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Legal and BusinessBy: VA VANNY, Lecturer of Law

Master of Law

Tel: 070 70 80 66, 016 629 606

E-mail: [email protected]

Semester I, Academic Year: 2015-2016

mailto:[email protected]

Syllabus

Lecturer’s Background

Name: VA VANNY

Education:

- Bachelor Degree of Business English

- Bachelor Degree of Law

- Master Degree of Law

Contact:

- Phone Number: 070 70 80 66, 016 629 606

- Email: [email protected]

By: VA VANNY, Lecturer of LawLegal and Business 3

About the Course

Subject’s Name: Legal and Business

Credit: 03

Week: 15 (45 Hours)

Text Book: Mekong School of Law, Business Law

Reference Textbooks:

- Law on commercial enterprise

- Law on commercial rules

- Law on investment of Cambodia

-Law on Bankruptcy

-Sub-degrees and other regulations related to business law


Course Description

This course focuses on the establishment of a business, and hot issues of

business at present both local and international such as business

environments, investment climates and SME.

This course also reviews important principles in business law.

Furthermore, it will focus on the business ethics and environment that can

make the students have an in-depth knowledge on how to run a business

legally and successfully.


Students will also study about the procedures and formalities of business as

well that it is a very important part of business law.

It will be of interest to business professionals and students of law who would

like a greater knowledge and understanding of laws relating to business and

commerce.


Course Objectives

After studying this course, students will be able to:

Be familiar with important principles of business law and business issues

Understand the principles of doing a business, business environment, investment climate, and

business activities

Know how to run a business legally and successfully

Understand about the Small and Medium Enterprise and Economic development

Understand the principles of business contract and statute of a company

Understand the forms of business

Understand about the procedures of commercial registration


Course Outline

Chapter 1: Doing a Business in Cambodia

Chapter 2: Business Environment

Chapter 3: Investment Climate

Chapter 4: Small and Medium Enterprise (SME)

Chapter 6: Business Activities

Chapter 7: Businessman

Chapter 8: Commercial Transactions

Chapter 9: Forms of business, Establishment

Chapter 10: The procedures and formalities of Commercial Registration


Requirement for Students

Students shall be punctual.

Students should read book and any material before class.

Students should complete all the works which lecturer and school given on time.

Students must be quiet and behave well during study time.

Students shall respect the University’s regulation.


The End


Master of Law

Tel: 070 70 80 66, 016 629 606


Semester I, Academic Year: 2015-2016


Chapter 1 DOING BUSINESS IN CAMBODIA

Overview

Cambodia is a rapidly developing country with a very open investment policy

and real opportunities for creative entrepreneurs and dynamic businesses.

The economy has experienced strong, positive growth over the last 15 years.

The Kingdom of Cambodia sits at the heart of Southeast Asia, a dynamic

region of trade in the world economy. Cambodia’s 1999 membership to the

Association of Southeast Asian Nations (ASEAN) and 2004 accession to the

World Trade Organization (WTO) have opened the country up to the global

marketplace.

By: VA VANNY,

Lecturer of LawBusiness and Legal 3

Doing Business sheds light on how easy or difficult it is for a local

entrepreneur to open and run a small to medium-size business when

complying with relevant regulations

By: VA VANNY,


Starting and Running a Business

You may be considering starting and running a business and want to knowhow, or maybe you already have your own business and want to know how tooperate your existing business better.

If you have been thinking about starting or have started a businessyour reasons, could be

Earn more money

Be your own boss

Accommodate a desired lifestyle.

Achieve financial independence.

Enjoy creative freedom.

Use your skills and knowledge.

By: VA VANNY,


Questions Asked

Where do I start?

What do I need before starting?

What type of business do I start?

Do I need any skills to run a business if so what are they?

What are the Pro’s & Con’s of having my own business?

What do I want to get out of having my own business?

How do I name my business?

How much income will my business need to make?

Who is my market?

How do I reach my market?

By: VA VANNY,


Basic Requirements for Establishing a

Business in Cambodia

The companies’ law regime in Cambodia is governed by the Law on

Commercial Enterprises, which was promulgated on 19th June, 2005.

Allowable business forms under this law include sole proprietorships,

partnerships and limited liability companies.

Foreign investors usually choose to register a limited liability company as a

subsidiary of the parent company to do business in Cambodia.

If their activities in Cambodia are more limited, a foreign investor may prefer

to open a Branch or Representative Office of the parent company.

