Corruption remains a major challenge and a constraint on improving Cambodia’s business environment, recent reports on the issue have shown.

Transparency International’s Corruption Perception Index released last week showed that Cambodia scored 22 out of a possible 100, placing it at 157 out of 176 countries, showing Cambodia to be less corrupt than Laos but more corrupt than Papua New Guinea, Bangladesh and Pakistan.

Peter Brimble, deputy country director to Cambodia for the Asian Development Bank (ADB), said the recent and rapid inflow of Japanese investors into Cambodia emphasised that certain elements of the index may not reflect the reality on the ground.

“Japanese investors are known to be sensitive to governance and transparency, and have shown their confidence by voting with their investment dollar and building modern factories in Cambodia,” he said. “I have had talks with Japanese investors, serious concerns have been expressed about transportation and logistics costs, energy costs, and skills shortages – but not that much on corruption.” he added.

“Foreign investors that come to visit Cambodia, and carefully evaluate the situation on the ground, may or may not decide to locate here – but they will base that decision on their evaluation of Cambodia as an investment location, not just on an international index based largely on secondary and possibly dated information.

“The Cambodian business environment is quite positive, with almost 100 new firms entering Cambodia in the first eight months of 2012 alone,” added Brimble.

The ADB in January released its report, Country Governance, Risk Assesment and Risk Management Plan, which said corruption remains significant and difficult to mitigate in the short term at lower levels, but gave no indication that this applies at higher levels.

The legal and judicial sector (police, prosecutors, and courts) remains weak but is critical to pursuing prosecutions.

“A joint ADB-Royal Government of Cambodia governance assessment published in 2012 stated clearly: ‘Corruption at all levels has long been regarded as the main area of concern for improving the business environment and overall governance in Cambodia, and this remains the case’,” said Brimble.

“If the governance situation were to worsen, which is not indicated by the recent FDI inflows from Japan and in the garment sector, nor by the improvement in the TI index in 2012, the FDI environment would be negatively affected. But governance is just one element of the overall investment climate,” he added.

He said that to address the concerns, the government has implemented a number of legislative and policy reforms. However, he said, it has yet to fully bear fruit.

Cheat Khemara, senior officer at the Garment Manufacturers’ Association of Cambodia, said the association has never faced corruption issues when dealing with local authorities.

Om Yinteang, head of the government’s Anti-Corruption Unit, on December 9 said it will make a greater effort to fight corruption in the forthcoming year – especially in terms of authorities charging illegal fees.

 

To contact the reporter on this story: May Kunmakara at [email protected]