VZCZCXRO6699
PP RUEHCHI RUEHDT RUEHHM RUEHNH
DE RUEHPF #0071/01 0281002
ZNR UUUUU ZZH
P 281002Z JAN 09
FM AMEMBASSY PHNOM PENH
TO RUEHC/SECSTATE WASHDC PRIORITY 0338
INFO RUCNASE/ASEAN MEMBER COLLECTIVE
RUCPDOC/USDOC WASHDC
RUCPCIM/CIMS NTDB WASHDC
RUEATRS/DEPT OF TREASURY WASHINGTON DC 0779
RUEHRC/DEPT OF AGRICULTURE WASHINGTON DC

UNCLAS SECTION 01 OF 16 PHNOM PENH 000071 
 
STATE FOR EAP/MLS, EB/IFD/OIA, EB/TPP/ABT, EEB/TPP/MTA, EEB/TPP/BTA 
STATE PASS TO USTR/BISBEE AND WEISEL 
STATE PASS TO USTDA/ROSSITER 
BANGKOK FOR USAID/KISSINGER, FCS/MEYER 
HANOI FOR FAS/REIDEL 
HO CHI MINH CITY FOR FCS/LE 
 
SIPDIS 
 
E.O. 12958:N/A 
TAGS: ECON EFIN EINV ELAB ETRD KIPR OPIC KTDB USTR CB
SUBJECT:  2009 Investment Climate Statement - Cambodia 
 
REF: 08 STATE 123907 
 
¶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 46 new 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.  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.  In 2007, the 
government promulgated a Customs Law, Law on Water Resources 
Management, Law on Land Traffic, Law on Insolvency, and Secured 
Transactions Law.  The government has either completed drafts of 
most of the remaining required laws or is waiting for their approval 
by the legislature.  According to the Economic Institute of 
Cambodia, an independent think tank, the government must promulgate 
an additional 17 laws required by WTO accession. 
 
¶3.  Since the re-establishment of a constitutional monarchy in 1993, 
the economy has grown steadily.  Real GDP growth averaged 8.8 
percent during the 1994-2008 period.  Despite dire predictions 
surrounding the expiration of the Multi-Fiber Agreement on January 
1, 2005, through which Cambodia obtained limited duty-free access to 
the U.S. market for garments, the economy grew at 13.4 percent in 
2005 -- the highest rate in a decade -- and in 2007 expanded by 10.2 
percent.  During the same period, per capita GDP grew from USD 440 
to USD 590.  Success in the garment, construction, and tourism 
sectors and good weather for agriculture generated the high growth. 
For 2008, the growth rate decreased to an estimated 6.7 percent, 
mainly as a result of decreasing garment orders, constrution 
projects, and tourist arrivals due to the global economic slowdown 
and political instability in Thailand. Per capita GDP for 2008 was 
USD 625. 
 
¶4.  Inflation increased sharply in 2008, as it did in many countries 
throughout Asia.  According to the Economic Institute of Cambodia, 
in 2008 the inflation rate reached an estimated 22.7 percent.  The 
rising price of fuel, depreciation of the dollar, and dramatic 
increase in food prices contributed to the dramatic spike.  Apart 
from the CPI, land prices retreated from record levels achieved at 
the beginning of the year, with the price of residential property in 
Phnom Penh decreasing by 25 percent from earlier highs, after rising 
by 100 percent in 2007. 
 
¶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 
reaching nearly USD 11 billion in 2008, compared with USD 201 
million in 2004.  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.  Nonetheless, the increase 
in investor interest may be attributed to increased political and 
macroeconomic stability, and ongoing government reforms designed to 
integrate Cambodia into the regional and global marketplace. 
Corruption has been singled out as one of the most serious 
deterrents to further private investment.  Given inadequate private 
investment and poor revenue collection, Cambodia remains dependent 
largely on foreign donor funding for budget assistance, capital 
expenditure, and social services. 
 
¶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 
 
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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 
facilitation. 
 
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. 
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 Cambodia 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 
practitioners. 
 
¶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 
Cambodia. 
--  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. 
 
Conversion and Transfer Policies 
--------------------------------- 
 
¶13.  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. 
 
