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Chanthol on reform, wages, politics

Recently appointed Minister of Commerce Sun Chanthol talks to the Post about his plans from his office in Phnom Penh
Recently appointed Minister of Commerce Sun Chanthol talks to the Post about his plans from his office in Phnom Penh on Tuesday. Chanthol served as the Minister of Public Works and Transport from 2004 to 2008. Pha Lina

Chanthol on reform, wages, politics

In today’s instalment, we’re running a longer-than-usual talk. The Post’s deputy business editor Joe Freeman sat down this week for a wide-ranging interview with recently appointed Minister of Commerce Sun Chanthol, who took the job in September after the ruling party reshuffled senior positions amid promises of reform. Chanthol replaced longtime Commerce Minister Cham Prasidh, quickly making several changes that suggest he’s out to make his mark. Chanthol, who was educated in the US in the late 1970s, brings years of private sector experience to the ministry, having worked as an executive at General Electric before returning to Cambodia in the 1990s and helping set up the Council for the Development of Cambodia, or CDC. He served as the Minister of Public Works and Transport from 2004 to 2008. Until taking up his current position, he was the senior minister at the CDC, where he still retains his vice-chairmanship. Can Chanthol change years of entrenched policies and use his influence to stamp out corruption, or will piecemeal reforms not add up to real change? Here, he discusses his plans, and weighs in on unrest in the garment industry, the opposition’s boycott of the National Assembly to protest the election results in July, and what drives Cambodia’s economy.

Did you want to take over the Ministry of Commerce?
I didn’t request the position. I was asked by our prime minister to move over here, to reform the ministry, to improve trade facilitation and to support the private sector. Obviously, the world has changed. We’ve got to be ready for the Asean Economic Community by 2015. I’m not saying what His Excellency Cham Prasidh did was not good. It was good.

Some might add that Prime Minister Hun Sen moved you and others around to show fresh ideas after the election in July saw large opposition gains.

Actually, the plan for reform was there all along, even before the election. Our prime minister already had a plan to make some changes and reforms in order to integrate and make Cambodia more competitive and attract more foreign direct investment. Though the result of the election accelerated the reform, the idea was there all along. It’s not as if he woke up one morning and said, hey, let’s do this reform. No, there’s been a plan. But the speed, the pace, will go a little faster now.

Can you walk us through some of the completed and planned reforms that make it easier to do business?
First, we eliminated the certificate of origin for exports to countries that don’t require it. Secondly, we allowed, effective January 1, exporters to prepare the certificate of origin themselves. They can bring the thumb drive to the computer downstairs in our ministry, and print the document out, so it saves time for data entry. We are also in the process of automating the certificate of origin system to take the human interface out. So the exporters do not have to even come to the ministry. They stay in their factory, they key in the information, send it to us online, we review it online, we release it online, and it can be printed wherever they want. Additionally, when you export, you need to register as a GSP [the system of trade preferences for developing countries] exporter. Every year you have to come back and do it again. We eliminated that. You do it one time and that’s it. Fourth, to register a company, first you have to go to the intellectual property rights department, then you go to the unit that does company registration. Today, no. There’s one single window, we combined them. You come to one window, we’re going to do all of this for you. We are also in the process of automating the company registration.

I’ve heard allegations of corruption taking place at Camcontrol, a Ministry of Commerce group responsible for checking the quality of imports and exports. Will you make changes there?
Definitely. I already talked to the director general of Camcontrol. We will look at it in detail to see which areas and what processes need to change. I will have a meeting to review activity from 2013 and to create an action plan for this year. I’ll work closely with them to find a way to improve in order to facilitate the export process for the investor, and to see how we can minimise, eliminate and reduce unofficial payments. I’ve also heard this, you’ve heard this, but I cannot get any concrete evidence that this is happening. But that’s what we hear in the field. You will see some changes in Camcontrol for sure.

How can Cambodia shed its reputation for corruption?
The automation of the certificate of origin and the automation of company registration show the world that we are moving in that direction. We are taking the human interface out, and when you can take that out, when you can eliminate or reduce that, then you can reduce the unofficial payments.

