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Why FDI has plummeted

Why FDI has plummeted

Foreign direct investment has fallen dramatically in Cambodia since 1996 because

the challenges outweigh the opportunities for investors.

This is the conclusion of four scholarship students - Saing Chan Hang, Thea Sophy,

Yi Makara and Kim Sokche. They presented their findings to an audience at the Australian

Centre for Education before leaving for Japan this week for postgraduate studies.

A key factor behind the decreasing investor interest, they said, was Cambodia's competitive

disadvantages against neighboring countries, such as Thailand and Vietnam. Operating

costs were generally higher in Cambodia; gasoline for example cost twice as much.

Unlike those countries, Cambodia lacks supporting industries. This means that raw

material and intermediate goods often have to be imported, at higher cost.

Another reason was the prevalence of bribes. Saing, Thea, Yi and Kim quoted a World

Bank survey claiming that 82 percent of 368 interviewed businesses operating in Cambodia

paid bribes.

Together with further discouraging factors such as problems with smuggling, an unskilled

labor force and a long registration process for new businesses , the students concluded

that the challenges overshadowed the opportunities for the investors.

They urged the government to take the following measures to put the country back

on the track:

* Strengthen law enforcement.

* Simplify registration processes.

* Improve infrastructure.

* Maintain economic and political stability.

* Curb smuggling.

* Enhance human resource capacity.

* Encourage investment in supporting industries.

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