Cambodian Online
___
The Gateway Portal to Cambodia
 

The Editor
Managing Editor
Cambodian Online

Contact Information
Cambodian Mobile:
012-247-125
International Mobile:
(855) 12-247-125

 Information

24-Aug-2005
Last Edited

Insight:.  Welcome to www.business-in-asia.com and to our Insight interview.  I know many of our readers may not be familiar with the term Secretary of State which has a different connotation in the U.S.  As I understand it, you are the Cambodian Deputy Minister of Commerce?  Is that correct and could you describe exactly what role the Secretary of State position plays in the Ministry of Commerce?

RK – a) The Royal Government of Cambodia (RCG) adopts the French administrative structure.  At the Ministry of Commerce (MoC), we have a Minister and two Secretaries of State (or Deputy Ministers) who are political appointees.  They are responsible and accountable for the Ministry to the Council of Ministers, the National Assembly (Parliament) and the Senate.
 b) There are twelve departments in MoC.  I oversee the Domestic Trade, Export Promotion, Trademarks, ASEAN and WTO departments.  In addition, five provincial bureaus (Kandal, Kratie, Stung Treng, Oddar Meanchey and Takeo) are under my supervision.

Insight: Cambodia is probably not the first site many potential investors would consider when looking for a site for investment.  In fact I’m sure for many perhaps scenes of conflict or violence is the first thing that jumps into their mind.  Could you comment on Cambodia’s current security situation?  Is crime particularly violent crime rising and do you believe it is a concern to business and to foreign investors?

RK: There are four additional factors that an investor looks at when there are macro-economic stability and growth potential, infrastructure, rule of law, environment and security.  In Cambodia, these are being put into place at a rather fast pace compared to many countries in the region.  My perception is that violent crime is more a negative image that foreign countries have of Cambodia because of its tragic past rather than a fact.  However, the RCG is aware of that and has started to tackle with real issues such as the elimination of sixty thousand weapons and its ammunitions around the country (which started on May 5, 1999).  More stringent regulation of weapons is being implemented, thus bringing down the crime rate around the country. 

Insight: Could you tell us what comparative advantages Cambodia offers a foreign investor looking for a site to relocate his manufacturing or other operations?

RK: Cambodia has MFN from the U.S.A. and GSP from 28 countries that allows thousands of products to be exported with favorable tariffs and quota free (with exception of twelve categories of garments to the U.S.A.).  Most of all, the Cambodian Investment law allows 100% foreign ownership of companies to take advantage of the situation.  (Refer to the MoC's website: www.moc.gov.kh/)

Insight: Given the above factors, which types of business has Cambodia been most successful in attracting?  Could you give examples of factories that have recently relocated or commenced operation and the size of investment and sectors they represent? 

RK: Garment, timber, tobacco, agro-industry and tourism are the fastest growing businesses in Cambodia.  There are two hundred factories producing for the American and European markets. British American Tobacco has been developing a cigarette brand for the Cambodians and is growing tobacco leaves for export. Tiger Beer has established its most modern brewery in Asia outside Phnom Penh city.  Nestlé is in a joint venture with a Cambodian partner to produce milk and dairy products for the domestic market and for export within Asia. World-class names are managing hotels and resorts in Phnom Penh and Siem Reap.  These investments are within the range of two to fifty million US dollars.

Insight: Are there sectors that your Ministry is currently targeting for priority investment?  If so, could you tell us what those sectors are and what incentives the government is offering to attract these investment projects? 

RK: MoC is coordinating with the Council for the Development of Cambodia (CDC) and other ministries to target tourism, agro-industries, light electronic assembly, transport and infrastructure sectors.   The investment incentives are numerous and can be found at our website.

Insight: One of the challenges that developing nations throughout the region have had to deal with is the relocation of rural families to the cities in an attempt to find work and earn a livelihood and the demands that this migration has place on the central government to find the funds to provide satisfactory schools, sanitation and other public services to meet the needs of these new residents.  Is the Cambodian government concerned about similar migrations of unemployed workers into the cities and how is your Ministry and the central government attempting to meet these challenges? 

RK: The public funds are spent on education, health, social reform and infrastructures.  Cambodia has a population of 12 million people and is 181,000 square kilometers.  The RCG has a three point plan:  allocating light industries to Phnom Penh in the center, developing Siem Reap in the Northwest for tourism and targeting exported related industries in Sihanoukville in the South to evenly distribute wealth and job creation in the country.