Part of your job is also drumming up investment. Where are you looking?
We are trying to get more and more investment from Japan. We see that Japanese businesses are moving to Cambodia, they are bringing manufacturing, the know-how, the technology to the country, so I’m excited about that. We are attracting investment in the agro-industry. We see more people looking to establish rice-milling facilities in Cambodia.

On a similar subject, some global investors want to see a better balance of power in the country and more transparency before putting their money here. Is the current government, which has dominated the political scene for years, the best way to lure those types of investors?
Political stability, macroeconomic stability, investment incentives, infrastructure, logistics, operating costs, these are all the elements that investors look at before they invest in a country. You cannot have only good political stability. If your macroeconomic stability is not there, your infrastructure is not good, no one will invest. Vice versa, you cannot have only macroeconomic stability and good infrastructure, but politically, it’s not good. So you need those elements to attract foreign direct investment to the country. Now, since the election, we have the political impasse. To some extent, yes some investors looking at Cambodia might wait on the sidelines for the time being to see what’s next, but for other investors, they say. ‘Look, I don’t think this is that major.’ Because I also serve as the vice–chairman for the CDC, I still sign investments coming to us through the CDC. This Friday we have like 20 different projects that we are going to review. On that note, I wish to see that the opposition take its place in the National Assembly and becomes part of the development of the country. Whatever needs to be debated, debate it in the National Assembly. It’s not healthy for the country, it’s not healthy. That doesn’t mix at all. I want to see us debate any policy differences in the National Assembly, not on the street. It would make my life a bit easier to promote investment when I go overseas. They vote for you to improve their standard of living.

They don’t vote for you to destroy the country.

If the opposition ever gets into a position of power, do they have the technical know-how to run the government?
I don’t know where their human resources are. But running a country, you don’t run it from a textbook. You need experience. You cannot come in and say look, here’s what I’m going to do, ba boom ba boom ba boom. With any company, you cannot take someone off the streets and say, go and run it. You cannot do it. You need to get in, you need to learn the ropes in order to move things forward in a private company or a country. So they need that experience. Personally, the people that I’ve seen in the opposition, not that many have experience running the country or an operation. I’m talking in general, I’m not saying they are not good, I’m saying that they need experience and background to run things, and so far I have not seen that they have that. Maybe they do.

But maybe it’s like getting a driver’s license, you have to get the license to drive the car. To get the experience you have to be given a chance to learn on the job.

It’s a chicken and egg thing, right. But you need the basic tools also. I am not saying that they cannot do it. Because some of them may have experience running the private sector before, but how deep are their human resources?

Opposition-led demonstrations are only one aspect of potential instability. There’s also the garment sector. At least four workers were killed in deadly riots earlier this month in Phnom Penh over the demand to double the minimum wage to $160. Should the government stay firm on wages or reconsider?

No official in any country around the world does not want to pay the people more. Everyone looks after the interest of their people. We want to pay them. If we could pay them $200, we’d pay them $200 a month. If they ask for $160 and we can do it for $200, we’ll pay $200. But the question is, if we do that, is Cambodia competitive? Can we continue to have factories in Cambodia, or will the factories move to another country that pays less than Cambodia, like Bangladesh, Sri Lanka, Myanmar, part of Vietnam and Laos? It’s less there than what we pay here. I have not seen any country, any private sector that doubles their minimum wage in one go. You need to do it gradually, you need analysis. Can you afford to keep the factory? Can you attract more investment in the country? Myanmar pays $57 a month and you pay $160, they'll ask. If you are the owner of the factory, you will pack up and go.

Maybe there are other things, like stability, infrastructure.
I don't think it's a maybe. Let's take the tie you are wearing. You go to one store, that tie sells for $10, you go to another store, same tie, $50. You are a buyer, you will buy from the $10 store, I guarantee you. All the brands that buy from Cambodia will search for the lowest possible location to produce to buy their goods. So we have to do an analysis to ensure that we can be competitive with other countries in the region. But having said that, the government has set up a task force chaired by deputy prime minister Keat Chhon to look at the whole possibility to increase the minimum wage. We are doing that; we aren't sitting and doing nothing at all. We do not wait for the opposition to say, 'We have to double or increase the minimum wage.' We fail to communicate all the things that we've done. And the opposition is good. Very good. I give them credit: They can go out there and just blah blah blah, you know. Sometimes when you don't do, it's easier to say. I can say this is wrong, this is wrong, this is wrong, this is wrong – it's very easy.

