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Draft PPP law sails through Cabinet

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The International Monetary Fund, World Bank and other financial institutions have all pegged Cambodia’s economic growth rate for 2021 in the 1.8-2.2 per cent range. Heng Chivoan

Draft PPP law sails through Cabinet

An expert believes that the draft Law on Public-Private Partnerships (PPP), approved by the Cabinet last weekend, will be a driving force for investment opportunities for locals and foreigners, and a welcome supplement to the new investment law.

Comprising 14 chapters, 49 articles and two appendices, the PPP bill sailed through October 8’s Plenary Session of the Council of Ministers, or Cabinet.

A press release on the minutes of the session noted that the draft law was prepared on the basis of the Policy Paper on PPPs for Public Investment Project Management 2016-2020, which was approved by the government in June 2016.

The bill was designed to replace the Law on Concessions after a review determined that it was “not fully compliant with international excellence and the actual situation of the management and implementation of PPP projects”.

The release listed areas of contention such as the roles of competent institutions, forms of payment, state guarantees, the rights and obligations of contracting parties, and project operation management procedures.

It went on to explain that PPPs are best pursued in a number of key contexts, such as limited national budget resources, reductions in global grant financing, or the gradual loss of Cambodia’s advanced concessional loans.

However, demand for public investment is steadily increasing, as the Covid-19 crisis undermines and erodes socio-economic gains made by Cambodia and hindering the Kingdom’s development process, notably the possible delay in the vision of becoming a high-middle-income country by 2030 and a high-income economy by 2050.

These are part of efforts to prevent Cambodia from falling into “price traps” that can occur through long-term contracts without the thorough and proper examinations and evaluations, promote growth, and maintain the economic life of Cambodia based on resources and innovations in the private sector, allowing private actors to participate in the development of public infrastructure and the provision of public services.

The law “aims to enhance the management of PPP mechanisms in the design and implementation of public infrastructure projects and public service projects aimed at strengthening Cambodia’s regional and global economic competitiveness for the benefit of socio-economic development and increase the attractiveness of the private sector in line with Cambodia’s rating of international excellence and practical contexts”.

Hong Vanak, director of International Economics at the Royal Academy of Cambodia, chalked up the law as a new mechanism to increase the Kingdom’s attractiveness for investors, in addition to public-private forums organised by the government each year in coordination with the Council for the Development of Cambodia.

He told The Post on October 10 that the law will be very influential on investor confidence, especially among those capable of making sizeable investments in medium- and large-scale industries.

“This draft law can be said to be an important mechanism for increasing the attractiveness for both local and foreign investors to invest in Cambodia and ensure strong, long-term economic growth,” he said.

Having recently bagged a number of regional and bilateral free trade agreements and established investment-related legislation, Cambodia must also consider strengthening its production capacity to meet international market demand as well, Vanak suggested.

At October 8’s Cabinet meeting, Prime Minister Hun Sen said the draft law would be very important in promoting economic growth in Cambodia, especially after the Covid-19 situation has improved.

The International Monetary Fund, World Bank and other financial institutions have all pegged Cambodia’s economic growth rate for 2021 in the 1.8-2.2 per cent range.

The prime minister said: “Economic growth is now projected at 2.2 per cent, but if we are able to reopen for the last two months of this year, especially domestic tourism and other services, economic growth will be able to increase a little more than that. National budget revenue will be able to return to a better state.”

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