US Ambassador Says Corruption Scares Off American Firms

U.S. Ambassador William Todd on Thursday said that despite his efforts to promote Cambodia as an attractive destination for business, major American companies are reluctant to invest here as they still perceive the country as indelibly corrupt.

“I believe now is the time for big U.S. businesses to come here. And I believe that they want to come here—but I believe that the issue about corruption is preventing them from coming here,” Mr. Todd said ahead of a workshop on corruption hosted by the American Cambodian Business Council (AmCham) in Phnom Penh.

Speaking without a script because he had just been in a minor traffic accident en route to the workshop and had left his prepared remarks in his Cadillac, Mr. Todd said that while there are many good reasons to invest in Cambodia such as favorable tax laws and low labor costs, the country’s reputation for graft causes American firms to give pause.

“The corruption issue, to be frank with you, has created what we think is a drag on the economy. It’s basically something that’s prevented a lot of U.S. businesses from coming in here,” he said.

“I see probably three or four companies a week who want to do business here in Cambodia, who either want to buy things, or sell things, or open things,” he said, “and I’ve seen some very large business—some of America’s largest—and they want to basically make 100-billion-dollar investments, 200-billion-dollar investments and so on, but they get scared off.”

According to the Cambodian Investment Board, U.S. investment in Cambodia amounted to just $5.3 million last year, a mere 0.23 percent of all foreign investment in the country.

Mr. Todd said that while the creation of an Anti-Corruption Law in 2010, and corresponding Anti-Corruption Unit (ACU), is a step in the right direction, implementation of that legislation has been limited.

“The government has dealt with corruption by creating the ACU,” he said. “They basically put a lot of laws on the books…but the enforcement has not been as robust as some of you might want,” he said.

He added that while between 41 and 42 percent of Cambodian exports go to the U.S., accounting for more than 20 percent of Cambodia’s gross domestic product, “unless the corruption issue is dealt with, making that number go much higher is going to be real hard to do. And making it go much higher in…industries other than textiles could be hard to do.”

Mr. Todd concluded by urging foreign companies currently operating in Cambodia to make sure they are compliant with existing anti-corruption laws, and expressed hope that future dialogue between the ruling CPP and opposition CNRP would bring more substantial reforms.

“In my opinion, the CPP and the CNRP are going to basically make sweeping changes in this country, and when they do that, corruption and how to deal with it is going to be one of them,” he said.

In August, the 2013-14 Asean Business Outlook Survey, conducted by the U.S. Chamber of Commerce and American Chamber of Commerce in Singapore, found that 81 percent of respondents cited corruption as a drawback to investing in Cambodia.

In an effort to assuage potential foreign investors concerned about complying with international anti-corruption laws, including the Foreign Corrupt Practices Act in the U.S., several ministries last year issued lists showing the costs of payments businesses must make for various government services, commonly called “facilitation fees.”

Still, corruption remains rife in part due to very few prosecutions taking place under the Anti-Corruption Law.

The ACU conducted just six prosecutions in 2011, compared to roughly 700 complaints filed with the body. Last year, some 800 complaints were filed, and there were no prosecutions.

But while speakers at Thursday’s workshop, attended by more than 100 representatives of American, European and local firms, focused on practical ways to avoid becoming mired in Cambodia’s “culture of corruption,” some members of the local business community said the government has taken substantial steps to curtail graft.

Bretton Sciaroni, chairman of the AmCham board and a legal adviser to the government, said the establishment of the ACU was one such step.

“The ACU has started prosecutions of government officials. That’s good. They are trying to inform the bureaucracy at least through cases, prosecution, what the new regime is all about.”

Mr. Sciaroni said that while the anti-graft body has yet to prosecute any businesspeople, its mere existence should make foreign companies feel more comfortable.

“The good blue-chip companies can find a way to do business in [Southeast Asia], and they’ll find a way here,” he said. “At least they can see a commitment on the part of the government, even if its not fully actualized yet.”

“If G.E. [General Electric] can function and survive and work… any other American company can,” said Rami Sharaf, CEO of RMA Cambodia—which has brought American companies such as Ford, John Deere and Dairy Queen into the country.

Attendees of the workshop also expressed concern that new anti-corruption laws might unfairly target them.

One man, who spoke on the condition of anonymity, said foreign companies operating in China have been prosecuted for hiring family members of government officials as a form of subtle bribe payment.

“The one thing that scares me is that I’ve hired…families to work for me to fill jobs,” he said. “And they work, they actually work, it’s not because I need their relative to be friendly with me. I actually put them to work.”

Other attendees were of the opinion that illicit business practices are here to stay.

“I think it’s going to be tough to get rid of corruption, because it has become part of the culture,” said Keo Sovan, sales and marketing manager at SCI Company Limited, which sells medical machinery.

“Nobody wants corruption, but the situation leaves them no choice,” said another attendee, who declined to be named due to the sensitive nature of the subject. “The top government officials have to set a good example for the people, like parents set a good example for their children,” he said.

Mr. Todd, though, recalling the start of his diplomatic mission in Cambodia more than a year ago, joked that levels of corruption are relative.

“I just came from Afghanistan as my prior assignment, so, you know, compared to Afghanistan, Cambodia is perfect,” he said.

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