¶14.  The U.S. dollar is widely used and circulated in the economy. 
The 2008 exchange rate was stable, although slightly depreciated 
compared to 2007.  At the end of 2008, the exchange rate was USD 1 = 
4,049 riel.  The government is committed to maintaining exchange 
 
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rate stability. 
 
Expropriation and Compensation 
------------------------------- 
 
¶15.  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." 
 
¶16.  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.  These actions are usually directed at 
poor people and those unable to protect their rights.  Human rights 
NGO ADHOC reported receiving 195 land-related cases from January to 
August 2008.  During the same period, another NGO received 51 
land-related cases in Phnom Penh and 13 other provinces affecting a 
total of 3,275 families.  If granted at all, compensation in these 
types of cases is usually less than the market value of the property 
being taken. 
 
¶17.  The Ministry of Economy and Finance is drafting a law on 
expropriation which will set broad guidelines on land-taking 
procedures for public interest purposes and define 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.  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 
------------------- 
 
¶19.  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. 
 
¶20.  Cambodian culture and its legal system have traditionally 
favored negotiation and conciliation over adversarial conflict and 
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 
trial.  The Ministry of Commerce is currently finalizing draft 
legislation to create a Commercial Court that will likely include a 
pre-trial mediation component.  A number of draft bills are slated 
to be considered by the National Assembly during its fourth term 
(2008-2013); no date has been set for consideration of Commercial 
Court legislation. 
 
¶21.  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. 
 
¶22.  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 8 other members, 
 
PHNOM PENH 00000071  004 OF 016 
 
 
is responsible for the appointment and conduct of judges and 
prosecutors. 
 
¶23.  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. 
 
¶24.  Under the 2006 Law on Commercial Arbitration, a National 
Arbitration Center (NAC) will be established in the Ministry of 
Commerce.  When active, 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 also 
allows the Cambodia Chamber of Commerce to establish its own 
arbitration center for disputes between members or between members 
and third parties.  Neither of these proposed arbitration centers 
has been established to date.  However a sub-decree on the 
establishment of the National Arbitration Center is currently 
awaiting approval by the Council of Ministers.  The Law on 
Commercial Arbitration 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.  Although party to the Convention for the Settlement of 
Investment Disputes between States and Nationals of Other States 
since 2005, Cambodia has not yet had any cases taken to the 
International Center for the Settlement of Investment Disputes. 
 
Performance Requirements and Incentives 
----------------------------------------- 
 
¶26.  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. 
 
¶27.  Seeking to increase government revenue, the international 
financial institutions recommended that the Cambodian government 
scale back its investment incentives.  Consequently, the Cambodian 
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. 
 
¶28.  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. 
 
¶29.  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 
 
PHNOM PENH 00000071  005 OF 016 
 
 
with over 50 percent equity owned by Cambodians. 
--  No price controls on goods produced or services rendered by 
investors. 
--  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. 
 
¶30.  The September 2005 sub-decree on the Implementation of the 
Amendment to the Law on Investment also details investment 
activities that are not eligible for 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. 
 
¶31.  Incentives are also not available for 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 not 
eligible for incentives. 
 
¶32.  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. 
 
¶33.  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. 
 
¶34.  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. 
 
¶35.  The CDC has the responsibility to obtain all of the licenses 
from relevant government agencies on behalf of the 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. 
 
¶36.  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. 
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. 
 
¶37.  Under a 2008 sub-decree, the CDC is required to submit 
investment proposals to the Council of Ministers for approval with 
an investment capital of USD  50 million or more; involve 
 
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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 concessions. 
 
¶38.  After receiving several billion dollars of real estate 
development proposals, the Ministry of Economy and Finance (MoEF) 
proposed new regulations in July 2008 to protect consumers from 
fraud. The proposed rules require all developers to obtain licenses 
from an Inter-Ministerial Task Force, purchase construction site 
insurance, and deposit two percent of total project costs in a 
non-interest bearing MoEF account at the National Bank of Cambodia. 
License fees and the period of the license would be determined by 
the type and size of development. It also requires developers to 
create a housing development account at a commercial bank into which 
buyers can make down payments on units. Developers would need 
approval from an inter-ministrerial working group to access the 
account, and the working group can intervene if the company fails to 
honor its contracts. The rule was originally slated to take effect 
from September 30, 2008 but was postponed amid complaints from 
international developers. After receiving support from the Prime 
Minister at the Government-Private Sector Forum in November 2008, 
the MoEF intends to reintroduce the regulations in early 2009. 
 
