The government and members of the private sector met last week to discuss a draft law that would require international and domestic NGOs and associations to register trust funds and submit financial statements with the government.
According to an unofficial version of the draft, the law would require NGOs and associations to inform the government of the owner behind the organization’s trust fund, which can be used to allocate capital to pensions, salaries and financing to stock markets.
Domestic organizations will need to submit annual financial reports to the Ministry of Interior, while international organizations operating in Cambodia will need to file information with the Ministry of Foreign Affairs.
Experts say the law, if passed, would help organizations render their finances more transparent. But, there are still questions over why the law specifically targets NGOs and associations and does not affect businesses in the same way.
The draft law comes as the government is drafting separate legislation that would require NGOs to reveal sources for funding, restrict assistance to political parties, and site staff members.
This law would “promote fund management in the insurance sector, pension fund[s] and other funds to invest in securities market[s] in Cambodia,” the draft law says.
Speaking at the government-private sector working group meeting on Law, Taxation and Governance, Finance Minister Keat Chhon said Thursday the law would not only help regulate Cambodia’s financial sector, but would also bolster transparency and investor confidence.
“Some NGOs don’t want us to see their finances,” he said. “[Under the law,] funds will not be shared between board members…or serve for personal benefit…. So we will submit this and see their reactions,” he said.
“We do not know where money is coming from and how much they give,” Ministry of Interior spokesman Lieutenant General Khieu Sopheak said by telephone on Friday. “They do not report it. This law will create accountability.”
Mr Chhon said that in order for NGOs to comply with the new law, they will need to first register with the government. There will then be a 45-day period to submit all the necessary information to the government.
After all the information has been submitted the organization can establish a trust board composing of at least 21 internally nominated members, three of whom must be Cambodian nationals.
Failure to comply with the regulations could lead NGOs and associations loosing their operational license for up to a year, Mr Chhon said.
Speaking at Thursday’s meeting, private sector members raised concerns that some of the language in the law was ambiguous. The draft fails to specify whether it pertains to all NGOs or just ones that wish to register a trust fund and it is also includes no framework for businesses to operate under.
According to Bretton Sciaroni, co-chair of Law, Tax and Good Governance committee and partner at the legal consultancy firm Sciaroni & Associates, the original law was intended to declare ownership of original capital from NGO’s that transferred into commercial enterprises.
“A lot of the original capital from NGO’s came from donors to help fight poverty or go into alleviation,” he said. “They don’t want that money back, so it’s logical to place it in a trust…. We are way past that point now.”
“Now it is in the private sector’s interest to have a broad-based application of the law as a precursor to the establishment of the stock market and in order to develop things such as pensions.”
Mr Chhon said that outstanding issues within the law would be “polished” through a think tank that will meet in the third week of December, before submitting a final draft of the law to the Council of Ministers.
Some NGO’s are worried about the intentions of the proposed law and furthermore that it doesn’t have the means to fully implement them.
“I am skeptical of the new law…. I think the current structures of NGO’s are generally sufficient…and a breach of internal regulations would be harmful,”
Yeng Virak, Executive Director of the NGO Community Legal Education Center, said “the government will do anything to protect their interests with big businesses and don’t care who gets hurt.”