The new Investment Law has reinforced the role of the CDC as the one-stop shop for investors. Could you tell us more about the organisation and the goals of the Council for the development of Cambodia?

In 1993 the first general elections were organized in Cambodia with the assistance of the United Nations and other countries; a government with a multi-party representation at the National Assembly was formed. Very quickly, this government realized that coordination and optimization of the inflow of capital getting into the country was needed. In this context, the government created the CDC (Council for the Development of Cambodia). This structure has two operational arms; one is the CRDB (Cambodian Rehabilitation and Development Board) which is taking care of aid mobilization and aid co-ordination, to sum up, they are in charge of Official Development Assistance (ODA). The second board being set up was the Cambodian Investment Board (CIB). The CIB is an Investment Promotion Agency (IPA), which is quite common in this region; in Thailand and in the Philippines they are called BOI, in Malaysia MIDA (Malaysian Industrial Development Authority), in Singapore EDB (Economic Development Board) and in Vietnam it is the Ministry of Planning and Investment. The purpose of all those IPAs is to facilitate the operation of foreign investors by helping them to sort out bureaucracy, red tape and other procedures and to provide them services.

In 1994, at the same time as the CDC was created, Cambodia promulgated the Law on Investment. Unlike in other countries, where such kind of law is called Foreign Investment Law, in Cambodia we called it Law on Investment to send a strong message to foreigners that we do provide national treatment to all investors. In fact, when it comes to do business in Cambodia, foreigners have the same rights as nationals; you can own and operate 100% any kind of business for instance, and which shows how liberal our investment policy is compared to other countries. The only difference in treatment between nationals and foreigners is regarding the ownership of land; according to the Cambodian constitution, ownership of land is reserved to a national person or a national entity. When we say Cambodian companies, we understand a company with at least 51% of the shares being held by a Cambodian.

Since the creation of the CDC and the adoption of the Law on Investment, the CDC through the CIB is supposed to be the one-stop-shop on matters of private investment. The fact is that since 1994 up to today, this role of one-stop-shop was not effective; during this period the investor had to come to us but also to several other bodies involved in the decision-making process such as Ministries and local or provincial authorities. Now, with the new law, the investor will come to the CDC, present its project and apply to us on the same way. The innovation lies in the role of the CDC to secure, on behalf of investors, all necessary permits, licenses and authorizations from other ministries. For example, in the case of a hotel, the CDC will have to get the building permits from the Ministry of Land Management, Urban Planning and Construction, obtain the authorization from the Ministry of Environment and acquire the authorization from the Apsara Authority in case it is a hotel in Siem Reap. This way the CDC will become a real one-stop-shop.

There is an other important point to underline, in the text according to the new law, the CDC will not anymore review or evaluate submitted applications; the law is already adopted but the implementing sub-decree still need to be adopted and signed. All this information is present on our website; so if you are anywhere in the world and you have a project, you just have to go to this Internet site and by reading that law and sub-decree you will know exactly whether your project is eligible for incentives and how many years of tax holidays you can be granted. If your project meets the requirements of the law, nobody in the CDC can reject it. Somehow, submission of an application at the CDC means automatic approval. The key words are transparency, predictability, and automatism.

Since 1998 the amount of foreign investment and registered companies through the CDC has been decreasing. Nevertheless, the year 2002 is showing an increase. Could you tell us more about the investment climate in Cambodia?

Figures may lead you to the wrong conclusions or wrong analysis. Let me elaborate on this; first, the figures that you are referring to are the figures of projects submitted to the CDC, which do not reflect the whole economic activities of the country. Why? Because people who came to the CDC are dealing with activities that are eligible for special incentives, but there is a list of activities which are not eligible for incentives such as banking activities; insurance; press; wholesale and retail; airlines; travel agencies. So when all those professional services want to operate in Cambodia, they register and ask for licenses or permits to the Ministry they depend on. To conclude, many activities that are booming in Cambodia are not reflected in the CDC figures and therefore these latter are not reflecting the reality of the investment climate in the country.

What has been the evolution of the Foreign Direct Investment in the last 5 years?

From 1994 to 1998 we had indeed a clear growth and from 1998 a decrease on FDI could be observed, due in part to the Asia financial crisis and other internal crisis. But this picture is not that correct as, even though in the first years we were having a lot of applications, the implementation rate was very low; maybe around 20% of the total pledges were effectively implemented. The adoption on December 29th 1997 of the sub-decree number 88, signed by the Prime Minister, arranged a few administrative matters and within this latter a clause state the following: "In order for the applicant to receive its license, he has to pay a deposit of 1.5 - 2 % of the planned investment, and then, when you have implemented 30% of your project, the CDC will refund this deposit". From that moment on, although the number of applications dropped, the real rate of implementation reached 90 to 95%.

