Cambodia

RISK & COMPLIANCE REPORT

Date: November 2018

KNOWYOURCOUNTRY.COM
 Executive Summary - Cambodia

Sanctions: None

FAFT list of AML No removed from list in February 2015

Deficient Countries

US Dept of State Money Laundering Assessment

Higher Risk Areas:
Not on EU White list equivalent jurisdictions
Corruption Index (Transparency International & W.G.I.)
World Governance Indicators (Average Score)
Failed States Index (Political Issues)(Average Score)

Non - Compliance with FATF 40 Recommendations

Medium Risk Areas

Major Investment Areas:

Agriculture - products:

rice, rubber, corn, vegetables, cashews, cassava (manioc), silk

Industries:

tourism, garments, construction, rice milling, fishing, wood and wood products, rubber,
cement, gem mining, textiles

Exports - commodities:

clothing, timber, rubber, rice, fish, tobacco, footwear

Exports - partners:

US 32.7%, UK 8.4%, Germany 7.7%, Canada 7.7%, Singapore 6.6%, Vietnam 5.8%, Japan
4.7% (2012)

Imports - commodities:

petroleum products, cigarettes, gold, construction materials, machinery, motor vehicles,

pharmaceutical products

Imports - partners:

Thailand 27.2%, Vietnam 20%, China 19.5%, Singapore 7.1%, Hong Kong 5.9%, South Korea
4.3% (2012)

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Investment Restrictions:

All sectors of the economy are open to foreign investment and 100 percent foreign
ownership is permitted in most sectors. In a few sectors, foreign investment is subject to
conditions, local equity participation, or prior authorization from authorities. These include
cigarette manufacturing, movie production, rice milling, gemstone mining and processing,
publishing and printing, radio and television, wood and stone carving production, and silk
weaving.

Although the Constitution prohibits foreigners from owning land, the new law allows them
to sign 15-year leases or more.

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Contents

Section 1 - Background ............................................................................................................................. 4

Section 2 - Anti – Money Laundering / Terrorist Financing ............................................................... 5
FATF Statement re AML Strategic Deficiencies: ................................................................................ 5
Compliance with FATF Recommendations ....................................................................................... 5
Key Findings ............................................................................................Error! Bookmark not defined.
US State Department Money Laundering Report ............................................................................ 8
Reports .................................................................................................................................................... 12
Sanctions: ............................................................................................................................................... 16
Bribery & Corruption ............................................................................................................................. 17
Section 3 - Economy .............................................................................................................................. 22
Banking ................................................................................................................................................... 23
Stock Exchange .................................................................................................................................... 23
Section 4 - Investment Climate ........................................................................................................... 24
Section 5 - Government ........................................................................................................................ 42
Section 6 - Tax ......................................................................................................................................... 44
Methodology and Sources..................................................................................................................... 45

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Section 1 - Background

Most Cambodians consider themselves to be Khmers, descendants of the Angkor Empire

that extended over much of Southeast Asia and reached its zenith between the 10th and
13th centuries. Attacks by the Thai and Cham (from present-day Vietnam) weakened the
empire, ushering in a long period of decline. The king placed the country under French
protection in 1863, and it became part of French Indochina in 1887. Following Japanese
occupation in World War II, Cambodia gained full independence from France in 1953. In
April 1975, after a five-year struggle, communist Khmer Rouge forces captured Phnom Penh
and evacuated all cities and towns. The 1991 Paris Peace Accords mandated democratic
elections and a ceasefire, which was not fully respected by the Khmer Rouge. UN-sponsored
elections in 1993 helped restore some semblance of normalcy under a coalition government.
Factional fighting in 1997 ended the first coalition government, but a second round of
national elections in 1998 led to the formation of another coalition government and renewed
political stability. The remaining elements of the Khmer Rouge surrendered in early 1999.
Some of the surviving Khmer Rouge leaders have been tried or are awaiting trial for crimes
against humanity by a hybrid UN-Cambodian tribunal supported by international assistance.
Elections in July 2003 were relatively peaceful, but it took one year of negotiations between
contending political parties before a coalition government was formed. In October 2004,
King Norodom SIHANOUK abdicated the throne and his son, Prince Norodom SIHAMONI, was
selected to succeed him. Local elections were held in Cambodia in April 2007, with little of
the pre-election violence that preceded prior elections. National elections in July 2008 were
relatively peaceful, as were commune council elections in June 2012.

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Section 2 - Anti – Money Laundering / Terrorist Financing

Cambodia is no longer on the FATF List of Countries that have been identified as having
strategic AML deficiencies

FATF Statement re AML Strategic Deficiencies: 25 February 2015

The FATF welcomes Cambodia’s significant progress in improving its AML/CFT regime and
notes that Cambodia has established the legal and regulatory framework to meet its
commitments in its action plan regarding the strategic deficiencies that the FATF had
identified in June 2011. Cambodia is therefore no longer subject to the FATF’s monitoring
process under its on-going global AML/CFT compliance process. Cambodia will work with
APG as it continues to address the full range of AML/CFT issues identified in its mutual
evaluation report.

Compliance with FATF Recommendations

The last Mutual Evaluation follow-up Report relating to the implementation of anti-money
laundering and counter-terrorist financing standards in Cambodia was undertaken in 2018.
According to that Evaluation, Cambodia was deemed Compliant for 2 and Largely
Compliant for 20 of the FATF 40 Recommendations. It was deemed Highly Effective for 0 and
Substantially Effective for 1 of the Effectiveness & Technical Compliance ratings.

Key Findings from Mutual Evaluation Report

Cambodia has made significant improvements to its level of technical compliance with the
FATF Standards since its 2007 mutual evaluation, including in relation to important ‘building
block’ FATF Recommendations (criminalisation of money laundering and terrorist financing,
customer due diligence, record-keeping and suspicious transaction reporting). However,
further improvements in technical compliance are necessary to make Cambodia’s regime
effective in the context of serious money laundering (ML) threats and vulnerabilities.

Cambodia finalised its first national risk assessment (NRA) in November 2016, immediately
before the assessment team’s on-site visit, and has developed some understanding of its ML
and terrorist financing (TF) risks. The main risks faced by Cambodia include ML from
fraud/scams, corruption and bribery, drug trafficking, human trafficking, illegal logging,
wildlife crime and goods and cash smuggling. There are gaps in the scope of the NRA with
respect to risks posed by legal persons, foreign trusts, the NPO sector and dealers in precious
metals and stones. The NRA also did not consider the risks associated with illicit inflow and
outflow of funds (both through movement of cash and trade-based money laundering). In
terms of ML vulnerabilities, there are higher risks associated with the casino and real estate
sectors, as well as the banking sector. However, the ML risks associated with banking,
remittance and lawyers are higher than as assessed by Cambodia. To be more

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comprehensive, future assessments of ML/TF risks will require better data, case studies and
feedback from stakeholders, within and outside government.

Cambodia has not yet sufficiently shared the results of its 2016 NRA with the private sector or
within the public sector, nor has it implemented a comprehensive, risk-based approach to
allocating resources and implementing measures to prevent or mitigate ML/TF. However,
agencies with responsibility for AML/CFT work were generally aware of the risks identified in
the NRA. Cambodia has a good institutional basis for national co-operation and co-
ordination, but effectiveness needs to be improved, particularly at offences, including in
developing evidence or tracing proceeds related to ML/TF. The limited ability of
Cambodia’s Financial Intelligence Unit (CAFIU) to produce financial intelligence significantly
undermines use of financial intelligence by competent authorities and levels of dissemination
do not satisfy the operational needs of LEAs.

The narrow scope of STR reporting (95% received from banks) and low number of cross-
border cash declarations limit the data available to CAFIU for analysis and do not align with
the assessed ML/TF risks. The NRA rated casinos and real estate as areas of higher risk but
there are limited reports received from entities outside the banking sector.

While Cambodia’s legal system provides a broad set of powers and responsibilities for law
enforcement agencies (LEAs) to investigate and prosecute ML offences, there is no policy or
practice of ‘following the money’ to identify and investigate ML and only three ML
investigations have been conducted, none of which proceeded to prosecution. Despite
investigations of some predicate offences, no prosecutions or convictions have occurred for
ML. Sanctions available for ML are not sufficiently dissuasive.

Cambodia’s legal framework for confiscation is generally sound. However, despite some
confiscation in relation to drug trafficking and corruption, Cambodia does not demonstrate
many of the characteristics of an effective system for confiscating proceeds and
instrumentalities of crime. Confiscation is not pursued as a policy objective and it is not clear
that LEAs consider confiscation when investigating predicate offences, or that the amount
sought to be confiscated fully represents the available proceeds.

Cambodia has a good legal framework to combat TF and has allocated substantial
resources to combating terrorism and its financing. There have been no prosecutions or
convictions for TF activity in Cambodia, but this is not inconsistent with the TF risk profile.
Historically, however, Cambodia has demonstrated an ability to identify and investigate
potential and actual cases of terrorism and TF and to cooperate domestically and
internationally in the course of an investigation.

Cambodia has a reasonable legal framework to deprive terrorists, terrorist organisations and
terrorist financiers of assets and instrumentalities related to TF activities, though some
improvements are required to the legal framework and to mechanisms to disseminate
updates to United Nations sanctions lists. Cambodia can designate individuals and entities
as terrorists under United Nations Security Council Resolution (UNSCR) 1373 if the need arises.
No terrorist assets have been identified or frozen under relevant UNSCRs.

Cambodia has a large NGO/NPO sector overseen by the Ministry of Interior (MOI), for
domestic NGOs, and the Ministry of Foreign Affairs and International (MFA-IC) for foreign and

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international NGOs. No review has been conducted of the TF risks and vulnerabilities within
the NPO sector, and no outreach has been delivered to the sector on the threat of terrorist
abuse.

Cambodia does not have a legislative basis for, nor has it taken steps to implement, targeted
financial sanctions (TFS) relating to combating proliferation of weapons of mass destruction.
The authorities do not systematically disseminate UN notices on proliferation financing (PF) to
financial institutions (FIs) or designated non-financial businesses and professions (DNFBPs),
despite there being a good diplomatic and political varies within the financial sector.
Commercial banks, securities firms and insurance companies have a more advanced
understanding as compared to the specialised banks, micro-finance institutions (MFIs),
money remittance operators, money changers and financial leasing companies.

There has been limited interaction between supervisors and DNFBPs, particularly real estate
agents, small casinos, dealers in precious metals and stones, lawyers, stand-alone
accounting and auditing firms. As a result, there is low understanding of ML/TF risks and
AML/CFT obligations among these entities. Implementation of customer due diligence
(CDD) obligations, including the collection of beneficial ownership information, is low. The
CDD threshold for casinos is set at USD 10,000, which is higher than required under the FATF
standards.

AML/CFT supervision has focused on banks and deposit taking MFIs, with few supervisory
activities conducted on other FIs and no supervision of DNFBPs. This is problematic given the
inherent risk of some DNFBPs and the vulnerabilities stemming from a lack of supervision. Risk-
based AML/CFT supervision is only applied to the banking sector. No sanctions have been
imposed on REs for breaches of AML/CFT obligations, however, CAFIU has identified
deficiencies during on-site inspections and required FIs to submit remedial plans to rectify the
deficiencies.