But unions and opposition members say the government ignored the available analysis on wages?
What I’m saying right now, if you put $160 now, the factories will close. Let’s say you have a driver, you pay him $100 and he says no, $200, what are you going to do? You are going to stop employing him.

The factories, when they set up in Cambodia they know, here’s the minimum wage, and here’s the cost of living increase, here’s the inflation, and here’s the price we are going to get from the buyer. So they factor in the numbers that they can pay and still make money. I’m concerned that if we are forced raise the salary like that, they’ll move out of Cambodia. What are we going to do with the 600,000 workers in Cambodia? Each worker supports four to five members of their family. You see the impact. Direct employment is 600,000. How about the associated activities? The motorcycle taxi driver, the lady who sells food on the street next to the factory, the beauty salon, getting a haircut, painting the nails. There are many related activities. It doesn’t hit one worker, it hits the whole economy in Cambodia. You have to be very careful. So we have to ask ourselves, can we afford to double the salary of every worker?

But the government proposal would raise the wage to $160 by 2018. What will have changed in the meantime?
Because the buyer also has to pay a higher price, because there’s inflation in the US, and inflation around the world. So the price of clothes you sell in the US goes up. That’s all it is, keeping pace with the cost of living. That’s why you cannot even double the salary like that, because that makes the inflation go crazy in the country, absolutely crazy. Now there’s a lot of money chasing few goods. Imagine you double all the money out there in one go. Inflation will hit. Then you will not have macroeconomic stability. That also will hurt the foreign direct investment in the future. So everything we do, everything the Cambodian government does, is to balance, to look at all the pros and cons and look at every action that we take. We are responsible. We cannot jump up and down like other people ask us to jump up and down. When you don’t have the responsibility you can say anything you want, but when you sit in my position, I have to be very careful with what action I do to ensure that I don’t disturb economic activity.

Will garment unrest and political turmoil threaten preferential trade agreements, like Everything But Arms, the cornerstone of the export economy?
The preferences are important, very important for Cambodia. The EBA is good for Cambodia. And we do not want to lose that, obviously. So we are doing what we have to do in order to keep that. Now let's talk about rice. We heard that the European Union expressed concern that our rice volume exports to Europe are going up fast, very fast. But though they are concerned, there is no substantial evidence to indicate that our rice is contaminated. So they want to ensure that we do whatever we need to do to ensure that our rice is not contaminated. The rice exporters in Cambodia are working right now on a code of conduct where all the exporters have to sign a code of conduct to ensure that they will not contaminate it or they will not use rice from other countries and export to Europe and say it's Cambodian rice. We also do our part here at the ministry of commerce to ensure that we know for a fact that rice is Cambodian rice before we issue a certificate of origin for them.

Are you concerned the garment unrest might put EBA agreements at risk?
For me, I hope that European countries that give us the EBA recognise what the Cambodian government is trying to do. On December 18 we signed a three-year extension for the monitor Better Factories
Cambodia. How many countries in the world have this kind of program? Not many. So we've done so much to satisfy this kind of requirement. Obviously there is a flaw in every country, but look at what we've done so far. Give us credit. Give us credit for doing the right thing for our people. Do not take this away. You take this away, you penalise Cambodian people.

Your ministry is reaching out more than others on social media. There's a Facebook page, a Ministry of Commerce YouTube channel, a new spokesman. Are ministries going to follow suit?
It's coming. Our prime minister said it again last cabinet meeting. He said to please go out, please provide information. We've done so much for the country, but we did not do a good job to provide information to the people. So you will see more and more ministries will have a PR unit to update their websites. What we're doing right now at Ministry of Commerce, we're redesigning our website; it should be finished in May, and [we'll have a] complete new website with more information. We're on Facebook, we have a YouTube channel. I think today, the traditional media is not as effective. Before you had to wait and read the newspaper, but now you go through all these.

This interview has been edited for length and clarity


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