Nestlé Dairy (Cambodia) Ltd, one of the few blue chip multinational corporations

with a presence in Cambodia, shut down its sweetened beverage creamer production

line at its Phnom Penh factory effective April 2, according to a company

official.

The move has cost 39 Nestlé employees their jobs and is a

small but serious blow to a government that has been trying to encourage foreign

corporations to invest in the Kingdom.

According to company general

manager Bertrand Sigwalt, Nestlé conducted an industrial study of its operations

here and concluded that its locally produced Bear Brand Sweetened Creamer was

"not competitive".

Sigwalt said the move was part of a business

restructuring to improve the company's long-term competitiveness and that

smuggling, mostly from Thailand, was part of the reason Nestlé decided to close

the production line of the only product it made, canned and marketed in

Cambodia.

"My main competition is from Thailand," said Sigwalt, citing

Alaska and Falcon brand creamers as the two products Nestlé could not compete

with.

Smuggling was one of the key problems cited by investors at the

Fifth Government-Private Sector Forum held on Feb 28. At the time, Prime

Minister Hun Sen said his government was committed to stopping smuggling and

called upon the cooperation of the police, armed forces and local authorities to

help implement a December, 2001 Executive Order designed to counter the illicit

trade. Investors, however, grumble regularly that it is these very same

officials who are in fact facilitating cross-border smuggling.

Nestlé

will continue to "re-package" several products at its 5,500 square meter plant

on Route 5 just north of the Japanese Bridge, including powdered milk, Coffee

Mate, Lactogen and a cereal for children, among others. These products are

imported to Cambodia from Nestlé plants in the region, packaged in cardboard

boxes with both Khmer and English labeling and then distributed nationwide.

Sigwalt called the decision "unfortunate" but said that Nestlé was still

committed to doing business in Cambodia. He said the company had invested "a

couple of million [dollars]" in its factory since 1998.

"We strongly

believe there is potential here," said Sigwalt, noting that in March alone the

company sold three million tins of Bear Brand Sterilized Fresh

Milk.

However, Sigwalt said that overall Cambodia was still a difficult

business environment within which to operate. "We are not making any profit

here," he said.

The company would now focus on "generating demand" and

had recently hired 20 marketing staff to help boost sales.

Swiss-based

Nestlé maintains 500 plants in 88 countries. It initially began operations in

Cambodia in 1970 but shut down its plant due to the civil war prior to 1975.