The vast majority of legal persons in Cambodia are registered in the online business register.
Basic information held in the register is publicly available online and competent authorities
can gain timely access to shareholder information held by the Ministry of Commerce (MOC).
However, there are some concerns regarding the accuracy and currency of this information.
The best source of beneficial ownership information is the information collected by reporting
entities (REs) pursuant to their CDD obligations. However, many DNFBPs and some non-bank
FIs fail to comply with their obligations. There are no mechanisms in place to mitigate the,
admittedly low, risks posed by bearer shares, bearer share warrants, nominee shares or
nominee directors.

While trusts cannot be created under Cambodian law, there is no explicit prohibition on
foreign trusts operating in Cambodia. There are no mitigating measures in place to prevent
the misuse of foreign trusts for ML/TF purposes.

Cambodia has a reasonable legal framework for international cooperation. However, in the
absence of a general mutual legal assistance (MLA) law (currently in draft), there is no
domestic legal framework for the provision and receipt of MLA outside of the ASEAN MLA
Treaty and special laws relating to drugs, corruption and terrorism. Broadly, while Cambodia
is responsive to incoming international requests for cooperation, as permitted by limited

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capacity and resources, its use of international cooperation is limited and does not match its
ML risk profile.

Risks and General Situation

Despite its world-renowned ancient history, Cambodia’s economy, bureaucracy and

institutions are young and still developing. It was as recently as 1993 that Cambodia
completed its transition to the present day State of Cambodia. Previously, under the rule of
the Khmer Rouge, it had experienced large scale loss of life (approximately two million lives
lost to executions, disease, starvation, and forced labour) and complete destruction of
governance infrastructure. In this context Cambodia is commended for its commitment to
AML/CFT efforts and the imptovements made since its 2007 mutual evaluation.

Cambodia’s significant cash economy, systemic capacity and resource constraints of

supervisors and LEAs, geographical position and porous borders increase its vulnerabilities to
ML/TF. Cambodia is exposed to a range of ML threats, with its most significant threats
coming from fraud/scams, corruption and bribery, drug trafficking, human trafficking, illegal
logging, wildlife crime and goods and cash smuggling. The sectors most vulnerable to ML
are the casino, real estate, lawyers, remittance and banking sectors, due to their materiality
and/or lack of supervision.

While Cambodia has benefited from a period of political stability and has demonstrated
highlevel commitment to addressing AML/CFT issues, the capability, integrity and
transparency of institutions, rule of law, and the effectiveness of Cambodia’s judicial system
are hindered by capacity constraints and high levels of corruption. There are capacity
constraints in many key agencies, both in terms of insufficient staffing levels and staff
capability.

US State Department Money Laundering Report

Cambodia is categorised by the US State Department as a Country/Jurisdiction of Primary

Concern in respect of Money Laundering and Financial Crimes.

OVERVIEW

Cambodia is neither a regional nor an offshore financial center. Cambodia’s money

laundering vulnerabilities include a weak AML regime; a cash-based, largely dollarized
economy; porous borders; loose oversight of casinos; and the National Bank of Cambodia’s
limited capacity to oversee the fast-growing financial and banking industries. A weak,
deeply politicized judicial system and corruption also constrain effective enforcement.

Cambodia has a significant black market for smuggled goods, including drugs and imported
substances for local production of methamphetamine. Both legal and illicit transactions,
regardless of size, are frequently conducted outside of formal financial institutions and are
difficult to monitor. Cash proceeds from crime are readily channeled into land, housing,
luxury goods and vehicles, and other forms of property, without passing through the formal

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banking sector. Casinos along the Thailand and Vietnam borders are other potential
avenues to launder money.

Cambodia has not adopted any significant additional AML legislation since 2014. The
government should continue its work to increase the volume and quality of STRs and CTRs
from reporting entities of all types and increase the operational independence as well as
capacity of the nascent and understaffed Cambodia Financial Intelligence Unit (CAFIU). Any
steps taken by the government to increase the independence and capacity of the judiciary
would likely positively impact AML effectiveness.

VULNERABILITIES AND EXPECTED TYPOLOGIES

Information on the sources of illicit funds is not readily identifiable. A national risk assessment
(NRA) has been drafted by CAFIU to help identify sectors where illicit funds may be
generated. According to the draft NRA, requests from relevant domestic and foreign
authorities on money laundering-related fraud and scam cases have to be sent to law
enforcement authorities for investigation. The government has not finalized or implemented
the draft NRA.

Although gaming is illegal for Cambodian citizens, illegal gaming flourishes. Gaming is legal
for foreigners, and there are 57 legal casinos. The town of Poipet, along the
Cambodia/Thailand border, has 10 operating casinos. Reportedly, more than 90 percent of
the patrons are Thai. Visas are not required for Thai citizens, and Thai baht is accepted. As a
result, large amounts of money flow through Poipet’s casinos; in 2015, it was estimated
approximately U.S. $12 million of cash destined for border casinos crossed the Poipet border
every day.

KEY AML LAWS AND REGULATIONS

The Cambodian government adopted its AML/CFT law in 2007. The law allows authorities to
freeze assets relating to money laundering until courts issue final decisions. In 2014,
Cambodia revised the National Strategies on AML/CFT 2013-2017 by adding actions to build
capacity of the CAFIU and law enforcement officials, and strengthen cooperation among
relevant domestic agencies. Donors have provided capacity-building assistance.

The National Coordination Committee on Anti-Money Laundering and Combating the

Financing of Terrorism (NCC), a permanent and senior-level AML/CFT coordination
mechanism, is responsible for ensuring the effective implementation of the AML/CFT law,
including the development of national policy and a monitoring system to measure AML
efforts. A domestic working group, created by the NCC to implement recommendations
from the country’s mutual evaluation, continues to discuss both technical compliance and
effectiveness. The group is comprised of officials from relevant ministries and private sector
representatives. Once the NRA has been finalized, the Cambodian government intends to
create an action plan to strengthen the AML regime.

Cambodia has KYC and STR requirements in place. Cambodia has information sharing
agreements with 22 countries. The United States does not have an agreement or MOU with
the CAFIU on record sharing, although information sharing should be possible through
Cambodia’s Egmont Group membership.

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Cambodia is a member of the APG, a FATF-style regional body.

AML DEFICIENCIES

Corruption among some law enforcement entities, low capacity, and a weak and often
politicized judiciary are major deficiencies in the government’s ability to fight money
laundering. The law on AML/CFT excludes pawn shops from its explicit list of covered entities.
Cambodia’s non-financial sectors, including, most significantly, the gaming and real property
industries, are unregulated or under-regulated. The CAFIU records casino STRs and CTRs
separately from those from other entities. No casino located in Cambodia has ever
submitted a CTR, and the volume of filed STRs is very small, reportedly less than five out of an
estimated 2,000 STRs filed in 2017.

The NCC has been active in the past in proposing legal and policy reforms to tackle AML
deficiencies. Limited resources remain one of the big challenges for AML implementation.
CAFIU has been building its capacity through various trainings supported by the Cambodian
government and donor community. Since late 2016, donors have provided Cambodia with
technical assistance on using risk-based supervisory tools and analysis.

The AML regime lacks a clear system for sharing information with foreign governments.

ENFORCEMENT/IMPLEMENTATION ISSUES AND COMMENTS

The government established a Review Panel as part of the supplementary measures laid out
in the National Strategies on AML/CFT 2013-2017. The panel, comprised of the CAFIU and
relevant law enforcement agencies, serves as a mechanism to strengthen cooperation
among regulatory and law enforcement bodies. CAFIU, when requested, has generally
cooperated with U.S. law enforcement in the past.

Information on money laundering convictions is not publicly available.

EU White list of Equivalent Jurisdictions

Cambodia is not currently on the EU White list of Equivalent Jurisdictions

World Governance indicators

To view historic Governance Indicators Ctrl + Click here and then select country

Failed States Index

To view Failed States Index Ctrl + Click here

Offshore Financial Centre

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Cambodia is not considered an Offshore Financial Centre

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 Reports

US State Dept Narcotics Report 2017:

Cambodia faces a significant and growing problem with narcotics consumption and
trafficking, and production. The manufacture, trafficking, and use of illegal drugs within
Cambodia, particularly of methamphetamine and other amphetamine-type stimulants
(ATS), escalated in 2016, cutting across all socio-economic lines.

Transnational criminal organizations from Asia and Africa target Cambodia as a

transshipment point and final destination for illegal drugs. Large quantities of heroin and
methamphetamine from Burma, Africa-sourced crystal methamphetamine, and South
America-sourced cocaine are smuggled into the country for local consumption and for
transshipment to Thailand, Australia, and China.

The National Authority for Combating Drugs (NACD) reported in 2016 that ATS was the
most prevalent illicit drug within Cambodia. Methamphetamine pills, known locally as
“yama,” are the most widely available form of ATS, though crystal methamphetamine is
becoming more available, particularly in Phnom Penh. Cocaine trafficking into Cambodia
for limited local consumption and further transshipment has also increased. Though there is
some consumption of heroin, the majority entering Cambodia is destined for other
regional markets. Cannabis is widely used, though eradication efforts in 2016 had some
modest impact in reducing its availability. Cambodia is one of three countries in the region
known to process safrole oil, a precursor chemical for MDMA (ecstasy). Production may
be declining due to deforestation.

In 2015, the most recent year for which data is available, NACD reported seizing 96.5
kilograms (kg) of illicit drugs and opening 2,356 cases. Cambodian law enforcement
arrested 5,032 individuals on drug charges, including 127 foreigners. NACD reported seizing
66.6 kg of crystal methamphetamine, 20.1 kg of methamphetamine tablets, 2.46 kg of
heroin, trace amounts of cocaine and MDMA, 1.5 metric tons of marijuana, and numerous
assets. Although NACD did not provide comparable figures for the first half of 2016, media
reports indicate that Cambodian authorities seized approximately 10.4 kg of crystal
methamphetamine, 110,750 methamphetamine tablets, 2.8kg of heroin, and 4 kg of
cocaine during this period, and eradicated more than 44,692 marijuana plants in March,
more than in 2013 and 2014 combined. It remains unclear whether these figures indicate an
increase in drug activity or improved reporting of them.

Cambodia’s cooperation with the U.S. Drug Enforcement Administration (DEA) has steadily
improved. The impact of U.S.-provided law enforcement training, coupled with a more
efficient Cambodian Anti-Drugs Department (CADD), led to notable successes against
drug trafficking organizations by Cambodian authorities in 2016. The NACD and CADD
cooperated closely with DEA, regional counterparts such as Australia, and the UN Office on
Drugs and Crime. In August 2016, acting on information provided by DEA, CADD seized
approximately five kilograms of cocaine at the Phnom Penh International Airport and
arrested one Nigerian and one Romanian national. Cambodia has no bilateral extradition
treaty with the United States. Although Cambodia does not have a bilateral mutual legal
assistance treaty with the United States, it has acceded to relevant multilateral conventions

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that enable such cooperation.

