EuroCham Cambodia issued its first business confidence survey yesterday, along with an inaugural White Book, a set of policy instructions aimed at helping the Cambodian government improve its ease of doing business rankings and attract European investment into the Kingdom.
The business confidence survey, compiled from the responses of 72 EuroCham member companies, found that Cambodia remains an attractive destination amongst ASEAN countries due to the low cost of human resources.
Nearly 80 per cent of respondents cited low-cost labour as the Kingdom’s main competitive advantage. However, more than half identified a shortage of qualified human resources as the main obstacle for doing business here.
Opaque procedures and unofficial fees also negatively influenced perceptions, with nearly two-thirds of respondents highlighting the need for greater transparency and just over half indicating that they saw no improvements in this regard during 2015.
Meanwhile, some 69 per cent of respondents said they had yet to see the impact of government reforms, while 22 per cent said conditions had worsened in the last 12 months.
Despite the survey’s findings, 81 per cent of respondents planned to further invest in Cambodia in 2016, with 71 per cent claiming to have reached or exceeded their profitability target over the past year.
George Edgar, European Union ambassador to Cambodia, said that despite the EU being Cambodia’s primary export destination for local products – totalling €4 billion ($4.48 billion) in 2015 – the Kingdom only received 5 per cent of the trading bloc’s FDI within ASEAN.
“The investments are very small compared to those from China, Korea and Japan. While the EU is the largest investor into ASEAN, the share of investment into Cambodia continues to lose ground,” he said.
In its White Book, EuroCham provided a “collective expression of the views of EuroCham member companies on specific aspects of the business environment in Cambodia”.
The document includes 58 recommendations covering 31 topics across eight sectors aimed at helping Cambodia facilitate business and attract European FDI. Its policy proposals – compiled from the input of EuroCham members as well private sector working groups – tackle everything from work permits and taxation to energy efficiency and public tenders.
Emmanuel Menanteau, chairman for EuroCham Cambodia, said that while Cambodia has benefitted under the preferential treatment of the Everything But Arms (EBA) scheme, the government should consider these policy recommendations given that the country’s competitiveness was likely to erode in light of the Trans-Pacific Partnership (TPP) and the EU-Vietnam Free Trade agreements.
“This creates a large challenge for how EU investors and EuroCham view Cambodia’s potential, and how Cambodia is perceived in the investment environment,” he said. “[It also shows the need to] address the challenges to bring the right businesses to Cambodia.”
Government officials and advisers present at the launch of the White Book were visibly rankled by the policy advice, claiming that EuroCham had not been doing their part to bring investment to Cambodia.
“I think that Eurocham should have a lot of more activity in Cambodia because [European companies] produce some of the best goods on the market with some of the best technology,” said government adviser Sok Siphana, who moderated the event. “But why is EuroCham not doing their job in bringing over European investment?”
Sok Chenda Sophea, secretary-general of the Council for the Development of Cambodia, said that while the government would look into the White Book’s recommendations, he challenged international figures for the ease of doing business and transparency that he said European and local media have consistently cited as discouraging investment in Cambodia.
“We say to the EU, come to Cambodia and you won’t see those negative stories,” he said.
He suggested the relatively small market size of Cambodia had made it an easy target for European criticism, while heavyweight economies did not face the same level of scrutiny.
“Multinationals all go to China and those same countries don’t get the complaints about an absence of human rights,” he said.
At the same time, countries less judgemental about Cambodia’s business environment bring more added-value investment through technology and skills training, he said, citing the China Plus One and Thailand Plus One models. As such, Cambodia’s clear alternative to EU investment was to receive FDI from these countries.
In his closing statement to a panel discussion, Siphana spoke of what he described as a “love-hate relationship” between the EU and Cambodia.
“Economic liberalism also brings a lot of criticism. It is a double-edge sword,” he said. “On one side, you have the good perspective of Cambodia as an open market, while you also have the role of media that only covers the dark side of country.”
“European companies needs to lower their standards,” he added. “With [an economy] that is growing at seven per cent, we have to have been doing something right.”