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Legal and BusinessBy: VA VANNY, Lecturer of Law
Master of Law
Tel: 070 70 80 66, 016 629 606
E-mail: [email protected]
Semester I, Academic Year: 2015-2016
Syllabus
Lecturer’s Background
Name: VA VANNY
Education:
- Bachelor Degree of Business English
- Bachelor Degree of Law
- Master Degree of Law
Contact:
- Phone Number: 070 70 80 66, 016 629 606
- Email: [email protected]
By: VA VANNY, Lecturer of LawLegal and Business 3
About the Course
Subject’s Name: Legal and Business
Credit: 03
Week: 15 (45 Hours)
Text Book: Mekong School of Law, Business Law
Reference Textbooks:
- Law on commercial enterprise
- Law on commercial rules
- Law on investment of Cambodia
-Law on Bankruptcy
-Sub-degrees and other regulations related to business law
By: VA VANNY, Lecturer of LawLegal and Business 4
Course Description
This course focuses on the establishment of a business, and hot issues of
business at present both local and international such as business
environments, investment climates and SME.
This course also reviews important principles in business law.
Furthermore, it will focus on the business ethics and environment that can
make the students have an in-depth knowledge on how to run a business
legally and successfully.
By: VA VANNY, Lecturer of LawLegal and Business 5
Students will also study about the procedures and formalities of business as
well that it is a very important part of business law.
It will be of interest to business professionals and students of law who would
like a greater knowledge and understanding of laws relating to business and
commerce.
By: VA VANNY, Lecturer of LawLegal and Business 6
Course Objectives
After studying this course, students will be able to:
Be familiar with important principles of business law and business issues
Understand the principles of doing a business, business environment, investment climate, and
business activities
Know how to run a business legally and successfully
Understand about the Small and Medium Enterprise and Economic development
Understand the principles of business contract and statute of a company
Understand the forms of business
Understand about the procedures of commercial registration
By: VA VANNY, Lecturer of LawLegal and Business 7
Course Outline
Chapter 1: Doing a Business in Cambodia
Chapter 2: Business Environment
Chapter 3: Investment Climate
Chapter 4: Small and Medium Enterprise (SME)
Chapter 6: Business Activities
Chapter 7: Businessman
Chapter 8: Commercial Transactions
Chapter 9: Forms of business, Establishment
Chapter 10: The procedures and formalities of Commercial Registration
By: VA VANNY, Lecturer of LawLegal and Business 8
Requirement for Students
Students shall be punctual.
Students should read book and any material before class.
Students should complete all the works which lecturer and school given on time.
Students must be quiet and behave well during study time.
Students shall respect the University’s regulation.
By: VA VANNY, Lecturer of LawLegal and Business 9
The End
Legal and BusinessBy: VA VANNY, Lecturer of Law
Master of Law
Tel: 070 70 80 66, 016 629 606
E-mail: [email protected]
Semester I, Academic Year: 2015-2016
Chapter 1 DOING BUSINESS IN CAMBODIA
Overview
Cambodia is a rapidly developing country with a very open investment policy
and real opportunities for creative entrepreneurs and dynamic businesses.
The economy has experienced strong, positive growth over the last 15 years.
The Kingdom of Cambodia sits at the heart of Southeast Asia, a dynamic
region of trade in the world economy. Cambodia’s 1999 membership to the
Association of Southeast Asian Nations (ASEAN) and 2004 accession to the
World Trade Organization (WTO) have opened the country up to the global
marketplace.
By: VA VANNY,
Lecturer of LawBusiness and Legal 3
Doing Business sheds light on how easy or difficult it is for a local
entrepreneur to open and run a small to medium-size business when
complying with relevant regulations
By: VA VANNY,
Lecturer of LawBusiness and Legal 4
Starting and Running a Business
You may be considering starting and running a business and want to knowhow, or maybe you already have your own business and want to know how tooperate your existing business better.