US State Dept Trafficking in Persons Report 2016 (introduction):

Cambodia is classified a Tier 2 country - A country whose governments does not fully
comply with the Trafficking Victims Protection Act’s minimum standards, but are making
significant efforts to bring themselves into compliance with those standards

Cambodia is a source, transit, and destination country for men, women, and children
subjected to forced labor and sex trafficking. Cambodian adults and children migrate to
other countries within the region and increasingly to the Middle East for work; many are
subjected to forced labor on fishing vessels, in agriculture, in construction, in factories, and in
domestic servitude—often through debt bondage—or to sex trafficking. Migrants using
irregular migration channels, often with the assistance of unlicensed brokers, were at an
increased risk of trafficking, but those using licensed recruiting agents also became victims of
forced labor or sex trafficking. Children from impoverished families are vulnerable to forced
labor, often with the complicity of their families, including in domestic servitude and forced
begging or street vending in Thailand and Vietnam. Significant numbers of male
Cambodians continued to be recruited in Thailand for work on fishing boats and subjected
to forced labor on Thai-owned vessels in international waters. Cambodian victims escaping
this form of exploitation have been identified in Malaysia, Indonesia, Mauritius, Fiji, Senegal,
South Africa, and Papua New Guinea. Cambodian men reported severe abuses by Thai
captains, deceptive recruitment, underpaid wages, and being forced to remain aboard
vessels for years. NGOs report significant numbers of women from rural areas are recruited
under false pretenses to travel to China to enter into marriages with Chinese men; some are
subjected to forced factory labor or forced prostitution.

All of Cambodia’s provinces are sources for human trafficking. Sex trafficking is largely
clandestine; Cambodian and ethnic Vietnamese women and girls move from rural areas to
cities and tourist destinations, where they are subjected to sex trafficking in brothels and,
more frequently, “indirect” sex establishments such as beer gardens, massage parlors, salons,
karaoke bars, and non-commercial sites. An NGO report released in 2013 examined the
prevalence of children among individuals in commercial sex establishments in three
Cambodian cities and found that children comprised 8.2 percent of this population. The
study concluded that the 2013 finding represented a significant decline in this form of child
sex trafficking compared to earlier reports by different entities published in 1997 and 2000.
The same NGO reported that a March 2015 assessment found that the prevalence of
children among this population declined further to 2.2 percent; the NGO had not yet
formally published these results at the close of the reporting period. Cambodian men form
the largest source of demand for children exploited in prostitution; however, men from other
Asian countries, the United States, Australia, South Africa, and Europe travel to Cambodia to
engage in child sex tourism. Vietnamese women and children, many of whom are victims of
debt bondage, travel to Cambodia and are subjected to sex trafficking. NGOs report
criminal gangs transport some Vietnamese victims through Cambodia before they are
exploited in Thailand and Malaysia. Traffickers in Cambodia are most commonly family or
community members or small networks of independent brokers. Trafficking-related corruption
remained a significant concern. Corrupt officials in Cambodia, Thailand, and Malaysia

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cooperate with labor brokers to facilitate the transport of victims between countries. Local
observers report corrupt officials often thwart progress in cases where the perpetrators are
believed to have political, criminal, or economic ties to government officials.

The Government of Cambodia does not fully meet the minimum standards for the
elimination of trafficking; however, it is making significant efforts to do so. The government
finalized national guidelines for the identification and referral of victims, and local authorities
identified 589 victims, an increase from 326 in the previous year. The government lacked
comprehensive data on law enforcement efforts, but information collected from various
sources indicates progress on prosecutions and convictions, particularly for labor trafficking
offenses. The government began implementing the national action plan launched during
the previous reporting period and allocated $500,000 to the interagency committee that
leads Cambodia’s anti-trafficking efforts. However, the government failed to investigate,
prosecute, or convict any complicit officials. The government did not issue formal guidance
allowing the use of undercover investigation techniques in trafficking investigations, and the
lack of explicit authority continued to impede officials’ ability to fully hold sex traffickers
accountable.

US State Dept Terrorism Report

Overview: Cambodia’s political leadership has demonstrated a strong commitment to taking

legal action against terrorists and, since the passage in 2007 of separate laws on terrorism
and terrorist financing, the Government of Cambodia has remained committed to
strengthening its counterterrorism capability through training and international cooperation.

Legislation and Law Enforcement: In September, the Cambodian National Counterterrorism

Committee (NCTC) took delivery of an Emergency Communication Vehicle system, which
strengthens response capabilities by enabling communications in the event of failed power
and telecommunications systems. Cambodia continued to process travellers on entry and
departure at two international airports and three land border sites with the U.S.-provided
Personal Identification Secure Comparison and Evaluation System (PISCES).

Regional and International Cooperation: In June, Cambodia became the fourth ASEAN
member state to ratify the ASEAN Convention on Counterterrorism. In July, Cambodia hosted
a large-scale multinational peacekeeping exercise as part of the U.S.-UN 2010 Global Peace
Operations Initiative. In September, the NCTC hosted the Pacific Area Sector Working Group
with representatives from the partner nations of ASEAN. The workshop provided a forum for
increasing cooperation on counterterrorism, disaster management, and information sharing
in a multilateral, interagency environment.

In July, Cambodian authorities arrested two Thai nationals and returned them to Thailand,
where they faced criminal charges for their alleged role in detonating a grenade outside the
headquarters office of a political party. Cambodian officials pointed to the arrests and
repatriation, which took place despite then-fractious ties between Cambodia and Thailand,
as an indicator of Cambodia’s commitment to cross-border cooperation on terrorism.

Countering Terrorist Finance: While the Cambodian government made some progress in
strengthening its counterterrorist finance regime, it is subject to prima facie review by the
Financial Action Task Force’s International Cooperation Review Group for apparent

14
deficiencies in its anti-money laundering and counterterrorist finance regime. The Financial
Intelligence Unit, which operates within the framework of the National Bank of Cambodia,
conducted on-site examinations of banks and financial institutions to gauge their
implementation of measures designed to counter terrorist financing and money laundering.

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 Sanctions:

None applicable

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 Bribery & Corruption

Index Rating (100-Good / 0-

Bad)

Transparency International Corruption Index 21

World Governance Indicator – Control of Corruption 8

Corruption is rampant in Cambodia. Companies should expect to deal with extensive red
tape to obtain the proper licenses and business permits. The judiciary is understaffed, lacks
qualified resources and receives insufficient financing, leading to widespread corruption and
deterring foreign investment. Cambodia's Anti-Corruption Law is in line with international
standards but is poorly enforced and public officials continue to engage in corrupt practices
with impunity. Corrupt acts are covered in the Criminal Code, which criminalizes corruption in
the form of active and passive bribery, abuse of office for private gain and extortion. It also
criminalizes accepting bribes in the form of donations or promises. There is no set limit on the
value of gifts, but they are forbidden if given with a corrupt intent. Facilitation payments are
prohibited in Cambodia. Nonetheless, businesses report that both gifts and facilitation
payments are extremely prevalent. Information provided by GAN Integrity.

US State Department

The Anti-Corruption Law was adopted in 2010 to combat corruption through education,
prevention, and more effective enforcement. Under this law, all civil servants are obligated
to declare their financial assets to the government every two years. The third round of asset
and debt declaration took place during the month of January 2014. The Anti-Corruption Unit,
which was formed in 2010, has launched several high-profile prosecutions against public
officials, including members of the police and judiciary.

Cambodia ratified the UN Convention against Corruption in 2007 and endorsed the Action
Plan of the Asian Development Bank/Organization for Economic Co-operation and
Development (OECD) Anti-Corruption Initiative for Asia and the Pacific in 2003. Cambodia is
not a party to the OECD Convention on Combating Bribery.

Business people, both local and foreign, have identified corruption, particularly within the
judiciary, customs service, and tax authorities, as the single greatest 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. The average
base salary for all civil servants is about $105 per month. Although salaries have increased by
20 percent annually over the last few years, these wages remain 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 facilitation fees to expedite any business transaction. Even though the
Cambodian government has published the official fees of public services since early 2013,

17
the practice of paying additional fees remains common. Furthermore, the process for
awarding government contracts is not transparent and is susceptible to corruption.

Transparency International - September 2014 - Transparency International

Report: Corruption and Cambodia’s Governance System

Extract: Key Weaknesses of the National Integrity System

The Judiciary and law enforcement agencies are the two weakest pillars. This finding is
supported by Transparency International’s Global Corruption Barometer 2013, which
showed the Judiciary and Police to be the institutions to which bribes are most commonly
paid. In comparison to other institutions, the legal framework regulating the law
enforcement agencies is weak. Key laws that apply to both institutions including the Law
on the Organisation and Functioning of the Courts, and, the Law on the Status of Judges
and Prosecutors have just been passed. Yet their content has come under strong protest
from relevant stakeholders, especially civil society, on the grounds that they fail to
ensure real independence of the Judiciary. Moreover, the salaries for judicial and law
enforcement officials are not considered adequate to ensure a middle class living
standard. This contributes to the reliance on supplementary income which may constitute
conflict of interest and result in corruption. Both the Judiciary and law enforcement
agencies are highly politicised, restricting the professionalism and objectivity of their
activities.

Read Full Report

Corruption and Government Transparency - Report by Global Security

Political Climate

The Kingdom of Cambodia is a constitutional monarchy. The Cambodian People's Party

(CPP) is the current governing party with Hun Sen as the country's Prime Minister. The CPP
won by a landslide in both the 2007 and 2008 elections, despite some irregularities being
reported. Corruption within the government is pervasive, as reported by the US Department
of State 2012, and government officials engage in corrupt practices with impunity.

Cambodia is a large recipient of international aid due to its high levels of poverty and
instability. Nevertheless, according to a 2013 article by Voice of America, foreign financial
aid has further encouraged official corruption. This is supported by U4 Anti-Corruption
Research Centre 2009 report, which notes that the Cambodian government has been
accused of siphoning off financial aid through ministries and government offices. The World
Bank suspended USD 64 million in loans, after finding evidence of corruption and fraud in 43
contracts in 2006, and asked Cambodia to repay USD 7 million in aid money. In 2007, the
World Bank resumed lending for Cambodian development projects after a good
governance framework had been adopted.

Although the Cambodian government has adopted the Anti-Corruption Action Plan for Asia
and the Pacific in 2003, it is of little practical use because no anti-corruption laws had been

18
implemented before that. According to a March 2010 article by Reuters, despite calls from
the United Nations and civil society groups to postpone the vote to allow adequate time for
the general public to be consulted, the Parliament finally passed a long-awaited,
controversial anti-graft law in 2010. Several observers have expressed concern about the
new law as it leaves room for corruption, amongst other things, by providing no or little
protection to whistleblowers, nor are government officials and their families required to
declare their assets. So far, the Cambodian government has only shown a minimum amount
of commitment to the anti-corruption agenda. Despite of all these concerns, 72% of
Cambodians perceive that the government’s effort in the fight against corruption are
‘effective’, while 15% of Cambodians perceive it as 'ineffective', as illustrated in Transparency
International's Global Corruption Barometer 2010/2011.

