Cablegate: 2010 Investment Climate Statement - Cambodia

DE RUEHPF #0029/01 0190041
P 190041Z JAN 10




E.O. 12958:N/A

REF: 09 STATE 124006

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1. Cambodia, a developing country, began the transformation from a
command economy to the free market in the late 1980s. It is now
integrating into the regional and world trading framework. In 1999,
Cambodia joined the Association of Southeast Asian Nations (ASEAN)
and in September 2004, became a member of the World Trade
Organization (WTO). On December 15, 2008 the entry into force of
the ASEAN Charter brought Cambodia and other member states into a
new regional legal framework. Cambodia has shown interest in
participating in other international trading arrangements, including
the Asia-Pacific Economic Cooperation forum (APEC).

2. As part of its WTO commitments to strengthen the investment
climate for both foreign and domestic businesses, Cambodia committed
to enact 47 laws or regulations to address areas where existing law
did not meet WTO requirements. Cambodia has been behind schedule in
fulfilling its WTO commitments to pass necessary business
legislation concerning the general business environment, trade in
goods, trade in services, and the protection of intellectual
property rights. However, the country has made progress recently,
passing several significant laws in 2008, including a Law on Plant
Breeder Rights and Law on Civil Aviation, and in 2009, the
government promulgated a Law on Tourism, a Law on Insolvency, and a
sub-decree establishing a national commercial arbitration body. The
government has either completed drafts of most of the remaining
required laws or is waiting for their approval by the legislature.

3. Since the re-establishment of a constitutional monarchy in 1993,
the economy has grown steadily. From 2004 to 2008, the economy grew
at an average of approximately 10 percent per year, driven largely
by an expansion in the garment, construction, agriculture, and
tourism sectors. In 2005, exploitable oil and natural gas deposits
were found beneath Cambodia's territorial waters, representing a new
revenue stream for the government if commercial extraction begins.
Mining also is attracting significant investor interest,
particularly in the northern parts of the country. However, the
global economic crisis has adversely affected the economy's key
pillars and economic growth was expected to contract in 2009.

4. Inflation decreased from its sharp rise in 2008, which peaked at
25.7 percent in May 2008 driven largely by the global surge in oil
and food prices. Because the economy is heavily dollarized, a
depreciation of the Cambodian riel and the U.S. dollar against
trading partner currencies contributed to imported inflation, while
rising domestic demand contributed to domestically generated
pressures. However, these pressures lessened in 2009 and Cambodia
recorded an average inflation rate of an estimated 4.5 percent and a
7.5 percent year-on-year inflation rate.

5. Foreign Direct Investment (FDI) approved by the Council for the
Development of Cambodia (CDC), Cambodia's investment approval body,
has dramatically increased in recent years, with approved proposals
peaking at nearly USD 11 billion in 2008, compared with USD 201
million in 2004. However, figures for the first 10 months of 2009
reveal that investment has slowed significantly to only USD 1.6
billion, an 82 percent decrease compared to total investments in
2008. The CDC does not have a functional mechanism to monitor
implementation of projects, so it is not clear how many proposed
projects are fully implemented. Corruption has been singled out as
one of the most serious deterrents to private investment.

6. Since early 1999, the Cambodian government has intensified its
economic reform program, a process the international financial
institutions and donors encourage, participate in, and monitor
closely. In recent years the government has publicly committed
itself on numerous occasions to fighting corruption, pursuing good
governance, and increasing transparency and predictability. This
strategy is set out in phase II of the government's latest public
reform effort called the "Rectangular Strategy for Growth,
Employment, Equity, and Efficiency."

7. The government has initiated specific measures to promote
business, especially small and medium-sized businesses, by reducing
costs and the time required for business registration and by
establishing a number of committees for business promotion and trade

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Openness to Foreign Investment

8. Cambodia officially welcomes foreign direct investment.
Cambodia's 1994 Law on Investment established an open and liberal
foreign investment regime. All sectors of the economy are open to
foreign investment and 100 percent foreign ownership is permitted in
most sectors. Article 44 of the Constitution provides that only
Cambodian citizens and legal entities have the right to own land.
However, a new law allowing foreign ownership of properties located
above the ground floor is expected to be passed in 2010. Aside from
this, there is little or no discrimination against foreign investors
either at the time of initial investment or after investment.
However, some foreign businesses have reported that they are at a
disadvantage vis-a-vis Cambodian or other foreign rivals, who engage
in acts of corruption or tax evasion, or take advantage of
Cambodia's poor enforcement of legal regulations.

9. In addition, there are a few sectors open to foreign investors
which are subject to conditions, local equity participation, or
prior authorization from relevant authorities. These sectors
include manufacture of cigarettes, movie production, rice milling,
exploitation of gemstones, publishing and printing, radio and
television, manufacturing wood and stone carvings, and silk weaving.
The government has issued a sub-decree restricting foreign
ownership of hospitals and clinics and forbidding the employment of
non-Cambodian doctors in any specialty in which the Ministry of
Health considers there to be an adequate number of Cambodian

10. Under a sub-decree dated September 2005, Cambodia prohibits
certain investment activities, including investment in production or
processing of psychotropic and narcotic substances, poisonous
chemicals, agricultural pesticides and insecticides, and other goods
that use chemical substances prohibited by international regulations
or the World Health Organization that affect public health and the
environment. Production of electric power by using waste imported
from foreign countries is prohibited, as is forestry exploitation.

11. The privatization of state enterprises and transactions
involving state property has not always been carried out in a
transparent manner. In several instances, the public learned that
enterprises were for sale or swap only after the government
announced a sale or deal to a particular buyer.

12. Investor rights (investment guarantees) provided for in the Law
on Investment include:
-- Foreign investors shall not be treated in a discriminatory
manner by reason of being a foreign entity, except in respect to
land ownership as provided for in the Constitution of the Kingdom of
-- The Royal Government of Cambodia shall not undertake a
nationalization policy that adversely affects the private property
of investors.
-- The Royal Government of Cambodia shall not fix the price of
products or fees for services.
-- The Royal Government of Cambodia, in accordance with relevant
laws and regulations, shall permit investors to purchase foreign
currencies through the banking system and to remit abroad those
currencies as payments for imports, repayments on loans, payments of
royalties and management fees, profit remittances and repatriation
of capital.

13. The following is a summary of Cambodia's rankings in
international indexes and the Millennium Challenge Corporation score

Measure Year Index/Ranking
TI Corruption Index 2009 2/158
Heritage Economic Freedom 2009 56.6/106
World Bank Doing Business 2010 145/145
MCC Govnt Effectiveness 2009 0.00/05 percent
MCC Rule of Law 2009 -0.20/33 percent
MCC Control Corruption 2009 -0.30/12
MCC Fiscal Policy 2009 -2.4/35 percent
MCC Trade Policy 2009 63.4/36 percent
MCC Regulatory Quality 2009 0.21/65 percent

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MCC Business Start Up 2009 0.765/16 percent
MCC Land Rights Access 2009 0.769/88 percent
MCC Natural Resource Mgmt 2009 68.75/61 percent

Conversion and Transfer Policies

14. There are no restrictions on the conversion of capital for
investors. The Foreign Exchange Law allows the National Bank of
Cambodia (the central bank) to implement exchange controls in the
event of a crisis; the law does not define what would constitute a
crisis. The U.S. Embassy is not aware of any cases in which
investors have encountered obstacles in converting local to foreign
currency or in sending capital out of the country.