By: VA VANNY,


Under the Law on Commercial Enterprises, the investor must register one of

the allowable business forms at the Ministry of Commerce (“MOC”) and file an

annual declaration the status of the enterprise, also at the MOC.

In addition a company must have a legally competent natural person as a

registered agent continually maintained in the Kingdom of Cambodia.

By: VA VANNY,


Company Obligations: National and

Legal Personality

A company is considered to have Cambodian nationality if it has a registered

office in Cambodia, and at least 51% of its shares are owned by Cambodian

nationals.

Under the Constitution of the Kingdom of Cambodia, only a local company is

entitled to own land. The chairman of the Board of Directors of a local

company must be a Cambodian national. Other directors can be foreigners.

By: VA VANNY,


Company Obligations: Use of a Khmer

Name

A partnership or company must display its name in the Khmer language on all

seals, signs letterhead, and forms and documents used for public purpose,

and on all public advertisements within the Kingdom of Cambodia and this

must be placed above and be larger than the name in another language.

The Khmer name must also sound phonetically the same as the name in the

other language. The partnership or company may however use and be

designated by a name in another language outside of the Kingdom of

Cambodia

By: VA VANNY,


Company Obligations: Labor Filing ,

Annual Declaration

Upon opening a business, employers must make a declaration to the Ministry

of Labor. This declaration, called the Declaration of the Opening of a

Business, must be made in writing and be delivered to the Ministry of Labor

before the actual opening of the business.

Employers must also make a declaration to the Labor Inspector each time

that the business hires or dismisses a worker. This declaration must be made

in writing within seven calendar days after the date of hiring or dismissal.

By: VA VANNY,


Company Obligations: Tax Paying

Tax Register

Tax on Profit

Patent

VAT

Tax on Salary

Others….

By: VA VANNY,


Market Overview

Since Cambodia became the first least-developed country (LDC) to join the

World Trade Organization (WTO) in 2004, trade has steadily increased.

The United States is Cambodia’s largest trading partner. Approximately 83

percent of Cambodia’s total exports are destined for the United States --

primarily garment and footwear products.

Cambodia is also a member of the Association of Southeast Asian Nations

(ASEAN) and the Asia Free Trade Area (AFTA).

By: VA VANNY,


Market Challenges

weak rule of law

poor infrastructure,

high energy costs

corruption

under-developed human resources

By: VA VANNY,


Market Opportunities

Cambodia offers potential investment opportunities in agribusiness and food

processing, tourism infrastructure and resorts; education; architecture,

construction and engineering services; household goods and appliances; used

cars and automotive parts; power generation equipment and power

transmission infrastructure; fast food and beverage franchises;

pharmaceuticals; and medical supplies and equipment.

By: VA VANNY,


Market Entry Strategy

Obtaining a local partner, such as an agent or distributor, is the most effective

way to reach Cambodian consumers. The local partner can facilitate and

expedite market entry with their market knowledge and established

networks. In Cambodia, personal relationships can be the key to successful

business transactions.

By: VA VANNY,


The End


Master of Law

Tel: 070 70 80 66, 016 629 606


Semester II, Academic Year: 2014-2015


Chapter 2 BUSINESS ENVIRONMENT IN CAMBODIA

Cambodia Overview

Geography: Located in South East Asia, 181 035 km2

Population: 15,205,539(2013 estimate) Density: 81.8/km2

Language: Khmer (Official)

Economy:

Free Market

GDP (nominal) per capita USD1108 (2013 Estimate)

Political System

Government: Constitutional Monarchy

Head of State: King Norodom Sihamoni

Head of Government: Prime Minister Hun Sen, leader of the Cambodian

People’s Party

By: VA VANNY,


Economic Growth

Cambodia continues to enjoy robust growth, albeit at a

slightly slower pace. Real growth in 2014 is estimated to

have reached 7%.

The garment sector, together with construction and

services, in particular finance and real estate, continues

to propel growth.

However, the 2015 and 2016 projection for economic

growth is about 6.9%, as it confronts stronger

competition in garment exports, continued weak

agriculture sector growth, and softer growth in the

tourism sector. By: VA VANNY,


Poverty Reduction

Poverty continues to fall in Cambodia, although the pace

has declined significantly.

The poverty rate was 17.7% in 2012, with almost 3

million poor people and over 8.1 million who are near-

poor.

About 90% of them live in the countryside.

