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Cambodia’s new era of reforms

Chheang Vannarith / Share:
Port facilities at Sihanoukville Autonomous Port. The reforms package include bringing down logistics costs to facilitate trade. KT/Mai Vireak

Promising steps have been taken to improve the business and investment environment in the Kingdom through a package of reforms. But Chheang Vannarith cautions against being complacent and urges the private sector and civil society to continuously deepen their engagement with the government to ensure that reforms deliver results.

Prime Minister Hun Sen has introduced a “sharp” new package of reform measures in his remarks, lasted for more than three hours, at the Government-Private Forum last Friday. It was perhaps the boldest statement on reforms by a Cambodian leader since 1993 with a clear, laudable vision and some concrete, practical measures.

This could be a new era of reforms and bold leadership seems to be taking form. The level of tolerance against institutional inefficiency and corruption is remarkably dropping with a clear warning to Cambodian politicians and bureaucrats that they must be prepared to perform professionally and productively.

The Forum is regarded as “an enlarged cabinet meeting”, which means that all the forum’s decisions have the same effect as cabinet decisions. This is a unique case in Asia in which the state gives significant power to the private sector in public institutional reforms. This is a positive beginning for promising robust governance reforms.

Under the mottos “reform internally and make friends externally based on a spirit of independence” and the five approaches of “looking into the mirror, taking a shower, scrubbing away the dirt, treating wounds and conducting surgery”, the government is determined to accelerate governance reforms to reduce production cost and enhance productivity and competitiveness, and foster economic diversification to ensure sustainable, inclusive and resilient long-term growth.

“Strengthening competitiveness and promoting economic diversification are not only key factors to ensure that Cambodia can achieve its long-term development vision but also an indispensable foundation for creating high-quality jobs, improving revenue and enhancing the livelihoods of people across the country,” stated Prime Minister Hun Sen.

Now Cambodia is in the stage of “institutional surgery”, which means removing infectious or bad elements in the governance system. Trade-related issues are the priority areas of “surgery”. The government has decided to remove the Cambodia Import-Export Inspection and Fraud Repression Directorate General (CAMCONTROL) and eliminate Kampuchea Shipping Agency & Brokers (KAMSAB). These two agencies have caused significant disruptions to trade facilitation.

Other areas of reform include trade facilitation measures under customs,

elimination of Certificates of Origin (CO) for countries where they are not required, reduction of costs in logistics, reduction of electricity costs, business facilitation measures, development of small and medium-sized enterprises, and development of the agricultural sector. In terms of public holidays, it will be reduced from 30 days to 21 days.

Digitalization of public services will gain new steam as the government accelerates the process of introducing an online system for public service delivery. In addition, the Law on E-Commerce is being discussed and will be adopted sometime this year to facilitate and properly govern online business transactions.

Export market diversification is also an urgent reform agenda. The Ministry of Commerce has not been so active in expanding export markets. Interestingly, Cambodia does not have any bilateral Free Trade Agreement with any country as yet. This clearly reflects some weaknesses and shortcomings of the Ministry. Prime Minister Hun Sen has urged the Ministry to negotiate bilateral free-trade agreements with Canada, the United Kingdom, China, Japan, Korea and other countries in Africa.

As for multilateral agreements, Cambodia is determined to continue to expedite negotiations on the Regional Comprehensive Economic Partnership (RCEP) and the Eurasia Economic Union (EEU). It is also interested in exploring the opportunity to join the Comprehensive and Progressive Trans-Pacific Partnership (CPTPP), with a condition that all Asean member states that have not acceded agree on a common stance to prepare for accession together. This will help promote Asean unity in shaping the regional economic architecture.

China, Japan, Korea, Thailand and Vietnam are regarded as the main sources of investment flow to Cambodia as these countries are the key production bases in the region. To attract investments from China, Japan and Korea will be a new government strategy because these three Northeast Asian economies have established their production networks in the Asean region, notably Thailand, Malaysia, Indonesia and Vietnam. Cambodia aims to become a critical part of the regional production chains.

Although there is certain political will and promising steps have been taken to improve the business and investment environment in the Kingdom, we should not be complacent and sit back. The private sector and civil society community need to continuously deepen their engagement with the government to ensure that reforms deliver results. Actions matter more than words.

Chheang Vannarith is president of the Phnom Penh-based Asian Vision Institute (AVI).


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