15. The U.S. dollar is widely used and circulated in the economy.
The 2009 exchange rate was stable, although slightly depreciated
compared to 2008. As of December 2009, the exchange rate was USD 1
= 4,164 riel. The government is committed to maintaining exchange
rate stability.

Expropriation and Compensation

16. Article 44 of the Cambodian Constitution, which restricts land
ownership to Cambodian nationals, also states that "the (state's)
right to confiscate properties from any person shall be exercised
only in the public interest as provided for under the law and shall
require fair and just compensation in advance." Article 58 states
that "the control and use of state properties shall be determined by
law." The Law on Investment provides that "the Royal Government of
Cambodia shall not undertake a nationalization policy which
adversely affects the private property of investors."

17. In late 2009, the National Assembly approved the Law on
Expropriation which sets broad guidelines on land-taking procedures
for public interest purposes and defines public interest activities
such as construction of infrastructure projects, development of
buildings for national protection and civil security, construction
of facilities for research and exploitation of natural resources,
and construction of oil pipeline and gas networks.

18. In spite of various legal protections, protection of immovable
property rights is complicated by the fact that most property
holders do not have legal documentation of their ownership rights.
Numerous cases have been reported of influential individuals or
groups acquiring property through means not entirely in keeping with
the Constitution or laws. This murky property holding environment
may adversely affect long-term leases and /or corporate social
responsibility goals unless proper due diligence is conducted. Cases
of inhabitants being forced to relocate continued to occur when
officials or businesspersons colluded with local authorities,
although the numbers reported dropped significantly from the
previous year. Human rights NGO ADHOC reported receiving 186 land
related cases during the year. During the same period, another NGO
received 115 land related cases in Phnom Penh and 14 provinces,
affecting a total of 8,806 families. Some of those expelled
successfully contested these actions in court, but the majority of
the cases in the courts were still being processed.

19. To date, there are no known investment disputes involving
government expropriation of property belonging to U.S. citizens. Up
to 17 Thai businesses sustained varying degrees of damage during
anti-Thai rioting in Phnom Penh on January 29, 2003. The Cambodian
government pledged to compensate Thai business owners, and all of
claims have been resolved.

Dispute Settlement

20. Cambodia's legal system is a mosaic of pre-1975 statutes
modeled on French law, communist-era legislation dating from
1979-1991, statutes put in place by the UN Transitional Authority in
Cambodia (UNTAC) during the period 1991-93, and legislation passed
by the Royal Government of Cambodia since 1993.

21. Cambodian culture and its legal system have traditionally
favored negotiation and conciliation over adversarial conflict and

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adjudication. Thus, compromise solutions are the norm, even in
cases where the law clearly favors one party in a dispute. In civil
cases, courts will often try conciliation before proceeding with a

22. Cambodia's court system is generally seen as non-transparent
and subject to outside influence. Judges, who have been trained
either for a short period in Cambodia or under other systems of law,
have little access to published Cambodian statutes. Judges can be
inexperienced and courts are often understaffed with little
experience, particularly in adjudicating commercial disputes. The
local and foreign business community reports frequent problems with
inconsistent judicial rulings as well as outright corruption, and
difficulty enforcing judgments. For these reasons, U.S. investors
are reluctant to resort to the courts to resolve commercial

23. The Cambodian judiciary system is beginning to undergo reform.
To provide the necessary background knowledge, judges and court
staff from around the country are being trained by the Royal Academy
for Judges and Prosecutors, which was created in 2002. In an effort
to clean up the court system, the Prime Minister has announced ad
hoc anti-corruption measures, including the dismissal, replacement,
and transfer of judges and prosecutors. The Supreme Council of
Magistracy, comprised of a president (the King) and eight other
members, is responsible for the appointment and conduct of judges
and prosecutors.

24. To address the perception of many Cambodian and foreign
business representatives that the court system is unreliable and
susceptible to external political and commercial influence, the
Cambodian government is finalizing draft legislation to create a
Commercial Court. In July 2009, the government passed a sub-decree
creating a commercial arbitration body, the National Arbitration
Center in the Ministry of Commerce. When the National Arbitration
Center is operational, parties involved in a commercial dispute that
have a written arbitration agreement will be able to settle
commercial disputes by means of quasi-judicial methods without
involvement of the Cambodian courts. Parties will be able to select
arbitrators without direct government interference. The Law on
Commercial Arbitration also allows the Cambodia Chamber of Commerce
to establish its own arbitration center for disputes between members
or between members and third parties. The law also mandates
recognition of arbitral awards made outside of Cambodia.
Arbitration awards can be appealed to the Appellate and Supreme
Court of Cambodia based on limited grounds.

25. To handle specific disputes with regard to labor, the Ministry
of Labor and Vocational Training established an Arbitration Council
in May 2003. Basing its decision on the provisions of the Labor
Law, the Council has 30 arbitrators. The Council is an independent
body whose function is to resolve collective labor disputes that the
Ministry is unable to solve by conciliation. The Council's
decisions are non-binding but it has been very successful in
reducing the number of industrial actions in the garment sector.
The Council plays a vital role in contributing to the development of
healthy industrial relations in Cambodia. The Council's success in
the garment industry has prompted unions in other sectors, e.g., the
hospitality and tourism sectors, to seek the Council's arbitration
and mediation services.

26. Cambodia became a party to the Convention for the Settlement of
Investment Disputes between States and Nationals of Other States in
2005. In 2009, the International Center for the Settlement of
Investment Disputes (ICSID) approved a U.S. investor's Request for
Arbitration in a case against the Kingdom of Cambodia.

Performance Requirements and Incentives

27. The Council for the Development of Cambodia (CDC), Cambodia's
foreign investment approval body, administers a package of
investment incentives. The CDC was created as a one-stop shop to
facilitate foreign direct investment.

28. Seeking to increase government revenue, the international
financial institutions recommended that the Cambodian government
scale back its investment incentives. Consequently, the Cambodian

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government amended the Law on Investment in 2003. The law creates
regimes for profit (20 percent), salary (5 to 20 percent),
withholding (4 to 15 percent), value-added (10 percent) and excise
taxes (rates vary). While some incentives have been eliminated, the
law provides a simplified, more transparent, and faster mechanism
for investment approval.

29. Under the amended Law on Investment, the profit tax exemption
is allocated automatically on the basis of activity and minimum
investment amounts as set out in the sub-decree. To maintain the
incentives under the law, qualified investment projects (QIP) are
required to obtain an annual Certificate of Compliance from the CDC
and file this with the annual tax return.

30. The amended Law on Investment includes the following
provisions, which include the exemption, in whole or in part, of
customs duties and taxes, for QIPs:
-- An exemption from the tax on profit imposed under the Law on
Taxation for a set period. The tax exemption period is composed of
a trigger period + three years + n years (a number of years
determined according to the Financial Management Law and depending
on the economic sector). The maximum allowable trigger period is to
be the first year of profit or three years after the QIP earns its
first revenue, whichever is sooner.
-- 100 percent exemption from import duties for construction
material, production equipment and production input materials for
export QIPs and supporting industry QIPs in accordance with the
provisions of the sub-decree on the Implementation of the Amendment
to the Law on Investment
-- Transfer of incentives by merger or acquisition.
-- Renewable land leases of up to 99 years on concession land for
agricultural purposes and land ownership permitted to joint ventures
with over 50 percent equity owned by Cambodians.
-- No price controls on goods produced or services rendered by
-- No discrimination between foreign and local investors.
-- 100 percent exemption from export tax or duty, except for
activities specifically mentioned in the Law on Customs.
-- Employment of foreign expatriates where no qualified Cambodians
are available. QIPs are entitled to obtain visas and work permits.
-- A QIP that is located in a designated special economic zone
(SEZ) is entitled to the same incentives and privileges as other
QIPs as stipulated in the law.