World Bank estimates suggest that Cambodia achieved

the Millennium Development Goal (MDG) of halving

poverty in 2009.

However, the vast majority of families who escaped

poverty were only able to do so by a small margin.By: VA VANNY,


Health and Education

Cambodia has made good strides in improving

maternal health, early child care, and primary

education programs in rural areas. The number

of deaths per 100,000 live births decreased from

472 in 2005 to 170 in 2014, the under-five child

mortality rate decreased from 124 per 1,000 live

births in 1998 to35 per 1,000 in 2014, and the

net primary school admission rate increased from

81% in 2001 to 94.3% in 2012.By: VA VANNY,


HIV/AIDS

Cambodia has also been successful in

preventing and treating HIV/AIDS. As of

2011, nearly 90% of AIDS patients in

Cambodia have access to antiretroviral

treatment. This coverage rate is among the

highest in the developing world.

By: VA VANNY,


Challenges Cambodia still faces a number of development

challenges, including effective management of land

and natural resources, environmental sustainability,

and good governance.

Corruption and weak public service delivery impede

inclusive development.

The key challenge going forward is to stimulate the

agricultural and tourism sectors to once again become

strong engines of growth supporting poverty

reduction, as well as to expand and sustain growth in

manufacturing including garments.By: VA VANNY,


Industrial Structure

As the primary industry occupies 32% of the total

economy, the agriculture is the main industry of

Cambodia. Major agricultural products are rice, rubber,

maize, cassava, etc. The secondary industry and tertiary

industry respectively account for 22% and 38% of the

total economy. The major industry of the manufacturing

sector is apparel products, which are directed to

exports. Among the tertiary industry, the tourism-related

industries are important to the Cambodian economy.

By: VA VANNY,


Trade

The trade balance of Cambodia keeps a continuous deficit. Both

exports and imports have been expanding as a result of economic

growth. In 2011, the export value was US$5.4 billion and the

import value was US$7.0 billion.

The major destination countries of exports are USA, Hong Kong,

China, EU, Canada, and Vietnam. The major importing countries

are Hong Kong, China, Taiwan, Thailand, and Vietnam.

The primary export product is apparel, which account for more

than 80% of total exports. The major import products are textiles,

petroleum product, and vehicles. Cambodia significantly depends

on imports for industrial input products and daily commodities.

By: VA VANNY,


Currency

Although the official national currency is the Riel,

US dollars are commonly used in business and

commercial transactions.

By: VA VANNY,


Business Environment

Establishing a business

Exchange Control

Banking

Currency

Telecommunication

Infrastructure

Legal System and Dispute Resolution

Labour

Anti-CorruptionBy: VA VANNY,


Limited Liability Company

By: VA VANNY,


Types of Business

By: VA VANNY,


Corporate tax

As a member of international organisations, ASEAN

(1999) and WTO (2004), tax policies are broadly aligned

with international rules and practices. The Law on

Taxation 2004 and Law on Customs 2007 provide

guidance.

Cambodia does possess some relatively unique tax

features, such as domestic withholding taxes and the

non-real and estimated regimes. References herein

refer to real-regime tax-payers.

By: VA VANNY,


Tax Declarations and Payment

Taxpayers are required to make tax declarations and

pay taxes on a monthly and annual basis.

The monthly income tax return is to be filed and

taxes paid not later than the 15th day of the

following month.

By: VA VANNY,


By: VA VANNY,


Banking and Capital Market

By: VA VANNY,


Given the abolition of currency during the Khmer

Rouge era in 1975, the Government has undertaken

a remarkable task to rebuild the currency and

banking systems of Cambodia.

The National Bank of Cambodia (NBC) is responsible

for regulation, oversight and licensing of the

banking industry. The applicable legislation is the

Law on Banking and Financial Institutions 1999.

By: VA VANNY,


Financial Report and Auditing

Accounting and auditing practice in Cambodia has

dramatically improved in recent years assisted by the

establishment of professional bodies, the increase in the

number of accounting firms and the development of

laws and regulations.

The National Accounting Council (NAC) is a division

within the Ministry of Economics and Finance which is

responsible for oversight of accounting, including

standard-setting.

By: VA VANNY,


The basic requirements for accounting,

financial reporting and auditing are outlined in

the Law on Commercial Enterprises and the Law

on Corporate Accounts, their Audit and the

Accounting Profession.

