US Ambassador
Says Corruption Scares Off American Firms
The
Cambodia Daily - September 20, 2013
U.S.
Ambassador William Todd on Thursday said that despite his efforts to promote
Cambodia as an attractive destination for business, major American companies
are reluctant to invest here as they still perceive the country as indelibly
corrupt.
“I
believe now is the time for big U.S. businesses to come here. And I believe
that they want to come here—but I believe that the issue about corruption is
preventing them from coming here,” Mr. Todd said ahead of a workshop on corruption
hosted by the American Cambodian Business Council (AmCham) in Phnom Penh.
Speaking
without a script because he had just been in a minor traffic accident en route
to the workshop and had left his prepared remarks in his Cadillac, Mr. Todd
said that while there are many good reasons to invest in Cambodia such as
favorable tax laws and low labor costs, the country’s reputation for graft
causes American firms to give pause.
“The
corruption issue, to be frank with you, has created what we think is a drag on
the economy. It’s basically something that’s prevented a lot of U.S. businesses
from coming in here,” he said.
“I
see probably three or four companies a week who want to do business here in
Cambodia, who either want to buy things, or sell things, or open things,” he
said, “and I’ve seen some very large business—some of America’s largest—and
they want to basically make 100-billion-dollar investments, 200-billion-dollar
investments and so on, but they get scared off.”
According
to the Cambodian Investment Board, U.S. investment in Cambodia amounted to just
$5.3 million last year, a mere 0.23 percent of all foreign investment in the
country.
Mr.
Todd said that while the creation of an Anti-Corruption Law in 2010, and
corresponding Anti-Corruption Unit (ACU), is a step in the right direction,
implementation of that legislation has been limited.
“The
government has dealt with corruption by creating the ACU,” he said. “They
basically put a lot of laws on the books…but the enforcement has not been as
robust as some of you might want,” he said.
He
added that while between 41 and 42 percent of Cambodian exports go to the U.S.,
accounting for more than 20 percent of Cambodia’s gross domestic product,
“unless the corruption issue is dealt with, making that number go much higher
is going to be real hard to do. And making it go much higher in…industries
other than textiles could be hard to do.”
Mr.
Todd concluded by urging foreign companies currently operating in Cambodia to
make sure they are compliant with existing anti-corruption laws, and expressed
hope that future dialogue between the ruling CPP and opposition CNRP would
bring more substantial reforms.
“In
my opinion, the CPP and the CNRP are going to basically make sweeping changes
in this country, and when they do that, corruption and how to deal with it is
going to be one of them,” he said.
In
August, the 2013-14 Asean Business Outlook Survey, conducted by the U.S.
Chamber of Commerce and American Chamber of Commerce in Singapore, found that
81 percent of respondents cited corruption as a drawback to investing in
Cambodia.
In
an effort to assuage potential foreign investors concerned about complying with
international anti-corruption laws, including the Foreign Corrupt Practices Act
in the U.S., several ministries last year issued lists showing the costs of
payments businesses must make for various government services, commonly called
“facilitation fees.”
Still,
corruption remains rife in part due to very few prosecutions taking place under
the Anti-Corruption Law.
The
ACU conducted just six prosecutions in 2011, compared to roughly 700 complaints
filed with the body. Last year, some 800 complaints were filed, and there were
no prosecutions.
But
while speakers at Thursday’s workshop, attended by more than 100 representatives
of American, European and local firms, focused on practical ways to avoid
becoming mired in Cambodia’s “culture of corruption,” some members of the local
business community said the government has taken substantial steps to curtail
graft.
Bretton
Sciaroni, chairman of the AmCham board and a legal adviser to the government,
said the establishment of the ACU was one such step.
“The
ACU has started prosecutions of government officials. That’s good. They are
trying to inform the bureaucracy at least through cases, prosecution, what the
new regime is all about.”
Mr.
Sciaroni said that while the anti-graft body has yet to prosecute any
businesspeople, its mere existence should make foreign companies feel more
comfortable.
“The
good blue-chip companies can find a way to do business in [Southeast Asia], and
they’ll find a way here,” he said. “At least they can see a commitment on the
part of the government, even if its not fully actualized yet.”
“If
G.E. [General Electric] can function and survive and work… any other American
company can,” said Rami Sharaf, CEO of RMA Cambodia—which has brought American
companies such as Ford, John Deere and Dairy Queen into the country.
Attendees
of the workshop also expressed concern that new anti-corruption laws might unfairly
target them.
One
man, who spoke on the condition of anonymity, said foreign companies operating
in China have been prosecuted for hiring family members of government officials
as a form of subtle bribe payment.
“The
one thing that scares me is that I’ve hired…families to work for me to fill
jobs,” he said. “And they work, they actually work, it’s not because I need
their relative to be friendly with me. I actually put them to work.”
Other
attendees were of the opinion that illicit business practices are here to stay.
“I
think it’s going to be tough to get rid of corruption, because it has become
part of the culture,” said Keo Sovan, sales and marketing manager at SCI
Company Limited, which sells medical machinery.
“Nobody
wants corruption, but the situation leaves them no choice,” said another
attendee, who declined to be named due to the sensitive nature of the subject.
“The top government officials have to set a good example for the people, like
parents set a good example for their children,” he said.
Mr.
Todd, though, recalling the start of his diplomatic mission in Cambodia more
than a year ago, joked that levels of corruption are relative.
“I
just came from Afghanistan as my prior assignment, so, you know, compared to
Afghanistan, Cambodia is perfect,” he said.
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