Logo of Phnom Penh Post newspaper Phnom Penh Post - Investment Law sails through NA

Investment Law sails through NA

Investment Law sails through NA

C AMBODIA'S Investment Law was passed after two days of debate in the National Assembly, ending months of anticipation and speculation.

Aside from three amendments, all of the articles were accepted with little or no change. There was extended debate on some issues, particularly the questions of the role of the Cambodian Development Council (CDC), the level of incentives extended to investors, how disputes were to be settled, and the taxation of companies exploiting natural resources. Some articles passed without debate or comment.

Most of the assembly members' questions were answered by Kiet Chhon, the vice-president of CDC and the chairman of the Cambodian Investment Board.

One of the issues that came up early in the debate was the relative role of the government and the CDC. Kiet Chhon said: "The CDC is entitled to make the final decision on a number of issues as stated in Article 3 [of the investment law]. But decisions about large scale investments are part of the overall economic strategy of the government. These should be decided by the government, so that CDC and the government have a common responsibility."

Bin Chhin, CPP MP from Prey Veng, worried that the provisions in Article 14, which specified the incentives offered by the Royal Government, would reduce the amount of tax revenue being collected under the current law.

"Although tax revenues will be reduced, we can boost our economy by having more work for our youth and for our people. The financial law will have some changes to improve the economy," Chhon said.

Ahmad Yahya, Funcinpec MP from Phnom Penh, proposed what would be the first of three amendments to the law. He suggested that companies exploiting natural resources be taxed at a higher rate.

"Mine profits are currently taxed at a rate of 20-25 percent. A tax rate of nine percent represents too great a loss for the government," he said.

Pou Sothirak, Funcinpec MP from Sihanoukville, and Minister of Industry, Energy and Mines, suggested that the tax rates for companies exploring for and exploiting natural resources, timber, oil, mines, gold, and precious stones be determined by separate laws. The amendment was passed.

Article 20, concerning the resolution of disputes, was also amended. Chuor Leang Huot, CPP MP from Kompong Cham, argued that investors should be given three choices about the settlement of disputes. They could bring the dispute to the CDC for advice, ask that it be settled in the Cambodian court system, or opt for international arbitration . "Thus we allow investors to have free choice to solve their problems," Leang Huot said.

Kan Morn, Funcinpec, and Kieth Chhon agreed with Leang Huot, but suggested that international arbitration only be allowed when there was mutual agreement between the parties to the dispute. This motion passed unanimously.

Potentially important for the Cambodian work force was the suggestion by Kan Mann, from Kandal, Ek Sam Ol, CPP from Prey Veng, Pol Ham, BLDP from Kompong Thom, and Cheam Yeab, CPP, that investors be required to upgrade the training of their Cambodian staff. This motion passed.

Kan Mann, argued that the government should be allowed to control the price of public services. Kiet Chhon said: "We practice market economics and we should not control prices, but we shall negotiate the price when the contract is signed." The wording of Article 10 was changed to include the word "price."

Debate rose over whether incentives for investment could be sold to third parties. Sot Say, Funcipec MP from Kratie, wanted to keep the original wording of the law, but he wanted the law to stipulate that logging companies be required to reforest cut areas in order to get approval for their investment proposal.

Chea Chan To, suggested that companies who planned to invest in Cambodia with only loan capital not be allowed.

Kiet Chhon replied to the two MP's: "The CDC should have final say on the applications, but some projects will require government approval.

Cambodia will be a member of the International Tropical Timber Organization, and logging activities will be managed in a sustainable way."

During discussion of Article 13, Ek Sam Ol, argued that when there is competition between imported goods and goods produced within the country, protective import tax barriers should be raised. He suggested import taxes of 100 or 200 percent. Kiet Chhon answered that such high taxes could have bad consequences. He argued in favor of more competition to put pressure on domestic companies to produce high quality goods.

The motion to change Article 15 failed. The original wording was accepted by 91 of 97 MPs voting. The alternatives, to allow the CDC to approve the transfer of incentives, or to allow the Royal Government to approve transfers of incentives failed. The latter had been suggested by Chem Snguon, the Minister of Justice.

Article 22 regulates the dissolution of a company. Sam Rainsy suggested a language change that would require certification that the employees had been paid when a company is dissolved. Kiet Chhon argued that the word "complainants" in the draft would provide sufficient protection to employees. The Article was passed by a vote of 87 to 1.

Article 25 has left some ambiguity as the Post went to press. According to the Khmer text of the law it empowers the CDC to withdraw the rights and benefits granted to a company for violating or for failing to comply with the conditions stipulated. However the English translation supplied by the CDC adds the words "by the CDC".

Samreth Pech, argued that the courts should be involved. Kiet Chhon argued that if companies disagree with CDC's action, they can go to the court. Chiem Yeap argued that the law should say that CDC "is entitled" rather than "shall have the power to withdraw the rights and benefits." In the debate, there was agreement that the conditions of withdrawal are those specified in the law, not stipulated by the CDC. The original wording of Article 25 was retained.

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