If you have been thinking about starting or have started a businessyour reasons, could be
Earn more money
Be your own boss
Accommodate a desired lifestyle.
Achieve financial independence.
Enjoy creative freedom.
Use your skills and knowledge.
By: VA VANNY,
Lecturer of LawBusiness and Legal 5
Questions Asked
Where do I start?
What do I need before starting?
What type of business do I start?
Do I need any skills to run a business if so what are they?
What are the Pro’s & Con’s of having my own business?
What do I want to get out of having my own business?
How do I name my business?
How much income will my business need to make?
Who is my market?
How do I reach my market?
By: VA VANNY,
Lecturer of LawBusiness and Legal 6
Basic Requirements for Establishing a
Business in Cambodia
The companies’ law regime in Cambodia is governed by the Law on
Commercial Enterprises, which was promulgated on 19th June, 2005.
Allowable business forms under this law include sole proprietorships,
partnerships and limited liability companies.
Foreign investors usually choose to register a limited liability company as a
subsidiary of the parent company to do business in Cambodia.
If their activities in Cambodia are more limited, a foreign investor may prefer
to open a Branch or Representative Office of the parent company.
By: VA VANNY,
Lecturer of LawBusiness and Legal 7
Under the Law on Commercial Enterprises, the investor must register one of
the allowable business forms at the Ministry of Commerce (“MOC”) and file an
annual declaration the status of the enterprise, also at the MOC.
In addition a company must have a legally competent natural person as a
registered agent continually maintained in the Kingdom of Cambodia.
By: VA VANNY,
Lecturer of LawBusiness and Legal 8
Company Obligations: National and
Legal Personality
A company is considered to have Cambodian nationality if it has a registered
office in Cambodia, and at least 51% of its shares are owned by Cambodian
nationals.
Under the Constitution of the Kingdom of Cambodia, only a local company is
entitled to own land. The chairman of the Board of Directors of a local
company must be a Cambodian national. Other directors can be foreigners.
By: VA VANNY,
Lecturer of LawBusiness and Legal 9
Company Obligations: Use of a Khmer
Name
A partnership or company must display its name in the Khmer language on all
seals, signs letterhead, and forms and documents used for public purpose,
and on all public advertisements within the Kingdom of Cambodia and this
must be placed above and be larger than the name in another language.
The Khmer name must also sound phonetically the same as the name in the
other language. The partnership or company may however use and be
designated by a name in another language outside of the Kingdom of
Cambodia
By: VA VANNY,
Lecturer of LawBusiness and Legal 10
Company Obligations: Labor Filing ,
Annual Declaration
Upon opening a business, employers must make a declaration to the Ministry
of Labor. This declaration, called the Declaration of the Opening of a
Business, must be made in writing and be delivered to the Ministry of Labor
before the actual opening of the business.
Employers must also make a declaration to the Labor Inspector each time
that the business hires or dismisses a worker. This declaration must be made
in writing within seven calendar days after the date of hiring or dismissal.
By: VA VANNY,
Lecturer of LawBusiness and Legal 11
Company Obligations: Tax Paying
Tax Register
Tax on Profit
Patent
VAT
Tax on Salary
Others….
By: VA VANNY,
Lecturer of LawBusiness and Legal 12
Market Overview
Since Cambodia became the first least-developed country (LDC) to join the
World Trade Organization (WTO) in 2004, trade has steadily increased.
The United States is Cambodia’s largest trading partner. Approximately 83
percent of Cambodia’s total exports are destined for the United States --
primarily garment and footwear products.
Cambodia is also a member of the Association of Southeast Asian Nations
(ASEAN) and the Asia Free Trade Area (AFTA).
