.”
He added that for some goods, he uses SGS and for others he pays the 7 percent fine at customs. He said he will check SGS prices for the goods he is importing, and if he calculates that going through SGS will cost him more in taxes, he will opt to pay the fine instead.
“I would prefer lower tariffs more than this corrupt system,” the importer said. “Cambodia needs to grow. With corruption, growth is limited. With lower tariffs, corruption would not be needed [for businesses] to make money. The government will collect more money and grow. Right now, the money collected goes to individual pockets.”
Phen Simon, director of the Customs Department, could not be reached for comment.
While the prince vowed to end corruption, Ministry of Commerce Secretary of State Sok Siphana, a CPP member, accused Funcinpec of overseeing the smuggling. “Provinces along the Thai border are ruled by Funcinpec,” Sok Siphana said.
Funcinpec has governors in both Banteay Meanchey and Oddar Meanchey provinces .
“Remove the Funcinpec governors to get rid of the smuggling,” Sok Siphana said. “[The prince] talks nonsense, and he does not understand that it backfires.”