By: VA VANNY,


The End


Master of Law

Tel: 070 70 80 66, 016 629 606




Chapter 3 BUSINESS ETHICS AND SOCIAL RESPONSIBILITY

By: VA VANNY,


Overview

As the opening vignette illustrates, determining how to

conduct business appropriately can be challenging.

Wrongdoing by businesses has focused public attention and

government involvement to encourage more acceptable

business conduct.

Any business decision may be judged as right or wrong,

ethical or unethical, legal or illegal.

By: VA VANNY,


In this chapter, we will take a look at the role of

ethics and social responsibility in business decision

making.

First, we define business ethics and examine why it is

important to understand ethics’ role in business.

Next, we explore a number of business ethics issues to

help you learn to recognize such issues when they

arise.

Finally, we consider steps businesses can take to

improve ethical behaviour in their organizations.By: VA VANNY,


Business Ethics and Social Responsibility

Business Ethics: principles and standards that determine acceptable

conduct in business organizations.

Many consumers and social advocates believe that businesses should

not only make a profit but also consider the social implications of

their activities.

By: VA VANNY,


We define social responsibility as a business’s obligation to

maximize its positive impact and minimize its negative

impact on society.

The most basic ethical and social responsibility concerns

have been codified as laws and regulations that encourage

businesses to conform to society’s standards, values, and

attitudes.

By: VA VANNY,


The Role of Ethics in Business

There are good business reasons for a strong commitment to ethical

values:

Ethical companies have been shown to be more profitable.

Making ethical choices results in lower stress for corporate

managers and other employees.

Our reputation, good or bad, endures.

Ethical behaviour enhances leadership.

The alternative to voluntary ethical behaviour is demanding and

costly regulation.

By: VA VANNY,


Recognizing Ethical Issues in Business

Learning to recognize ethical issues is the most important

step in understanding business ethics.

An ethical issue is an identifiable problem, situation, or

opportunity that requires a person to choose from among

several actions that may be evaluated as right or wrong,

ethical or unethical.

By: VA VANNY,


Ethics are also related to the culture in which a

business operates.

In Canada or the United States, for example, it would

be inappropriate for a businessperson to bring an

elaborately wrapped gift to a prospective client on

their first meeting—the gift could be viewed as a bribe.

Experience with the culture in which a business

operates is critical to understanding what is ethical or

unethical.

By: VA VANNY,


Ethical Issues

Conflicts of interest

Fairness and honesty

Communications

Business relationships

By: VA VANNY,


Improving Ethical Behavior in Business

By: VA VANNY,


It is difficult for employees to determine what conduct is

acceptable within a company if the firm does not have ethics

policies and standards.

And without such policies and standards, employees may base

decisions on how their peers and superiors behave.

Codes of ethics, policies on ethics, and ethics training programs

advance ethical behaviour because they prescribe which

activities are acceptable and which are not, and they limit the

opportunity for misconduct by providing punishments for

violations of the rules and standards.

By: VA VANNY,


A survey by the US Ethics Resource Center on attitudes

toward and knowledge of ethics and ethics programs

indicated that employees’ personal ethics improve when

their organization has a comprehensive ethics training

program.

By: VA VANNY,


The Nature of Social Responsibility

By: VA VANNY,


Social Responsibility Issues

As with ethics, managers consider social responsibility on

a daily basis as they deal with real issues. Among the

many social issues that managers must consider are their

firms’ relations with employees, government regulators,

owners, suppliers, customers, and the community.

By: VA VANNY,


Relations with Owners and Shareholders

Employee Relations

Consumer Relations

Environmental Issues

Community Relations

By: VA VANNY,


By: VA VANNY,


THE END

By: VA VANNY,



Master of Law

Tel: 070 70 80 66, 016 629 606




Chapter 4

Small and Medium Enterprises

(SMEs) In Cambodia

Overview

In 2004 the Cambodian government formed the SME

Sub-Committee and the SME Development Framework

was created.

The framework is the first attempt by the government

of Cambodia to identify barriers and introduce

measures specific to promoting development of the

country’s SMEs.

A number of policies have been implemented and

recommended to overcome these obstacles to SME

development.By: VA VANNY,


Small and medium enterprises (SMEs) are a crucial part

of the Cambodian economy, contributing to both

economic and social development.

SMEs drive industrial progress, improve an economy’s

ability to deal with shocks and are recognized as

breeding grounds of innovation.

By: VA VANNY,


With the expansion of globalisation, manufacturing

SMEs everywhere are facing increasing international

competition and need to improve quality and

efficiency of output to international standards to

survive.

