News / Asia

    Cambodian Anti-Corruption Drive Creates Headache for Western Firms

    A man working at a money exchange (R) passes 100 Cambodian riel notes to a client  in central Phnom Penh, March 12, 2011 (file photo)
    A man working at a money exchange (R) passes 100 Cambodian riel notes to a client in central Phnom Penh, March 12, 2011 (file photo)
    Robert Carmichael

    Earlier this month the Cambodian government announced that as part of its anti-corruption drive, it had outlawed the payment of fees to civil servants.  But the move has opened a new set of problems that worry Western businesses that operate in the country.

    To the government, this was expected to be a minor announcement.  As of August 1, all corruption offenses contained in two separate laws were now in force.

    For Phnom Penh, this was another step on the road to combating corruption.

    The problem is that the move has effectively outlawed "facilitation fees," payments that are critical for doing business in Cambodia.  Anyone who pays them can be jailed for 10 years, while the person receiving them can get 15 years.

    But what exactly is a facilitation fee?

    "Facilitation fees are what are paid basically to low-ranking government officials to assist in doing their job," said Matthew Rendall, the managing partner at Sciaroni & Associates, a law firm in Phnom Penh.  "No advantage and nothing illegal is being obtained.  And you are basically having to pay these in order to do legitimate business."

    He says these fees are not exorbitant and most businesses routinely pay them.

    "It is day-to-day nickel-and-dime payments made to supplement the salaries of government workers who otherwise you know would not have enough," Rendall added.  "You know it could be $2 for a form, $5 to submit it, $20 to put your monthly tax filing in."

    In other words, these are payments made to process paperwork.  They are not bribes. They are the sorts of fees that in other countries are paid to get a passport renewed or a license issued.

    The difference is that other countries list those fees on a schedule and issue a receipt.  In Cambodia, a customer pays the civil servant, who pockets the fee.

    Cambodia's civil servants have long relied on facilitation fees, because their salaries are typically around $50 a month, far below what they consider a livable wage.

    Stephen Higgins is the chief executive officer of ANZ Royal Bank, a part-owned subsidiary of Australian banking giant ANZ.  He explains why outlawing the payment of facilitation fees is a problem.

    "It is a major issue for business because theoretically if any business pays them, they are liable to face criminal charges and the person paying them is liable to five years jail or more," said Higgins.  "And for a business such as ours, if we were to pay them then theoretically I would be liable to go to jail here in Cambodia, in Australia, in the U.K. and in the U.S. And I certainly don't wish that upon myself."

    While it is unlikely that the Cambodian government would prosecute investors for paying facilitation fees, outlawing them has effectively triggered other anti-corruption regulations in Western nations.

    U.S. and Australian law allowed companies to pay such fees provided they were not illegal in the country where the payment was made.  

    Now that they are illegal in Cambodia, any U.S. or Australian firm paying facilitation fees here is opening itself up to prosecution at home.

    Rendall says the result is that Western businesses simply cannot risk paying them.  He adds that investors have long asked the Cambodian government to formalize this system by drafting a schedule of fees and issuing receipts.  There is now a pressing urgency to do so.

    "I mean we are scrambling to get the government to implement practices so that those payments are receipted or scheduled at least," Rendall explained.

    Once those fees are legal, Western businesses will be able again to pay them.  But finding out what action the government will take is tricky.  No government official responded to numerous requests for clarification of the policy.

    Such ambiguity gives investors from Western nations pause and is already having an impact.

    Last month, courier company FedEx said it would not deliver any items worth more than $300 until the government instituted a schedule for payments for more valuable goods.

    Matthew Rendall says the situation could eventually skew the business climate to favor investors from Asia.

    "Those countries that have foreign corrupt practices laws - the United States, the Western countries, etcetera - are at a massive disadvantage now," said Rendall.  "So the one impact it has had: Does it basically result in a situation where Cambodia finds itself almost exclusively with Chinese, Vietnamese-type investors who are not susceptible back home to being prosecuted, and excluded from OECD-type countries?  Absolutely.  It is a concern, it has been raised."

    Although that result does not appear to be the intention of the law, Rendall says it could be an unforeseen consequence unless the government finds a way to resolve the problem.

    You May Like

    Mother of IS Supporter: Son Was Peaceful, 'Role Model'

    Somali-American Abdirizak Mohamed Warsame pleaded guilty Thursday to charges of conspiring to provide material support to Islamic State militants

    Factions Shift as Civilians Die in Syrian War

    Scenario likely only to further confuse military situation on ground and potentially worsen humanitarian crisis that already has grown to epic proportions

    Presidential Hopefuls Woo Minorities, Evangelicals

    Four GOP candidates to speak at forum at Bob Jones University in Greenville, South Carolina