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.  Investment incentives vary depending on 
the nature of the investment project. 
 
¶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 
verified. 
 
¶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 
not approved by the CDC.  To remove the ambiguity, several real 
estate developers and members of the legal community are urging the 
government to issue formal regulations for foreign ownership rights 
on buildings such as apartments and condominiums. 
 
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 
 
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ownership.  Although foreigners are constitutionally forbidden to 
own land, the 2001 law allows long or short-term leases to 
foreigners. 
 
¶45.  Intellectual property rights (IPR):  As a WTO member, 
Cambodia's IPR regime is in compliance with its WTO 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.  Once operational, this committee will develop national 
policy on intellectual property, strengthen interagency cooperation, 
prepare and disseminate new laws and regulations, and act 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.  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 2008, the Ministry of Commerce 
resolved 12 cases of trademark infringements. 
 
¶49.  Since 1991, the Ministry of Commerce has maintained an 
effective trademark registration system, registering more than 
30,000 trademarks (nearly 6,000 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 
Cambodia. 
 
¶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 hopes to draft a sub-decree on 
collective management in 2009.  In mid-2007, the Ministry of Culture 
and Fine Arts created a Copyright Department which is gradually 
building capacity. 
 
¶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 
 
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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 
designs. 
 
¶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.  Cambodia has committed to the WTO 
to promulgate a law by 2009 but is unlikely to meet this goal. 
 
¶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.  The Business Software Alliance recently 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-violated 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 
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 2008, the 
government adopted the Law on Civil Aviation and the Law on Plant 
Breeder Rights.  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 
or still pending promulgation. 
 
¶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.  When fully functional, the ISC will serve 
as the secretariat of the National Standards Council which will 
consist 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 
 
PHNOM PENH 00000071  009 OF 016 
 
 
standards. 
 
¶60.  The responsibility for establishing industrial standards and 
certifications currently resides with the Department of Industrial 
Standards of Cambodia of MIME which will become part of the 
Institute of Standards of Cambodia in the future.  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 will 
be brought under the ISC in the future. 
 
¶61.  Quality control of foodstuffs, plant and animal products is 
currently under the Department of Inspection and Fraud Repression 
(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. 
 
¶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 
detail.) 
 
¶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, and Infinity 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 
amount of time spent applying for 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.  During the Trade and 
Investment Framework Agreement (TIFA) discussions in November 2007, 
the government 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.  The Budget Law for 2007 permitted the government to issue 
bonds worth USD 250,000.  However no 2007 bonds were sold to 
investors and Prime Minister Hun Sen mentioned 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 
¶2009. 
 
¶67.  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. 
 
 
PHNOM PENH 00000071  010 OF 016 
 
 
¶68.  The total assets of Cambodia's banking system as of July 2008 
were approximately USD 4 billion, an increase of nearly 50 percent 
from the end of 2005.  Loans account for about 56 percent of the 
banking system's assets.  Nonperforming loans have fallen to 
historic lows, between 2 - 4 percent, likely due to dramatic 
increases in property values through mid-2008, but banking experts 
predict an increase in future nonperforming loans as property prices 
decline.  As of July 2008, credit granted by the commercial banks 
amounted to USD 2.2 billion.  Loans made to services and the 
wholesale and retail sectors accounted for over 50 percent of total 
loans. 
 
¶69.  The banking sector has shown significant improvement, but 
requires continued progress to gain international confidence.  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.  Since the shakeout, Cambodian banks have 
gradually increased in number with 25 commercial banks in operation 
as of January 2009.  As a supplement to commercial banking, six 
specialized banks and seventeen microfinance institutions also offer 
financial services to the public.  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 12.5 million to USD 37.5 million.  In January 2008, 
Cambodia's banks were given their first-ever risk assessment from 
Standard & Poor's. Their placement was alongside that of banks in 
Venezuela, Bolivia, Ukraine, and Jamaica. 
 