Insight: Cambodia is a country that has historically been a rich agricultural producer.  What priority is agriculture, growing of commodities and food processing given in terms of government policy?  Does your Ministry offer incentives to foreign companies interested in investing in this sector and if so can you give some examples?

RK: Agriculture is a top priority of the RCG.  The MoC is establishing a methodology for Cambodian producers to fulfill the country's food security needs and to export its surpluses.  MoC is facilitating the formation of associations and cooperatives so that the Cambodian producers can access information and a global network to improve the quality of their products for a necessary diversification of trade.  Recently, the MoC has deregulated company ownership restrictions; 100% foreign owned import/export companies are now allowed to facilitate the import and export of commodities with the objective of promoting the export of agricultural products.

Insight: Recently Cambodia has been in the news, both the printed news and on the Internet.  Many of these stories have concerned claims that labor right were being abused by textile firms under contract to The Gap, Abercrombie & Fitch and others?  What role does your Ministry play in trying to resolve these disputes?  Can you tell us also what the current average monthly wage is for a factory worker in Phnom Penh, the capitol.  Also, what is the Cambodian government’s position on both a minimum wage and on improving working conditions for factory workers?

RK: The recent labor disputes you mention are already resolved.  Many conflicts happen because of the lack of understanding of the progressive Cambodian Labor Law. On March 16, the MoC is organizing a public forum gathering union representatives, the Garment Manufacturer's Association, the Ministry of Industry, the Ministry of Labor, and the Ministry of Commerce to voice their views and clarify any misunderstandings of the Law.  A formal committee made up of the MoC along with the above-mentioned ministries, the workers union representatives and the Garment Manufacturers' Association resolves all labor disputes that arise.

There is an agreement between the union of workers and the garment manufacturers on minimum wage of $40US per month in the industry. The Labor Law protects the working conditions of the workers.

Insight: We have seen reports from some sources that corruption over acquisition of land for factory sites, corrupt import and export officials and a less than full enforcement of the law with respect to commercial regulations are all concerns that potential investors in the region articulate as factors in determining their choice of investment locations.  We are not trying to single Cambodia out here but how big of a problem compared to your neighbors is corruption in deterring investment and what is your Ministry and the Government doing to improve the situation?

RK:  The real problem is the long delays in administrative procedures.  The MoC has set up a system to shorten all procedures within the time frame of 48 hours with the exact allocation of tasks to the MoC's civil servants.  This has been achieved successfully and is being put forth as a model for the RCG to follow.

Insight: The Monday, February 28, 2000 issue of the Wall Street Journal has a front-page article about Cambodia titled “  Dropped Stitches - A Trade Deal Helps Cambodian Workers But Payoff is Withheld.”  This article describes an agreement made by your Ministry and the U.S. government to improve working conditions in return for an increase in your county’s Textile quota with the U.S.  According to the article which is actually fairly sympathetic to Cambodian performance on this issue, working conditions have improved but the U.S. government has yet to live up to its agreement to raise your quota because of opposition from U.S. Labor.  Could you tell us a little about how your government came to make such an agreement which I understand is a first for the U.S. with another sovereign nation and how you see this matter ultimately being resolved?

RK: The Ministry of Commerce signed the Textile Agreement with the United States of America which includes Labor Conditions (Cambodia is the first country to ever sign such an agreement with the U.S. All developing countries refused such clauses during the last WTO meeting in Seattle.)  It is a strategy for the future to open the industry's door to orders from the best US companies therefore giving Cambodia products a higher added value and sustainable purchase orders when companies source for politically correct manufacturers.  Although labor condition has been fulfilled, we are still waiting for the U.S. to give us the remaining 9% of the 14% reward quota.  MoC plans to initiate more talks with the next administration.

Insight: According to the above article, Cambodia is not yet a member of the World Trade Organization.  I also saw a report that Cambodia is not yet a member of APEC.  Does Cambodia have plans to join these two organizations and if so when do you hope entry will be granted?

RK: The RCG has submitted the application.  The RCG is eager to enter the WTO and recognizes that there are many preconditions to work on.

Insight: If a company was interested in learning more about business opportunities in Cambodia and in securing information on legal requirements, costs of establishing business, etc., what would you recommend as the best strategy to research the issue and to thoroughly research the issue? 

RK: The MoC provides regularly updated information at its website, www.MOC.gov.com.kh, and information from the Cambodian Embassies abroad and the foreign embassies represented in Cambodia can be found at www.business-in-asia.com.