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New fees, political crisis mean fewer businesses

New fees, political crisis mean fewer businesses

The number of new businesses registering in Cambodia continued to plummet through the third quarter of this year amid tightened rules for start-ups and waning investor confidence following the still-unresolved national elections.

Data from the Ministry of Commerce yesterday showed that 853 new businesses registered with the ministry from July to September, down 6.5 per cent from 912 in the 2012 quarter.

The numbers are part of a downward slide in the first nine months of the year, when there were 2,221 new business registrations, compared with 2,606 in the 2012 time frame, a fall of 14.7 per cent.

In the first nine months, foreign-owned company registrations stood at 1,118, down 8.8 per cent from 1,227 in the same period of 2012. New local businesses fell from 1,379 to 1,105, a decline of 19.9 per cent, according to the data.

Kong Putheara, spokesman for the Ministry of Commerce, blamed the performance on the post-election stalemate in which Cambodia National Rescue Party members have steadfastly refused to take their seats in protest over election results.

The party has also threatened a general boycott if its demands for an independent review of the election, which went to the ruling Cambodian People’s Party, aren’t met.

“Well, in terms of business confidence, I think the businessmen and investors wait to see the progress of our political situation here – this affects their investment decisions to start up the business,” Putheara said.

Grant Knuckey, CEO of ANZ Royal Bank, touched on the same point.

“I believe they are simply a function of the overall slowdown in business activity in the third quarter of the year, particularly in the post-election period,” Knuckey said, adding that mass floods exacerbated the problem.

“Undoubtedly, many potential new businesses would have been waiting for signs that the political deadlock was behind us before registering. This is a fairly natural level of caution.”

The slowdown was also tied to increased fees and processes for new businesses introduced by the government over the past year.

In a report released on Tuesday, the World Bank said that Cambodia is making it more difficult to do business in the country because of requirements that a company register its name with the Department of Intellectual Property, pay higher fees for getting registration documents approved and stamped by the Phnom Penh Tax Department, and mandating incorporation with the commercial registrar.

Cambodia ranked 137th out of the 189 countries surveyed, a slide of two positions from 135th last year. As for overall ease in starting a business, Cambodia was ranked an abysmal 184th.

The new data show that incorporating a company with the Business Registration Department in the Ministry of Commerce costs $400, as opposed to $105 in last year’s assessment. Also, having registration documents stamped and approved by the Phnom Penh Tax Department rose to $250 from $49.

Putheara, with the Ministry of Commerce, conceded the changes in the registration process introduced earlier this year were worrisome.

“Of course, I do agree with the World Bank report because it makes the businessmen spend more due to what they have to go through, the many steps with other departments,” he said. “But, I hope we will discuss the issue with the minister in order to improve the situation soon.”

He said most foreign businesses were from China, South Korea, Singapore, Malaysia, Vietnam and Thailand.

Chan Sophal, former president of the Cambodia Economic Institute, said the political situation is in the “eye of investors,” but the climate is “still normal despite businessmen waiting to see the improvement of the political situation,”

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