The integrity of business in the Kingdom is threatened by a flawed legal framework and a culture of corruption, according to a report released yesterday by Transparency International Cambodia

Some two years in the making, the corruption watchdog’s wide-ranging study gives the business sector – one of 13 governance institutions it says is required to sustain a system of integrity – an overall “weak” rating of 32 points out of a possible 100.

Endemic corruption, business connections to the political elite, a weak judiciary and a lack of transparency all contribute to a business environment with little accountability and a lack of integrity, according to the report.

“Threats to business integrity include the limited implementation of certain laws, as well as widespread petty corruption and high-level nepotism within the patronage network of the ruling elite,” the report reads.

While there are laws to allow for the easy establishment of businesses and the creation of contracts, and a requirement for financial record keeping, the rules are poorly enforced and easily avoided, TI found.

Heavy bureaucratic processes open the door to bribe seeking and bribe offering, while business records stay in-house and are rarely made public.

Rath Sophoan, chairman of the board of directors for TI, said many foreign companies in Cambodia were prevented by their own regulations from engaging in corrupt practices.

“They have lots of laws governing them, and they have resources and the capacity to build internal structures to reduce their chance of committing corruption,” he said, using UK businesses as an example.

However, for local companies that rely heavily on government support for their business, corruption is difficult to avoid.

“But what they can do is try to ensure that the corrupt practice is minimal, to ensure competition is fair,” Sophoan said.

Speaking during a panel discussion at the release of the report yesterday, Mu Sochua, a lawmaker with the opposition Cambodia National Rescue Party, said a code of conduct needs to be established for all companies to abide by.

“For companies that want to follow those basic principles, they need to be encouraged. They need it recognised that they are clean and corruption-free,” Sochua said.

Sochua also called on larger companies to be more transparent with regard to their ownership.

Among its recommendations to strengthen business integrity, TI says firms should develop their own sets of internal anti-bribery provisions, with penalties handed to employees who break them. The corruption watchdog has also called on the Anti-Corruption Unit to work with the Ministry of Economy and Finance to find ways to reward businesses for cleaning up their act, such as incentives for paying their taxes correctly.

Despite 15 years of nearly 8 per cent average annual growth, Wan-Hea Lee, the head of the UN Office of the High Commissioner for Human Rights in Cambodia, said corruption was an issue that had led to greater inequality in the country.

“Yes there has been growth, tremendous growth, but the Human Development Report [shows] that there has been highly unequal growth,” she said, referring to a recently released UN report.

“Who knows what kind of growth, what level of growth and how equitable it could have been had this question of equity have been addressed squarely and what role corruption plays in that,” she said.

The government declined to attend the TI study’s release, but when contacted yesterday Council of Ministers spokesman Phay Siphan said the government was making improvements “gradually”.