U.S. companies doing business in Cambodia are optimistic about the country’s overall investment environment, but remain dissatisfied with the supply of cheap and skilled labor, corruption, tax structure, and attitudes toward the U.S., according to a new survey.
Conducted by the U.S. Chamber of Commerce last year and released earlier this month, the 2017 Asean Business Outlook Survey collected answers from 26 of the 98 members of the American Cambodian Business Council, known as AmCham, which responded to the online survey.
The often-pessimistic snapshot of the Cambodian business climate supports findings by the ANZ Royal Business Confidence Index released in March, which noted a 7 percentage point drop in business confidence that it partially attributed to political instability.
All of the companies surveyed by AmCham in April and May last year expected to add employees or remain at the same staffing levels last year, while nearly two-thirds said they expected to expand their locations, and 88 percent said they expected to make a better profit last year than the year before.
And 69 percent of the AmCham businesses said the overall domestic business environment was improving, compared to 45 percent across Asean.
Other findings were less rosy, however. Respondents were less satisfied than they were in 2011 across all 16 categories measured, from the availability of low-cost labor to sentiment toward the U.S.—both down about a third since five years ago, with the latter score at an all-time low of 27 percent. AmCham members were also 54 percent less likely to say they were operating in a “stable government and political system.”
Just 4 percent of respondents said they were satisfied with current levels of corruption, and less than 20 percent said they were satisfied with a majority of other business factors, including laws and regulations, infrastructure and availability of raw materials.
The results contrasted sharply with neighboring Vietnam, where most measures were stable or up from 2011, with most other Asean members registering mixed results.
AmCham chairman Bretton Sciaroni did not respond to requests for comment.
But the ANZ survey suggested companies in Cambodia were facing new headwinds, noting that Cambodia’s business confidence score—76 out of 100—was the lowest mark it had seen since it kicked off in 2014, according to The Phnom Penh Post.
Small- and medium-sized companies were more likely to feel less confident, while larger ones gave similar scores to the year before.
“The decline of overall confidence could derive from the increasing competition in the market, perceived political instability and the uncertainty of the coming elections, deterring business from investments in the near term,” the report said.
Corruption, lack of infrastructure, and high utility costs were all identified as barriers by local business owners, according to the Post, while respondents praised improved tax collection efforts and low labor costs.
Meas Soksensan, a secretary-general at the Finance Ministry, said he had not seen the AmCham survey, but admitted there were “some issues that need to be reformed.”
But he said respondents seemed to ignore positive government efforts, including stepped-up tax collection, one-service windows and simplified business registration.
“I don’t know if all of the facts have been taken into account,” he said.
Miguel Chanco, lead regional analyst for the Economist Intelligence Unit, said the declines in Cambodia’s scores have clear causes.
“The turmoil that followed in the wake of the disputed election in 2013 and the CPP’s ongoing campaign of political suppression since mid-2015 have undoubtedly soured views on the country’s political climate,” he wrote in an email.
Minimum wage hikes in the wake of the vote were out of line with productivity and inflation, he said, while corruption remained endemic after the 2010 passage of the Anti-Corruption Law.
“That said, I think that the big picture view of Cambodia remains positive because investing is a relative play, and the much more entrenched problems in other parts of Asean continue to make the country look like a relatively good bet over the long run,” he said.
© 2017, Ben Paviour. All rights reserved.