Business and Corruption

In the World Economic Forum Global Competitiveness Report 2012-2013 corruption is

identified as the most problematic factor for doing business in Cambodia. A June 2010 news
article by IRIN reports that Cambodia loses around USD 500 million to corruption each year,
signifying pervasive and large-scale corruption. According to the Bertelsmann Foundation
2012, Cambodia's informal economy activities account for 80% of GDP and nearly 90% of
overall employment. This phenomenon facilitates corruption as many business transactions
are made in cash. The use of bank transactions may not eradicate corruption completely;
however, the paper/electronic trails generated through such transactions create
deterrence. The Investment Climate Statement 2013 also notes that facilitation payments
often occur to facilitate and expedite business transactions in Cambodia. The same report
also suggests that a law addressing secured transactions was promulgated in May 2007.
Normally, bribes are paid to secure efficiency of services. In Cambodia, however, there does
not seem to be any correlation between the size of the bribe and the speed of the
administrative procedure. According to Global Integrity 2008, there is no regulation
governing gifts and hospitality given to civil servants.

According to the Asian Intelligence 2013 Report on Asian business and politics, the survey has
shown that corruption is heavily influencing the business environment in Cambodia. This is
further corroborated by a finding by the IFC & the Asia Foundation Provincial Business
Environment Scorecard in Cambodia 2009, which reports that around 72% of the surveyed
companies in Phnom Penh view that connections are important for winning procurement
contracts, while a little more than 41% of companies in Phnom Penh consider corruption as a
'major' or 'severe' obstacle to business operations. Furthermore, business executives surveyed
by the World Economic Forum Global Competitiveness Report 2012-2013 report that public
funds are sometimes diverted to companies, individuals or groups due to corruption.

According to the Bertelsmann Foundation 2012, the Cambodian government has privatised
several state-owned enterprises since the late 1980s. Some important sectors such as
electricity generation and transmission remain under the control of state-owned enterprises.
Other sectors such as water and telecommunications are partly privatised, providing some
level of competition between state-owned enterprises and partly privatised enterprises.
Nevertheless, Global Integrity 2008 reports that the process of privatisation is not transparent,
and there is no regulation either addressing conflict of interests for government officials
involved in privatisation or requiring the government to publicly announce the results of
privatisation decisions. According to Global Witness 2009 and Freedom House 2010, oil
exploration licences were granted through an opaque channel and petroleum contracts

19
are regularly drafted on an ad hoc basis, undermining consistency and providing
opportunities for kickbacks. Furthermore, Freedom House 2010 notes that the discovery of oil
and gas in Cambodia will be a fertile ground for the occurrence of high-level corruption in
the short and medium term. For these reasons, companies are recommended to use a
specialised public procurement due diligence tool in order to mitigate corruption risks related
to public procurement in Cambodia. In addition, companies planning to invest in or are
already doing business in Cambodia are highly recommended to implement integrity
systems and to conduct extensive due diligence when contracting agents to facilitate
business transactions in the country.

Regulatory Environment

According to the World Bank & IFC Doing Business 2013, Cambodia's regulatory environment
is both cumbersome and time-consuming for businesses. Starting a company requires 9
procedures and can take up to 85 days, which is 49 days longer than the average of the
Asia-Pacific region. The cost is around 110% of per capita income, whereas the average cost
for Asia-Pacific countries is around 23% of per capita income. According to the World
Economic Forum Global Competitiveness Report 2012-2013, business executives consider
government regulations in Cambodia are burdensome. Companies should be aware that
they have to deal with extensive red tape when obtaining licences and permits, especially
construction related permits. Furthermore, demand for and supply of bribes are
commonplace in this process, as indicated by the nearly 92% of surveyed companies who
expect to give gifts in order to receive a construction permit. The same survey also reports
that 78% of companies surveyed express that a typical firm reports less than 100% of sales for
tax purposes, and nearly 33% of companies surveyed identify competition from the informal
sector as a major constraint in doing business in Cambodia. According to Bertelsmann
Foundation 2012, the informal economy dominates the private sector, which makes up 80%
of Cambodia's GDP and accounts for nearly 90% of overall employment. The same source
states that there are only about 7,000 registered enterprises and that the business registration
process has been inefficient and plagued with corruption.

The revised Land Law, passed in 2001, provides the legal basis for real property security and a
system for recording titles and ownership. However, the land title system does not function in
practice, and most 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 ownership. Although the Constitution prohibits
foreigners from owning land, the new law allows them to sign 15-year leases or more. There
are examples of foreign companies being granted land concessions that run for 70 years, but
these are illegal. Foreigners may also construct buildings and make improvements on the
land that they lease.

U4 Anti-Corruption Research Centre 2009 states that Cambodian courts are often
understaffed, and judges are perceived to be either inexperienced or incompetent - only 1
in 6 judges have a law degree and positions within the judiciary are often bought. According
to the US Department of State 2013, numerous cases of inconsistent rulings and outright
corruption in commercial disputes have been reported. For that reason, most of the
commercial disputes are currently resolved by negotiations facilitated by the Ministry of
Commerce, the Cambodian Chamber of Commerce, and other concerned institutions. In
2010, the government established the National Arbitration Centre, Cambodia’s first
alternative dispute resolution mechanism, to enable companies to resolve commercial

20
disputes more quickly and inexpensively than through the court system. However, official
operation of the centre was delayed until early 2012. Cambodia is also a member of the
International Centre for the Settlement of Investment Disputes (ICSID) and has ratified the
New York Convention 1958. Access the Lexadin World Law Guide for a collection of
legislation in Cambodia.

21
Section 3 - Economy

Cambodia has experienced strong economic growth over the last decade; GDP grew at an
average annual rate of over 8% between 2000 and 2010 and at least 7% since 2011. The
tourism, garment, construction and real estate, and agriculture sectors accounted for the
bulk of growth. Around 600,000 people, the majority of whom are women, are employed in
the garment and footwear sector. An additional 500,000 Cambodians are employed in the
tourism sector, and a further 50,000 people in construction. Tourism has continued to grow
rapidly with foreign arrivals exceeding 2 million per year since 2007 and reaching around 4.5
million visitors in 2014. Mining also is attracting some investor interest and the government has
touted opportunities for mining bauxite, gold, iron and gems.

Cambodia remains one of the poorest countries in Asia and long-term economic
development remains a daunting challenge, inhibited by endemic corruption, limited
human resources, high income inequality, and poor job prospects. As of 2012, approximately
2.66 million people live on less than $1.20 per day, and 37% of Cambodian children under the
age of 5 suffer from chronic malnutrition. More than 50% of the population is less than 25
years old. The population lacks education and productive skills, particularly in the
impoverished countryside, which also lacks basic infrastructure.

The Cambodian Government has been working with bilateral and multilateral donors,
including the Asian Development Bank, the World Bank and IMF, to address the country's
many pressing needs; more than 30% of the government budget comes from donor
assistance. A major economic challenge for Cambodia over the next decade will be
fashioning an economic environment in which the private sector can create enough jobs to
handle Cambodia's demographic imbalance.

Agriculture - products:

rice, rubber, corn, vegetables, cashews, cassava (manioc, tapioca), silk

Industries:

tourism, garments, construction, rice milling, fishing, wood and wood products, rubber,
cement, gem mining, textiles

Exports - commodities:

clothing, timber, rubber, rice, fish, tobacco, footwear

Exports - partners:

US 23.1%, UK 8.8%, Germany 8.2%, Japan 7.4%, Canada 6.7%, China 5.1%, Vietnam 5%,
Thailand 4.9%, Netherlands 4.1% (2015)

Imports - commodities:

petroleum products, cigarettes, gold, construction materials, machinery, motor vehicles,

pharmaceutical products

Imports - partners:

Thailand 28.7%, China 22.2%, Vietnam 16.4%, Hong Kong 6.1%, Singapore 5.7% (2015)

22
 Banking

Cambodia‘s banking sector is relatively small but is rapidly expanding, with 31

commercial banks, 6 specialized banks and 20 licensed Microfinance Institutions (MFIs). The
banking sector has shown significant improvement, but requires continued progress to gain
international confidence. With increased political stability in Cambodia after decades of
war and instability, bank deposits rose on average by approximately 41.6% per year from
2004 to 2007. In 2010, deposits rose roughly 32% to US$3.4. Loans in 2009 increased only 10%,
coupled with declining banking industry profits.

Stock Exchange

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. However no bonds have been issued since 2007 and
Prime Minister Hun Sen said 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. In partnership with the Korean Stock Exchange, Cambodia is
planning to establish a stock market in the near future.

23
Section 4 - Investment Climate

Executive Summary

Cambodia has experienced rapid economic growth over the last decade. Cambodia’s
gross domestic product (GDP) grew at an average annual rate of nearly eight percent
during the past fifteen years. The tourism, garment, construction and real estate, and
agriculture sectors accounted for the bulk of growth. The percentage of the population living
in poverty also decreased to approximately 17.7 percent in 2012, the latest figures available.
GDP per capita increased to an estimated USD 1,228 in 2015.

Cambodia has an open and liberal foreign investment regime with a relatively pro-investor
legal and policy framework. Investment incentives available to foreign investors include 100
percent foreign ownership of companies, corporate tax holidays of up to eight years, a 20
percent corporate tax rate after the incentive period ends, duty-free import of capital
goods, and no restrictions on capital repatriation.

Historically, these incentives have not been able to attract significant U.S. capital due to
various factors including pervasive corruption, a limited supply of skilled labor, inadequate
infrastructure (including high energy costs), and a lack of transparency in government
approval processes. The political impasse and labor unrest that followed the 2013 national
elections were additional deterrents to investment. Despite these challenges, the Phnom
Penh Special Economic Zone has attracted more than USD 100 million in investments from
several large American companies, including Coca Cola, Tiffany & Co., and American
Licorice.

Following the 2013 national elections, the government announced a variety of economic
and business reforms. In 2015, the government also issued an Industrial Development Plan
identifying key challenges to economic growth in Cambodia.

According to International Monetary Fund (IMF) data, the total stock of foreign direct
investment (FDI) in Cambodia in 2014, the most recent year available, jumped to USD 41
billion, largely due to a USD 38.7 billion investment from Thailand in 2014. Annual foreign
direct investment inflow based on fixed assets decreased to USD 785 million in 2015.

Table 1

Index or
Measure Year Rank Website Address

TI Corruption
2015 150/168 www.transparency.org/country/#KHM
Perceptions index

World Bank’s Doing

Business Report
2016 127 of 189 doingbusiness.org/rankings
“Ease of Doing
Business”

Global Innovation globalinnovationindex.org/content/page/data-

2015 91 of 141
Index analysis

24
U.S. FDI in partner
country ($M USD, 2015 85 http://www.cambodiainvestment.gov.kh/
stock positions)

World Bank GNI per

2014 1,020 USD data.worldbank.org/indicator/NY.GNP.PCAP.CD
capita

Millennium Challenge Corporation Country Scorecard

The Millennium Challenge Corporation, a U.S. Government entity charged with delivering
development grants to countries that have demonstrated a commitment to reform,
produced scorecards for countries with a per capita gross national income (GNI) of USD
4,125 or less. A list of countries/economies with MCC scorecards and links to those scorecards
is available here: http://www.mcc.gov/pages/selection/scorecards. Details on each of the
MCC’s indicators and a guide to reading the scorecards are available here:
http://www.mcc.gov/pages/docs/doc/report-guide-to-the-indicators-and-the-selection-
process-fy-2015.

