Big business breathed a sigh of relief on Tuesday after the ruling Cambodia People’s Party and the opposition Cambodian National Rescue Party struck a deal, which promises to end the yearlong political stalemate as early as next week. While analysts and the private sector are now anticipating an increase in foreign investment to Cambodia, Bretton Sciaroni, head of the American Chamber of Commerce says the focus now should be on legislation and judicial reform to improve the Kingdom’s standing as a place to do business. Sciaroni, well-known as Prime Minister Hun Sen’s long time legal advisor, sat down with the Post’s Eddie Morton to discuss how Cambodia’s investment climate might improve after Tuesday’s turnaround.
Did Cambodia’s uncertain political climate ever really have an impact on foreign business sentiment?
There is no doubt that the entire business community is happy that a resolution has been made. Having a year go by with this sort of political strife, it detracts people inside the government from their primary jobs, so that, of course, will have an impact on investment. And with problems occurring in Thailand and Vietnam, this piece of good news will be benefit Cambodia.
Will investment increase now? Sure. Was there any real, severe impact in the first place? I don’t know.
Businesses have not been explicit in the reasons for coming or not coming. I know that I have had a few disappointments with big companies changing their plans, but they usually cite reasons other than the Cambodian political situation.
Have I been brokering less deals for US firms than usual? No, I would say it has been about the same even through the political deadlock.
So if a political stalemate doesn’t deter US firms’ interest in Cambodia, what will?
This last year, there have been several issues that have hurt us. The situation in Thailand has hurt the tourist trade. But at the same time, there have been a few Thai companies looking to move their operations over to Cambodia because of the increase in wage levels there, floods and obviously the political turmoil.
But really at the forefront, Cambodia’s labour issues are by far the greatest concern, at least from a business standpoint.
The labour issue, which now seems to be quieting down and we hope to be resolved soon, is a much more important issue than the political standoff. That issue is being worked on, however, with the government tackling the trade union, labour union and minimum wage laws, and continuing negotiations with workers.
The US is Cambodia’s largest client when it comes to garments. How far up can the minimum wage level go before we start to see a tapering in orders?
I am not an economist, so I do not know exactly where that tipping point is or where it will be. I don’t know at what point it will be that Cambodia will see the same phenomenon that China and Thailand are seeing, which is if you increase too much, people look elsewhere for better deals.
What is sure, is that the wage increase is done incrementaly. To double the minimum wage in a one time swoop, has inflationary impacts on the wider economy and if the workers really understood how that would impact their own self interests, it simply would not be in their interest to double it.
You recently came back from a trade mission to the US. The US ambassador, William Todd, said there were literally a number of US companies waiting for Cambodia’s political deadlock to end before investing. Is this actually the case?
It is difficult to say. Like I said, many private companies don’t always say why or why not they are or are not coming. There was, however, many positive results that came out of the trade mission. We received a lot of good feedback purely due to the fact that the US Embassy was also part of the trade mission.
I’m not going to take a naive view of Cambodia, I have lived here for 20 years, so I know about the corruption, I know about the problems, and there is that image that Cambodia is still a country at war. So there are a lot of problems in overcoming that.
As a result, actually bringing companies here and showing them the positive attributes of Cambodia, is also difficult.
We are planning to do another trade mission next year because of the positive results we had this year.
I cannot identify which companies exactly did express interest in investing.
It is well known that you have a good relationship with the CPP. Do you have one with the CNRP at all?
No, but I welcome participation by everybody. Again, it is everybody’s responsibility to help the country grow. The problem in Cambodia remains that most of the laws emanate from the executive branch and by the time they get to the legislative branch [down to the National Assembly level] they are usually pretty well set.
With that in mind, we may have to be doing more with the opposition to make sure the best laws are enacted.
How are private companies meant to penetrate that inner circle of the executive branch then?
For the private sector, the reality is that if you do not get to the executive branch early to communicate your concerns for law and policy making, it will be too late if you wait to get to the National Assembly and the Senate.
You have got to get involved in the process early on if you want to have any effect.
There are various ways to do that. Private and public sector working groups, individual companies lobbying, business associations, there is not just one solution.
You are not going to win everytime, many times you won’t win, but there is value in simply letting the government know about the private sector’s concerns.
With the CNRP returning to their National Assembly seats, do you think the government’s suite of promised reforms in investment laws, judicial laws and corruption laws will come quicker?
There is an industrial development policy that is being drafted at the moment. The adoption of that policy, as I understand it from my colleagues in the government, would then be a precondition to a full new investment law for Cambodia.
We have not seen a draft investment law yet, but we are keen to be involved in that process as we were in 2003 to the revisions to the investment laws.
I know that part of the new investment law will be the complete separation of laws for Special Economic Zones.
An SEZ-only law is important because both the public and private sectors are interested in getting the SEZs working. The SEZs have been good, but I think the government is wanting to know how to make them more attractive.
I would like to think that the new investment law will make Cambodia even more open to foreign investment.
The high cost of doing business and the courts have for a long time been deterrents to investment. People want to know that if they get into a contract dispute, that they can solve it outside of the courts.
Better dispute resolution for private sector is key. The National Arbitration Centre, which is now operational, will be a big plus in showing Cambodia is a quality investment destination.
But the Arbitration Centre’s success wont happen overnight – we need some cases, some successful ones at that.
The third thing that deters investment is corruption. I have a number of blue chip clients and they are very concerned that they cannot come to Cambodia without everything being done above board.
These big companies do not make enough money here to justify being caught up in a fully fledged investigation. So to fully implement the anticorruption act is vital.
Both parties in the government, should have good focus on getting solid laws passed through, and we in the private sector are counting on that for future development.
This interview has been edited for length and clarity