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

Mood Tense Ahead of Scotland Independence Vote

As race to persuade undecided voters continues, 'No' voters say they believe life in Scotland will slowly improve, 'Yes' vote not worth the risk More

South Africa’s 'Open Mosque' Admits Everyone, Including Critics

Open Mosque founder plans to welcome gay worshipers and allow women to lead prayers More

Ukrainian Activist in Despair About Future of Her Country

IrIna Dovgan, accused of being a spy and tortured by pro-Russian separatists, is appealing to UN Human Rights Council to support her country More

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.
A Dinosaur Fit for Land and Wateri
X
September 17, 2014 8:44 PM
Residents and tourists in Washington D.C. can now examine a life-size replica of an unusual dinosaur that lived almost a hundred million years ago in northern Africa. Scientists say studying the behemoth named Spinosaurus helps them better understand how some prehistoric animals adapted to life on land and in water. The Spinosaurus replica is on display at the National Geographic museum. VOA’s George Putic has more.
Video

Video A Dinosaur Fit for Land and Water

Residents and tourists in Washington D.C. can now examine a life-size replica of an unusual dinosaur that lived almost a hundred million years ago in northern Africa. Scientists say studying the behemoth named Spinosaurus helps them better understand how some prehistoric animals adapted to life on land and in water. The Spinosaurus replica is on display at the National Geographic museum. VOA’s George Putic has more.
Video

Video Iraqi Kurdistan Church Helps Christian Children Cope find shelter in churches in the Kurdish capital, Irbil

In the past six weeks, tens of thousands of Iraqi Christians have been forced to flee their homes by Islamic State militants and find shelter in churches in the Kurdish capital, Irbil. Despite U.S. airstrikes in the region, the prospect of people returning home is still very low and concerns are starting to grow over the impact this is having on the displaced youth. Sebastian Meyer reports from Irbil on how one church is coping.
Video

Video NASA Picks Boeing, SpaceX to Carry Astronauts Into Space

The U.S. space agency, NASA, has chosen Boeing and SpaceX companies to build the next generation of spacecraft that will carry U.S. astronauts to the International Space Station by the year 2017. The deal with private industry enables NASA to end its dependence on Russia to send space crews into low Earth orbit and back. Zlatica Hoke has more.
Video

Video Future of Ukrainian Former President's Estate Uncertain

More than six months after Ukraine's former President Viktor Yanukovych fled revolution to Russia, authorities have yet to gain control of his palatial estate. Protesters occupy the grounds and opened it to tourists but they are also refusing to turn it over to the state. VOA's Daniel Schearf reports from Mezhigirya, just north of Kyiv.
Video

Video China Muslims Work to Change Perceptions After Knife Attacks

China says its has sentenced three men to death and one woman to life in prison for a deadly knife attack in March that left more than 30 dead and 140 injured. Beijing says Muslim militants from China's restive western region of Xinjiang carried out the attacks. Now, more than six months after the incident, residents in the city are still coping with the aftermath. VOA's Bill Ide has more from Kunming.
Video

Video Enviropreneur Seeks to Save the Environment, Empower the Community

Lorna Rutto, a former banker, is now an ‘enviropreneur’ - turning plastic waste into furniture and fences discusses the challenges she faces in Africa with raw materials and the environment.
Video

Video West Trades Accusations Over Ransoms

As world leaders try to forge a common response to the threat posed by Islamic State militants in Iraq and Syria, there is simmering tension over differing policies on paying ransoms. In the past month, the jihadist group has beheaded two Americans and one Briton. Both countries refuse to pay ransom money. As Henry Ridgwell reports for VOA from London, there is uncertainty in the approach of some other European nations.
Video

Video Scotland Independence Bid Stokes Global Interest

The people of Scotland are preparing to vote on whether to become independent and break away from the rest of Britain, in a referendum being watched carefully in many other countries. Some see it as a risky experiment; while others hope a successful vote for independence might energize their own separatist demands. Foreign immigrants to Scotland have a front row seat for the vote. VOA’s Henry Ridgwell spoke to some of them in Edinburgh.


Carnage and mayhem are part of daily life in northern Nigeria, the result of a terror campaign by the Islamist group Boko Haram. Fears are growing that Nigeria’s government may not know how to counter it, and may be making things worse. More

AppleAndroid