By: VA VANNY,
Lecturer of LawBusiness and Legal 13
Market Challenges
weak rule of law
poor infrastructure,
high energy costs
corruption
under-developed human resources
By: VA VANNY,
Lecturer of LawBusiness and Legal 14
Market Opportunities
Cambodia offers potential investment opportunities in agribusiness and food
processing, tourism infrastructure and resorts; education; architecture,
construction and engineering services; household goods and appliances; used
cars and automotive parts; power generation equipment and power
transmission infrastructure; fast food and beverage franchises;
pharmaceuticals; and medical supplies and equipment.
By: VA VANNY,
Lecturer of LawBusiness and Legal 15
Market Entry Strategy
Obtaining a local partner, such as an agent or distributor, is the most effective
way to reach Cambodian consumers. The local partner can facilitate and
expedite market entry with their market knowledge and established
networks. In Cambodia, personal relationships can be the key to successful
business transactions.
By: VA VANNY,
Lecturer of LawBusiness and Legal 16
The End
Legal and BusinessBy: VA VANNY, Lecturer of Law
Master of Law
Tel: 070 70 80 66, 016 629 606
E-mail: [email protected]
Semester II, Academic Year: 2014-2015
Chapter 2 BUSINESS ENVIRONMENT IN CAMBODIA
Cambodia Overview
Geography: Located in South East Asia, 181 035 km2
Population: 15,205,539(2013 estimate) Density: 81.8/km2
Language: Khmer (Official)
Economy:
Free Market
GDP (nominal) per capita USD1108 (2013 Estimate)
Political System
Government: Constitutional Monarchy
Head of State: King Norodom Sihamoni
Head of Government: Prime Minister Hun Sen, leader of the Cambodian
People’s Party
By: VA VANNY,
Lecturer of LawBusiness and Legal 3
Economic Growth
Cambodia continues to enjoy robust growth, albeit at a
slightly slower pace. Real growth in 2014 is estimated to
have reached 7%.
The garment sector, together with construction and
services, in particular finance and real estate, continues
to propel growth.
However, the 2015 and 2016 projection for economic
growth is about 6.9%, as it confronts stronger
competition in garment exports, continued weak
agriculture sector growth, and softer growth in the
tourism sector. By: VA VANNY,
Lecturer of LawBusiness and Legal 4
Poverty Reduction
Poverty continues to fall in Cambodia, although the pace
has declined significantly.
The poverty rate was 17.7% in 2012, with almost 3
million poor people and over 8.1 million who are near-
poor.
About 90% of them live in the countryside.
World Bank estimates suggest that Cambodia achieved
the Millennium Development Goal (MDG) of halving
poverty in 2009.
However, the vast majority of families who escaped
poverty were only able to do so by a small margin.By: VA VANNY,
Lecturer of LawBusiness and Legal 5
Health and Education
Cambodia has made good strides in improving
maternal health, early child care, and primary
education programs in rural areas. The number
of deaths per 100,000 live births decreased from
472 in 2005 to 170 in 2014, the under-five child
mortality rate decreased from 124 per 1,000 live
births in 1998 to35 per 1,000 in 2014, and the
net primary school admission rate increased from
81% in 2001 to 94.3% in 2012.By: VA VANNY,
Lecturer of LawBusiness and Legal 6
HIV/AIDS
Cambodia has also been successful in
preventing and treating HIV/AIDS. As of
2011, nearly 90% of AIDS patients in
Cambodia have access to antiretroviral
treatment. This coverage rate is among the
highest in the developing world.
By: VA VANNY,
Lecturer of LawBusiness and Legal 7
Challenges Cambodia still faces a number of development
challenges, including effective management of land
and natural resources, environmental sustainability,
and good governance.
Corruption and weak public service delivery impede
inclusive development.
The key challenge going forward is to stimulate the
agricultural and tourism sectors to once again become
strong engines of growth supporting poverty
reduction, as well as to expand and sustain growth in
manufacturing including garments.By: VA VANNY,
Lecturer of LawBusiness and Legal 8
Industrial Structure
As the primary industry occupies 32% of the total
economy, the agriculture is the main industry of
Cambodia. Major agricultural products are rice, rubber,
maize, cassava, etc. The secondary industry and tertiary
industry respectively account for 22% and 38% of the
total economy. The major industry of the manufacturing
sector is apparel products, which are directed to
exports. Among the tertiary industry, the tourism-related
industries are important to the Cambodian economy.