Political Violence 
------------------- 
 
¶70.  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. 
 
¶71.  Cambodian political activities have turned violent in the past, 
and the possibility for politically motivated violence remains.  In 
November 2000, an anti-government group based in the U.S. led an 
attack against government buildings in Phnom Penh.  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. 
 
¶72.  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. 
 
¶73.  Following the July 2008 UNESCO World Heritage Site listing of 
the Preah Vihear Temple, thousands of Thai and Cambodian soldiers 
amassed in various areas along the Thai-Cambodian border, 
particularly near the disputed Preah Vihear temple area.  Soldiers 
clashed October 15, 2008 near the temple resulting in deaths on both 
sides, but the outbreak of violence was isolated and lasted only a 
few hours. 
 
Corruption 
----------- 
 
¶74.  Despite increasing investor interest, Cambodia continues to 
rank poorly on global surveys of competitiveness and corruption. 
The World Economic Forum's 2008 competitiveness survey ranked 
Cambodia 109 out of 134 countries surveyed, slightly better than its 
2007 rating of 110 out of 131.  The World Bank also ranked Cambodia 
in the lower half of the list, 134 of 181, on business climate.  The 
 
PHNOM PENH 00000071  011 OF 016 
 
 
2007 Transparency International Global Corruption Barometer ranked 
Cambodia second-worst in corruption with 72 percent of those 
surveyed reporting that they paid a bribe to receive a service in 
the previous 12 months. 
 
¶75.  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 
business. 
 
¶76.  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 has been a recent salary 
increase of 15 percent for some officials, 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. 
 
¶77.  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. 
 
¶78.  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. 
 
¶79.  After a draft national anti-corruption law was sent to the 
National Assembly but not voted on in 2003, the Cambodian government 
undertook to revise the draft with cooperation from local and 
international NGOs, and international donors.  The draft, which is 
still pending, falls short of international standards due to limited 
independence of the proposed anti-corruption body and weak 
declaration of assets provisions. 
 
¶80.  Cambodia is under increasing pressure from donors to address 
the issue of good governance in general, and corruption in 
particular.  In a draft action plan on good governance presented to 
donors in May 2000, Cambodia promised to pass anti-corruption 
legislation by late 2001.  After missing the first deadline, the 
government again promised to pass anti-corruption legislation by 
July 2003.  In the December 2004 Consultative Group (CG) meeting of 
development assistance agencies, donors established a benchmark to 
have a new anti-corruption law submitted to the National Assembly 
before the next CG meeting, which was held June, 2006.  However, 
this deadline was not met and donors have become increasingly 
frustrated with the government's failure to act.  The passage of new 
anti-corruption legislation is reportedly a high priority for the 
fourth mandate government. 
 
¶81.  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 ineffective because of its secrecy and lack of 
independence. 
 
¶82.  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.  The first 
investigation of ACU resulted in the arrest of five illegal car 
 
PHNOM PENH 00000071  012 OF 016 
 
 
importers and 39 officials; 10 mid-level officials have been removed 
from their positions.  Other investigations are underway.  However 
the ACU is considered to be ineffective because of its lack of 
independence and capacity. 
 
¶83.  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 
------------------------------- 
 
¶84.  Cambodia has signed bilateral investment agreements with 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, Burma, Egypt, Russia, the 
United Kingdom, and Ukraine are planned.  The agreements provide 
recprocal 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. 
 
¶85.  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.  In 2008, 
several bilateral working level meetings were held to advance the 
TIFA agenda. 
 
OPIC and Other Investment Insurance Programs 
-------------------------------------------- 
 
¶86.  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. 
 
¶87.  Cambodia is a member of the Multilateral Investment Guarantee 
Agency (MIGA) of the World Bank, which offers political-risk 
insurance to foreign investors. 
 
Labor 
------- 
 
¶88.  The country has an economically active population (defined as 
being ten years of age and older) of some 7.8 million people out of 
a population of 13.4 million.  According to the EIC, the labor 
participation rate was 70 percent in 2008.  While government 
statistics are somewhat higher, they do not fully capture the 
problems of unemployment and underemployment in Cambodia. 
 
