Commerce Minister Urges Reform of Business Environment as Defense against Recession

By Soy Sophea

Cham Prasidh, Cambodia’s Commerce Minister has urged all governmental institutions and provincial governors to take active measures to improve the business environment, warning

that the worst of the global economic downturn was yet to hit the country. When it does arrive, it will require the concerted effort of every stakeholder to ride out the storm, according to the Minister.

The Minister stressed at the launch of a World Bank Business Report said it would demand the complete commitment of government officials to improve public services, increase transparency, promote effectives and encourage value for money.

The Minister said when doing business with developing countries, investors will go straight to those that can claim a stable society free of riots and demonstration

s. “If we can improve our current business environment, it means that we secure our country and our local enterprises,” he said.

“I urge you all [provincial governors and rep

resentatives of government institutions] to strengthen your efforts to implement the report’s findings. Think of them as a compass to help you negotiate the uncertain economic times ahead,” he added.

To cope with the global economic crisis, Cambodia urgently needs to improve its business environment at both the national and local levels, according to studies jointly released on May 25, 2009 at the Cambodiana Hotel by the World Bank (WB), the International Finance Corporation (IFC) and the Asia Foundation.

Making it easier, cheaper and less confusing to start a new businesses could help Cambodia compete in both the international and domestic markets. This is according to the World Bank/IFC Second Investment Climate Assessment and the Provincial Business Environment Scorecard (PBES), published by IFC and The Asia Foundation.

The Minister Prasidh praised the two studies for offering a wide range of information about factors which help and hinder the development of Cambodia’s private sector.

“As these two publications show, Cambodia has made great economic progress in just a few short years, but we still face important challenges,” he said. “Private companies, and especially small and medium enterprises, need better access to finance, information on regulations and procedures, export opportunities, reliable dispute resolution and efficient and transparent government services.”

Qimiao Fan, World Bank Country Manager stressed the importance of addressing chronic business environment problems. “Cambodia’s dynamic private sector has enormous potential to create jobs, improve income, and help reduce poverty,” Fan said. “But business environment problems are holding entrepreneurs back seem as serious as they do now.”

He added, “But now with the global economic crisis impacting Cambodia in significant ways, continued problems in the business environment may force firms to go out of business and investors may choose to postpone investment or move to more business friendly countries.”

Julia Brickell, IFC’s Resident Representative in Cambodia, noted that both the PBES and ICA studies show that reform efforts succeed.

“The ICA discusses how government, private sector and donor collaboration has cut processing times for imports almost in half from 6.5 days in 2003 to 3.7 days in 2007. Automating customs procedures is expected to further reduce import/export times and costs in Cambodia,” Brickell said.

She also stated that giving provincial authorities comprehensive information on entrepreneur perceptions of the business environment is a strong motivator for reform. “For example, Siem Reap Province, with technical assistance from IFC, reduced the time required to register a business and obtain necessary licenses,” she added.

Veronique Salze-Lozac’h, Regional Director of Economic Programs for the Asia Foundation also stressed the importance of regularly surveying business owners about their challenges.

“Widely-publicizing PBES results help government officials identify where they should concentrate their efforts to help businesses thrive. Over the next two months, when PBES results are presented in a number of provinces, entrepreneurs will be able to compare their province with others and engage government on reform,” she said.

The 2009 PBES, which surveyed business owners in the capitals of all 24 provinces and selected urban areas, shows that Kampong Cham Province has a better business environment than other provinces, as was the case in the 2006 PBES. Also both Sihanoukville and Siem Reap moved up from near the bottom in 2006, to the higher ranks on the 2009 PBES, by making significant advances in four out of the ten areas.

According to Gavin Tritt, Country Representative-Designate for the Asia Foundation, “Nationwide, indicators showing the most improvement described those related to the cost of starting a business. Another area of distinct improvement related to the time spent complying with government regulations and tax administration.

Indicators which deteriorated in the 2009 PBES, in comparison with 2006 related to property rights, informal charges, transparency and dispute resolution.” Julia Brickell said, “Overall, PBES 2009 results show that firms are more likely to expand their businesses if provincial administrators reduce informal charges, prevent crime more effectively, make it easier for entrepreneurs to start businesses, and also make it easier for business owners to pay their taxes.”