    This forum has been closed.
    Comments
         
    There are no comments in this forum. Be first and add one

    Featured Videos

    Your JavaScript is turned off or you have an old version of Adobe's Flash Player. Get the latest Flash player.
    Two-thirds of World Faces Water Shortagei
    X
    February 12, 2016 7:31 PM
    Four billion people — or two out of every three on the planet — do not have enough water to meet their basic needs. That is far greater than previously thought, according to a new study that presents a more accurate picture of the problem. As VOA's Rosanne Skirble reports, the findings will help policymakers and the public craft solutions to address the threat.
    Video

    Video Two-thirds of World Faces Water Shortage

    Four billion people — or two out of every three on the planet — do not have enough water to meet their basic needs. That is far greater than previously thought, according to a new study that presents a more accurate picture of the problem. As VOA's Rosanne Skirble reports, the findings will help policymakers and the public craft solutions to address the threat.
    Video

    Video Gateway to Mecca: Historical Old Jeddah

    Local leader Sami Nawar's family has been in the Old City of Jeddah for hundreds of years and takes us on a tour of this ancient route to Mecca, also believed to be the final resting place of Adam's wife, Eve.
    Video

    Video New Technology Aims to Bring Election Transparency to Uganda

    A team of recent graduates from Uganda’s Makerere University has created a mobile application designed to help monitor elections and expose possible rigging. The developers say the app, called E-Poll, will make Uganda's democratic process fairer. From Kampala, VOA's Serginho Roosblad reports.
    Video

    Video As Refugees Perish, Greek Graveyards Fill

    Aid workers on the Greek island of Lesbos say they are struggling to bury the increasing number of bodies of refugees that have been recovered or washed up ashore in recent months.  The graveyards are all full, they say, yet as tens of thousands of people clamor to get out of Syria, it is clear refugees will still be coming in record numbers. For VOA, Hamada Elrasam reports from Lesbos, Greece.
    Video

    Video Russia Bristles at NATO Expansion in E. Europe

    Russian Foreign Minister Sergei Lavrov is meeting Friday with the head of NATO after the Western military alliance and the United States announced plans for the biggest military build-up in Europe since the Cold War. Russia has called NATO's moves a threat to stability in Europe. But NATO says the troop rotations and equipment are aimed at reassuring allies concerned about Russia as VOA's Daniel Schearf reports from Moscow.
    Video

    Video To Fight Zika, Scientists Target Mosquitoes

    Mosquitoes strike again. The Zika virus outbreak is just the latest headline-grabbing epidemic carried by these biting pests, but researchers are fighting back with new ways to control them. VOA's Steve Baragona takes a look.
    Video

    Video Mosul Refugees Talk About Life Under IS

    A top U.S. intelligence official told Congress this week that a planned Iraqi-led operation to re-take the city of Mosul from Islamic State militants is unlikely to take place this year. IS took over the city in June 2014, and for the past year and a half, Mosul residents have been held captive under its rule. VOA's Zana Omar talked to some families who managed to escape. Bronwyn Benito narrates his report.
    Video

    Video Scientists Make Progress Toward Better Diabetes Treatment, Cure

    Scientists at two of the top U.S. universities say they have made significant advances in their quest to find a more efficient treatment for diabetes and eventually a cure. According to the International Diabetes Federation, the disease affects more than 370 million people worldwide. VOA’s George Putic reports.
    Video

    Video NATO to Target Migrant Smugglers

    NATO has announced plans to send warships to the Aegean Sea to target migrant smugglers in the alliance's most direct intervention so far since a wave of people began trying to reach European shores.
    Video

    Video Russia's Catholics, Orthodox Hopeful on Historic Pope-Patriarch Meeting

    Russia's Catholic minority has welcomed an historic first meeting Friday in Cuba between the Pope and the Patriarch of Russia's dominant Orthodox Church. The Orthodox Church split with Rome in 1054 and analysts say politics, both church and state, have been driving the relationship in the centuries since. VOA's Daniel Schearf reports from Moscow.
    Video

    Video Used Books Get a New Life on the Streets of Lagos

    Used booksellers are importing books from abroad and selling them on the streets of Africa's largest city. What‘s popular with readers may surprise you. Chris Stein reports from Lagos.
    Video

    Video After NH Primaries All Eyes on South Carolina

    After Tuesday's primary in New Hampshire, US presidential candidates swiftly turned to the next election coming up in South Carolina. The so-called “first-in-the-South” poll may help further narrow down the field of candidates. Zlatica Hoke reports.
    Video

    Video Smartphone Helps Grow Vegetables

    One day, you may be using your smartphone to grow your vegetables. A Taipei-based company has developed a farm cube — a small, enclosed ecosystem designed to grow plants indoors. The environment inside is automatically adjusted by the cube, but it can also be controlled through an app. VOA's Deborah Block has more on the gardening system.
    Video

    Video Exhibit Turns da Vinci’s Drawings Into Real Objects

    In addition to being a successful artist, Renaissance genius Leonardo da Vinci designed many practical machines, some of which are still in use today, although in different forms. But a number of his projects were never realized — until today. VOA’s George Putic reports.