1. Openness To, and Restrictions Upon, Foreign Investment

Attitude toward Foreign Direct Investment

Cambodia began the transformation from a command to a free market economy in the
late 1980s. It is now integrating into the regional and world trading framework. Cambodia
joined ASEAN in 1999 and served as its chair in 2012. In 2001, the country joined the World
Customs Organization, and in September 2004, it became one of the first Lesser Developed
Countries to become a member of the World Trade Organization (WTO).

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 the government
permits 100 percent foreign ownership of companies in most sectors. In a few sectors, such as
cigarette manufacturing, movie production, rice milling, gemstone mining and processing,
publishing and printing, radio and television, wood and stone carving production, and silk
weaving, foreign investment is subject to local equity participation or prior authorization from
authorities. There is little or no discrimination against foreign investors either at the time of
initial investment or after investment. Some foreign businesses, however, have reported that
they are at a disadvantage vis-a-vis Cambodian or other foreign rivals that engage in acts of
corruption or tax evasion or take advantage of Cambodia’s poor enforcement of laws and
regulations. The Cambodian Bar Council has periodically taken actions to restrict or impede
the work of foreign lawyers or foreign law firms. More information about investment and
investment incentives in Cambodia may be found on the Council for the Development of
Cambodia’s website via the following link: www.cambodiainvestment.gov.kh.

Other Investment Policy Reviews

In compliance with WTO requirements, Cambodia conducted its first review of trade policies
and practices in November 2011. The next review will be conducted in 2017. Cambodia’s full
trade policy review report can be found at:
http://www.wto.org/english/tratop_e/tpr_e/tp353_e.htm.

In response to the trade policy review recommendations, Cambodia has completed the
following reforms:

25
  Elimination of the Certificate of Origin requirement for exports to countries where a
certificate is not required;

 Implementation of online business registration;

 Adoption of a competitive hiring process for Ministry of Commerce staff;

 Implementation of risk evaluation measures for the Cambodia Import-Export

Inspection and Fraud Repression Directorate General (CamControl) and creation of
a CamControl risk management unit;

 Enactment of the Law on Public Procurement;

 Enactment of three judicial system laws: the Law on Court Structures, the Law on the
Duties and Discipline of Judges and Prosecutors, and the Law on the Organization
and Functioning of the Supreme Council of Magistracy;

 Creation of the Commercial Court as a specialized Court of First Instance;

 The creation of a credit bureau;

 Establishment of a Telecom Regulator of Cambodia (TRC); in 2012, the Ministry of

Posts and Telecommunication transferred its regulatory role to the TRC;

 Enactment of the Law on Telecommunications in December 2015; and

 Enactment of the Law on Animal Health and Production in February 2016.

 Ongoing or planned reforms include the following:

 Amendment to the Law on Standards;

 Enacting a competition law;

 Enacting a Law on Special Economic Zones;

 Enacting a Law on Food Safety; and

 Enacting a Law on E-Commerce.

Laws/Regulations on Foreign Direct Investment

Although the Cambodian Constitution calls for an independent judiciary, foreign investors
are generally reluctant to use the Cambodian judicial system to resolve commercial disputes
because the courts are perceived as unreliable and susceptible to political influence or
bribery. Although the Cambodian government enacted the Law on Court Structure in July
2014 in an effort to increase the judiciary’s professionalism and discourage corruption and
political influence, corruption remains endemic in the judicial system.

Cambodia’s 1994 Law on Investment created an investment licensing scheme to regulate

the approval process for foreign direct investment and provide incentives to potential
investors. In March 2003, the government simplified the licensing scheme and increased
transparency and predictability by enacting the Law on the Amendment to the Law on
Investment (Amended Law on Investment). The licensing scheme for investments of less than
USD 2 million was clarified in February 2005 in a sub-decree on the Establishment of the

26
Subcommittee on Investment in the Provinces-Municipalities of the Kingdom of Cambodia.
Sub-decree No. 111 on the Implementation of the Law on the Amendment to the Law on
Investment, issued in September 2005, lays out detailed procedures for registering a Qualified
Investment Project (QIP), which is entitled to certain taxation incentives, with the Council for
the Development of Cambodia and provincial/municipal investment subcommittees.

The website of the Council for the Development of Cambodia,

www.cambodiainvestment.gov.kh, provides a list of laws, rules, procedures and regulations
which could be useful for foreign investors.

Business Registration

A. All businesses are required to register with the Ministry of Commerce (MoC) and the
General Department of Taxation (GDT). In January 2016, the Ministry of Commerce launched
an online business registration portal that allows all existing and new businesses to register
their companies at: http://www.businessregistration.moc.gov.kh. Information about the
online business registration process is available on the website of the MoC at
www.moc.gov.kh/en-us/company-registration. The link also provides sources of information
for various types of business registration documents. New business registration takes about
two weeks. Depending on the types of business activities, new businesses are also required to
register with other relevant ministries. For example, travel agencies must register at the
Ministry of Tourism and private universities must register with the Ministry of Education, Youth
and Sport, in addition to registering with the MoC and the GDT. Foreign companies may use
the online registration system. However, difficulties in completing the registration, such as
technical or language issues, have led some foreign and domestic companies to seek
professional assistance to register or re-register.

B. The Council for the Development of Cambodia promotes and approves investments in
Cambodia and provides investment incentives to companies with QIPs. Criteria used to
evaluate the eligibility of QIPs include the amount of registered investment capital and
activities of the business. Additional information about criteria to qualify for QIPs can be
found at http://www.cambodiainvestment.gov.kh/investment-scheme/investment-
incentives.html.

C. The “SME Development Framework” developed by the SME Sub-Committee of the Private
Sector Steering Committee classifies Small and Medium Enterprises (SMEs) according to the
number of employees and the value of their assets. The calculation of employees is based on
the equivalent of full-time employees. The classification levels of Micro, Small, and Medium
Size Enterprises are listed in the below chart:

Government Definition
Classification
Employees Assets

Micro Fewer than 10 employees Less than $50,000

Small 11 – 50 employees $50,000 - $250,000

Medium 51 – 100 employees $250,000 - $500,000

Large Over 100 employees Over $500,000

27
Industrial Promotion

The government has identified the agricultural sector and export-oriented investments as
priority sectors. In an effort to promote and attract investment in these sectors, the
government offers incentive programs including reductions or exemptions on import taxes for
materials.

Limits on Foreign Control and Right to Private Ownership and Establishment

There are few limitations on foreign control in Cambodia. Foreign investors may own 100
percent of their investment projects except in the sectors of cigarette manufacturing, rice
milling, gemstone mining and processing, publishing and printing, radio and television, wood
and stone carving production, and silk weaving. According to Cambodia’s Amended Law
on Investment and related sub-decrees, there are no limitations based on shareholder
nationality or discrimination against foreign investors except in relation to investments in real
property or state-owned enterprises. The Law on Investment and the Amended Law on
Investment state that the majority interest in land, however, must be held by one or more
Cambodian citizens. Pursuant to the Law on Public Enterprise, the Cambodian government
must directly or indirectly hold more than 51 percent of the capital or the right to vote in
state-owned enterprises. The Cambodian Bar has periodically taken actions to restrict or
impede the work of foreign lawyers or foreign law firms.

Privatization Program

There are no ongoing privatization programs.

Screening of FDI

Foreign direct investment must be registered at the Ministry of Commerce, and investors must
obtain operating permits from the relevant line ministries. If a foreign investor seeks
investment incentives as a Qualified Investment Project, he/she must register and receive
approval from the Council for the Development of Cambodia or the Provincial-Municipal
Investment Sub-Committee. The application to the Council for the Development of
Cambodia may be made either before or after the registration at the Ministry of Commerce.
More information about the QIP process may be found at
http://www.cambodiainvestment.gov.kh/investment-scheme/investment-application-
procedures.html.

Competition Law

The government is in the process of drafting a competition law. The Ministry of Commerce
has consulted an expert from the Australian Competition and Consumer Commission
(ACCC) and plans to submit a draft Law on Competition to the Council of Ministers in 2016.

2. Conversion and Transfer Policies

Foreign Exchange

Though Cambodia has its own currency, the riel, U.S. dollars are in wide circulation in
Cambodia and remain the primary currency for most large transactions. There are no
restrictions on the conversion of capital for investors. Cambodia’s 1997 Law on Foreign
Exchange states that there shall be no restrictions on foreign exchange operations through
authorized banks. Authorized banks are required, however, to report the amount of any

28
transfer equaling or exceeding USD 100,000 to the National Bank of Cambodia on a regular
basis.

Loans and borrowings, including trade credits, are freely contracted between residents and
nonresidents, provided that loan disbursements and repayments are made through an
authorized intermediary.

The Foreign Exchange Law allows the National Bank to implement exchange controls in the
event of a foreign exchange crisis. In the event of such a crisis, the National Bank may
impose certain temporary restrictions for a maximum period of three months on the activity
or foreign exchange position of authorized intermediaries or on any loans in domestic
currency extended to nonresidents. The U.S. Embassy is not aware of any cases in which
investors have encountered obstacles in converting local currency to foreign currency or in
sending capital out of the country.

Remittance Policies

Article 11 of the Law on the Amendment to the Law on Investment of 2003 states that
Qualified Investment Projects can freely remit abroad foreign currencies purchased through
authorized banks for the discharge of financial obligations incurred in connection with
investments. These financial obligations include:

 Payment for imports and repayment of principal and interest on international loans;

 Payment of royalties and management fees;

 Remittance of profits; and

 Repatriation of invested capital in case of dissolution.

Financial Action Task Force (FATF) status

Cambodia has committed to work with the FATF and the Asia Pacific Group (APG) to
address its strategic Anti-Money Laundering/Combating the Financing of Terrorism (AML/CFT)
deficiencies. The FATF’s website states that Cambodia has made significant progress in
improving its AML/CFT regime and notes that Cambodia has established the legal and
regulatory framework to meet its commitments in its action plan regarding the strategic
deficiencies that the FATF had identified in June 2011. Cambodia is therefore no longer
subject to the FATF’s monitoring process under its ongoing global AML/CFT compliance
process. Cambodia committed to working with the APG as it continues to address the full
range of AML/CFT issues identified in its mutual evaluation report.

3. Expropriation and Compensation

Land rights are a contentious issue in Cambodia, complicated by the fact that most property
holders do not have legal documentation of their ownership as a result of official policies and
social upheaval during Khmer Rouge era. Numerous cases have been reported of influential
individuals or groups acquiring land titles or concessions through political and/or financial
connections, and then using force to displace communities to make way for commercial
enterprises. In late 2009, the National Assembly approved the Law on Expropriation, which
sets broad guidelines on land-taking procedures for public interest purposes. It defines public
interest activities to include construction, rehabilitation, preservation, or expansion of
infrastructure projects, and development of buildings for national defense and civil security.

29
These provisions include construction of border crossing posts, facilities for research and
exploitation of natural resources, and oil pipeline and gas networks. Property can also be
expropriated for natural disasters and emergencies, as determined by the government.
Legal procedures regarding compensation and appeals are expected to be established in a
forthcoming sub-decree, which is under internal discussion within the technical team of the
Ministry of Economy and Finance. The U.S. Embassy is not aware of any cases in which
Cambodia has expropriated a U.S. investment.