The Cambodian business environment needs

improving, and SMEs need developing, to be able to

compete with imports.

Creating a level playing field and encouraging SME

development will not only enable Cambodian SMEs to

compete successfully in their domestic market; it will

also pave the way for their involvement in exporting.By: VA VANNY,


The Royal Government of Cambodia (RGC) has stated a

commitment to private sector led growth and

recognizes the importance of SMEs for sustainable and

equitable economic development as well as creating

employment, and reducing poverty.

By: VA VANNY,


Although still at the very early stages of

implementation, the government has introduced a

range of policies focused on SME development.

Key to organizing SME development strategies has

been the forming of the SME Sub-committee in

2004.

By: VA VANNY,


Definition of SMEs

By: VA VANNY,


History of Cambodian SMEs

Following independence from the French in 1954 therewas a boom in the number of Cambodian industrialSMEs.

According to a 1958 government report, in the mid 1950s there were 369 registered SMEs operating in Cambodia. By 1958 there were over 1000.

Included in this group were assembly plants for Citroencars, motorcycles and sewing machines, two scooterfactories, soap factories, weaving factories, paper andsugar mills and a canning factory.

By: VA VANNY,


These factories along with much of the country’s

infrastructure were destroyed as Cambodia got dragged

into the deepening regional conflict.

During the Khmer Rouge (KR) regime’s control of the

country from 1975 to 1979 all enterprises were

forbidden, and trade, markets and money were

outlawed.

By the early 1980s agro-industry food processing

activities, predominantly rice milling, had started

taking place under the cooperative sector.

By: VA VANNY,


By the mid 1980s a host of small private enterprises

providing basic manufactured goods, such as fish

sauce, had emerged to meet growing domestic

demand.

Nationalized SMEs were sold or leased to the private

sector from late 1989, and in 1991 the government

introduced a full-scale privatization programmed.

Macro-economic stability had been largely achieved by

the late 1990s and basic infrastructure and institutions

had been rebuilt providing the platform for growth of

SMEs.By: VA VANNY,


The number of Cambodian manufacturing SMEs has

increased steadily since the late 1980s. A National

Institute of Statistics (NIS) survey of industrial firms

shows that manufacturing SMEs in Cambodia doubled

between 1993 and 2000.

By the late 1990s registered manufacturing SMEs in

Cambodia had grown to number over 24,000, increasing

to nearly 29,000 by 2005.

By: VA VANNY,


With so many unregistered SMEs, it is difficult to

estimate the number of enterprises in Cambodia,

especially the number of very small businesses i.e. the

micro enterprise sector. Furthermore, predicting trends

in SME development is difficult due to the limited data

available on them.

However, it is very clear that the number of registered

SMEs has increased in the last few years and this trend

is bound to continue as Cambodia becomes more

integrated into the ASEAN and global economy.

By: VA VANNY,


Main Features of Enterprises in

Cambodia

Micro, small and medium enterprises (MSMEs) account

for 99.9 percent of all businesses (503,008). Most

enterprises are concentrated in Phnom Penh and the

most economically active provinces of Kampong Cham,

Siem Reap, Battambang, Kandal and Takeo.

Majority of enterprises are in the service sector (85.8

percent), followed by manufacturing (14.1 percent).

By: VA VANNY,


The overwhelming majority of enterprises (98 percent)

active within the service sector are micro firms. The

dominant subsectors are retail trade (60.2 percent),

food and beverage service activities (15.4 percent) and

wholesale and retail trade of motor vehicles and

motorcycles (5.2 percent).

By: VA VANNY,


The main sectors in SMEs

Agriculture

Garment

Tourism

Food and Beverages

Construction

By: VA VANNY,


By: VA VANNY,


The Roles of SMEs

SMEs play and important role in:

Creating Jobs (40%-50% of total employment)

Generating Income for low-income people and

vulnerable populations

Fostering Economic Growth, Social Stability, and

contributing to growth of dynamic private sector.

By: VA VANNY,


SME’s Challenges and Constraints

High Regulatory Compliance Costs

Lack of a Clear and Market-Oriented Framework for SME

Development

Limited Access to Finance

An uneven playing field

Low productivity

Lack of access to information and customer markets

By: VA VANNY,


How to Improve SMEs?

