Foreign Direct Investment (FDI) plays a critical role in any country’s sustainable growth and development. In this regard, Cambodia is no different to many of the nations around the globe who seek FDI as a means of enhancing economic growth, and the creation of jobs and capital. Since 1993, when the new government was inaugurated, Cambodia quickly passed a liberal investment law that has attracted billions of FDI dollars. It is fair to say that almost none of the many thousands of foreign firms operating in the Kingdom today had a presence here prior to 1993.
Over the past two decades, improvements in the system have been worked on progressively. As a member of the Cambodian Government-Private Sector Forum, I can personally testify to the steady and significant progress made in enhancing Cambodia’s attractiveness as a foreign investment destination.
The system and the investment climate are by no means perfect. We all know that, but all positive steps forward are important. In this light, it is worth noting that the Ministry of Commerce (MoC), under the energetic leadership of His Excellency Sun Chanthol, is introducing new regulations and mechanisms which will make it easier to both set up a new company in Cambodia and to operate an existing one. By the end of this year, the MoC will introduce online registration for new businesses reducing the amount of time it takes to do this from days to a matter of hours.
Cambodia is already witnessing an upsurge in new business registrations. As The Phnom Penh Post recently reported, the number of firms that set up shop in the first quarter of 2015 was 1,108, compared to 1,066 for the same period last year. The figure for all of 2014 was 3,850, an increase of 39% on 2013.
Moving the business registration process online will only enhance this trend, especially as many Japanese firms are looking to invest in Cambodia because of their “China-Plus-One” strategy to reduce their dependency on operations in China where labour costs have risen dramatically in the past five years. The MoC is also introducing systems to facilitate trade.
A first step is the automation of the Certificate of Origin (CO) process used by exporters. While not yet fully implemented, exporters can now submit online relevant documents such as invoices, packing lists, and bills of lading for review by appropriate officials before they are printed for signature.
Eventually, e-signature and e-stamp procedures for COs will be introduced so that exporters can print the COs by themselves, submit them online and pay the relevant fees via three approved banks. In the long run, the goal is to digitise the entire process so that no hard copies will be necessary.
All of this increases efficiency and reduces the cost of doing business, which is always welcome news for the private sector.
On a related front, the MoC has also introduced a new Code of Conduct for rice exporters to ensure that one of the Kingdom’s major exports maintains of a quality sufficient to meet international standards. Rice exports have surged in the past five years so this is a positive initiative, which will help give Cambodian rice greater value around the world.
More broadly, the Council of Ministers has approved a new Industrial Development Policy designed to match and assist Cambodia’s gradual transition from a primary products producer to one where light industry is developed through value added areas such as food processing, electrical machinery and leather products.
Overall, these recent developments don’t make front-page news. But they are part and parcel of a gradual, step-by-step process that is helping Cambodia become more competitive and contributing to the Kingdom’s high economic growth rate. As such, they are welcome by all of us in the private sector.
By Bretton G. Sciaroni
Bretton G. Sciaroni is the Senior Partner of Sciaroni & Associates, a professional services and investment advisory firm based
in Cambodia since 1993 with legal offices in Laos and Myanmar. He is also chairman of the American Chamber of Commerce in Cambodia and the International Business Chamber of Cambodia.