4. Dispute Settlement

Legal System, Specialized Courts, Judicial Independence, Judgments of Foreign Courts

Most investors are generally reluctant to use the Cambodian judicial system to resolve
commercial disputes because the courts are perceived as unreliable and susceptible to
external political influence or bribery. Both local and foreign businesses report frequent
problems with inconsistent judicial rulings, corruption, and difficulty enforcing judgments. For
these reasons, most commercial disputes are currently resolved through negotiations
facilitated by the Ministry of Commerce, the Council for the Development of Cambodia, the
Cambodian Chamber of Commerce, or other institutions.

Cambodia adopted a Commercial Arbitration Law in 2006. In 2010, the government

provided for the establishment of the National Commercial Arbitration Center (NCAC),
Cambodia’s first alternative dispute resolution mechanism, to enable companies to resolve
commercial disputes more quickly and inexpensively than through the court system. The
NCAC was officially launched in March 2013, but has limited capacity and has received only
one case to date. Three laws related to the judicial system were enacted in July 2014: the
Law on Court Structures, the Law on the Duties and Discipline of Judges and Prosecutors,
and the Law on the Organization and Functioning of the Supreme Council of Magistracy.
Under the Law on Court Structure, the Commercial Court, established as one of the four
specialized Courts of First Instance, will have jurisdiction over all commercial matters,
including insolvency cases. The Commercial Chambers will hear all appeals arising out of the
Commercial Court.

Bankruptcy

Cambodia’s 2007 Law on Insolvency was intended to provide collective, orderly, and fair
satisfaction of creditor claims from debtor properties and, where appropriate, the
rehabilitation of the debtor’s business. The Law on Insolvency applies to the assets of all
business people and legal entities in Cambodia. The World Bank’s 2016 Doing Business Report
ranks Cambodia 82 out of 189 in terms of the “ease of resolving insolvency,” a two-point
decrease from 2015.

Investment Disputes

The Embassy has received no reports on investment disputes and the government does not
publicize any relevant reports.

International Arbitration

International arbitration is available for Cambodian commercial disputes. In March 2014, the
Supreme Court of Cambodia confirmed a decision of the Cambodian Court of Appeal,
which had ruled in favor of the recognition and enforcement of an arbitral award issued by

30
the Korean Commercial Arbitration Board (KCAB) of Seoul, South Korea. Cambodia became
a member of the World Bank’s International Center for Settlement of Investment Disputes in
January 2005. In 2009, the International Center approved a U.S. investor’s request for
arbitration in a case against the Cambodian government, and in 2013 the tribunal rendered
an award in favor of Cambodia.

Domestically, commercial disputes could also be resolved through the National Commercial
Arbitration Center (NCAC), Cambodia’s first alternative dispute resolution mechanism, which
was officially launched in March 2013.

ICSID Convention and New York Convention

Cambodia has been a member of the Convention on the Settlement of Investment Disputes
between States and Nationals of Other States (ICSID Convention - also known as the
Washington Convention) since 2005. Cambodia is also a signatory to the New York
Convention on the Recognition and Enforcement of Foreign Arbitral Awards 1958 (the New
York Convention) since 1960. In 2001, Cambodia passed the Law on Agreement and
Implementation of the United National Convention on the Recognition and Enforcement of
Foreign Arbitral Awards.

Duration of Dispute Resolution – Local Courts

Due to corruption and an overly bureaucratic system, investment/commercial disputes may

take years to resolve.

5. Performance Requirements and Investment Incentives

WTO/TRIMS

To date, Cambodia has not notified the WTO of any measurements that were inconsistent
with the Trade Related Investment Measure (TRIMs) requirements.

Investment Incentives

All investments need to be registered with the Ministry of Commerce. Cambodia’s Law on
Investment and Amended Law on Investment also provide a mechanism for varying types of
investment incentives that meet specified criteria. Investors seeking an incentive must submit
an application to the Cambodian Investment Board within the Council for the Development
of Cambodia. Investment activities excluded from incentives are detailed in the September
2005 Sub-Decree on the Implementation of the Amendment to the Law on Investment. These
include the following sectors: retail, wholesale, and duty-free stores; entertainment
establishments (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.
Incentives also may not be applied to investments in the production of certain products if the
investment is less than USD 500,000. This includes food and beverages; textiles, garments, and
footwear; and plastic, rubber, and paper products. Investors are not required to place a
deposit guaranteeing their investment except in cases involving a concession contract or
real estate development project. Investors who wish to apply are required to pay an
application fee of seven million riel (approximately USD 1,750), which covers securing
necessary approvals, authorizations, licenses, or registrations from all relevant ministries and
entities, including stamp duties. Under a 2008 sub-decree, the Council for the Development

31
of Cambodia is required to seek approval from the Council of Ministers for investment
proposals that involve capital of USD 50 million or more, politically sensitive issues, the
exploration and exploitation of mineral or natural resources, or infrastructure concessions. The
Council for the Development of Cambodia is also required to seek approval from the
Council of Ministers for investment proposals that will have a negative impact on the
environment or the government’s long-term economic strategy.

Qualified Investment Projects are entitled to receive different incentives such as profit tax
exemptions, special depreciation, and duty-free import of production equipment and
construction materials. Investment projects located in designated special promotion zones or
export processing zones are also entitled to the same incentives. Industry-specific investment
incentives, such as a three-year profit tax exemption, may be available in the agriculture
and agro-industry sectors. Agricultural materials used as inputs in export industries may be
exempt from the value-added tax. More information about the criteria and investment areas
eligible for incentives can be found at the following link:
www.cambodiainvestment.gov.kh/investment-scheme/investment-incentives.html

Research and Development

The government does not have any restrictions on foreign firms participating in government
financed and subsidized research and development programs. The government has public
procurement procedures that companies can follow.

Performance Requirements

Under Cambodian law, most foreign investments and foreign investors are subject to the
following taxes: corporate profits tax (20 percent), tax on individual salaries (zero to 20
percent), withholding taxes (four to 15 percent), value-added taxes (zero to ten percent),
and import duties (zero to 35 percent).

The Law on Investment permits investors to hire foreign nationals for employment as
managers, technicians, or skilled workers if the qualifications and/or expertise are not
available in Cambodia. According to the Cambodian Labor Law, the number of foreign
employees should not exceed ten percent of the total number of Cambodian employees. In
practice, companies can request an increase in this ratio.

Data Storage

Cambodia does not have any forced localization policy that obligates foreign investors to
use domestic contents in goods or technology. Cambodia also does not require foreign
Information Technology providers to turn over source code.

The General Department of Information and Communications Technology (ICT) in the

Ministry of Post and Telecommunications oversees ICT-related policy in Cambodia.

6. Protection of Property Rights

Real Property

Mortgages exist and Cambodian banks often require certificates of property ownership as
collateral before approving loans. The mortgages recording system, which is handled by
private banks, is generally considered reliable.

32
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 not been uniform, and there are reports of court
cases in which judges have sought additional proof of ownership. Although foreigners are
constitutionally forbidden to own land, the 2001 law allows long- or short-term leases to
foreigners. As noted above, Cambodia also allows foreign ownership in multi-story buildings
from the second floor up. Cambodia was ranked 121 out of 177 economies for ease of
registering property in the 2016 World Bank Doing Business Report.

Intellectual Property Rights

Cambodia has adopted legislation concerning the protection of intellectual property rights,
including the Law on Copyrights and the Law on Patent and Industrial Design. Cambodia is a
member of the World Intellectual Property Organization and the Paris Convention for the
Protection of Industrial Property, and is a party to the ASEAN Framework Agreement on
Intellectual Property Cooperation. Cambodia has also concluded bilateral agreements on
intellectual property protection and cooperation with the United States, China, Thailand,
Japan, and South Korea.

Cambodia has enacted several laws pursuant to its WTO commitments on intellectual
property. Copyrights are governed by the Law on Copyrights and Related Rights, which was
enacted in January 2003. Trademarks are governed by the Law Concerning Marks, Trade
Names and Acts of Unfair Competition, which was enacted in 2002. A patent law has been
in place since 2003. Some gaps in intellectual property protection remain, however, and
outstanding legislation includes a draft law for protecting trade secrets, a law on integrated
circuit protection, and legislation on protecting encrypted satellite signals required by the
World Intellectual Property Organization. In January 2014, Cambodia enacted the Law on
Geographical Indications, recognizing geographical indications of local and foreign
products. Infringement of IPR is pervasive, particularly related to software, compact discs
and music, books, cigarettes, alcohol, and pharmaceuticals. In March 2015, the Cambodian
government submitted its instrument of accession to the Madrid Protocol for International
Registration of Marks at the World Intellectual Property Organization.

Although Cambodia is not a major center for the production and export of pirated compact
discs, digital video discs (DVD), or other copyrighted materials, local businesses report
Cambodia is growing as a source of pirated material due to weak enforcement. An inter-
ministerial committee was established to combat piracy of compact discs and DVDs in the
domestic market. Infringement complaints may be made to the Economic Police, Customs,
the Cambodia Import-Export Inspection and Fraud Repression Directorate General, or the
Ministry of Commerce. The division of responsibility among each agency, however, is not
clearly defined. The National Intellectual Property Rights Committee is planning to create two
new subcommittees: a subcommittee on IPR enforcement and a subcommittee on the
education and dissemination of IPR rules and regulations. The sub-decree on the
establishment of the two subcommittees is under review by the Council of Ministers.

Cambodia was not listed in the U.S. Trade Representative (USTR)’s Special 301 report or
notorious markets report.

33
For additional information about treaty obligations and points of contact at local IP offices,
please see the World Intellectual Property Organization’s country profiles at:
http://www.wipo.int/directory/en/details.jsp?country_code=KH.

Resources for Rights Holders

Regional Contact:

 Mr. Peter N. Fowler

 Regional IP Attaché

 Telephone number: (662) 205-5913

 Email address: Peter.Fowler@trade.gov

Country resources:

 American Chamber of Commerce Cambodia

 Email address: ed@amchamcambodia.net

 Website: www.amchamcambodia.net

List of local lawyers: http://cambodia.usembassy.gov/list_of_lawyers.html.

7. Transparency of the Regulatory System

There is no pattern of systematic discrimination by the government against foreign investors in

Cambodia. Numerous issues of transparency in the regulatory regime arise, however, from
the lack of legislation and limited capacity of key institutions. Investors often complain that
the decisions of Cambodian regulatory agencies are inconsistent, arbitrary, or corrupt.
Cambodia has indicated a desire to discourage monopolistic trading arrangements in most
sectors, but it has yet to pass the Law on Competition which was part of its WTO accession
obligations. The Ministry of Commerce expects Cambodia to enact competition legislation in
2016. Under the most recent draft, a National Committee on Competition would be
established.

8. Efficient Capital Markets and Portfolio Investment

The Cambodian government does not use regulation of capital markets to restrict foreign
investment. Banks have been free to set their own interest rates since 1995, and increased
competition between local institutions has led to a gradual lowering of interest rates from
year to year. Domestic financing, however, is still difficult to obtain at competitive interest
rates. The average annual interest rate on loans in U.S. dollars stood at 11.61 percent in
October 2015. A 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 existing
contract and real property laws. Commercial and specialized bank deposits increased by 17
percent in 2015 over the previous year, equivalent to 62 percent of GDP. Loans also
increased by 26 percent to 63 percent of GDP in 2015. The ratio of non-performing loans
stood at two percent at the end of 2015, a decrease of 0.2 percentage points compared to
2014.

