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Phnom Penh, October 31, 2006 —
A new study of 10 of Cambodia’s most economically active provinces and municipalities finds that the eastern border provinces of Kampong Cham and Svay Rieng have the best business environments. The study was released at a seminar for 200 representatives from government, private enterprise, donor agencies, and the media, held in Phnom Penh recently.
The study, the 2006 Provincial Business Environment Scorecard, is based on interviews with 500 business leaders in the 10 provinces. It was a joint initiative of the International Finance Corporation’s Mekong Private Sector Development Facility (IFC-MPDF) and The Asia Foundation. Funding was provided by the Australian Agency for International Development.
According to the study, Kampong Chhnang, Kampot, Kandal, Banteay Meanchey and Battambang provinces followed the top-ranked provinces in descending order. Lowest-ranked were the capital, Phnom Penh, as well as Siem Reap and Sihanoukville. No province excels in all areas, and even top-ranked Kampong Cham scored poorly on indices related to unofficial charges, proactivity of authorities, and resolution of disputes.
Priority areas for improvement in all surveyed provinces include costs of starting a business, property rights, transparency (specifically access to information on regulations), participation in policymaking, informal charges, and crime prevention.
Speaking at the seminar, Suy Sem, Cambodia’s Minister of Industry, Mines, and Energy, thanked IFC-MPDF and The Asia Foundation for conducting the study and agreeing to continue it for two more years. “This is very valuable assistance—an annual survey that ranks provinces on the business-friendliness of their policies, regulations, and services will encourage local officials to be more responsive to the needs of entrepreneurs. It will lead to a better business environment and more investment, and ultimately will create jobs and reduce poverty,” he said.
Dorothy Berry, IFC’s Vice President for Human Resources and Administration, congratulated the Ministry of Industry, Mines, and Energy and the Ministry of Commerce for endorsing the study. “Research worldwide shows that for business environment reform to succeed, it must be implemented effectively at the subnational level. Reforms will not succeed if communication between national and local authorities is weak and if local authorities lack the resources to implement reforms,” she said.
IFC, The Asia Foundation, and other development agencies have been surveying business environments in developing countries and helping authorities simplify regulations at the provincial or municipal level. Dorothy Berry added, “This is where complex, costly, and time-consuming regulations take their toll on the businesses that must comply with them.”
As an example of a successful reform, she noted, “In Quezon City in the Philippines, faster times for obtaining business licenses and permits mean that the number of permits issued rose by about 70 percent. Local businesses also reported more satisfaction with municipal services and less corruption. The municipality also gained, with revenues rising by about 40 percent.”
Roderick Brazier, Country Representative of The Asia Foundation, stressed the important role the private sector, especially small and medium enterprises, play in reducing poverty. He said, “In some places across Asia, as many as 99 percent of nonfarm workers are employed by SMEs. Helping the small business sector grow more effectively reduces poverty by creating jobs for poor Cambodians. Conversely, obsolete or unclear regulations, cumbersome administrative procedures, bureaucratic red tape, and corruption all stifle the growth of small businesses and prolong poverty.”
Brazier added, “IFC-MPDF and The Asia Foundation hope that the scorecard results will encourage the public sector to improve policies and adopt good practices from the high-scoring provinces. We also hope that business owners and associations will use the data in the study to encourage officials to improve their performance. In our work on similar surveys in Indonesia, the Philippines, and Vietnam, we found that for the first time, publicity about the surveys encouraged a large and influential audience to pay attention to business environment issues.”
H.E.Lisa Filipetto, Australian Ambassador to Cambodia, stated, “It is our hope that the scorecard will enhance the dynamic for change at the local level, for both the public and private sectors, and strengthen the demand for a better business environment. We also hope it will improve the capabilities of provincial authorities.”
Several development agencies have indicated interest in helping provincial authorities improve economic governance and the business environment, as ways to increase economic growth and incomes for Cambodia’s poorest people.
About IFC
The International Finance Corporation, the private sector arm of the World Bank Group, is the largest multilateral provider of financing for private enterprise in developing countries. IFC finances private sector investments, mobilizes capital in international financial markets, facilitates trade, helps clients improve social and environmental sustainability, and provides technical assistance and advice to businesses and governments. From its founding in 1956 through FY06, IFC has committed more than $56 billion of its own funds for private sector investments in the developing world and mobilized an additional $25 billion in syndications for 3,531 companies in 140 developing countries. With the support of funding from donors, it has also provided more than $1 billion in technical assistance and advisory services. For more information, visit
www.ifc.org
The Mekong Private Sector Development Facility
is a multidonor funded initiative set up by IFC in Cambodia, Lao PDR, and Vietnam to reduce poverty through sustainable private sector development. Its interrelated programs seek to improve the business environment; develop the financial sector; improve managerial capacity; and increase sustainable business practices in sectors that are central to economic growth and poverty reduction – tourism, agribusiness, and garments. The facility’s donors are the Asian Development Bank, Australia, Canada, Finland, IFC, Ireland, Japan, New Zealand, the Netherlands, Norway, Sweden, Switzerland, and the United Kingdom. For more information, visit
www.mpdf.org
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The Asia Foundation
is a nonprofit, nongovernmental organization committed to the development of a peaceful, prosperous, just, and open Asia-Pacific region. It supports programs in Asia that help improve governance and law, economic reform and development, women's empowerment, and international relations. Drawing on 50 years of experience in Asia, the foundation collaborates with private and public partners to support leadership and institutional development, exchanges, and policy research.
With a network of 18 offices throughout Asia, an office in Washington, D.C., and headquarters in San Francisco, the foundation addresses these issues at the country and regional levels. In 2005, it provided more than $61 million in program support and distributed 1.1 million books and educational materials valued at $28 million throughout Asia. For more information, visit
www.asiafoundation.org.
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