31. The September 2005 sub-decree on the Implementation of the
Amendment to the Law on Investment also details investment
activities that are excluded from incentives, although investment is
permitted. They include the following sectors: retail, wholesale,
and duty-free stores; entertainment (including restaurants, bars,
nightclubs, massage parlors, and casinos); tourism service
providers; currency and financial services; press and media related
activities; professional services; and production and processing of
tobacco and wood products.

32. Incentives are also excluded in the production of certain
products with an investment of less than USD 500,000 such as food
and beverages; textiles, garments and footwear; and plastic, rubber,
and paper products. Investors are encouraged to refer to the
sub-decree for details of other investment activities that are
excluded from incentives.

33. Investment activities that are eligible for customs duty
exemption, but not eligible for the profit tax exemption, are
telecommunication basic services; exploration of gas and oil,
including supply bases for gas and oil activities; and mining.

34. Cambodia allows foreign lawyers to supply legal services with
regard to foreign law and international law, and allows them to
supply certain legal services with regard to Cambodian law in
"commercial association" with Cambodian law firms. Cambodia's WTO
General Agreement on Trade in Services (GATS) commitment defines
"commercial association" as any type of commercial arrangement,
without any requirement as to corporate form. Thus, there are no
equity limitations on the practice of foreign and international law
by foreign enterprises and there are no equity limitations on the
formation of "commercial associations" under which foreigners may
practice certain legal services with regard to Cambodian law.

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35. Investors who wish to take advantage of investment incentives
must submit an application to the Cambodian Investment Board (CIB),
the division of the CDC charged with reviewing investment
applications. Investors not wishing to apply for investment
incentives, or who are ineligible, may establish their company
simply by registering corporate documents with the Department of
Legal Affairs of the Ministry of Commerce. Once an investor's
application is submitted, the CDC will issue to the applicant either
a Conditional Registration Certificate or a Letter of Non-Compliance
within three workdays. The Conditional Registration Certificate
will set out the terms, such as approvals, authorization,
clearances, permits or registrations required. If the CDC fails to
issue the Conditional Registration Certificate or Letter of
Non-Compliance within three workdays, then the Conditional
Registration Certificate will be considered approved.

36. The CDC has the responsibility to obtain all of the licenses
from relevant government agencies on behalf of investor applicants.
The relevant government agencies must issue the required documents
no later than 28 workdays from the date of the Conditional
Registration Certificate. At the end of the 28 days, the CDC will
issue a Final Registration Certificate.

37. The Sub-decree on the Implementation of the Amendment of the
Law on Investment adopted on September 27, 2005 does not require
investors to place a deposit guaranteeing their investment except in
cases in which the deposit is required in a concession contract or
real estate development project. Investors who wish to apply are
required to pay an application fee of seven million riel (approx.
USD 1,750) representing the administration fees for securing the
approvals, authorizations, licenses, or registrations from all
relevant ministries and entities including stamp duty.

38. Under a 2008 sub-decree, the CDC is required to submit to the
Council of Ministers for approval investment proposals with an
investment capital of USD 50 million or more; involve politically
sensitive issues; involve the exploration and the exploitation of
mineral or natural resources; may have a negative impact on the
environment; have long-term strategy; or, involve infrastructure

Right to Private Ownership and Establishment

39. There are no limits on the rights of foreign and domestic
entities to establish and own business enterprises or to compete
with public enterprises. However, the Constitution provides that
only Cambodian citizens or legal entities have the right to own
land. A legal entity is considered to be Cambodian when at least 51
percent of its shares are owned by Cambodian citizen(s) or by
Cambodian legal entities. A new law allowing foreign ownership of
properties, such as apartments and condominiums is expected to be
passed in 2010. The current draft stipulates that only properties
located above the ground floor can be foreign-owned, and foreigners
would not be able to own property within 30 kilometers of a national

40. Under the 2001 Land Law, foreign investors may secure control
over land through concessions, long-term leases, or renewable
short-term leases. If investors intend to take a long-term lease
interest in land or ownership interest through a 51 percent
Cambodian company, it is essential that caution be exercised to
ensure that clear and unencumbered ownership of the land is

41. The Land Law establishes a comprehensive legal framework for
long-term leasing. The leaseholder has a contractual interest in
the land, which means the lease can be sold or transferred through
succession and can be pledged as security in order to raise
financing. It is also important to make sure that the land
ownership is clearly and legally established before entering into
any leasing agreement.

42. Qualified investors approved by the Council for the Development
of Cambodia have the right to own buildings built on leased
property. However the law is unclear as to whether buildings from
qualified projects can be transferred between foreign investors or
whether foreign investors can own buildings built through projects

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not approved by the CDC.

Protection of Property Rights

43. Cambodia has adopted legislation concerning the protection of
property rights, including the Land Law and the Law on Copyrights
and Law on Patent and Industrial Design. Cambodia is a member of
the World Intellectual Property Organization (WIPO) and the Paris
Convention for the Protection of Industrial Property.

44. Chattel and real property: The 2001 Land Law provides a
framework for real property security and a system for recording
titles and ownership. Land titles issued prior to the end of the
Khmer Rouge regime in 1979 are not recognized due to the severe
dislocations that occurred during the Khmer Rouge period. The
government is making efforts to accelerate the issuance of land
titles, but in practice, the titling system is cumbersome,
expensive, and subject to corruption. The majority of property
owners lack documentation proving ownership. Even where title
records exist, recognition of legal title to land has been a problem
in some court cases where judges have sought additional proof of
ownership. Although foreigners are constitutionally forbidden to
own land, the 2001 law allows long or short-term leases to

45. Intellectual property rights (IPR): Cambodia's IPR regime is
in compliance with its WTO member commitments; however,
comprehensive enforcement remains problematic. The 1996
U.S.-Cambodia Trade Agreement contained a broad range of IPR
protections, but given Cambodia's very limited experience with IPR,
the WTO agreement granted phase-in periods for the Cambodian
government to fully implement IPR protections. On November 9, 2005,
the WTO granted a deadline extension until 2013 for Cambodia and
other least developed countries to enforce copyright laws and begin
accepting patents.

46. In a significant step toward consolidating IPR policy-making,
enforcement and technical assistance, the Council of Ministers
created the National Committee for Intellectual Property Management
on September 18, 2008 with its secretariat within the Ministry of
Commerce. This committee is responsible for developing national
policy on intellectual property, strengthening interagency
cooperation, preparing and disseminating new laws and regulations,
and acting as a clearinghouse for technical assistance relating to
the intellectual property sector. This new interagency IPR
committee chaired by the Minister of Commerce includes a broad range
of IPR actors including representatives from the Council of
Ministers and the Ministries of Industry Mines and Energy; Culture
and Fine Arts; Interior; Economy and Finance; Posts and
Telecommunications; Health; Agriculture, Forestry and Fisheries;
Environment; Justice; Education; and Tourism.