¶89.  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 2004 Intercensal Population Survey (CIPS), persons 
20 years of age or younger account for 53 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. 
 
¶90.  Approximately 65 - 70 percent of the labor force is engaged in 
subsistence agriculture.  At the end of 2008, about 337,000 people, 
the majority of whom are women, were employed in the garment sector, 
 
PHNOM PENH 00000071  013 OF 016 
 
 
with 300,000 Cambodians employed in the tourism sector, and a 
further 50,000 people in construction. 
 
¶91.  The 2008-2009 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. 
 
¶92.  Overall literacy, for those aged fifteen and over, is 74 
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 
employees. 
 
¶93.  Cambodia's 1997 labor code protects the right of association 
and the rights to organize and bargain collectively.  The code 
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 temporary 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. 
 
¶94.  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 of October, 2007, approximately 250,000 workers, most from 
the garment sector, contribute to the fund through their employer. 
A second phase of the fund, to be implemented in 2010, will focus on 
health care for employees, followed by pensions in 2012. 
 
¶95.  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 attempts to build on the labor standards 
established. 
 
¶96.  For the past few years, Cambodia has enjoyed high economic 
growth and low inflation of approximately 4-6 percent, keeping 
inflation-driven wage increases in check.  However, the early part 
of 2008 saw inflation skyrocket, driven in part by high oil and food 
prices.  After peaking in May, inflation has slowly been declining 
to about 18 percent in November, year-on-year.  Experts suggest the 
increase in the cost of living insufficiently compensated by the 
recent USD 6 cost of living allowance has led to a recent shortage 
of workers willing to work in the garment industry. 
 
Foreign Trade Zones 
------------------- 
 
¶97.  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. 
 
PHNOM PENH 00000071  014 OF 016 
 
 
 
¶98.  Cambodia has yet to pass the Law on Industrial Zones which will 
define SEZs and establish the rules under which they will operate. 
The law is currently being drafted by the Council for the 
Development of Cambodia and may be submitted for approval of the 
Council of Ministers in 2009. 
 
¶99.  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 
zone. 
 
¶100.  Since issuing the sub-decree, the Cambodia Special Economic 
Zones Board (CSEZB) has approved 19 SEZs, located near the borders 
of Thailand and Vietnam, Phnom Penh, Kampot, and at Sihanoukville. 
 
Foreign Investment Statistics 
------------------------------- 
 
¶101.  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.  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.  FDI registered capital increased to 
USD 260 million in 2008. 
 
¶102.  Total FDI registered capital flows into Cambodia for the years 
1995-2008 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.) 
 
1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 
---- ---- ---- ---- ---- ---- ---- ---- ---- ---- ---- ---- ---- 
 351  294  320  135  74   81   50   30   45  383   209 473  260 
 
¶103.  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. 
 
¶104.  Total cumulative registered investment projects approved, by 
country of origin, August 1994 to December 2008 (source: CDC) 
 
Country      USD million         Pct. 
 
Malaysia        1,736            32.79 
Cambodia        1,509            28.50 
China             569            10.27 
Taiwan            400             7.56 
Thailand          206             3.89 
Singapore         194             3.67 
South Korea       165             3.12 
U.K.              130             2.46 
USA                70             1.32 
Vietnam            61             1.15 
Indonesia          54             1.02 
Australia          54             1.02 
France             40             0.76 
Japan              23             0.43 
Other              82             1.55 
Total           5293 
 
---------------------------------------- 
 
¶105.  Total cumulative registered investment capital by sector, from 
January 1998 to December 2008 (source CDC) 
 
Sector                USD million         No. of Projects 
Industry                1,482.0                699 
- Food Processing          91.5                 12 
 
PHNOM PENH 00000071  015 OF 016 
 
 
- Garments                449.4                401 
- Petroleum               203.0                  5 
- Wood Processing          98.3                 15 
- Footwear                 27.8                 21 
Agriculture               177.1                 74 
Services                  338.8                 78 
- Construction             63.6                 14 
- Telecommunications       92.5                 15 
Tourism                   434.4                 88 
Total                    2432.4 
 
¶106.  New investment projects in USD million, by country of 
origin,1998-2008(source: CDC) 
 
