Cambodia moved down four places in the World Bank’s “Ease of Doing Business” index for 2018, from 131 to 135, a downgrade that indicates the country is not moving fast enough when it comes to reforming key institutions involved in facilitating business activity.
The World Bank’s “Doing Business 2018: Reforming to Create Jobs” report was released yesterday, ranking 190 countries according to 11 indicators, which include the ease of starting a business, dealing with construction permits, getting electricity, obtaining credit, paying taxes and registering property.
Van Vichet, the executive director of Deewee Consultants, said that based on Cambodia’s ranking performance during the last decade, the country still has a long road ahead to achieve concrete improvements that could be of benefit to the business community.
“Cambodia’s path to meaningful reforms is still inconsistent and not implemented in a comprehensive, integrated manner across ministries as evidenced by our ranking in 2017, which put us back in the same position we were in 2013,” he said.
Crucial areas remain unchanged, including institutional capacity and legal framework efficiency, Mr Vichet said, adding that Cambodia still lacks a proper commercial court.
The National Arbitration Council has been in existence for years, but has only handled a couple of cases in the last two years, he said.
“The business community still seems reluctant to use this mechanism,” he said.
“Many laws that needed to be passed following WTO membership never materialised or are lingering without any clear date as to when they will be implemented,” he added.
“Against such background, the deteriorating political climate only adds to worries from international companies considering setting up branches in Cambodia.
“But it is a cyclical pattern. Every electoral period sees business activity slow down to pick up pace again after the elections, once the political dust settles.”
In Channy, the president and CEO of Acleda Bank, the largest locally-owned bank in the kingdom, said the report paid too much attention to the upcoming elections and did not reflect the reality of the country’s economic performance.
“The report focuses on the situation next year with the national elections,” he said.
“But people need to understand that the government is clever enough to keep stability in the country, building a good business and investment environment in order to attract more investment.”
Anthony Galliano, the CEO of Cambodian Investment Management, said the report has consistently placed Cambodia in the lowest quartile ranking in terms of the ease of doing business, mainly due to the complexity of starting a business, dealing with construction permits and accessing electricity.
“I believe the report fails to recognise the progress Cambodia has made gravitating towards digitalising the business registration process, which should reflect some improvements in the ratings,” he said.
Mr Galliano said the kingdom allows 100 percent foreign ownership, boasts extremely low capital requirements as well as very limited barriers to market entry, all facts that go unrecognised in the report and result in a substantially unfair ranking.
However, he added that for every two steps taken in the right direction, the kingdom seems to take one step back.
While the process of business registration with the Ministry of Commerce has been moved online – a milestone for the modernisation and automatisation of the country’s bureaucracy – there are still very few enterprises that have been able to carry out the whole registration process online.
Companies report facing similar difficulties with the online platform of the Ministry of Labour and Vocational Training, while the website for Tax Registration has not enjoyed positive feedback either, particularly among small taxpayers, Mr Galliano said.
“I remain sanguine on the business and economic prospects for the kingdom,” he said.
“For small to medium sized businesses, Cambodia remains a hot spot, and I believe that this will continue given the low labour costs, increasing levels of education, steady seven percent GDP growth and improving infrastructure.
“Large businesses generally have a different experience than SMEs, and the kingdom will need to focus on improving this.”
Kol Preap, the executive director of Transparency International Cambodia, said more work needs to be done to improve the business and investment environment and attract businesses.
“Cambodia still has a lot to do to improve the business environment and ensure business integrity,” he said.
“The current political climate in the lead-up to the 2018 national elections and corruption in the judicial systems, among other factors, often discourage investors, especially those from Western countries,” Mr Preap added.