47. Trademarks: The Cambodian National Assembly approved the Law
Concerning Marks, Trade Names and Acts of Unfair Competition to
comply with Cambodia's WTO obligations under the Agreement on
Trade-Related Aspects of Intellectual Property Rights (TRIPS).
Signed in February 2002, the law outlines specific penalties for
trademark violations, including jail sentences and fines for
counterfeiting registered marks. It also contains detailed
procedures for registering trademarks, invalidation and removal,
licensing of marks, and infringement and remedies.

48. Since 1991, the Ministry of Commerce has maintained an
effective trademark registration system, registering more than
35,500 trademarks (nearly 6,599 for U.S. companies) under the terms
of a 1991 sub-decree, and has proven cooperative in preventing
unauthorized individuals from registering U.S. trademarks in

49. Despite lacking clear legal authority to conduct enforcement
activities, the Ministry of Commerce has taken effective action
against trademark infringement in several cases since 1998. The
Ministry has ordered local firms to stop using well-known U.S.
marks, including Pizza Hut, McDonalds, Nike, Scotties, Marlboro,
Seven Eleven, and Pringles. In 2009, the Ministry of Commerce
resolved 12 cases of trademark infringements.

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50. Copyrights: Copyrights are governed by the Law on Copyrights
and Related Rights, which was enacted in January 2003.
Responsibility for copyrights is split between the Ministry of
Culture and Fine Arts, which handles phonograms, CDs, DVDs, and
other recordings, and the Ministry of Information, which deals with
printed materials. Pirated CDs, videos, textbooks, and other
copyrighted materials are widely available in Cambodian markets and
used throughout the country. Before the adoption of the law, there
were no provisions for enforcement of copyrights.

51. To protect and manage their economic rights, authors and
related rights holders are allowed by law to establish a collective
management organization (CMO). The creation of the CMO requires
authorization from either the Ministry of Culture and Fine Arts or
the Ministry of Information, depending on the nature of their work.
The Ministry of Culture and Fine Arts is developing a sub-decree on
collective management. In mid-2007, the Ministry of Culture and
Fine Arts created a Copyright Department which is gradually building

52. Patents and industrial designs: Cambodia has a very small
industrial base, and infringement on patents and industrial designs
is not yet commercially significant. With assistance from WIPO, the
Ministry of Industry, Mines, and Energy (MIME) prepared a
comprehensive law on the protection of patents and industrial
designs which went into force in January 2003. The law provides for
the filing, registration, and protection of patents, utility model
certificates and industrial designs. The MIME issued a declaration
in June 2006 on granting patents and registering industrial

53. Encrypted satellite signals, semiconductor layout designs, and
trade secrets: The Ministry of Commerce is preparing a draft law
for trade secrets while the Ministry of Industry, Mines, and Energy
is drafting a law on integrated circuit protection. Cambodia has
not yet made significant progress toward enacting required
legislation on encrypted satellite signals, although it obtained a
model law on encrypted satellite signals and semiconductor layout
designs from WIPO in March 1999.

54. IPR enforcement: With the exception of the trademark
enforcement, the Cambodian government has taken few significant
actions to enforce its IPR obligations. However, in January 2008,
at the annual conference of the Ministry of Culture and Fine Arts,
the government suggested it would increase prosecutions for
copyright violations on domestically produced products before
expanding prosecutions for foreign products. Cambodian copyright
law allows IPR owners to file a complaint with the authorities to
take action. Law enforcement action taken at the request of owners
is directed against the piracy of domestically produced music or
video products, but not against piracy of foreign optical media.
The owners requesting crackdowns must pay support costs to the
authorities for conducting the operation. Crackdowns on such IPR
violations are not conducted on a consistent basis.

55. Infringement of IPR is pervasive, ranging from software,
compact discs, and music, to photocopied books and the sale of
counterfeit products, including cigarettes, alcohol, and
pharmaceuticals. In 2008, the Business Software Alliance estimated
a 95 percent software piracy rate in Cambodia which cost the
industry USD 47 million in 2007. Although Cambodia is not a major
center for the production and export of pirated CDs, videos, and
other copyrighted materials, local businesses report Cambodia is
becoming an increasingly popular source of pirated material due to
weak enforcement. The Ministry of Commerce has plans to put in
place measures to stop IPR-violating products at borders, as
post-inspection mechanisms are unlikely to be effective. During the
TIFA discussions in November 2007, Cambodia requested technical
assistance for a draft sub-decree on Border Measures detailing
procedures at the borders allowing IPR owners to file an application
with customs to suspend clearance of suspected counterfeit goods.

Transparency of the Regulatory System

56. There is no pattern of discrimination against foreign investors
in Cambodia through a regulatory regime. Numerous issues of
transparency in the regulatory regime arise, however, from the lack

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of legislation and the weakness of key institutions. Investors
often complain that the decisions of Cambodian regulatory agencies
are inconsistent, irrational, or corrupt.

57. The Cambodian government is still in the process of drafting
laws and regulations that establish the framework for the market
economy. In addition to existing laws and regulations, in 2009, the
government adopted the Law on Tourism, the Insolvency Law, and a
sub-decree establishing a national commercial arbitration body. A
commercial contract law and other important business-related laws
such as commercial court, e-commerce, telecommunications, and
personal property leasing laws are in draft.

58. Cambodia currently has no anti-monopoly or anti-trust statutes.
On a practical level, Cambodia has indicated a desire to discourage
monopolistic trading arrangements in most sectors.

59. Cambodia is currently working on the establishment of standards
and other technical measures based on international practice,
guidelines, and recommendations. Under the Law on Standards in
Cambodia, passed in 2007, the Institute of Standards in Cambodia
(ISC) was created within the Ministry of Industry, Mines, and Energy
(MIME) as a central authority to develop and certify national
standards for products, commodities, materials, services, and
practices and operations. The ISC serves as the secretariat of the
National Standards Council which consists of representatives from
various government ministries, state-controlled academic/research
institutions, the private sector, and a consumer representative
created to advise as well as approve standards.

60. The ISC has been assigned as the focal point for technical
barriers to trade (TBT) and as the agency responsible for
notifications and publications required by the WTO TBT Agreement.
The Ministry of Health is charged with prescribing standards,
quality control, distribution and labeling requirement for
medicines, but this responsibility may be brought under the ISC in
the future.

61. Quality control of foodstuffs, plant and animal products is
currently under the General Directorate of CamControl of the
Ministry of Commerce. Cambodia is a member of the Codex
Alimentarius Commission. Currently CamControl is the national
contact point for Codex Alimentarius. Its primary responsibility is
the enforcement of quality and safety of products and services
relating to sanitary and phytosanitary (SPS) measures. Cambodia was
provided a transition period until January 2007 to implement its WTO
TBT Agreement commitments and until January 2008 to implement its
SPS Agreement commitments, but has not yet fully implemented these
commitments. The RGC plans to adopt a subdecree on Automatic
Adoption of Codex Norms by the end of 2010.

62. The Cambodian Constitution and the 1997 Labor Code provide for
compliance with internationally recognized core labor standards.
The law authorizes the Ministry of Labor and Vocational Training to
set health, safety and other conditions for the workplace. (The
"Labor" Section of this report discusses the labor situation in more

63. The National Bank of Cambodia supervises Cambodia's banks and
financial institutions while the Ministry of Economy and Finance
regulates the insurance industry. The insurance market in Cambodia
is relatively new, but has recently begun to gain credibility and
expand its scope. Currently, there are a few major insurance
companies operating here such as Asia Insurance, the state-owned
insurance company Caminco, Forte Insurance, Campubank Lonpac
Insurance, and Infinity Insurance. Cambodia Reinsurance Company
(Cambodia Re) is the only reinsurance company in Cambodia
established by the government to carry out reinsurance business
operations for all classes of risk, including general insurance and
life insurance.

