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Logo of Phnom Penh Post newspaper Phnom Penh Post - Three years on, WTO legal compliance lags

Three years on, WTO legal compliance lags

On September 11, 2003, when Cambodia became the first Least Developed Country (LDC)

to be accepted into the World Trade Organization (WTO), the government heralded the

move as a sure-fire means to economic growth and a foothold in an increasingly globalized

marketplace.

At the time, Minister of Commerce Cham Prasidh stated that "the survival of

our country depends on our ability to capture the right opportunities at the right

time. We believe the entry to the WTO is such a case."

Upon returning from the WTO meeting in Mexico, Secretary of State Sok Siphana, the

key architect in Cambodia's accession to the world trade club, was asked what penalties

would be handed down if the country didn't manage to meet its lengthy list of legislative

commitments.

"Bad image, to start with," Siphana told the Post at the time.

Now, nearly three years later, his words may be proving prescient. Economic analysts

are debating what Siphana called the "dilemma of being the first LDC" and

wondering whether the concessions were too much, the commitments unrealistic.

The business community is still awaiting a surge of foreign investment, the improved

business climate and the job creation required by the 230,000 new workers who join

the potential labor force each year.

"WTO accession as an approach was good and the framework has been positive,"

said one senior Western economist. "But today progress is so slow, it's affecting

investment."

Of the 47 regulations and laws that Cambodia pledged to enact in its "Work Program"

by 2006, only 19 have been adopted. Foreign investors are increasingly wary of investing

capital in the country without effective commercial laws or implementation.

"Basicly the benefit of enacting the required WTO legislation is the discipline

it will force on the government to make changes private sector has wanted for a long

time," the economist said.

But the glacial pace of the promised legislation has raised questions about the legal

and judicial dimensions of WTO membership and the ability of the government to harness

its benefits.

"It is crucial that Cambodia meets its WTO obligations - as a first step by

passing these laws," said Adam Sack, general manager of the International Finance

Corporation's Mekong Private Sector Development Facility (MPDF) on August 23. "These

are important not only for fulfilling contractual commitments with the WTO, but also

for giving a favorable signal to investors that Cambodia is committed to improving

its business climate. This signal, along with consistent implementation of respective

laws, should in turn attract new domestic and foreign investment. This is crucial

for creating jobs and for alleviating poverty in Cambodia."

The MPDF, in its publication Business Issues Bulletin, has identified seven key commercial

laws set down in Cambodia's WTO agreement that have yet to be passed and which would

have the most immediate impact on the country's private sector.

"Speedy adoption and fair implementation of these laws can unleash capital and

promote entrepreneurial activities that, in turn, stimulate economic growth and create

jobs for thousands of Cambodians," reads the MPDF report.

According to the MPDF, the first four - Secured Transactions Law, Commercial Leasing

Law, Law on the Issuance and Trade of Non-Governmental Securities, Insolvency law,

Commercial - would be expected to increase access to finance and boost business growth.

The enactment of the other three-Contracts Law, Competition Law and Court Commercial

Law-are related to business and consumer trust.

"The passage and fair enforcement [of these three laws] can instill confidence

in businesses and consumers about the economy and rule of law in the country,"

the report states. "This can motivate existing businesses to expand and encourage

potential entrepreneurs to start new ventures, which in turn can create new jobs,

foster economic growth and reduce poverty."

But in a rebuttal of the report, Mao Thora, Undersecretary of State for the Ministry

of Commerce (MOC), said lack of cooperation between legal experts and the MOC in

drafting the laws, and political stagnation after the 2003 election were the causes

for the delay.

"The passage of these business laws will encourage private sector growth as

they set out frameworks for more equitable business transactions," Thora wrote.

"In order to speed up the passage of these laws we need both human and financial

resources. We are working on restructuring the MOC's Legal Department so that it

consists of staff who are qualified to work on drafting the various commercial laws.

We also need financial support to increase the effectiveness of our work."

Neak Samsen, researcher at the Economic Institute of Cambodia (EIC) agrees that there

are numerous causes for Cambodia's inability to pass WTO laws.

"First, there is a lack of technical assistance from developing partners that

was promised when Cambodia pledged to draft laws on WTO membership," Samsen

said. "Also, the legal system in Cambodia requires multiple ministries to be

involved in drafting laws. Finally, the National Assembly has so often lacked a quorum

that there has not been enough time to check and approve them."

Samsen and other economists are concerned the lack of commercial court is scaring

off foreign investors.

"It is normal that the lack of this court , and the failure to pass our WTO

laws, would affect foreign investment and the economy because when disputes occur

we have no law to implement for resolution," he said. "We'd be better to

speed up the legislation and respect our promises."

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