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Graft ‘holding back’ SMEs: report

A general view of the Ministry of Commerce in Phnom Penh
A general view of the Ministry of Commerce in Phnom Penh yesterday. A new report found that nearly half of the respondents had to pay unofficial fees for company registration. Vireak Mai

Graft ‘holding back’ SMEs: report

Corruption continues to hamper the potential of Cambodia’s small- and medium-size enterprises, a new report has found.

The report, released yesterday by Transparency International Cambodia, reviewed corruption perceptions among 100 SMEs in the Kingdom. It found that nearly half of the respondents had to pay unofficial fees for registering their company with the government, while 60 per cent reported corruption as having a damaging influence on their business.

Just 61 of the respondents had registered with the Ministry of Commerce or Department of Taxation, but a majority of them had to dole out bribes or “tea money” in the process.

“Up to present, although good governance is still a very serious issue, Cambodia has enjoyed steady economic growth and reasonable development,” said Ok Serei Sopheak, chairman of the board at Transparency International Cambodia.

“But business integrity is critically needed if we want this to be sustainable.”

When presented with the findings of the TI report, Ken Ratha, spokesman for the Ministry of Commerce, said the ministry would welcome “concrete evidence” of corruption and measures had been put in place at the ministry to tackle graft.

“We cannot change everything overnight but we are doing everything we can to reform the ministry,” Ratha said.

Commerce Minister Sun Chanthol has vociferously promoted reforms at his ministry to thwart corrupt practices. The on-going automation in issuing Certificates of Origin, used by exporters, and a new online business registration system, scheduled to be completed by the end of the year, are two measures meant to circumvent or reduce interaction with corrupt officials.

Cambodia currently has over 500,000 SMEs, comprising 98 per cent of all business enterprises in the Kingdom and employing 70 per cent of the workforce. According to a report released last year from the International Labour Organization corruption is estimated to cost Cambodia’s economy about $1.7 billion annually – close to 10 per cent of the Kingdom’s GDP.

According to the TI report SMEs believe the reason for continued corruption is the low pay given to government officials.

But Ly Visal, operations manager at the Federation of Associations for SMEs of Cambodia, said that poor government salaries were not an excuse for corrupt practices.

“If we say that low salary leads to corruption, then that means that all government officials need to be corrupt,” said Visal.

He added that awareness of rules and regulations among SMEs was so low, which made it easy for corrupt officials to take advantage of business owners.

“If they [SMEs] are doing things lawfully no one can put them into corruption, but if they do not know, they will give these [officials] money easily,” Visal said.

Chann Veasna, member of the Young Entrepreneurs Association of Cambodia, said there was no incentive for SMEs to run a clean business when other businesses were indulging in corrupt practices, like paying little or no tax and skimping on import duties.

“Some business people want to go clean [with their] business. But without a fair playing field if they do business in a clean perspective they will die,” he said.

The Kingdom has been consistently called out by international organisations for its poor performance in stamping out graft. The World Bank’s Ease of Doing Business 2015 report ranks Cambodia at 135 out of 189 nations on the ease of doing business and 184 for ease of starting a business, which includes registering a company.

Transparency International’s Global Corruption Barometer 2013 in Cambodia showed that 62 per cent of respondents had paid bribes for registration and permit services. Their Corruption Perception Index for 2014, a measure for corruption in the public sector, ranked Cambodia 156th out of 175 countries, the lowest rank in the ASEAN region.

The Tax Department could not be reached for comment.


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