64. To help Cambodian businesses stay competitive in the world
market, the government introduced specific measures to facilitate
business, in particular exports, by attempting to reduce informal
costs and streamline bureaucratic hurdles. Measures included: (1)
introduction of a joint inspection by CamControl and the Customs and
Excise Department and issuance of a common inspection report valid
for both agencies and the "Federal Office" in order to reduce the

PHNOM PENH 00000029 010.8 OF 017

amount of time spent applying for export goods inspection; (2) based
on this common report, MIME and the Ministry of Commerce will issue
the Certificate of Processing (CP) and the Certificate of Origin
(CO), respectively; (3) reduction of the costs of registration from
USD 615 to USD 177 and of the time limit for Cambodian government
issuance of registration from 30 days to ten and a half working
days; and (4) reduction of time required to acquire documents
related to the CO and exports and for goods inspection.

65. Cambodia has renewed its commitment to creating a favorable
environment for investment and trade and has further committed to
reducing unofficial fees and costs related to imports and exports.

Efficient Capital Markets and Portfolio Investment
--------------------------------------------- -----

66. Cambodia is moving to address the need for capital markets. In
November 2006, the National Assembly passed legislation to permit
the government to issue bonds and use the capital to make up budget
deficits. However no bonds have been issued since 2007 and Prime
Minister Hun Sen said in 2008 that the government does not plan to
issue bonds in the near future. In 2007, the government also passed
the Law on the Issuance and Trading of Non-government Securities,
and, in partnership with the Korean Stock Exchange, plans to
establish a stock market by the end of 2010.

67. At the end of November 2009, the Securities and Exchange
Commission of Cambodia (SECC) released a draft administrative order
on equity securities issuance, which is expected to be adopted in
2010. According to the regulation, the issuance of equity
securities in the Cambodia stock market can be private placement or
public offering. Private placement refers to a personal offer that
is made to no more than 30 investors and with an issue size not
exceeding 20 percent of shareholder's equity when shareholder's
equity is less than USD 4.8 million or with an issue size not
exceeding 15 percent of shareholder's equity when shareholder's
equity is more than USD 4.8 million during a 12-month period. In
addition, the allotment of equity securities of public offerings are
divided, with a reserve of 20 percent of total public offering for
investors who are Cambodian citizens, and 80 percent of the
remaining public offering amount open to investors who are both
Cambodian and non-Cambodian citizens.

68. The Cambodian government does not use regulation of capital
markets to restrict foreign investment. Domestic financing is
difficult to obtain at competitive interest rates. A new law
addressing secured transactions, which includes a system for
registering such secured interests, was promulgated in May 2007.
Most loans are secured by real property mortgages or deposits of
cash or other liquid assets, as provided for in the existing
contract law and land law.

69. The total assets of Cambodia's banking system as of September
2009 were approximately USD 4.9 billion, an increase of nearly 22
percent from 2008. Loans account for about 49 percent of the
banking system's assets. The National Bank of Cambodia (NBC)
reported that the non-performing loans (NPLs) ratio of banks has
increased from 3.7 percent in December 2008 to 5.2 percent in May
2009 and that the rate could reach as high as 10 percent by the end
of the year. Credit disbursement has also slowed, from a growth
rate of 50 percent in 2008 to just 1 percent through the middle of
2009. As of September 2009, credit granted by the commercial banks
amounted to USD 2.4 billion. Loans made to services and the
wholesale and retail sectors accounted for over 40 percent of total
loans. The banking sector has shown significant improvement, but
requires continued progress to gain international confidence.

70. Under the amended Law on Banking and Financial Institutions,
all of Cambodia's commercial banks had to reapply for licenses from
the NBC and meet new, stricter capital and prudential requirements
by the end of 2001. As a result, there was a significant shakeout
and consolidation within the banking sector with the closure and
liquidation of 12 banks. In September 2008, the National Bank of
Cambodia moved to slow the rapid growth in the number of commercial
banks, which increased by more than 20 percent in the first nine
months of 2008, giving commercial banks without an investment grade
shareholder until the end of 2010 to triple minimum capital from USD
13 million to USD 37 million. In January 2008, Cambodia's banks

PHNOM PENH 00000029 011.6 OF 017

were given their first-ever risk assessment from Standard & Poor's
of a 'B+/B' rating with stable outlook. Their placement was
alongside that of banks in Venezuela, Bolivia, Ukraine, and Jamaica.
Banks have been free to set their own interest rates since 1995 and
average annual interest rate spread has declined from 15.3 percent
in 2004 to 9.6 percent in May 2009 which reflects an increase in the
interest rate for deposits and a decline in the interest rate for

Competition from State Owned Enterprises

71. Private enterprises are allowed to compete with public
enterprises under the same terms and conditions and in general are
not entitled to special trading rights or privileges. However,
certain laws and regulations reserve special rights for the state to
monopolize various services including the Electricity Law which
provides special privilege for the Electricity of Cambodia (EDC) to
provide power transmission to the distribution companies and bulk
power consumers.

72. Cambodia has several state-owned enterprises and two
joint-venture enterprises with a majority state holding. These
include rubber plantations and an agricultural inputs company,
infrastructure operating companies, the Phnom Penh Water Supply, the
EDC, the Rural Development Bank, and two joint-venture companies -
telecommunication operator Camintel and Cambodia Pharmaceutical
Enterprise. Currently, the country does not have a sovereign wealth

73. All SOEs are under the supervision of certain line Ministries
or government institutions and are overseen by boards of directors
drawn from among senior government officials. The Law on Audit
established the National Audit Authority and empowers the Auditor
General to conduct audits of state-owned enterprises. The audit
conducted by the Auditor General's Office primarily focuses on
compliance with rules governing SOE financial management. Limited
information is publicly available on the financial position and
performance of state-owned enterprises.

74. Cambodia has yet to pass the Law on Competition as part of its
WTO accession obligations. Under the draft law, a National
Committee on Competition will be established. However, the 1993
Constitution of Cambodia provides for the state to take necessary
intervention measures to protect the competitive process of the
marketplace as well as to protect consumer welfare.

Corporate Social Responsibility (CSR)

75. CSR is a new concept to Cambodia and is not widely understood
among local producers or consumers. However, certain labor and
social standards have been established in key industries,
particularly in the garment sector. Under the terms of the 1999
U.S.-Cambodia Trade Agreement, the U.S. Government committed to
increase the size of Cambodia's garment export quota if the country
could demonstrate improvements in labor standards. This was the
first bilateral trade agreement to positively link market access
with progress in compliance with labor obligations. Currently labor
standard monitoring in the garment sector is being conducted by the
International Labour Office (ILO) in coordination with the
government. The ILO project succeeded in improving compliance with
labor standards, virtually eliminating the worst labor abuses such
as forced labor and child labor within the garment sector. Socially
responsible businesses continue to source garments from Cambodia due
to its well-deserved reputation for high labor standards.

76. Currently, the ILO's Better Work and Better Factories Cambodia
program is developing a training package on planning and
implementing the transition of the inspections regime towards
substantial compliance with international labor standard such as the
OECD Guidelines for Multinational Enterprises. In addition, several
multinational enterprises conduct CSR programs in Cambodia which are
viewed favorably by the local community.