Thanks to this new regulation, we also got rid of the "middleman" as there were people presenting a project and once they obtained the license, they sold it to foreign investors without us knowing anything about it. Another measure we have introduced is that once you pay this deposit and undertake no action for 6 months, the deposit is considered automatically state property. Of course, when a company has a sincere reason of delay, we do not take this amount, there is no intention of speculation. But I think it is a fair measure to ensure the seriousness of the projects.

Last but not least to understand this figures you also have to consider that since 1996, when we signed several agreements with the US and the EU which open those markets to our garments industry, there have been all of a sudden a "mushrooming" of garment factories. Later on, in 1999, garment items from Cambodia were subject to quota; not all items, only twelve, but the key ones were under quota. Cambodia became then less attractive as compared to its previous situation. We can consider that investments in the garment industry have doped these figures for previous years.

What are the main changes in terms of investment procedure and facilities with regards to 1994?

As you know, Cambodia is still relying a lot on foreign assistance and two years ago we realized there was a trend of decreasing ODA. Of course, there are always other countries in need of help like East Timor, Afghanistan or currently Iraq. The government knows that ODA will not be here forever; Cambodia has to rely on other sources and one of those is definitely FDI. The government has been then thinking how, not to attract but to be more attractive. In this point of view, it is quite a common observation worldwide that in developing countries one of the main impediments to foreign investment or business activities is the bureaucracy. That explains that the CDC bet on the predictable, automatic and transparent mechanism; this is regarding only the administrative side of the procedure but it has been strongly applauded by the private sector.

At the same time it is also true that in Cambodia production costs are high as compared to neighboring countries. So in the 1994 Law, all approved projects were subject to 9% corporate tax, while the normal corporate tax in the country was 20%. But we bear in mind that the crucial point is to provide better utilities and better public services to these companies and of course all those facilities have to be paid. In order to allow the royal government to do so, in 2003, according on the new investment law, every company will be subject to a flat 20% corporate tax rate. With the collection of that tax we will be able to repair the infrastructure and serve them better. We are trying to strike a better balance between collecting more tax, more revenue for the government action, and on the other hand provide better administrative facilitation to all businessmen.

Some of the multinationals established in Cambodia are saying that this new taxation system is discriminatory towards foreign companies. What can you comment on this statement?

The tax law does not have any discriminatory measures, but in Cambodia as in France, because the system is French, we have two systems the real system and the estimated system. The real system is the regime that is applied to companies that have a certain turnover. All other activities with a lower turnover are subject to the estimated system. The estimated system, as in France, is meant for small companies in order for them not to suffer the administrative burden, declarations, etc. You facilitate the work of those small companies and also save your own resources, by reliving the administrative capacity of our tax department. On the other hand, the big companies are subject to the real regime where they have to do properly the financial statement to the tax department with all the implied administrative tasks.

As you already mentioned, one of the main changes in the new law is the increase of fiscal pressure to some companies, which will affect Cambodia's attractiveness compared to other countries, could you comment on that fact?

I don't want anyone to misunderstand this point, when you are talking about taxation you have to be very careful. The technical terminology we are speaking about is the fiscal burden. It is true that we moved from 9% to 20%, but this 20% corporate tax rate is one of the lowest in the region and in the world. As a businessman, when I make a comparison between various fiscal regimes from various countries, I should not look at the rate of the corporate tax alone, I should look at the fiscal burden that means the corporate tax plus the rest of taxes involved. In Cambodia there are no other tax. At the end of the day we are providing supply of better services and more transparency in exchange of this tax increase.

Can you tell us what are the main projects you are currently handling?

Right now there are no significant projects. One thing I would like to bring to your attention is that in 2002, out of 35 approved projects for the whole year, 13 of them were expansion projects. Meaning that companies that already are in Cambodia are expanding their facilities, this is mainly the case of garment factories. I must tell you that I prefer the expansion of actual companies than the arrival of new ones. The new comers might collapse or go bankrupt within six months because they were not able to get the market. On the other hand, the expansion projects are for me the perfect counter-example. Some people complain about the conditions here and leave the country, I don't know why, what I can tell you is that I have 13 that are very happy. Did you know that the biggest garment factory in Cambodia is a Korean one? They started with 3,000 staff and now they have 10,000 people working. It is a basic principle; it is better to keep your client than try to get new ones.

