A bleak World Bank draft report says endemic corruption and government inefficiency are blocking the country’s economic growth and have led to an “alarmingly negative” view of the country’s business climate among entrepreneurs.
According to the report, businesses on average pay double the amount of bribes than their counterparts in Bangladesh—one of the most corrupt countries in the world—and the so-called “bribe taxes” that businesses pay to operate in Cambodia total an estimated $120 million each year.
“The governance problem is pervasive, and most firms acknowledge that payments to public officials are frequently, mostly or always required to ‘get things done,’” the draft states.
Obtained by The Cambodia Daily on Thursday, the draft “Towards a Private Sector Development Strategy for Cambodia” was written late last year and presented to donor representatives and the government.
World Bank officials said Thursday that they are work-
ing with government officials
to revise the report and hope
to release an official, finalized version in the coming weeks.
Robert Taliercio, a World Bank economist based in Phnom Penh, said the report was distributed for consultation and not approved by Bank management in Washington and Bangkok.
“It is informal and a first draft,” Taliercio said.
He said several changes had been made to the document, and that the government had agreed to a reform plan addressing several problems outlined in the draft since its distribution.
Attempts to reach Commerce Minister Cham Prasidh and the ministry’s secretary of state, Sok Siphana, were unsuccessful Thursday. Sok Chenda, secretary-general of the Council for the Development of Cambodia, refused to comment.
Government spokesman Khieu Kanharith said he had not seen the report.
The report gives a harsh picture of the current business climate, clouded by corrupt officials, lengthy bureaucratic delays, monopolistic practices and a general lack of confidence in the government.
Corruption topped a survey of entrepreneurs as their main complaint, costing businesses an average of 5 to 6 percent of their sales and, in total, some $120 million. Bribery is particularly rife in the garment sector, the report states.
“Firms’ financial data suggests that this is a substantial cost, exceeding a number of other costs, such as fuel,” the report states.
“Assuming that this was spread evenly to 160,000 public sector employees, the average would be $750 per year, or $62 per month, per employee,” it states.
More than 80 percent of business owners had a negative view of the judiciary and the Customs and Excise Department, and more than 60 percent gave bad ratings to the Ministry of Commerce and Prime Minister Hun Sen’s central government.
The survey also suggested that businesses were more frustrated with “unfair and informal competition” and the court system than at the time of a similar survey in 1999 and 2000.
“Overall, business’s view of agency integrity is alarmingly negative,” the report states.
The report also says the government’s infrastructure projects have been marred by secretive deals, a disregard for law and procedure and “institutional muddle,” among other things.
“Every major infrastructure transaction with the private sector that has not been donor funded has been directly negotiated with the private contractor, without competitive funding,” it says, noting that roads, power and other services are especially poor and expensive.
Those faulty projects have failed to connect the bulk of Cambodians to outside markets, helping to keep them impoverished, it notes. Farmers are significantly less productive here than in other poor countries like Bangladesh and Pakistan, it states.
The report is also critical of the Ministry of Finance’s handling of state properties, alleging it often bypasses laws and procedure, and suggests a massive overhaul of the country’s notoriously corrupt import agencies.
“The perception of entrepreneurs inside and outside of Cambodia is that corruption is widespread, the rules of the game are not fair or do not exist, and that the country is still prone to instability. Consequently, the Government has not established investor confidence,” it states.
Another obstacle to development is the perceived problem of “privileged groups,” with more than two-thirds of businesses saying that businessmen and firms with personal ties to political leaders had influence over national laws and business regulations.
“Foreign firms, organized crime and international development agencies and foreign governments round out the groups perceived by the majority of respondents as wielding at least moderate influence over national decisions,” the draft states.