Political Violence

PHNOM PENH 00000029 012.8 OF 017

77. Cambodia is relatively peaceful compared to its pre-UNTAC
history. Election-related violence has decreased in each national
election held at five-year intervals since 1993. Cambodia's 2007
commune council elections followed by the July 2008 National
Assembly election had little of the pre-election violence or
intimidation that preceded the 2002 and 2003 elections. The 2007
and 2008 polls resulted in clear victories for the Cambodian
People's Party, with the Sam Rainsy Party emerging as the main
opposition party.

78. Cambodian political activities have turned violent in the past,
and the possibility for politically motivated violence remains.
During the anti-Thai riots in 2003, the Royal Embassy of Thailand
and Thai-owned commercial establishments were attacked. In November
2006, police arrested six people for allegedly plotting to conduct
bomb attacks in Phnom Penh during the Water Festival.

79. On July 29, 2007, three improvised explosive devices (IEDs)
were planted at the Vietnam-Cambodia Friendship Monument in Phnom
Penh. One of the IEDs partially exploded, but the others failed to
detonate and were recovered by Cambodian authorities. No one was
injured. On January 2, 2009, two undetonated IEDs were found near
the Ministry of National Defense and state-owned TV3. While there
is no indication these incidents were directed at U.S. or other
Western interests, the possibility remains that further attacks
could be carried out.

80. Following the July 2008 UNESCO World Heritage Site listing of
the Preah Vihear Temple, thousands of Thai and Cambodian soldiers
amassed in a few isolated areas along the Thai-Cambodian border,
particularly near the disputed Preah Vihear temple area. Since
then, soldiers have clashed near the temple resulting in deaths on
both sides, but the outbreaks of violence have been rare and lasted
only a few hours. Both the Thai and Cambodian governments have
committed to a peaceful resolution of the dispute.


81. Despite increasing investor interest, Cambodia continues to
rank poorly on global surveys of competitiveness and corruption.
According to the World Economic Forum's Global Competitiveness
Report 2009-2010, Cambodia's competitiveness ranking slipped by one
point to 110 of 133 countries surveyed, a reversal of the one point
climb to 109 in the 2008-2009 report (of 134 countries). The World
Bank also ranked Cambodia in the lower half of the list, 145 of 183,
on business climate. In 2009, Cambodia scored 2.0 on a scale of 0
(highly corrupt) to 10 (highly clean) in Transparency
International's Corruption Perceptions Index, ranking 158 out of 180
countries assessed, suggesting widespread and endemic forms of

82. Business people, both local and foreign, have identified
corruption, particularly within the judiciary, as the single biggest
deterrent to investment in Cambodia. Corruption was cited by a
plurality of respondents to the World Economic Forum survey as the
most problematic factor for doing business in Cambodia. A 2007
USAID-funded survey of the Phnom Penh Chamber of Commerce also found
that corruption is considered to be the main obstacle for doing

83. Public sector salaries range from USD 25-60 per month for
working level officials, and around USD 2000 per month for
high-ranking officials. Although there is an annual salary increase
of 10-15 percent, these wages are far below the level required to
maintain a suitable quality of life in Cambodia, and as a result,
public employees are susceptible to corruption and conflicts of
interest. Local and foreign businesses report that they must often
pay extra facilitation fees to expedite any business transaction.
Additionally, for those seeking to enter the Cambodian market, the
process for awarding government contracts is not transparent and is
subject to major irregularities.

84. Current Cambodian laws and regulations and their application
are insufficient to address the problem of corruption. Laws dating
from the UNTAC period (1991-93) against embezzlement, extortion, and
bribing public officials exist, but are enforced rarely, often for
political reasons.

PHNOM PENH 00000029 013.8 OF 017

85. Cambodia is not a signatory to the OECD Anti-Bribery
Convention, but has endorsed the ADB/OECD Anti-Corruption Action
Plan for Asia and the Pacific. In 2007, the government signed a
regional anti-corruption pact with eight other ASEAN countries, and
in September of the same year, also signed the UN Convention Against
Corruption. Cambodia is considering joining the Extractive
Industries Transparency Initiative governing the oil sector.

86. Cambodia is under increasing pressure from donors to address
the issue of good governance in general, and corruption in
particular. Cambodia began efforts to draft and enact
anti-corruption legislation in the 1990's. In a draft action plan
on good governance presented to donors in May 2000, Cambodia
promised to pass anti-corruption legislation by late 2001. Since
then, donors have become increasingly frustrated with the
government's failure to meet a series of benchmarks to enact new
anti-corruption legislation.

87. However, in October, the National Assembly passed a new Penal
Code, which the government has long stated was a prerequisite to the
heavily anticipated anti-corruption law. In December, the Cambodian
government finally approved the draft anti-corruption law which is
expected to be approved by the National Assembly in 2010. Under the
new law, all civil servants would be obliged to declare their
financial assets to the government every two years.

88. The Ministry of National Assembly-Senate Relations and
Inspection (MONASRI) has an anti-corruption mandate, but is largely
inactive. In 2007, however, MONASRI, with technical assistance from
USAID, created a draft Access to Information Policy. The draft has
yet to be forwarded to the Council of Ministers. The government
also created an anti-corruption commission within the cabinet in
late 1999, which has undertaken a few investigations, one of which
resulted in the dismissal of a mid-level official in late 2001.
Also in 2001, the government established a National Audit Authority,
which has been only marginally effective because of its lack of
transparency and independence.

89. Ignoring the existing anti-corruption commission, the
government established the Anti-Corruption Unit (ACU) in August
2006, a temporary body designed to address corruption until the
anti-corruption legislation is passed. The mission of the ACU is to
focus on preventing corruption, strengthening law enforcement, and
obtaining public support for combating corruption. However the ACU
is considered to be ineffective because of its lack of independence
and capacity.

90. In its most comprehensive reform strategy, the Rectangular
Strategy Phase II, adopted as the government platform in 2008 after
phase I in 2004, the Cambodian government once again renewed its
commitment to fight corruption and make good governance the
centerpiece of reform. The strategy acknowledges the importance of
taking action against corruption, but the challenge remains a
daunting and long-term one that will require political will at the
highest levels of the government.

Bilateral Investment Agreements

91. Cambodia has signed bilateral investment agreements with
Australia, China, Croatia, Cuba, the Czech Republic, France,
Germany, Indonesia, Kuwait, Japan, Laos, Malaysia, the Netherlands,
North Korea, the Organization of the Petroleum Exporting Countries
(OPEC), Pakistan, the Philippines, Singapore, South Korea,
Switzerland, Thailand, and Vietnam. Future agreements with Algeria,
Bulgaria, Burma, Egypt, Hungary, Libya, Malta, Qatar, Russia, the
United Kingdom, and Ukraine are planned. The agreements provide
reciprocal national treatment to investors, excluding benefits
deriving from membership in future customs unions or free trade
areas and agreements relating to taxation. The agreements preclude
expropriations except those that are undertaken for a lawful or
public purpose, are non-discriminatory, and are accompanied by
prompt, adequate and effective compensation at the fair market value
of the property prior to expropriation. The agreements also
guarantee repatriation of investments and provide for settlement of
investment disputes via arbitration.