By: VA VANNY,


ASEAN SME Policy Index

ASEAN SME Policy Index 2014 is one of the latest

publications by ERIA in collaboration with OECD. It

reviews, tracks and identifies SME policy development

and implementation, and can be used by governments

to compare policy experiences and analyze policy gaps

at national and regional levels.

By: VA VANNY,


The Index calculates scores for eight policy

dimensions: institutional framework, access to

support services, cheaper and faster start-up and

better regulations, access to finance, technology and

technology transfer, international market expansion,

promotion of entrepreneurial education, and more

effective representation of small enterprises’

interests.

By: VA VANNY,


Small and medium-sized enterprises (SMEs) are an

important driver for job creation and economic

growth in the ASEAN region.

As the ASEAN Economic Community moves towards a

higher level of market integration, new perspectives

are opening for these firms. Innovative and high-

growth SMEs, in particular, have an opportunity to

transform their business.

By: VA VANNY,


To help SMEs fully tap these new possibilities, the 10

ASEAN member countries (Brunei, Cambodia,

Indonesia, Lao PDR, Malaysia, Myanmar, Philippines,

Singapore, Thailand and Vietnam) are taking steps to

stimulate SME growth. This includes extensive

structural reforms to enhance productivity, human

capital and enterprise performance.

The fact that small and medium enterprises (SMEs)

account for more than 96 per cent of all enterprises in

ASEAN shows their significance as the engine of growth

in the region.

By: VA VANNY,


By: VA VANNY,


SMEs in the region, however, are reported to have

difficulties in access to finance, technology, and

competitive markets. Entrepreneurship, compliance

with standards, marketing and management are also

some of the other problems faced by SMEs in ASEAN.

The strengthening of ASEAN SMEs requires

improvement of human resources, provision of access

to finance, technology and innovation, and market as

well as internationalization through policy support

measures, supplementary activities and appropriate

communication as well as providing access to finance

for start-up.

By: VA VANNY,


Cambodia’s scores on all policy dimensions are below

regional averages and the lowest among ASEAN

countries, informing policymakers and stakeholders

that more needs to be done to overcome the barriers

to SMEs’ competitiveness and productivity given

regional integration.

There was scepticism about Cambodia’s scores being

lower than those of Laos and Myanmar as some

participants had experienced more difficulty doing

business in Laos than in Cambodia.

By: VA VANNY,


By: VA VANNY,


The Cambodian government could use

ASEAN regional integration as a platform

for reforms, seizing opportunities to

strengthen sectors and subsectors that have

competitive advantages.

By: VA VANNY,


THE END


Master of Law

Tel: 070 70 80 66, 016 629 606




Chapter 5Investment and Investment

Environment In Cambodia

By: VA VANNY,


Overview

Private sector development and investment to enhance

export-led, pro-poor growth is and has been a key

priority of the Royal Government of Cambodia (RGC) for

many years.

2012 marks a turning point led by FDI inflows of $1.5

billion, up from $900 million in 2011.

To promote private sector investment, important private

sector legal and regulatory reforms and measures have

been implemented already at the national level, many

under the umbrella of meeting Cambodia’s WTO

obligations. By: VA VANNY,


RGC is committed to strengthening selected export

value chains in part by stimulating the requisite

foreign and domestic investment through investment

promotion, facilitation, and improvements in the

business environment.

To promote private sector investment, important

private sector legal and regulatory reforms and

measures have been implemented already at the

national level, many under the umbrella of meeting

Cambodia’s WTO obligations.By: VA VANNY,


Global and National Contexts

Global, regional, and national investment trends

combine to create a complex backdrop against which

Cambodia’s attempts to stimulate growth and

diversification through increasing investment will

play out.

According to the newly released UNCTAD’s 2013

World Investment Report, global FDI fell by 18

percent to $1.35 trillion in 2012, with the inflows to

developed countries experiencing a significant drop.

By: VA VANNY,


For the first time, developing countries took the

lead, attracting more FDI than developed economies.

While developing regions witnessed a small overall

decline in FDI inflows, the least developed countries

saw a 20 percent increase in FDI flows in 2012.

Cambodia, Myanmar, and Viet Nam are particularly

bright spots for labor-intensive FDI.

By: VA VANNY,


FDI inflows to ASEAN increased by 2 percent in 2012,

with multinationals from Japan and elsewhere

increasing their FDI in the region.

This is partly due to opportunities resulting from

ongoing regional integration, including the prospect of

ASEAN Economic Community (AEC), in particular in

emerging frontier economies, such as Vietnam,

Myanmar, Lao PDR, and Cambodia.