By: VA VANNY,
Lecturer of LawBusiness and Legal 9
Trade
The trade balance of Cambodia keeps a continuous deficit. Both
exports and imports have been expanding as a result of economic
growth. In 2011, the export value was US$5.4 billion and the
import value was US$7.0 billion.
The major destination countries of exports are USA, Hong Kong,
China, EU, Canada, and Vietnam. The major importing countries
are Hong Kong, China, Taiwan, Thailand, and Vietnam.
The primary export product is apparel, which account for more
than 80% of total exports. The major import products are textiles,
petroleum product, and vehicles. Cambodia significantly depends
on imports for industrial input products and daily commodities.
By: VA VANNY,
Lecturer of LawBusiness and Legal 10
Currency
Although the official national currency is the Riel,
US dollars are commonly used in business and
commercial transactions.
By: VA VANNY,
Lecturer of LawBusiness and Legal 11
Business Environment
Establishing a business
Exchange Control
Banking
Currency
Telecommunication
Infrastructure
Legal System and Dispute Resolution
Labour
Anti-CorruptionBy: VA VANNY,
Lecturer of LawBusiness and Legal 12
Limited Liability Company
By: VA VANNY,
Lecturer of LawBusiness and Legal 13
Types of Business
By: VA VANNY,
Lecturer of LawBusiness and Legal 14
Corporate tax
As a member of international organisations, ASEAN
(1999) and WTO (2004), tax policies are broadly aligned
with international rules and practices. The Law on
Taxation 2004 and Law on Customs 2007 provide
guidance.
Cambodia does possess some relatively unique tax
features, such as domestic withholding taxes and the
non-real and estimated regimes. References herein
refer to real-regime tax-payers.
By: VA VANNY,
Lecturer of LawBusiness and Legal 15
Tax Declarations and Payment
Taxpayers are required to make tax declarations and
pay taxes on a monthly and annual basis.
The monthly income tax return is to be filed and
taxes paid not later than the 15th day of the
following month.
By: VA VANNY,
Lecturer of LawBusiness and Legal 16
By: VA VANNY,
Lecturer of LawBusiness and Legal 17
Banking and Capital Market
By: VA VANNY,
Lecturer of LawBusiness and Legal 18
Given the abolition of currency during the Khmer
Rouge era in 1975, the Government has undertaken
a remarkable task to rebuild the currency and
banking systems of Cambodia.
The National Bank of Cambodia (NBC) is responsible
for regulation, oversight and licensing of the
banking industry. The applicable legislation is the
Law on Banking and Financial Institutions 1999.
By: VA VANNY,
Lecturer of LawBusiness and Legal 19
Financial Report and Auditing
Accounting and auditing practice in Cambodia has
dramatically improved in recent years assisted by the
establishment of professional bodies, the increase in the
number of accounting firms and the development of
laws and regulations.
The National Accounting Council (NAC) is a division
within the Ministry of Economics and Finance which is
responsible for oversight of accounting, including
standard-setting.
By: VA VANNY,
Lecturer of LawBusiness and Legal 20
The basic requirements for accounting,
financial reporting and auditing are outlined in
the Law on Commercial Enterprises and the Law
on Corporate Accounts, their Audit and the
Accounting Profession.
By: VA VANNY,
Lecturer of LawBusiness and Legal 21
The End
Legal and BusinessBy: VA VANNY, Lecturer of Law
Master of Law
Tel: 070 70 80 66, 016 629 606
E-mail: [email protected]
Semester II, Academic Year: 2014-2015
Chapter 3 BUSINESS ETHICS AND SOCIAL RESPONSIBILITY
By: VA VANNY,
Lecturer of LawBusiness and Legal 2
Overview
As the opening vignette illustrates, determining how to
conduct business appropriately can be challenging.