It is indeed a good sign that you are keeping the investors that you already attracted. But as you know, the investment competition in the region is quite tough. What are according to you the competitive advantages of Cambodia?

In order to be more attractive as an investment destination, the Royal Government of Cambodia has undertaken a set of measures. First of all with the amendment of the investment law, but that was not enough. There are several reforms going on, the civil administration, the fiscal and the judiciary systems, and the armed forces that are all being reformed with one objective in mind: to create a better environment and to provide better services.

If we don't develop a basic infrastructure, we cannot attract investment. This is why, during this second mandate of the government, the Prime Minister has always said that it is the "government of roads". Although we have a limited capacity and modest financial means, we have done our best to improve the road network. The Prime Minister stated that by 2005, if he remains in power, at least the entire former road network from before the war period should have to be renovated.

How can we compare ourselves with neighboring countries if Cambodia has weak points such as poor infrastructure? Of course there are strong points. When it comes to development the Cambodian economy has several assets. The tourism industry with the entire cultural heritage and a beautiful nature including the seaside; the traditional agricultural sector with abundant land and a surplus of workforce; we also have industrial activities and a strategic location of the country in the heart of South East Asia. Presently, there is no more local market everything is regional or global. So even if the Cambodian market might not be interesting because of its size, it still is interesting to install a production plant here and export regionally or globally. I am convinced Cambodia is able to produce parts of a chain of production for exemple (automotive parts, TV sets, etc.). Then we can ship them elsewhere in Thailand or Malaysia. We can even receive all the parts of a product and assemble them here taking advantage of tariff rates, and then ship them to other markets.

With regards to the agriculture, I am trying to convince everybody in the government that Cambodia, because of its size and its stage of development, has to target a niche market, thinking in terms of high quality. For instance, Organic Food is easy in Cambodia, we are so poor that we don't have money to buy fertilizer, god bless us. I am serious, we don't have money to buy fertilizer, good, let's go for organic. We transform this disadvantage into an advantage. For everything we undertake, we have to go for a niche market and I will work like crazy for this concept. Take a look at rice production; we are between the 1st and 2nd exporters in the world, Thailand and Vietnam, if we do the same rice as them, in terms of export we cannot compete, as we don't have the economy of scale and our price per ton won't be competitive. There is always space for a new product and we have to concentrate on that.

You also have to consider that Cambodia is a young country. We have had just a few years of peace and stability and of course many structures are not in place. Once again I would like to turn this disadvantage into an advantage; this means that we are able to comply easily with rules and legal frameworks from outside (i.e. WTO regulations) as our structure is easily adaptable. This is not the case for other countries that have been developing for a few years now and have more difficulties adapting to new structures.

The man behind the structure also interests us, can you tell us more about your career path?

I was born and raised in Cambodia. I obtained my french baccalaureate at the age of 17, in 1974. In Cambodia, it was already wartime with the Khmer Rouge bombarding every day the city. That same year I went to study to France. In April 1975, when Phnom Penh collapsed and the Khmer Rouge took power, I found myself in France with no nation, no ambassador, no money, no family, nothing at all. I managed to survive and finished my studies of Economics. It was very tough but also a good learning experience. I had never made a decision before but from April 17th 1975 on, my future was in my hands and I started to become a manager; I managed my life and then I managed companies and now I manage the CDC.

I remained in France for 17 years where I worked for 5 different companies in 5 different fields. My last job was as General Manager of a French advertising company, from 1987 to 1992. Once the Berlin Wall fell in 1989, I realized that the situation in Cambodia may evolve and it was time for me to prepare myself to come back, as ever since I left Cambodia in 1974 I knew I had to come back. I never asked for French citizenship; and I have only a Cambodian passport, whenever I go to France I have to ask for a visa. In 1991, with the signing of the peace agreement in Paris, I went to my Chairman to discuss about my replacement and one year later in 1992, I arrived in Cambodia. From 1993 to 1997 I was Undersecretary of State for Tourism, and since 1997 I am the Secretary General of the CDC.

As main responsible for the investment in this country, what would be your final message to investors willing to come to Cambodia?

Investors will hopefully login your site, will look at your work and will get interested about Cambodia. People should bear in mind that if you look at Cambodia, you should consider it is within a transitional period. Ten years back I would not be able to speak with you at this moment of the day (6 P.M.) as there was no electricity. Of course there are still shortages but work is in progress. We have a lot to do yet, but what we are doing now is to lay the foundations; infrastructures are being built and human resources are being educated, nothing is obvious, but bear in mind that work is in progress.