By: VA VANNY,


Cambodia continues to attract a strong flow of foreign

investment and witnessed a 73 percent gain in FDI

inflows from 2011 to 2012.

Preferential market access, low wages, a beneficial

geographic location, an open investment and trade

regime, political stability, and steady economic growth

among other factors have been cited as driving these

investment decisions.

Cambodia’s economy has remained strong with real GDP

growth at 7.3 percent in 2012 and projected at 7.2

percent for 2013.By: VA VANNY,


Overall, the financial system has been resilient to shocks,

an generally withstood the global economic downturn.

Diversity of financial services has been growing fast with

the following developments recently noted: (a) trading at

the Cambodia Securities Exchange started in 2012; (b)

three life insurance companies, in addition to general

insurance businesses, were established in the past year;

and, (c) one financial leasing company opened up under

the supervision of the National Bank of Cambodia.

By: VA VANNY,


The RGC has been preparing actively to enhance the

business environment for public–private partnerships

to meet the huge financial requirements of the

infrastructure needed for the country’s growing

economy.

With development partner support, the RGC has an

ambitious range of initiatives under way to

strengthen the legal, regulatory, and institutional

environment for public–private partnerships.

By: VA VANNY,


FDI Trends and Policies FDI in Cambodia began in the mid-1990s and expanded

sharply after the conclusion of a comprehensive trade

agreement with the United States that granted Most

Favored Nation (MFN) treatment to Cambodian

exports.

Following the UN-sponsored national elections in 1993,

Cambodia took an outward-looking approach and

focused on liberalizing its economy.

Cambodia joined ASEAN and the ASEAN Free Trade Area

in 1999, allowing it to import and export goods and

services within the region with lower duties and taxes.By: VA VANNY,


In 2004, Cambodia acceded to the WTO, which

expanded trading opportunities between Cambodia

and the rest of the world.

Together with these developments, Cambodia

focused on updating its legal and regulatory

framework and adopting new laws and regulations to

facilitate and promote investment, trade, and

business.

By: VA VANNY,


The 1994 Law on Investment established the Council for

the Development of Cambodia (CDC) – the major

decision-making body for private and public sector

investment. The CDC is chaired by the Prime Minister and

composed of senior ministers from various government

departments.

In 2003, to simplify licensing schemes and make them

more transparent, predictable, and nondiscretionary, the

original Law on Investment was amended substantially by

the Law on the Amendment to the Law on Investment.

By: VA VANNY,


As the Law on Investment stipulates, FDIs are treated in a non-

discriminatory manner except for land-ownership, which is stated

in the Constitution, and allowed to invest freely in many areas.

Under the current Law on Investment, the investors, who are

given Final Registration Certificates, will be entitled to various

incentives.

In addition, the Cambodian government has been improving their

investment facilitation services. For example, the Government

decided in 2005 to establish the Cambodian Special Economic

Zone Board (the CSEZB) under the CDC to promote the special

economic zone (SEZ) scheme in Cambodia.

By: VA VANNY,


By: VA VANNY,


Responsible Organization

The Council for Development of Cambodia (CDC) is

the sole and One-Stop Service organization

responsible for the rehabilitation, development and

oversight of investment activities.

The CDC is responsible for the evaluation and the

decision-making on all rehabilitation, development

and investment project activities (Article 3,

“Amended Law on Investment”).

By: VA VANNY,


However, the CDC shall submit for the approval of the Council of Ministers any of thefollowing investment projects (Article 11, “Sub-Decree No.147 on the Organizationand Functioning of the Council for the Development of Cambodia”).

Capital investment of US$ 50 million and above

Politically sensitive issues

Exploration and the exploitation of mineral andnatural resources

Possible negative impact on the environment

Long-term development strategy

Infrastructure projects such as projects on the basisof Build-Own-Transfer (BOT), Build-Own-Operate-Transfer (BOOT), Build-Own-Operate (BOO) or Build-Lease-Transfer (BLT)

By: VA VANNY,


Outline of Investment Approval Scheme

“Amended Law on Investment” of 2003 was made to adoptthe automatic approval system of the investment projects,which must be completed within 31 working days after thereceipt by the CDC or PMIS of the investment proposal, unlessthey are among the fields prohibited in the negative list orinvestment project related to the national interest/environmental sensitivity.