PHNOM PENH 00000029 014.12 OF 017

92. In addition, in July 2006, Cambodia signed a Trade and
Investment Framework Agreement (TIFA) with the United States, which
will promote greater trade and investment in both countries and
provide a forum to address bilateral trade and investment issues.
Two very successful meetings were held under the TIFA in 2007 in
which the U.S. and Cambodian governments discussed WTO accession
requirements, trade facilitation and economic development
initiatives, and progress on intellectual property rights. Since
then, several bilateral working level meetings have been held to
advance the TIFA agenda.

OPIC and Other Investment Insurance Programs

93. Cambodia is eligible for the Quick Cover Program under which
the Overseas Private Investment Corporation (OPIC) offers financing
and political risk insurance coverage for projects on an expedited
basis. With most investment contracts written in U.S. dollars,
there is little exchange risk. Even for riel-denominated
transactions, there is only one exchange rate, which is fairly
stable. Cambodia is a member of the Multilateral Investment
Guarantee Agency (MIGA) of the World Bank, which offers
political-risk insurance to foreign investors.

94. The Export-Import Bank of the United States (Ex-Im Bank)
provides financing for purchases of U.S. exports by private-sector
buyers in Cambodia on repayment terms of up to seven years. Ex-Im
Bank support typically will be limited to transactions with a
commercial bank functioning as an obligor or guarantor; however, it
will consider transactions without a bank undertaking on a
case-by-case basis.


95. The country has an economically active population (defined as
being ten years of age and older) of some 8.8 million people out of
a population of 13.4 million. While government statistics are
somewhat higher, they do not fully capture the problems of
unemployment and underemployment in Cambodia.

96. The economy is not able to generate enough jobs in the formal
sector to handle the large number of entrants to the job market.
This dilemma is likely to become more pronounced over the next
decade. Cambodia suffers from a large demographic imbalance.
According to the 2008 General Population Census of Cambodia,
Cambodia's annual population growth rate is 1.54 percent. Persons
20 years of age or younger account for 48.1 percent of the total
population. As a result, over the next decade at least 275,000 new
job seekers will enter the labor market each year.

97. Approximately 65 - 70 percent of the labor force is engaged in
subsistence agriculture. At the end of 2009, about 278,000 people,
the majority of whom are women, were employed in the garment sector,
with 300,000 Cambodians employed in the tourism sector, and a
further 50,000 people in construction.

98. The 2009-2010 Global Competitiveness Report of the World
Economic Forum identified an inadequately educated workforce as one
of the most serious problems in doing business in Cambodia. Given
the severe disruption to the Cambodian education system and loss of
skilled Cambodians during the 1975-79 Khmer Rouge period, workers
with higher education or specialized skills are few and in high
demand. A Cambodia Socio-Economic Survey conducted in 2004 found
that about 12 percent of the labor force has completed at least an
elementary education. Only 1.2 percent of the labor force completed
post-secondary education.

99. Overall literacy, for those aged fifteen and over, is 75.1
percent with male literacy rates considerably higher than those for
females in both urban and rural areas. Many adults and children
enroll in supplementary educational programs, including English and
computer training. Employers report that Cambodian workers are
eager to learn and, when trained, are excellent, hardworking

100. Cambodia's 1997 labor code protects the right of association
and the rights to organize and bargain collectively. The code

PHNOM PENH 00000029 015.12 OF 017

prohibits forced or compulsory labor, establishes 15 as the minimum
allowable age for paid work, and 18 as the minimum age for anyone
engaged in work that is hazardous, unhealthy or unsafe. The statute
also guarantees an eight-hour workday and 48-hour work week, and
provides for time-and-a-half pay for overtime or work on the
employee's day off. The law gives the Ministry of Labor and
Vocational Training (MOLVT) a legal mandate to set minimum wages
after consultation with the tripartite Labor Advisory Committee. In
January 2007, the minimum wage for garment and footwear workers was
officially set at USD 50 per month. In April 2008, a USD 6 per
month cost of living allowance was instituted to offset high levels
of inflation. There is no minimum wage for any other industry. To
increase competitiveness of garment manufacturers, the labor code
was amended in 2007 to establish a night shift wage of 130 percent
of day time wages.

101. Acleda Bank, a local commercial bank, is currently managing
Cambodia's first National Social Security Fund (NSSF), which
protects workers against occupational risks and workplace accidents.
The fund was established by sub-decree in 2007 and requires
employers to contribute 0.8 percent of each employee's salary to the
NSSF. As December 29, 2009, approximately 350,000 workers, most
from the garment sector, contribute to the fund through their
employer. The Cambodian government has responded to the global
economic crisis by temporarily contributing 0.3 percent towards the
NSSF on behalf of employers for two years (2009-2010) which has
resulted in a reduction of employers' obligation from 0.8 percent to
0.5 percent of total wages. A second phase of the fund, to be
implemented in 2010, will focus on health care for employees,
followed by pensions in 2012.

102. Enforcement of many aspects of the labor code is poor, albeit
improving. Labor disputes can be problematic and may involve
workers simply demanding conditions to which they are legally
entitled. In labor disputes in which workers complain of poor or
unhealthy conditions, MOLVT and the Ministry of Commerce have
ordered the employer to take corrective measures. The U.S.
Government, the ILO, and others are working closely with Cambodia to
improve enforcement of the labor code and workers' rights in
general. The U.S.-Cambodia Bilateral Textile Agreement linked
Cambodian compliance with internationally recognized core labor
standards with the level of textile quota the U.S. granted to
Cambodia. While the quota regime ended on January 1, 2005, a
"Better Factories" program continues to build on the labor standards

Foreign Trade Zones

103. To facilitate the country's development, the Cambodian
government has shown great interest in increasing exports via
geographically defined special economic zones (SEZs), with the goal
of attracting much-needed foreign direct investment.

104. The government is preparing a Law on Special Economic Zones
which will define SEZs and establish the rules under which they will
operate. The law may be submitted for approval of the Council of
Ministers in 2010.

105. In late December 2005, the Council of Ministers passed a
sub-decree on Establishment and Management of Special Economic Zones
to speed up the creation of the zones. The sub-decree details
procedures, conditions and incentives for the investors in the

106. Since issuing the sub-decree, the Cambodia Special Economic
Zones Board (CSEZB) has approved 21 SEZs as of December 2009, of
which 4 are in operation, located near the borders of Thailand and
Vietnam, and in Phnom Penh, Kampot, and Sihanoukville.

Foreign Investment Statistics

107. Foreign Direct Investment (FDI) proposals approved by the
Council for the Development of Cambodia (CDC) have dramatically
increased in recent years, with approved FDI reaching USD 10.9
billion in 2008, compared with USD 201 million in 2004. However, FDI
inflows declined dramatically to only USD 1.6 billion as of October

PHNOM PENH 00000029 016.10 OF 017

2009 due to the impact of the global economic crisis. FDI registered
capital however, has been modest since 1995, with an average inflow
of USD 304 million in the period 1995-2008. The FDI registered
capital figures probably understate actual investment, since they
report only registered capital and not fixed assets. CDC statistics
for fixed assets, however, are based on projections, and the CDC has
no effective monitoring mechanism to determine the veracity of the
numbers. The FDI registered capital flow into Cambodia is uneven
and gradually declined from USD 135 million in 1999 to USD 30
million in 2003, but rose to USD 105 million in 2009.

108. Total FDI registered capital flows into Cambodia for the years
1998-2009 are presented in the table below, in USD million.
(Source: CDC) (Note: statistics from the National Bank of Cambodia
differ significantly from CDC's figures.)

