C AMBODIA'S long-awaited, new investment law is expected to be submitted to the
National Assembly this month according to officials of the Royal Government.
Passage of an investment code is critical for both the short and
long-term economic development of the Kingdom. In the absence of an established
legal investment framework, foreign and local potential investors have been
sitting on the sidelines waiting to see what the government would produce and no
new investment applications have been submitted since the beginning of this
The latest draft of the law, which has been circulating among
relevant government ministries since early May could go to the Council of
Ministers as soon as next week, after which it would be sent to the Assembly for
"Our goal is to have the bill passed in June," said
Sun Chanthol, secretary-general of the Cambodian Development Council (CDC) in an
interview with the Post on May 31. Chanthol said that the draft bill has been
reviewed and approved by First Prime Minister Norodom Ranariddh and Minister of
State Keat Chhon.
The CDC is the agency tasked with writing the new law.
Established by a sub-decree of the Council of Ministers on Dec 15 last year, the
CDC's primary objectives, according to Chanthol, are "to rebuild the economy and
to promote investment".
"The CDC was established because things were
moving too slowly," said Chanthol. "It has been designed to be the engine to
pull things together."
The CDC plans to have two major sub-divisions:
the Cambodian Investment Board (CIB) which would serve as a "one-stop"
government entity overseeing project approvals and the Cambodian Reconstruction
Board (CRB) which would coordinate the more than $1 billion in expected foreign
CIB Secretary-General Ith Vichit says that his agency would
guarantee a 45-day turn-around on all project approvals.
If the current
CDC draft law is passed, investment incentives in the bill would include a
corporate tax rate of 9 percent, no taxes on the distribution of dividends or
profits, a corporate tax exemption of up to eight years for certain projects
prioritized by the government, and a 100 percent import tax exemption for
capital goods on projects which export at least 80 percent of the goods produced
and which are located in a designated industrial zone and/or a Special Promotion
However, the draft law is not without its critics.
internal memorandum obtained by the Post and written by an expatriate economic
advisor to the Ministry of Planning the draft bill is deemed to be confusing.
According to the memo the draft "mixes together a law establishing a
Cambodian Investment Board with a law of principles and policies regarding
It confuses investment incentives and the regulation of these
incentives with regulation of investment per se."
Simply put, the
question is whether or not the law should even include a list of specific
incentives because if it does and these are changed then the law would have to
be amended by the National Assembly.
One economic analyst contacted by
the Post who asked to remain anonomyous said that "If you separate the
incentives from the law it wouldn't be too bad."
CDC's Sun Chanthol says
that the law includes a list of incentives so that investors will have a clear
idea of the investment environment.
"The approach that we use has to be
convincing," said Chanthol. "And the incentives that we list have to last a long
"It is not our intention to change these for several
Chanthol also says that the articles in the law concerning the
CIB are very short and actually designed to eliminate confusion.
Moreover, he agrues that the CIB already has a legal basis for its
existence and that the draft investment law only clarifies this
The memo to the Ministry of Planning also says that the draft
law "duplicates all the worst provisions of the (Thai) Board of Investment law."
CIB's Vichit counters that in fact the opposite is the case. "A lot of
people just wanted to follow the Thai law," said Vichit. "For us it wasn't the
"We looked at Singapore and Thailand and modified them to suit
Vichit said that the draft law was "tested" on a number
of private investors and reviewed by one of the world's top five accounting
Vichit also stresses that the detail included in the draft bill
was necessary to make the Kingdom's new economic policy orientation clear to
"Some investors think we are still a socialist nation," said
Vichit. "The law clarifies our economic policy orientation and restresses the
committment of the Royal Government to the free market system."
thing all parties in the investment law debate agree on is the need to pass a
Tourism revenues and public investment expenditures are
lower than expected and paddy yields likely to drop due to fighting in the west.
These factors are likely to cut in half the projected growth this year
of 7 to 8 percent, according to the memo to the Ministry of Planning.