An investment approval will be issued not to an investor orinvesting enterprise but to a project. A project whichreceives the investment approval is called a QualifiedInvestment Project (or “QIP”).

By: VA VANNY,


The investment incentives are granted automatically

to a QIP.

The CDC is expected to act as One-Stop Shop and

obtain all of necessary licenses required from

relevant ministries entities listed in the Conditional

Registration Certificate (CRC) for investment on

behalf of the investment applicant.

A QIP may be in the form of a joint venture. A joint

venture may be formed between Cambodian entities,

between Cambodian entities and foreign entities or

between foreign entities.

By: VA VANNY,


Investment Incentives

Investment Incentives Granted to a Qualified

Investment Project (QIP)

Investment Incentives Granted to a Project in SEZ

(Chapter 4, the SEZ Sub-Decree)

Incentives Entitled to Specific Fields

By: VA VANNY,


Investment Incentives (QIP)

The main incentive offered to QIPs is profit tax exemption (profit

tax is usually 20 percent) for a specific number of years (typically

six years plus a “priority period.)

Alternatively, QIPs can elect to use a special depreciation

allowance (more attractive for capital-intensive projects) which

allows a deduction of 40 percent of the value of tangible assets

used in production in their year of purchase or first year of use.

QIPs are exempt from import taxes on production equipment,

construction materials, and production inputs (the latter only in

cases where used to produce exports.)

By: VA VANNY,


By: VA VANNY,


Investment Incentives (ZES)

Profit tax exemption for nine years

Import duty exemption for equipment for

constructing the zone

VAT exemption

No foreign exchange transfer restrictions

Guarantees against nationalization and price

fixing.

By: VA VANNY,


Investment Incentives (Specific Fields) Import duty reduction or exemption and the government-

borne VAT scheme (VAT exemption) have been introduced on

various agricultural materials such seeds, breeds or residues

and agricultural machines including tractors. : Prakas No.390

(MEF) on Adjustment to Customs Duty and Imposition of VAT

borne by the State.

QIPs in the area of agriculture and agro-industry may obtain

incentives in the form of a priority period of tax exemption on

profit for three (3) years.

VAT on the imported production input and equipment of

supporting industry, who serves to the export of garment,

textile or footwear, shall be exempted.By: VA VANNY,


Investment Guarantee

A foreign investor shall not be treated in any

discriminatory way by reason only of the investor being

a foreign investor, except in respect of ownership of

land.

The Royal Government shall not undertake a

nationalization policy that would adversely affect

private properties of investors in Cambodia.

The Royal Government shall not fix the price or fee of

the products or services of a QIP.

By: VA VANNY,


The Cambodian Government shall permit investors to purchase

foreign currencies through the banking system and to remit

abroad these currencies for the following purposes:

Payment for imports and repayment of principle

and interest on international loans

Payment of royalties and management fees

Remittance of profits

Repatriation of invested capital

By: VA VANNY,


Limitation on Foreign Investment

Ownership and Use of Land: Ownership of land by investors for

the purpose of carrying on a QIP shall be vested only in natural

persons holding Cambodian citizenship or in Cambodian entities

but the use of land shall be permitted to investor, including

concessions, unlimited long-term leases and limited short-term

leases that are renewable.

Employment of Foreigners: A QIP is entitled to obtain visas and

work permits for the employment in Cambodia of foreign

citizens as managers, technicians and skilled workers, if the

qualification and expertise are not available in Cambodia

By: VA VANNY,


Investment Procedures

By: VA VANNY,


Advantages of Investing in Cambodia

ASEAN membership offers regional trade benefits

WTO member since 2004 increasing trade integrations

Duty free or preferential export access to most

developed economies

Among Asia’s lowest labour cost and a dynamic

workforce

Favorable investment environment.

By: VA VANNY,


Constraints of Investing in Cambodia

Ineffective Legal Framework

Energy Supply

Transport Logistics Bottlenecks

Trade Facilitation

Skill Shortages

By: VA VANNY,


The Impacts of Investing on Cambodia’s

Development

FDI contributes to the host country, not only by

providing the much-needed capital for investment

but also by enhancing job creation and

managerial skills and transferring new and

superior technology. All of these ultimately

contribute to economic growth and development.

By: VA VANNY,


Augmenting Domestic Resources

FDI and Trade Promotion

Employment and Poverty Alleviation

Skills and Technology Development

Community Development

By: VA VANNY,


THE END

By: VA VANNY,


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