1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009
320 135 74 81 50 30 45 383 209 473 260 105

109. Figures from the CDC for registered capital of approved
projects, including domestic investment, and broken down by country
of origin and economic sector, are provided below. The FDI
registered capital figures below may overstate investment because
they include projects that have not yet been, or may never be, fully
implemented and retention of dormant or defunct projects from
earlier years makes the investment figures appear higher.

110. Total cumulative registered investment projects approved, by
country of origin, August 1994 to October 2009 (source: CDC)

Country USD millions Pct.
Malaysia 1,736 32.17
Cambodia 1,526 28.28
China 603 11.17
Taiwan 405 7.50
Thailand 221 4.09
Singapore 199 3.68
South Korea 170 3.15
U.K. 132 2.44
USA 71 1.31
Vietnam 69 1.27
Indonesia 55 1.01
Australia 55 1.01
France 42 0.77
Japan 24 0.44
Other 88 1.63
Total 5,396 100

111. Total cumulative registered investment capital by sector, from
January 1998 to October 2009 (source CDC)

Sector USUSD millions Number of Projects
Industry 1,538.7 748
- Food Processing 93.5 13
- Garments 469.4 421
- Petroleum 212.2 9
- Wood Processing 100.3 17
- Footwear 33.8 27
Agriculture 209.6 90
Services 342.8 81
- Construction 64.6 15
- Telecommunications 94.5 16
Tourism 446.4 98
Total 2537.5

112. New investment projects in USD million, by country of origin,
2004-2009(source: CDC)

Country 2004 2005 2006 2007 2008 2009
Malaysia 7.81 0.6 2.5 19.8 1 na
Cambodia 15 78.5 116.8 264.3 99.8 17.6
U.S. 2.1 2.2 4.3 6.5 12.3 1
Taiwan 4.6 4.1 16.4 14 9.5 5
Singapore 1.6 5.3 3.8 1 12 5.5
China 24 38 28.3 40.4 37.9 34.5
South Korea 4.1 16 4.5 22 19.5 5.2
Hong Kong na 0.3 1.5 0.6 na 1
France 0.6 0.4 na 0.3 2.3 1.6

PHNOM PENH 00000029 017.10 OF 017

Thailand 2 15 10 13.8 30.6 15.5
U.K. 1.5 1 1 1.5 1 2
Canada 1.7 0.6 1.5 na 4.8 1
Indonesia na na na na na 1
Australia na 7 na 3.5 1 na
Japan 0.7 na 1 7.5 4.6 1
Other na na 8.1 78.5 4.1 11
Total 65.71 169 199.7 473.7 240.4 102.9

113. New investment projects in USD million, by sector, 2004-2009
(source: CDC)

Sector 2004 2005 2006 2007 2008 2009
Industry 53.5 325 173.4 269.9 90 56.7
- Food Processing 1 na 22 24 4 2
- Garments 19 54 41.9 45.1 49 20
- Petroleum 1 200 na na na 9.2
- Wood Processing 1 na na 2 na 2
- Mining na 30 1 149 4 7
Agriculture 2 4 2 50.1 26 32.5
Services 5 32 16.3 127.2 43 4
- Construct 3 31 6 5 1 na
- Telecom na na na 42.2 2 2
- Infrastructure na na na 65 na 1
Tourism 5.5 18 18 33.5 101 12
Total 66 379 209.7 480.7 260 105.2

114. The CDC has registered approximately USD 71 million in U.S.
investment since August 1994. Caltex has a chain of service
stations and a petroleum holding facility in Sihanoukville; Crown
Beverage Cans Cambodia Limited, a part of Crown Holdings Inc.,
produces aluminum cans; and Chevron is actively exploring offshore
petroleum deposits. W2E Siang Phong Co., Ltd., a joint venture
between U.S.- Dutch investors, invested in biogas power generation.
There are also U.S. investors in a number of Cambodia's garment

115. In 2008, several Cambodia-focused private equity funds emerged
seeking to raise between USD 100 and USD 500 million each for
investments in infrastructure, agriculture, tourism, and real estate
development, among other sectors. However it appears the global
economic slowdown is limiting fund-raising abilities, and widespread
investments by these funds have not yet materialized.

116. Major non-U.S. foreign investors include Asia Pacific
Breweries (Singapore), Asia Insurance (Hong Kong), ANZ Bank
(Australia), BHP Billiton (Australia), Oxiana (Australia), Infinity
Financial Solutions (Malaysia), Total (France), Cambodia Airport
Management Services (CAMS) (France), Samart Mobil Phone (Malaysia),
Shinawatra Mobile Phone (Singapore), Thakral Cambodia Industries
(Singapore), Petronas Cambodia (Malaysia), Charoeun Pokphand
(Thailand), Siam Cement (Thailand), and Cambrew (Malaysia).

117. Since 2007, several well-known U.S. companies opened or
upgraded their presence in Cambodia. General Electric and DuPont
have established representative offices. Otis Elevators, a division
of United Technologies, also upgraded to a branch office, and
Microsoft initiated a presence through its Market Development

118. Some major local companies and their sectors are: Sokimex
(petroleum, tourism, garment), Royal Group of Companies (mobile
phone, telecommunication, banking, insurance), AZ Distribution
(construction, telecommunication), Mong Rethy Groups (construction,
agro-industry, rubber and oil palm plantation), KT Pacific Group
(airport project, construction, tobacco, food and electronics
distribution), Hero King (cigarettes, casinos and power), Anco
Brothers (cigarettes, casinos and power), Canadia Bank (banking and
real estate), Acleda Bank (microfinance), and Men Sarun Import and
Export (agro-industry, rice and rubber export).

119. In 2009 Acleda Bank opened its first bank branch outside of
Cambodia in Laos, and has announced plans for further expansion into
Vietnam and China. Statistics on Cambodian investment overseas are
not available, but such investments are likely minimal.


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Palestinian Ministry of Health: Developments In The Health Situation During The Israeli Aggression On The Cities & Governorates Of The Gaza Strip
For the second day in a row, the Israeli aggression against the Gaza Strip continues by targeting overcrowded residential areas and neighborhoods, as the death toll rose to 13 citizens, including a 5-year-old girl and a 23-year-old woman... More>>

UN: Horn Of Africa Faces Most ‘Catastrophic’ Food Insecurity In Decades, Warns WHO

The World Health Organization (WHO) warned on Tuesday that the Greater Horn of Africa is experiencing one of the worst famines of the last 70 years... More>>

FAO: Warns 90 Per Cent Of Earth’s Topsoil At Risk By 2050
A full 90 per cent of the Earth’s precious topsoil is likely to be at risk by 2050, according to the UN Food and Agriculture Organization, FAO...

Somalia: ‘We Cannot Wait For Famine To Be Declared; We Must Act Now’
Rising acute food insecurity in Somalia has caused more than 900,000 people to flee their homes in search of humanitarian assistance since January last year, the Food and Agriculture Organization (FAO) has warned... More>>

UN: American West Faces Water And Power Shortages Due To Climate Crisis
Two of the largest reservoirs in the United States are at dangerously low levels due to the climate crisis and overconsumption of water, which could affect water and electricity supply for millions in six western states and Mexico, the UN Environment Programme (UNEP) warned on Tuesday... More>>

Singapore: UN Experts Call For Immediate Moratorium On Executions For Drug Offences

UN experts* today condemned the execution of Nazeri Bin Lajim, a 64-year-old Malay Singaporean national convicted of drug offenses and urged the Government of Singapore to halt plans to execute individuals on death row for drug related charges... More>>