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World Bank puts Kingdom lower in Doing Business report

Technicians work to establish a new power connection in central Phnom Penh.
Technicians work to establish a new power connection in central Phnom Penh. Heng Chivoan

World Bank puts Kingdom lower in Doing Business report

For the second year in a row, Cambodia has slipped further down the World Bank’s annual Doing Business report. The Kingdom now ranks 135 out of 190 countries this year, dropping four places in the index – or eight places over the last two years – due to a lack of much-needed governmental reforms, according to economists.

New Zealand and Singapore again occupied the top two spots of the global ranking report released yesterday, which measures the business regulatory environment worldwide. Malaysia and Thailand ranked 24 and 26 respectively, while Laos came in at 141 and Myanmar took the last spot in the region at 171.

The report shows that Cambodia has not made a single positive or measurable reform over the past year. The data show that starting a business again remains a challenge in Cambodia, with the Kingdom ranking 183 – the worst in the region – in the category due to burdensome startup procedures. The report said the average time to complete all the steps necessary to legally start a business remained at 99 days on average, the same amount it was a year ago.

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Another tough spot for Cambodia in this year’s index was in the category dealing with construction permits, where it ranked 179, up four points from last year despite no progress being made through reforms. The report showed that building a mid-sized warehouse in Cambodia from start to finish requires 652 days on average and involves 20 regulatory procedures.

The report also noted that in terms of enforcing contracts, Cambodia scored a low 179 out of 190 with the costs of settling a claim being 3.4 percent higher than the value of the claim.

Miguel Chanco, lead Asean analyst for the Economist Intelligence Unit, said that the country’s low rank in the World Bank’s survey speaks for itself in terms of the government’s willingness to improve its status.

“While Cambodia boasts a relatively liberal foreign investment regime, it seems like the government hasn’t made any strides in reducing the red tape when businesses actually decide to set up shop,” he said in an email. “In many ways this isn’t really a big surprise given how people in the system benefit (via corrupt practices) from the high amount of red tape.”

He added that Cambodia’s low ability to enforce contracts was a reflection of its weak judiciary system, and that the government was choosing populist policies over sound economic principles.

“My worry is that, over the short run, the government’s priorities are running against the policies that are needed to attract and entice investors,” he said.

Kaing Monika, deputy secretary-general of the Garment Manufacturers Association in Cambodia, said yesterday that while the government had taken some measures to support the garment industry, the low ranking was skewed because Cambodia was being compared to other countries.

“In some case, we fall down in rankings despite us doing better than before because other countries are making faster improvements than us,” he said. “Still, the information in the report is the main source for consideration which means the government needs to work harder.”

Long Kemvichet, spokesman for Ministry of Commerce, refuted the overall ranking while defending the ease of starting a business. He added that the ranking was unlikely to impact investment decisions.

“The number of days mentioned in the report is not the actual number of days required to register a business. In fact, the report did not reflect the improvements made in the registration process,” he said.

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