Country  1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 
-------- ---- ---- ---- ---- ---- ---- ---- ---- ---- ---- ---- 
Malaysia  22.6  17   1.6  28   na  3.6  7.8  10.6  2.5 19.8  1.0 
Cambodia 110    98  28  47   21 44   15    78.5 116.8 264.3 99.8 
USA      2.3 4.4 3.7 5.2 na na 2.1  2.2 4.3 6.5 12.3 
Taiwan 79 29 16 35.6 5 1 4.6 4.1 16.4 14 9.5 
Singapore 12 2.3 3.1 na 10 3.3 1.6 5.3 3.8 1 12 
China 75 36 3.9 4.2 8 14 24 38 28.3 40.4 37.9 
South Korea 4.0 na 10 2 7.6 1 4.1 16 4.5 22.0 19.5 
Hong Kong 48 22 4 0.7 1 1 na 0.3 1.5 0.6 na 
France 0.6 0.6 3 na na 1.7 0.6 0.4 na 0.3 2.3 
Thailand 53 16 17 3.1 na 3.1 2.0 15 10.0 13.8 30.6 
U.K.  0.4 1.5 6.5 1.5 0.4 0.5 1.5 1 1 1.5 1 
Canada   2.1 0.2 1 na 2.2 na 1.7 0.6 1.5 na 4.8 
Indonesia 10 0.4 3  na na na na na na na na 
Australia 1.4 0.02 0.8 na na 0.6 na 7 na 3.5 1 
Japan  2 2.1 0.2 na 1.2 na 0.7 na 1 7.5 4.6 
Other  8.3 2.8 1.3 1.7 13.6 na na na 8.1 78.5 4.1 
--------------------------------------------- ------ 
Total  430 233 103 129 69 74.3 66 379 209.7 473.7 259.9 
 
¶107.  New investment projects in USD  million, by sector, 1998-2008 
(source: CDC) 
 
Sector  1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 
------  ---- ---- ---- ---- ---- ---- ---- ---- ---- ---- ---- 
Industry 298 101 48 61 22.5 41 53.5 325 173.4 269.9 90 
- Food  8.0 2.4 27 1.5 na 1.6 1 na 22 24 4 
 Processing 
- Garments 91.6 49.5 28 17 12.6 42 19 54 41.9 45.1 49 
- Petroleum 1 1 na na na na 1 200 na na na 
- Wood  92 na na 1 1 1.3 1 na na 2.0 na 
 Processing 
- Mining 5 na na na na 2 na 30 1 149 4 
 
Agriculture 44 31.3 8.5 1 6.2 2.0 2.0 4.0 2.0 50.1 26 
 
Services 22.1 55 10 5.2 18 5.5 5 32 16.3 127.2 43 
 
- Construct 1.2 16.4 na na na na 3.0 31 6.0 5 1 
- Telecom 13.4 22 na na 2.9 10 na na na 42.2 2 
- Infrastructure 2 na na 1.5 4.1 na na na na 65 na 
 
Tourism  67 45.5 36.5 61 22 26 5.5 18 18 33.5 101 
--------------------------------------------- ------ 
Total  430 233 103 129 69 74 66 379 210 473 261 
 
¶108.  The CDC has registered approximately USD 70 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.  There are also U.S. investors in a number of 
Cambodia's garment factories. 
 
¶109.  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. 
 
¶110.  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 
 
PHNOM PENH 00000071  016 OF 016 
 
 
(Singapore), Petronas Cambodia (Malaysia), Charoeun Pokphand 
(Thailand), Siam Cement (Thailand), and Cambrew (Malaysia). 
 
¶111.  Since 2007, several well-known U.S. companies opened or 
upgraded their presence in Cambodia.  General Electric opened a 
representative office in July 2007.  In 2008, Cargill and Dupont 
established representative offices.  Otis Elevators, a division of 
United Technologies, also upgraded to a branch office, and Mircosoft 
initiated a presence through its Market Development Program. 
 
¶112.  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). 
 
¶113.  In January 2008, Acleda Bank announced it obtained permission 
to operate in Laos, and the bank has plans for further expansion 
into Vietnam and China.  Statistics on Cambodian investment overseas 
are not available, but such investments are likely minimal. 
RODLEY