34
Cambodia has 36 commercial banks, 11 specialized banks (set up to finance specific turn-
key projects such as real estate development), and 41 licensed microfinance institutions, of
which seven were licensed microfinance deposit taking institutions. There were 38 registered
rural credit operators as of end of 2014. The National Bank has also granted licenses to six
financial leasing companies, six third-party processor companies (Wing Limited, Western
Union Network Limited, Money Gram Payment System Inc, Pay Go SEA Ltd, Viettel PTE., Ltd,
and IME (M) SDN BHD), and one Credit Bureau Company to improve transparency and
credit risk management and encourage more lending to small-and medium-sized enterprise
customers.

In a move designed to address the need for capital markets in Cambodia, the Cambodian
Securities Exchange (CSX) was launched on July 11, 2011. In April 2012, the Phnom Penh
Water Supply Authority, a state-owned enterprise, was the first domestically registered
company on the CSX. In June 2014, Grand Twins International (Cambodia) Plc, a garment
factory from Taiwan, became the second company to list on the CSX. Phnom Penh
Autonomous Port listed its company in December 2015. The Phnom Penh Special Economic
Zone launched its IPO on the CSX in April 2016. Two other state-owned enterprises, the
Autonomous Port of Sihanoukville and Telecom Cambodia, and a private local company,
Express Food Group Co., Ltd, are preparing for initial public offerings, but listing dates have
yet to be announced. In November 2006, the National Assembly passed legislation to permit
the government to issue bonds to address the country’s budget deficits. No bonds, however,
have been issued since 2007, and Prime Minister Hun Sen said in 2008 that the government
did 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.

Money and Banking System, Hostile Takeovers

In August 2015, Moody’s Investors Service affirmed Cambodia’s government issuer rating at
B2 based on its healthy growth path and modest debt burden. However, Moody’s report
noted Cambodia could face sovereign credit challenges due to its low per capita income
and weak institutional framework. The report noted China’s slower economic growth could
negatively impact Cambodia’s economy because Cambodia benefits from Chinese trade,
concessional loans, and investment.

In 2008, the National Bank of Cambodia (NBC) raised the minimum capital reserve
requirements for banks from USD 13 million to USD 37.5 million. In March 2016, the NBC
doubled the minimum requirement to USD 75 million for commercial bank and USD 15 million
for specialized banks. Based on the new regulations, microfinance deposit taking institutions
are required to increase capital reserves from USD 2.5 million to USD 30 million and other
microfinance institutions need to increase to USD 1.5 million.

By the end of 2014 (the latest figure available), total assets in the banking system
(commercial and specialized banks) had reached USD 16.2 billion, an increase of 29.6
percent compared with 2013 and equivalent to 95 percent of GDP. The infusion of capital
from newly created banks and additional customer deposits were the primary drivers
underlying the growth. Two large local banks, Acleda bank and Canadia bank, have the
largest assets in the market with 19 percent and 14.4 percent respectively.

9. Competition from State-Owned Enterprises

35
Cambodia has four main state-owned enterprises: Electricité du Cambodge, which is in
charge of producing and distributing power nationwide; the Phnom Penh Water Supply
Authority, which is responsible for water treatment and supply; the Rural Development Bank,
which services and refinances loans to licensed financial institutions, commercial banks,
specialized banks, micro-finance institutions, associations, development communities, and
small- and medium-sized enterprises that take part in rural development in Cambodia; and
the Green Trade Company, which manages Cambodia’s national reserve of rice through
purchases and sales made at market prices. In March 2015, the Cambodian government
through the Ministry of Mines and Energy announced it is exploring the possibility of
establishing a national oil company to invest in oil and gas sector.

OECD Guidelines on Corporate Governance of SOEs

Each state-owned enterprise is under the supervision of a line ministry or government

institution and is overseen by a board of directors drawn from among senior government
officials. Private enterprises are generally allowed to compete with state-owned enterprises
under equal terms and conditions. These entities are also subject to the same taxes and
value-added tax rebate policies as private-sector enterprises. State-owned enterprises are
covered under the law on public procurement, which was promulgated in January 2012,
and their financial reports are audited by the appropriate line ministry, the Ministry of
Economy and Finance, and the National Audit Authority.

Sovereign Wealth Funds

Cambodia does not have a sovereign wealth fund.

10 Responsible Business Conduct

The Government does not have policies to promote responsible business conduct (RBC) or
corporate social responsibility (CSR). However, there is increasing awareness of RBC among
larger and multinational companies in the country. In 2015, a group of private sector and
NGO representatives formed a National CSR Working Group to urge the government to
adopt a national CSR framework. Initiated by the NGO Forum on Cambodia and Oxfam, the
group meets quarterly to discuss CSR practices and seek solutions to problems caused by
state and private investments. A number of economic land concessions in Cambodia have
led to high profile land rights cases. The Cambodian government has recognized the
problem, but in general, has not effectively and fairly resolved land rights claims. The
Cambodian government does not have a national contact point for Organization for
Economic Cooperation and Development (OECD) multinational enterprises guidelines and
does not participate in the Extractive Industries Transparency Initiative.

11. Political Violence

The risk of political violence directed at foreign companies operating in Cambodia is low.
Foreign companies have been the targets of violent protests in the past, such as the 2003
anti-Thai riots against the Embassy of Thailand and Thai-owned commercial establishments.
More recently, there were reports that Vietnamese-owned establishments were looted during
a January 2014 labor protest. Authorities have also used force, including truncheons, electric
cattle prods, fire hoses, and even gunfire, to disperse protestors. Incidents of violence
directed at businesses, however, are rare. Post is unaware of any incidents of political
violence directed at American or other non-regional interests.

36
Since mid-2015, the government’s pressure on the opposition party has intensified. Two
opposition Cambodia National Rescue Party (CNRP) parliamentarians were beaten by
plainclothes security personnel on grounds of the National Assembly October 2015, and the
leader of the Party fled the country to avoid being imprisoned on politically motivated
defamation charges. In April 2016, the CNRP deputy leader was threatened with multiple
prosecutions from various government agencies, including the Anti-Corruption Unit, based on
private phone conversations he had that were mysteriously leaked to the public. The decline
in political freedom over the past year has not so far manifested itself in the economic realm.

12. Corruption

The Anti-Corruption Law was adopted in 2010 to combat corruption through education,
prevention, and more effective enforcement. Under this law, all civil servants are obligated
to declare their financial assets to the government every two years. The fourth round of asset
and debt declaration took place during January 2015. The Anti-Corruption Unit (ACU), which
was formed in 2010, has launched several high-profile prosecutions against public officials,
including members of the police and judiciary. The ACU has also been accused of
deliberately targeting the political opposition.

UN Anticorruption Convention, OECD Convention on Combatting Bribery

Cambodia ratified the UN Convention against Corruption in 2007 and endorsed the Action
Plan of the Asian Development Bank/ OECD Anti-Corruption Initiative for Asia and the Pacific
in 2003. Cambodia is not a party to the OECD Convention on Combating Bribery.

Despite the passage of the Anti-Corruption Law and creation of the ACU, business people,
both local and foreign (including U.S. companies), have identified corruption, particularly
within the judiciary, customs service, and tax authorities, as the single greatest 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. The
minimum salary for administrative civil servants was raised from USD 138 to USD 175 per month
in 2016, however, these wages still remain below the level required to maintain a suitable
quality of life in Cambodia. As a result, public employees remain susceptible to corruption.
Local and foreign businesses report that they must often pay facilitation fees to expedite
business transactions. Even though the Cambodian government has published the official
fees of public services since early 2013, the practice of paying additional fees remains
common. Furthermore, the process for awarding government contracts is not transparent
and is susceptible to corruption. The ACU has been criticized for initiating a series of politically
motivated investigations in 2016 while being slow to investigate government corruption.

In 2015, the ACU, in collaboration with the private sector, established guidelines encouraging
private companies to create internal codes of conduct prohibiting bribery and corrupt
practices. The guidebook is publicly available on the website of the ACU at
http://www.acu.gov.kh/en_index.php. Private companies can sign a Memorandum of
Understanding (MoU) with the ACU pledging to operate corruption-free and cooperate on
anti-corruption efforts. There are currently more than 20 private companies that have signed
an MoU with ACU.

Resources to Report Corruption

Government point of contact:

37
  Om Yentieng

 President

 Anti-Corruption Unit

 Building No. 54, Preah Norodom Blvd, Sangkat Phsar Thmey 3, Khan Daun Penh,
Phnom Penh

 Telephone number: +855-23-223954

 Email address: info@acu.gov.kh

NGO point of contact:

 Preap Kol

 Executive Director

 Transparency International Cambodia

 Telephone number: +855-23-214430

 Email address: info@ticambodia.org

13. Bilateral Investment Agreements

Bilateral Taxation Treaties

Bilateral investment treaties provide reciprocal national treatment to investors, excluding

benefits deriving from membership in future customs unions or free trade areas and
agreements relating to taxation. These agreements preclude expropriations except those
that are non-discriminatory, undertaken for a lawful or public purpose, and 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. Cambodia has signed bilateral
investment agreements with Austria, Belarus, Burma (Myanmar), China, Croatia, Cuba,
Czech Republic, Democratic People’s Republic of Korea, France, Germany, Hungary,
Indonesia (later terminated), Japan, Kuwait, Laos, Malaysia, the Netherlands, Pakistan, the
Philippines, the Republic of Korea, Russia, Singapore, Switzerland, Thailand, Vietnam, and the
Organization of the Petroleum Exporting Countries. Future agreements are planned with
Algeria, Bangladesh, the Belgium-Luxembourg Economic Union, Bulgaria, Egypt, Hungary,
Israel, Iran, Libya, Macedonia, Malta, Qatar, Russia, Turkey, the United Kingdom, and Ukraine.

In July 2006, Cambodia signed a Trade and Investment Framework Agreement (TIFA) with the
United States to promote greater trade and investment in both countries and provide a
forum to address bilateral trade and investment issues. In February 2016, the third TIFA
meeting was held in Phnom Penh. In August 2012, the United States and Cambodia agreed
to begin exploratory discussions on a potential bilateral investment treaty (BIT). Additional
exploratory talks on a BIT were held in February 2016.

Cambodia does not have a bilateral taxation treaty with the United States.

14. Foreign Trade Zones/Free Ports/Trade Facilitation

38
To facilitate the country’s development, the Cambodian government has shown great
interest in increasing exports via geographically defined special economic zones (SEZs). In
December 2005, the government adopted the Sub-Decree on Special Economic Zones to
speed up the creation of the zones by detailing the procedures, conditions, and incentives
for investors. Since then, the Cambodia Special Economic Zones Board has approved 36
SEZs, which are located in Phnom Penh, Koh Kong, Kandal, Kampot, Sihanoukville, and near
the borders of Thailand and Vietnam. The main investment sectors in these zones include
garments, shoes, bicycles, food processing, car and motorcycle assembly, and electrical
equipment manufacturing.

