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.
