Cambodia has promised reform in an effort to attract foreign investors.

Prime Minister Hun Sen said the government will reduce costs for businesses, cut bureaucracy and strengthen the rule of law.

Dramatic falls in foreign direct investment, criticisms from the World Bank over corruption and a fall in the forecast growth rate prompted the move.

Foreign direct investment fell from between $750m (£409m) and $800m between 1995 and 1998 to $251m in 2003.

Cutting business costs

"A healthy private sector is key to promoting economic development. Thus the government will continue strengthening the legal framework, regulations and institutional capacity to facilitate business and private investment facilities," the prime minister said.

He announced a 71% cut in the cost of registering a company, bringing the cost down to $177.

The Council for the Development of Cambodia, the government's top agency for development, will be able to grant licences directly within 28 days.

Previously, investors had to go through several different ministries to get a licence.

Prime minister Sen's actions follow last week's report from the World Bank, which highlighted the spread of corruption within Cambodian society. About 80% of the 800 firms surveyed acknowledged "the necessity of paying bribes".

"Cambodian firms identify corruption as their leading constraint," the World Bank report said.

The prime minister's remarks "addressed the critical issues that are holding Cambodia back," said Bretton G Sciaroni, a partner at the consulting firm Sciaroni & Associates.

The International Monetary Fund (IMF) recently predicted that growth in the Cambodian economy would slow to 1.9% next year.

This compares with a projected growth rate of 4.3% for this year.

Separately, Cambodia's parliament is expected to ratify the country's entry into the World Trade Organisation (WTO) in the next three weeks, a move which should attract foreign investment.