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

French Refugee Drama Wins Cannes Top Prize

Dheepan is about a group of Sri Lankan refugees who pretend to be a family in order to flee their war-torn country for a housing project in France More

Photogallery Crisis in Macedonia Requires Meaningful and Swift Measures

The international community has called on Macedonian leadership to take concrete measures in support of democracy in order to exit the crisis More

Activists: IS Executes 217 Civilians, Soldiers Near Palmyra

British-based Syrian Observatory for Human Rights on Sunday said the victims include nurses, women, children and Syrian government fighters 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.
Female American Soldiers: Healing Through Filmmakingi
X
Bernard Shusman
May 24, 2015 2:55 PM
According to the United States Defense Department, there are more than 200-thousand women serving in the U.S. Armed Forces.  Like their male counterparts, females have experiences that can be very traumatic.  VOA's Bernard Shusman tells us about a program that is helping some American women in the military heal through filmmaking.
Video

Video Female American Soldiers: Healing Through Filmmaking

According to the United States Defense Department, there are more than 200-thousand women serving in the U.S. Armed Forces.  Like their male counterparts, females have experiences that can be very traumatic.  VOA's Bernard Shusman tells us about a program that is helping some American women in the military heal through filmmaking.
Video

Video Rolling Thunder Run Reveals Changed Attitudes Towards Vietnam War

For many US war veterans, the Memorial Day holiday is an opportunity to look back at a divisive conflict in the nation’s history and to remember those who did not make it home.
Video

Video Millions Flock to Ethiopia Polls

Millions of Ethiopians cast their votes Sunday in the first national election since the 2012 death of longtime leader Meles Zenawi. Mr. Meles' party, the Ethiopian People's Revolutionary Democratic Front, is almost certain of victory again. VOA's Anita Powell reports from Addis Ababa.
Video

Video Scientists Testing Space Propulsion by Light

Can the sun - the heart of our solar system - power a spacecraft to the edge of our solar system? The answer may come from a just-launched small satellite designed to test the efficiency of solar sail propulsion. Once deployed, its large sail will catch the so-called solar wind and slowly reach what scientists hope to be substantial speed. VOA’s George Putic reports.
Video

Video FIFA Trains Somali Referees

As stability returns to the once lawless nation of Somalia, the world football governing body, FIFA, is helping to rebuild the country’s sport sector by training referees as well as its young footballers. Abdulaziz Billow has more from Mogadishu.
Video

Video With US Child Obesity Rates on the Rise, Program Promotes Health Eating

In its fifth year, FoodCorps puts more than 180 young Americans into 500 schools across the United States, where they focus on teaching students about nutrition, engaging them with hands-on activities, and improving their access to healthy foods whether in the cafeteria or the greater community. Aru Pande has more.
Video

Video Virginia Neighborhood Draws People to Nostalgic Main Street

In the U.S., people used to grow up in small towns with a main street lined by family-owned shops and restaurants. Today, however, many main streets are worn down and empty because shoppers have been lured away by shopping malls. But in the Del Ray neighborhood of Alexandria, Virginia, main street is thriving. VOA’s Deborah Block reports it has a nostalgic feel with its small restaurants and unique stores.
Video

Video Effort Underway to Limit Damage from California Oil Spill

Cleanup crews are working around the clock to remove oil from the waters off the coastal city of Santa Barbara, in California. About 380,000 liters of oil may have leaked out before a rupture in an onshore, underground pipeline was discovered Tuesday. The environmental disaster hit the popular West Coast resort area before the Memorial Day weekend. VOA's Zlatica Hoke reports investigators have yet to determine what caused the incident.

VOA Blogs