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PM Outlines Business Plan

By Brian Calvert

The Cambodia Daily

       In his bi-annual meeting with private sector businessmen, Prime Minister Hun Sen on Monday said that while the world faces economic slowdown, there are ways Cambodia can improve its own situation.

The premier listened to some suggestions from the private sector on ways to improve the economy, but stopped short of supporting an amendment to the labor law that would allow for a third, night shift, something garment manufacturers say would make the country more competitive.

Hun Sen promised to rekindle negotiations with investors who are angry over proposal by the World Bank and the International Monetary fund to reduce investment incentives. The premier also asked Commerce Minister Cham Prasidh to halve the number of import and export inspections in order to make factories here more globally competitive.

“We are gathering here at a time when a synchronized world wide recession has become a serious danger,” Hun Sen told 700 officials and businessmen at the government-private sector forum at the Hotel Inter-Continental. The Us, Japan, Europe and South American markets are slumping, he said, which has an impact on investment decisions worldwide.”

Cambodia, while experiencing a boom in tourism and enjoying an increase in garment exports, is facing a continuing decline in foreign investment.

Investment approvals by the Council for the Development of Cambodia dropped by 40 percent between 1999 and 2000. The first half of 2001 saw those approvals drop 36 percent compared to the same time last year, Hun Sen said, calling the decline “worry-some to us all.”

Of concern to investors is a World Bank proposal to cut investment incentives,. In a February forum, Hun Sen told investors he would have to cut some incentives in order to raise revenue for the government’s budget.

The World Bank’s Foreign Investment Advisory Services recommended in March some cuts to those incentives, sparking protests from investor. The government promised to look at the local investors ‘counterproposals, but here has been no resolution.

“I cannot understand what logic is being used here,” Bretton Sciaroni, a representative of the law, tax and governance-working group, told Hun Sen Monday. With Cambodia’s decimated in-restructure and high costs of doing business, a cut in investment incentives could repel not attract__ investors, he said.

The “misguided” FIAL proposal “will not increase investment, and it will not raise revenue,” Sciaroni said.

 World Bank representatives were not immediately available for comment, but officials have said they support cuts as a way to boost government revenue. Amendments to the law include the elimination of duty exemptions, reduction of tax holidays, and an increase in revenue taxes.

Hun Sen publicly extended an invitation to investors and the World Bank to renew negotiations.

Meanwhile, the global slowdown and unrest are hurting Cambodia’s number one export industry, Garments accounted for almost \\$1 billion in exports last year, said Van Sou leng, chairman of the Garment Manufacturers Association and a representative from the export processing working group.

“We are becoming less competitive,” he told Hun Sen. adding that the labor law does not allow for night shifts unless workers are paid more.

Transportation, importing and Exporting are all slow in Cambodia, making garment manufacturers less flexible, and therefore less appealing to buyers in Western markets concerned with style, cuts and colors, Veng Souleng said.

Cham Prasidh promised to find a way to streamline the import and export process to improve flexibility.

Streamlining the process could help, Van Sou Ieng said. But so would an amendment to the law that allows factories to employ a third “night shift.”

Not having a night shift decreases a factory’s efficiency by one-third, Van Sou Ieng said, which can result in the loss of orders from buyers.

When faced with the question of supporting a night shift amendment, Hun Sen shied away from it. The labor law as written gives Cambodia special trade status with Western countries like the US, he said.

Progress reports from the other sectors went smoothly, although there were still complaints that smuggling and poor infrastructure continue to hurt the country.

Hun Sen established the groups, which consist of private and government counterparts in seven areas, two years ago to boost investor confidence and to solve problems.