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World Bank: Cambodia’s Business Rankings Fall, Starting a Business Gets Costlier

In this photo taken on August 24, 2015, labourers work at a construction site on Koh Pich island in Phnom Penh, Cambodia.
In this photo taken on August 24, 2015, labourers work at a construction site on Koh Pich island in Phnom Penh, Cambodia.

Starting a business in Cambodia got more expensive in the last year according to the World Bank’s “Doing Business 2020” rankings, where the country ranked 144 out of 190 countries for the ease of doing business.

The annual rankings were released by the development bank on Thursday and was centered around the slowing of economic reforms in the East Asia and Pacific region. Cambodia which ranked 138 in last year’s rankings, fell to 144 this year amid increasing concerns over the economic prospects of the country.

Two weeks ago, the World Bank projected Cambodia’s growth rate to fall to 7 percent this year, flagging concerns over the potential loss of tariff-free access to the European Union and rising debt in the real estate and construction sectors.

Cambodia has consistently ranked high on access to credit, registering at 25 out of 190 nations. However, it performed poorly on ease of starting a business and the enforcing of contracts.

“Cambodia made starting a business more expensive by increasing the costs associated with business registration at the Ministry of Labor and Vocational Training,” the report reads, referring to the ease of starting a business metric.

The Ministry of Commerce had made a big push in the last mandate to make it easier to start a business by creating an online registration portal and allowing for certain trade documents to be created digitally.

Regionally, Cambodia fared better than Lao PDR and Myanmar, but was considerably lagging compared to its neighbors, Thailand and Vietnam.

Charlotte Nan Jiang, a regulatory specialist at the World Bank, said one of the biggest hurdles was getting construction permits, making Cambodia one of the slowest in the world.

“It takes 652 days to obtain all necessary construction permits to build a new commercial warehouse in Phnom Penh, the longest amongst 190 economies covered by the Doing Business 2020 report,” she said in an email.

She added that other factors like being the third most expensive economy to enforce a contract and the lack of judicial best practices to deal with contract disputes hit Cambodia’s ranking.

VOA Khmer could not reach Labor Ministry spokesperson Heng Sour, but government spokesperson Phay Siphan acknowledged there were some initial burden to starting a business and that the government was working to alleviate these concerns.

“Therefore, the Cambodian government has reduced all costs that are not necessary in order to increase the competitiveness through what it’s called package of reformation, removing agents such CamControl and agents along the international border-checkpoints,” he said.

Phay Siphan is referring to an easing of regulatory measures by the government following concerns that the European Union could suspend the “Everything But Arms” trade scheme, which allows the Kingdom duty- and quota-free access to the economic bloc.

The World Bank report also points out that the government had reduced the fees for obtaining a building permit.

Nget Chou, an economic researcher, said it was critical Cambodia addressed these concerns, or else it would make it hard to attract non-Chinese foreign investment.

“I think Cambodia needs to put more efforts to improve the ease of starting a business, otherwise, we will not be able to attract good [foreign direct investment] from countries besides China,” Nget Chou said.