OUTCOME OF THE THIRD GOVERNMENT PRIVATE SECTOR FORUM

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On February 7, 2001 the Government held for the third time the Government – Private Sector Forum under the high patronage of Prime Minister Hun Sen. The forum was focused especially on reviewing and resolving issues of concerns facing investors in Cambodia.

  The following are excerpts of the resolutions adopted by the Government pertaining to trade and investment:

A.  Good Governance

1.  the Ministry of Economy and Finance shall further review and to put in place other complementing measures so as to increase the effectiveness of the fight against tax evasion and tax avoidance and particularly pay high attention on economic strategies such as tax reform, tax collection system. In order to eradicate the said illegal activities there shall be a combination of hot administrative measures and soft economic measures.

2.   encourage and support the proposal of the Ministry of Economy and Finance in establishing an inter-departmental group tasked with receiving complaints and investigating irregularities of tax and custom officials in order to resolve concerns of, and complaint from, businessmen and investors.

3.   In order to ensure fair competition, the Tax Department shall properly conduct document inspections of investment enterprises and implement the tax policy in an equitable manner by requiring all investment enterprises to register with the tax department in accordance with the law into force. To achieve this objective, continuous capacity building of tax and custom officials should be considered in order to ensure effective implementation of the law.

4.   the Royal Government hereby call on businessmen and investors to revisit their practices as regard their public relation staffs who, for their personal benefits, claim company expenditures under the pretense of using them for building relations with the  ministries/institutions and place the blame on officials for irregular acts. To improve good governance, both ministries/institutions and the private sector shall cooperate to stamp out irregularities and corruption.

B.  Taxation

1.  the competent ministries/institutions shall consider and review the incentives for import substitution production with the aim of striking a balance between maintaining macro-economic stability and attracting investment.

2. with regard to the value added tax for the agriculture sector, the Ministry of Economy and Finance shall collaborate with the working group and the relevant ministries for the purpose of evaluating and submitting their recommendation to the Council of Ministers for consideration and submission for ratification by the legislative branch in  the case of amendment to the Law on Taxation.

C.  Laws and Regulations

1. the Ministry of Commerce shall accord first priority to draft laws contained in the Commercial Code.

2.   the Ministries of Commerce and Justice shall thoroughly review the appropriate mechanism for the enforcement of foreign arbitral awards, pay close attention on the  establishment of the legal framework and the mechanism for enforcing commercial arbitrations so as to provide confidence to businessmen and investors to do business in Cambodia.

3.   in order to assure transparency and predictability in the adoption of laws and regulations affecting businesses and the private sector, the Royal Government welcomed the views of the private sector in the law making process.

4.  Ministries/institutions that have completed their draft laws and regulations affecting the business of the private sector shall submit them to the working group in charge of legislation, taxation, and governance in order to provide the opportunities for the business community and investors to comment and propose recommendations within a specific period prior to submission of these drafts to the inter-ministerial meetings and thereafter to the Council of Ministers for approval.

5. factories/enterprises employers shall try their best effort to implement the labor law provisions with regard in particular to the rights and interests of employees so as to prevent strikes or lockouts arising from the violations of the labor law by employers which can have unfavorable effects not only to the credibility of the Royal Government but also damage the interest of employers.

D.  Processing for Export Sector

1. while some countries in the region have lost their MFN and GSP status, the competent ministries/institutions shall cooperate in promoting the establishment of export processing zones along the border in areas such as Poipet and Koh Kong with the aim of attracting investors from the neighboring countries.

2. agree to allow the relocation of factories from abroad into Cambodia, meaning allowing the import for reinvestment of second hand machineries with remaining useful life. However, such authorization shall be considered on their technological merits in order to avoid turning Cambodia into a dumping ground for obsolete equipment particularly telecommunications system using obsolete analogue technologies when currently the digital or more modern technologies are in high demand.

3. all chemical raw materials to be imported by investment enterprises for their production which ingredients can be drug precursors shall be allowed, provided however that a technical evaluation from the Ministry of Industry, Mines and Energy shall be made and copied to all relevant competent authorities.

Parallely, there shall be created an “Inter-ministerial Committee” composing of the ministries of Commerce; Health; Industry, Mines and Energy; Economy and Finance; the CDC, the National Authority for Combating Drugs, for the purpose of monitoring the utilizing of imported chemical raw materials in finished products by factories/enterprises.

The Ministry of Health shall appoint its representative on a permanent basis to the CDC to review and approve on relevant matters particularly on the request by companies for import of chemical raw materials which can used as drug precursors.

E.   Tourism – Infrastructure

1.  the Royal Government would hereby call on all domestic and foreign businessmen or investors to invest in hydro power plant projects, transmission lines from neighboring countries, so as to ensure adequate provisions of electricity at an affordable rates to hotels, factories, enterprises, and the population who suffer currently from power shortage.

2. for the purpose of attracting and facilitating the visits of tourists and businessmen to Cambodia, the Royal Government has decided to open up three border water gateways with visa issuance facilities, namely Sihanoukville, ChamYeam of Koh Kong province and Kh’orm Somnar. Through these gateways, visitors may proceed on from Sihanoukville or Koh Kong airports directly to Phnom Penh or Siam Reap, or may proceed by road or waterway to Phnom Penh or Siam Reap.

F.   Other Sectors

1. there shall be established a new working group called the “Working Group on the Pro-Poor Trade Sector Strategy for Cambodia” under the chairmanship of H.E. Cham Prasidh, Minister of Commerce, to serve as a dialogue partners with donor countries and the international donor community.

2. the Ministry of Agriculture, Forestry and Fisheries shall review the status of the performance of existing forestry concessions and assess the possibility of canceling the non-performing concessionaires. Withdrawn concessions shall be kept for the benefits of landless citizens or reallocate to serious committed concessionaires. The granting of concessions shall be subject to a performance bond deposit. In the event of non-performance, such deposit shall be forfeited for the benefit of the state budget.

3. the Ministry of Environment shall clearly determined the type of factories/enterprises to be equipped with “water waste treatment” facilities depending on the environment impact assessment reports.

4. H.E. Keat Chhon, Senior Minister, Minister of Economy and Finance and Vice Chairman of CDC shall reorganize the composition of the “Working Group on Banking and Finance” for the reason that the scope of this working group is quite different from such service areas as social affairs, education and health care. As such members with no expertise in banking and finance may be transferred to another working group.

5. the Ministry of Social Affairs, Vocational Training and Youth Rehabilitation shall reconsider the formula as regard employee trainings in the workplace so as to assure the balance between employers' benefit and the transfer of know-how to employees.

6. the existing seven Government working groups shall, whenever and as frequently as possible, convene meetings to resolve issues of concerns of businessmen and investors. For matters beyond their control, they shall report them to the Office of the Council of Ministers for immediate resolution by the Council of Ministers without having to wait for the semi-annual Royal Government-Private Sector Forums.