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Talking commerce in Cambodia

110531_9
Commerce Minister Cham Prasidh speaks to reporters from The Post yesterday in Phnom Penh. Photo by: HENG CHIVOAN

SENIOR Minister and Minister of Commerce Cham Prasidh sat down with The Post yesterday to discuss Cambodia’s business environment, the challenges of attracting foreign companies to Cambodia and the effect of the border conflict on commerce. Edited by Jeremy Mullins and May Kunmakara.

In your discussions with foreign businesses, what do you raise as Cambodia’s strong point? Why should foreign businesses come to Cambodia?
When foreign businessmen go to one country, they are looking for at least three key factors. One is political stability. We know that Cambodia has already ensured political stability.

The second one is macro-stability. And we do also have that, despite a little hiccup during the world economic crisis. But it affected everybody, not just Cambodia. This was an exception. But apart from this, the economy is in good shape.

The third key factor is providing a sound and predictable legal framework for the businesspeople.… That means international practices are implemented in Cambodia as well, so it’s not the law of the jungle for businessmen that come to Cambodia.

These are the three key factors, but for Cambodia we have been able to provide to businessmen one more key factor, which is access to foreign markets.

We are inviting them to come invest in to Cambodia to produce for export to European markets on a duty-free and quota-free basis. To Canada, it’s the same, to Australia, to Japan, to India, to China, to Korea, to many big, rich countries, and almost everything is duty free and quota free.

The other thing that is very important is we have a very open liberal trade regime.

On the flipside, what are the largest obstacles to locating and running a business in Cambodia? And what is being done to improve on these obstacles?
People first think Cambodia is only a small market. You have only 14 million, and next door you have 70 and 80 million people, and 200 million down south, and over 1 billion people up north.

The moment foreign investors come to the region, you try to attract them to come to Cambodia, they zip or zap to Vietnam or to Thailand because of the large domestic market. But you provide them with a different way to do business [in Cambodia].

A handicap for Cambodia is that infrastructure is not all [complete] right now. But you have seen through many years that the government has tried to put all the infrastructure in place.

We still have one handicap in the cost of electricity.… But there are hydropower sites we have started to build.

In not less than 10 years, a lot of power will be generated from Pursat, from Koh Kong, or from the northeast. So that means this is not a handicap anymore for Cambodia.

We have a trump card, which is our market access, which most of our neighbours don’t have.

Laos and Myanmar have advantages like Cambodia, they are also Least Developed Countries.

But Laos is a landlocked country.…And from Myanmar you can produce the same as you can in Cambodia, but the problem is market access.

In ASEAN, Cambodia is the only one country that can maximise its status as a Least Developed Country.

The need to diversify exports from too much reliance on a single industry is often discussed. In your view, is it happening? What can be done to encourage it and also close the trade gap?
First you have to understand that for Least Developed Countries such as Cambodia, when you have large markets next door it is very difficult.

The first type of industry that we can get here are those that can compete with neighbouring countries. ... Cambodia can provide cheaper labour, compared to Vietnam or Thailand.

So what type of industry uses cheaper labour? First, it’s the garments and footwear industry. So this is why you can see the garment and footwear industry coming and flourishing in Cambodia.

What about electronics and other things? People are always having the wrong perception about Cambodia. They think there are still a lot of illiterate people. We have done a lot in the education system. I think many things have improved.

If you want to invest in microchips, for example, it is does not mean that you need a lot of PhDs and engineers. You need maybe 10 or 20 people, but the rest are people who can only tighten the bolts and everything.

More products are being produced in Cambodia. Bicycles, for example. Before nobody thought we could produce bicycles – now we can. Motorcycles, the assembly line is here.

Now we also have Minebea from Japan, which produces very small motors. That is very important for computers for the hard disc, and this is now produced in Cambodia.

When you have this type of production coming into Cambodia, people start to wake up and say why not [set up] in Cambodia?

I think it’s going to go little by little. And the automotive industry is going to move in, once they realise there are lots of opportunities to produce in Cambodia for export.

What lessons did you take from the effects of the global financial crisis on Cambodia?
Well, the world crisis affected everybody. The lesson you have to learn is you have to try not to trust the big guys too much. The lesson is that you were always thinking the big guy would never fall down, and when they fell it [caused] really big damage to the small guys.

Can you discuss your decision to postpone the second Thai trade exhibition, which was originally going to be held in Phnom Penh earlier this month? Were you concerned it would cause an escalation of some sort?
The reason why I postponed the Thai Exhibition 2011 is because of some wrongdoings at the border.

While the tension is still there, the [Thai] army also intervened in preventing free-flow of goods, preventing some essential goods from coming to Cambodia.

For example, oil sometimes, iron, cement. They think Cambodia used these to build bunkers, or our troops use the gasoline.

At the same time, the Ministry of Commerce of Thailand also imposed new duties on products from Cambodia.

Of course, they put them in place for other countries as well, but they do not follow the rules of ASEAN. It affects the border trade.

The reason why I postponed this is not because of [problems] with selling across the border, but because we had also this army intervening in trade.

You have seen the policy of my Prime Minister is always confining the conflict to only military things, not in the economic field. So we still continue to promote trade.

They wanted to organise this exhibition right away at the time the Thai army are creating problems with our products at the border.

I feel it is not appropriate for us to try to promote Thai products at the time they are bullying us at the border.

We say okay, maybe it’s not the right time. You never know what the reaction of the Cambodian public would be; whether they would come and buy or they would come and create troubles with the exhibitors.

I say maybe it’s not safe for Thai exhibitors at this time. You cannot guarantee safety for them, too. Because you are stamping on my feet and you try and promote your products - it’s not fair.

In the trade sector we have already seen a reduction of two-way trade. I believe it could be [a drop of] around 20 percent at least, not because people fear the safety of the goods crossing the border. The problem is people fear their goods would not be sold in Cambodia, or would not be as popular as before in Cambodia.

Who is losing? You will see. We are only exporting $200 million, and we are importing $2 billion US dollars.

So they have to weigh the pros and cons. We want to use business to create a border of peace and cooperation with Thailand. But the problem is that domestic politics interfere with that type of behaviour.

Do you feel the fighting has affected the international business community’s view of Cambodia?
I don’t think so. First, international business sees Cambodia as being bullied by a bigger country. At the same time they have seen we have tried to confine the conflict to the border area only, so people can trade and do business and invest together.

For foreign businessmen, there is nothing that is going to change in Cambodia.

The macro-economy is going to be still here. Political stability is also here. A sound, predictable legal framework is also here. Market access is also here. The four key factors I mentioned earlier, they’re still here.

What effects will the Cambodia Securities Exchange have on business in Cambodia?
It will provide more capital for companies that are searching for capital that the bank cannot give.

We have to go step by step, steady step. I’m not very much in favour of the stock exchange, but I see it also as an important tool for the economy in the future.

But we have to go step by step, making sure that the securities exchange we are setting up is not going to be a time bomb for the Cambodian economy, but rather a paved road for people looking for capital. But you have to make sure the road is safe.

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