15. Foreign Direct Investment and Foreign Portfolio Investment Statistics

According to IMF data, total FDI in Cambodia as reported by counterpart economies

reached USD 41 billion in 2014, with Thailand responsible for a USD 38.7 billion that year. The
IMF’s 2015 data is not yet available. According to the Council for the Development of
Cambodia, the total stock of FDI for reported fixed assets in Cambodia was USD 30.2 billion in
2015. The Council for the Development of Cambodia numbers are based on projections and
not actual investments. Foreign direct investment inflow based on fixed assets were
projected to be USD 785 million in 2015.

Table 2: Key Macroeconomic Data, U.S. FDI in Host Country/Economy

Ministry of
USG or International Source of Data:
Economy and World Bank
BEA; IMF; Eurostat; UNCTAD, Other
Finance

Economic
Year Amount Year Amount
Data

Host 2015 18,502 2015 16,780 www.worldbank.org/en/country/cambodia

Country
Gross
Domestic
Product
(GDP) ($M
USD)

Council for USG or

Foreign
the international USG or international Source of data:
Direct
Development statistical BEA; IMF; Eurostat; UNCTAD, Other
Investment
of Cambodia source

U.S. FDI in 2015 85 2012 54 BEA data available at

partner http://bea.gov/international/direct_investment_
country ($M multinational_companies_comprehensive_data.htm
USD, stock
positions)

Host N/A N/A N/A N/A BEA data available at

country’s http://bea.gov/international/direct_investment_
FDI in the multinational_companies_comprehensive_data.htm

39
United
States ($M
USD, stock
positions)

Total 2015 31.3 2015 221 Total FDI Stock (2014 IMF data): $41 billion
inbound 2015 Cambodia GDP: $18.5 billion
stock of FDI
as % host
GDP

By end of 2015, the Council for the Development of Cambodia had recorded approximately
USD 85 million in U.S. registered capital investments since August 1994, equivalent to 0.5
percent of Cambodia’s GDP. Major U.S. business investments in Cambodia include: Caltex,
which has a nationwide chain of service stations and a petroleum holding facility in
Sihanoukville; GE; Crown Beverage Cans Cambodia Limited, which produces aluminum
cans; CBREGroup, Inc.; Motorola Solutions Inc; Coca Cola; Tiffany’s, which has a diamond
polishing factory; American Licorice; Otis Elevators; DuPont; and W2E Siang Phong Co., Ltd.,
a biogas power generation joint venture between U.S. and Dutch investors. U.S. franchises
and brands with local distribution include: John Deere, Ford, Chevy, Gallo Wines, Swensen’s
Ice Cream, Dairy Queen, Krispy Kreme doughnuts, Carl Jr’s, Cold Stone Creamery, Microsoft,
Kohler, Domino’s Pizza, Burger King, Hard Rock Café; Coffee Bean and Tea Leaf, Starbucks
Coffee, and Burger King. There are also U.S. investors in several Cambodian garment
factories.

Major non-U.S. foreign investors in Cambodia include Asia Pacific Breweries (Singapore), Asia
Insurance (Hong Kong), ANZ Bank (Australia), BHP Billiton (Australia), Oxiana (Australia), Infinity
Financial Solutions (Malaysia), Total (France), PTT Cambodia (Thailand), Cambodia Airport
Management Services (CAMS) (France), Forte Insurance (France), Manulife Cambodia PLC
(Canada), Prudential (United Kingdom), Smart Axiata Co., Ltd (Malaysia), Thakral Cambodia
Industries (Singapore), Petronas Cambodia (Malaysia), Charoeun Pokphand (Thailand), Siam
Cement (Thailand), Bank of China (China), Cambrew (Malaysia), Aeon shopping mall
(Japan), Parkson mall (Malaysia), and Metfone (Vietnam).

Some major local companies include: Sokimex Group (petroleum, hotel and tourism, and
garments), Royal Group of Companies (telecommunications and information technology,
banking and insurance, media and entertainment, hotel and resort properties and
development, trading, and transportation), AZ Distribution (construction and
telecommunications), Mong Reththy Group (construction, agro-industry, and rubber and
palm oil plantations), KT Pacific Group (airport projects, 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
(banking), Men Sarun Import and Export (agro-industry and rice and rubber exports), SOMA
Group (agriculture production and processing, education, energy, infrastructure, and
trading), Vattanac Capital (banking, real estate, and golf resorts), and Worldbridge Group
(logistics, real estate, industrial complex, construction, entertainment and media, e-
commerce, and franchises). In 2009, Acleda Bank opened its first bank branch outside of
Cambodia in Laos, and in 2013 it opened offices in Burma.

Table 3: Sources and Destination of FDI

40
According to IMF data, total FDI in Cambodia as reported by counterpart economies
skyrocketed from USD 2.69 billion in 2013 to USD 41 billion in 2014, with Thailand responsible for
the lion’s share, at 94.42 percent of total investment. The other top four foreign direct
investment countries in Cambodia were Republic of Korea, Malaysia, France, and Denmark.
The number of Cambodian investments outside the country was quite small compared to
inward foreign direct investment. In 2014, outward foreign direct investment totaled USD 233
million (a 51 percent decrease compared to 2013), with around 62 percent of the total
investment going to Singapore. Outward investment to the Philippines (USD 7.34 million)
decreased by 72 percent compared to 2013. The IMF’s 2015 data is not yet available.

Direct Investment from/in Counterpart Economy Data

From Top Five Sources/To Top Five Destinations (US Dollars, Millions)

Inward Direct Investment Outward Direct Investment

Total Inward 41,027.91 100% Total Outward 233.33 100%

Thailand 38,738.36 94.42% Singapore 144.48 61.92%

1,214.26 China, P.R. 76.46

Republic of Korea 2.96% Mainland 32.77%

Malaysia 623.74 1.52% Philippines 7.34 3.15%

France 224.63 0.55% Czech Republic 5.31 2.27%

Denmark 94.91 0.23% Republic of Korea 1.83 0.79%

"0" reflects amounts rounded to +/- USD 500,000.

Source: IMF’s Coordinated Direct Investment Survey (http://data.imf.org/CDIS)

Table 4: Sources of Portfolio Investment

All the figures in the above tables are provided by the country of origin of the investments.
Cambodian-supplied data is not available.

The total value of portfolio investment assets was USD 40.4 billion in 2014, the latest figures
available. Among the top five partners, Thailand holds the largest equity securities (96
percent share). Korea ranked first in term of debt securities investment in Cambodia with 74.8
percent of total debt securities.

Data on Cambodia from the IMF’s Coordinated Portfolio Investment Survey (CPIS) site is not
available.

Investment Assets

Top Five Partners (Millions, US Dollars)

Total Equity Total Debt

41
All 100% All 100% All 100%
Countries 40,391.05 Countries 39,382.88 Countries 1,008.17

Thailand Thailand Korea,

38,749.63 95.94% 38,514.54 97.80% Republic of 754.46 74.83%

Korea Korea, Thailand

Republic
1,216.09 3.01% of 461.63 1.17% 235.08 23.32%

France 224.63 0.56% France 202.80 0.51% France 21.83 2.17%

Denmark 94.91 0.23% Denmark 94.91 0.24% Belgium 4.61 0.46%

China,
China, P.R.:
76.46 0.19% P.R.: 76.46 0.19% Philippines 7.00 0.69%
Mainland
Mainland

Source: the IMF’s Coordinated Investment Survey (CDIS)

Section 5 - Government

Chiefs of State and Cabinet Members:

For the current list of Chiefs of State and Cabinet Members, please access the following -
Central Intelligence Agency online directory of Chiefs of State and Cabinet Members of
Foreign Governments

Political parties and leaders:

Cambodian People's Party or CPP [CHEA SIM]

Cambodian National Rescue Party or CNRP [SAM RANGSI also spelled SAM RAINSY]
National United Front for an Independent, Neutral, Peaceful, and Cooperative Cambodia or
FUNCINPEC [KEV PUT REAKSMEI]
Nationalist Party or NP former Norodom Ranariddh Party or NRP [SAO RANY]
note: the CNRP is a merger between the former Human Rights Party or HRP [KHEM SOKHA,
also spelled KEM SOKHA] and the Sam Rangsi Party or SRP

Legal system:

Civil law system (influenced by the UN Transitional Authority in Cambodia) customary law,
Communist legal theory, and common law

42
 International organization participation:

ADB, ARF, ASEAN, CICA, CICA (observer), EAS, FAO, G-77, IAEA, IBRD, ICAO, ICRM, IDA, IFAD,
IFC, IFRCS, ILO, IMF, IMO, Interpol, IOC, IOM, IPU, ISO (correspondent), ITU, MIGA, NAM, OIF,
OPCW, PCA, UN, UNCTAD, UNESCO, UNIDO, UNIFIL, UNMISS, UNWTO, UPU, WCO, WFTU
(NGOs), WHO, WIPO, WMO, WTO

43
Section 6 - Tax

Exchange control

Generally, there are no foreign exchange control in place.

Treaty and non-treaty withholding tax rates

Cambodia does not have any bilateral or multilateral international double tax treaties
currently in force although Treaty negotiations are anticipated between Cambodia and a
number of the other Association of South-East Asian Nations (ASEAN) countries, including
Thailand, ahead of the planned economic area in 2015.

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 Methodology and Sources

Section 1 - General Background Report and Map

(Source: CIA World Factbook)

Section 2 - Anti – Money Laundering / Terrorist Financing

Lower Risk Medium Risk Higher Risk

FATF List of Countries identified with strategic AML Deficient

Not Listed High Risk
AML deficiencies but Committed

>69% 35 – 69% <35% Compliant

Compliance with FATF 40 + 9
Compliant or Compliant or or Fully
recommendations
Fully Compliant Fully Compliant Compliant

US Dept of State Money Laundering

Monitored Concern Primary Concern
assessment (INCSR)

INCSR - Weakness in Government Legislation <2 2-4 5-20

US Sec of State supporter of / Safe Haven for Safe Haven for State Supporter
No
International Terrorism Terrorism of Terrorism

EU White list equivalent jurisdictions Yes No

International Sanctions Arab League /

None UN , EU or US
UN Sanctions / US Sanctions / EU Sanctions Other

Corruption Index (Transparency International)

Control of corruption (WGI) >69% 35 – 69% <35%
Global Advice Network

World government Indicators (Average) >69% 35 – 69% <35%

Failed States Index (Average)

>69% 35 – 69% <35%

Offshore Finance Centre

No Yes

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Section 3 - Economy

General Information on the current economic climate in the country and information on
imports, exports, main industries and trading partners.

(Source: CIA World Factbook)

Section 4 - Foreign Investment

Information on the openness of foreign investment into the country and the foreign
investment markets.

(Source: US State Department)

Section 5 - Government

Names of Government Ministers and general information on political matters.

(Source: CIA World Factbook / https://www.cia.gov/library/publications/world-leaders-

1/index.html)

Section 6 - Tax

Information on Tax Information Exchange Agreements entered into, Double Tax Agreements
and Exchange Controls.

(Sources: OECD Global Forum on Transparency and Exchange of Information for Tax
Purposes PKF International)

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