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Corruption quandry

Corruption quandry

CAMBODIA’S Anti-Corruption Law by now is famous for what it most likely won’t do, at least no time soon: provide the transparency in government for which so many of the legislation’s proponents had hoped. What has been less noticed, though, is the potential harm it could to the Kingdom’s economy.

There has been, of course, an outcry over the requirement of government officials to declare assets, as their spouses are not required to do the same, and those declarations are seen only by the Anti-Corruption Unit, which reports directly to the prime minister. Critics of the law have also pointed to the potential six-month sentence whistle-blowers could face if their allegations “prove” unsubstantiated. Under these provisions, the original targets of the law – and winking at the government here is no great stretch given Cambodia’s consistent ranking as one of the world’s most corrupt countries – seem likely to escape unscathed.

But another potential problem has come to light: The law makes it extremely difficult for companies from some of the Kingdom’s major trading partners to do business here.

The issue is one of so-called facilitation fees, where overseas firms pay Cambodian officials for any number of services. According to the new law, the practice comes with a punishment of up to a decade in jail for the offending members of the firm. While the absence of any pay-for-service transactions is ideal, such stark changes in business practices could in fact hurt, rather than help, in the short term. Major international companies already are taking steps to comply with the law. US-based FedEx has stopped all packages worth more than US$300 bound for the Kingdom so as to avoid paying those facilitation fees, according to reports. Apparently it’s customary practice to pay customs officials to clear high-value shipments, the company has said.

Surely, though, FedEx is only the beginning of what could be major cutbacks for businesses that operate in Cambodia as they adjust to these new rules. And if so, what will it mean as those cutbacks ripple out to the country’s economy?

Oddly, countries with strict anti-corruption laws allow for the payment of facilitation fees in some form, or in certain circumstances, including the US and Australia. Even the Organisation for Economic Cooperation and Development’s Convention on Combating Bribery of Foreign Public Officials in International Business Transactions, while discouraging the practice, does not deem it illegal.

It is strange then that the Cambodian government would overlook its entrenched system of informal payments and include such a provision without allowing for a suitable transition period. Perhaps pressure from donors forced its hand. But did neither party foresee the precarious position in which international companies doing business here now find themselves, or how that would affect the Kingdom as a whole?

A solution might be to implement new procedures that ease the country toward what many hope will be a more transparent future. No one wants to rubber-stamp corruption, but large-scale shifts in culture take time and the law needs to account for that.

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