WHEN India conducted an auction for 3G wireless licences last year, generating close to US$15 billion in revenues for the country, the process marked a drastic improvement on licensing for 2G services that took place in 2008.
Although convoluted – the process required 183 rounds of bidding over 34 days – last year’s auction was considerably more transparent than the earlier 2G process in which the IT and Communications Minister A Raja is alleged to have dished out cheap licences to favoured businesses and individuals. He resigned last November and is under investigation for corruption.
In the wake of the 3G licensing scandal engulfing Deputy Prime Minister Nhek Bun Chhay and the manner in which many businesses licences are distributed here, Cambodia should take note.
The main difference between the two processes in India was that last year’s auction – a transparent process in which companies were required to openly stake their claim to a licence – replaced the notoriously opaque “first-come-first-served” transactions.
It is the latter system of licensing that unfortunately remains the norm in Cambodia.
And it’s a system responsible for the recent allegations against the Deputy Prime Minister, mismanagement in the telecoms sector, the possibility licence revenues are not reaching state coffers and the perpetuation of a culture of graft that threatens investment and undermines the economy.
If Prime Minister Hun Sen is to lead a serious effort to tackle corruption, a problem he acknowledged last week in identifying the need for a “well-regulated environment for business”, then there would be no better place to start than licensing procedures.
Licensing represents the front line of interaction between the state and the private sector, and is therefore highly prone to acts of corruption. And for a country like Cambodia, negative repercussions as a result are substantial and wide-ranging.
Cases in which licences are distributed for the personal gain of the issuer almost always result in lost revenues for the state, a situation Cambodia can ill-afford given the miniscule government budget.
India’s 2G scandal is likely to have cost the country about $7 billion in lost licence fees.
How much money has Cambodia lost in the past due to its own under-regulated and opaque licensing system?
Although senior politicians in Cambodia continue to congratulate themselves on passing recent anti-corruption legislation, measures such as this have thus far remained largely antidotal. They do not address the root cause of corruption before it can take place.
By switching to an open bidding process to allocate operating licences for sectors such as telecoms, mining and energy, Cambodia would eradicate the possibility for the kind of corruption related to licensing documented in major sectors of the economy.
Every time a licence is issued in this country in murky circumstances, a precedent for impropriety is laid for the business concerned and the cycle of graft begins again.
Cambodia could break this cycle without too much difficulty. Just ask India.