Wrongdoing by businesses has focused public attention and
government involvement to encourage more acceptable
business conduct.
Any business decision may be judged as right or wrong,
ethical or unethical, legal or illegal.
By: VA VANNY,
Lecturer of LawBusiness and Legal 3
In this chapter, we will take a look at the role of
ethics and social responsibility in business decision
making.
First, we define business ethics and examine why it is
important to understand ethics’ role in business.
Next, we explore a number of business ethics issues to
help you learn to recognize such issues when they
arise.
Finally, we consider steps businesses can take to
improve ethical behaviour in their organizations.By: VA VANNY,
Lecturer of LawBusiness and Legal 4
Business Ethics and Social Responsibility
Business Ethics: principles and standards that determine acceptable
conduct in business organizations.
Many consumers and social advocates believe that businesses should
not only make a profit but also consider the social implications of
their activities.
By: VA VANNY,
Lecturer of LawBusiness and Legal 5
We define social responsibility as a business’s obligation to
maximize its positive impact and minimize its negative
impact on society.
The most basic ethical and social responsibility concerns
have been codified as laws and regulations that encourage
businesses to conform to society’s standards, values, and
attitudes.
By: VA VANNY,
Lecturer of LawBusiness and Legal 6
The Role of Ethics in Business
There are good business reasons for a strong commitment to ethical
values:
Ethical companies have been shown to be more profitable.
Making ethical choices results in lower stress for corporate
managers and other employees.
Our reputation, good or bad, endures.
Ethical behaviour enhances leadership.
The alternative to voluntary ethical behaviour is demanding and
costly regulation.
By: VA VANNY,
Lecturer of LawBusiness and Legal 7
Recognizing Ethical Issues in Business
Learning to recognize ethical issues is the most important
step in understanding business ethics.
An ethical issue is an identifiable problem, situation, or
opportunity that requires a person to choose from among
several actions that may be evaluated as right or wrong,
ethical or unethical.
By: VA VANNY,
Lecturer of LawBusiness and Legal 8
Ethics are also related to the culture in which a
business operates.
In Canada or the United States, for example, it would
be inappropriate for a businessperson to bring an
elaborately wrapped gift to a prospective client on
their first meeting—the gift could be viewed as a bribe.
Experience with the culture in which a business
operates is critical to understanding what is ethical or
unethical.
By: VA VANNY,
Lecturer of LawBusiness and Legal 9
Ethical Issues
Conflicts of interest
Fairness and honesty
Communications
Business relationships
By: VA VANNY,
Lecturer of LawBusiness and Legal 10
Improving Ethical Behavior in Business
By: VA VANNY,
Lecturer of LawBusiness and Legal 11
It is difficult for employees to determine what conduct is
acceptable within a company if the firm does not have ethics
policies and standards.
And without such policies and standards, employees may base
decisions on how their peers and superiors behave.
Codes of ethics, policies on ethics, and ethics training programs
advance ethical behaviour because they prescribe which
activities are acceptable and which are not, and they limit the
opportunity for misconduct by providing punishments for
violations of the rules and standards.
By: VA VANNY,
Lecturer of LawBusiness and Legal 12
A survey by the US Ethics Resource Center on attitudes
toward and knowledge of ethics and ethics programs
indicated that employees’ personal ethics improve when
their organization has a comprehensive ethics training
program.
By: VA VANNY,
Lecturer of LawBusiness and Legal 13
The Nature of Social Responsibility
By: VA VANNY,
Lecturer of LawBusiness and Legal 14
Social Responsibility Issues
As with ethics, managers consider social responsibility on
a daily basis as they deal with real issues. Among the
many social issues that managers must consider are their
firms’ relations with employees, government regulators,
owners, suppliers, customers, and the community.
By: VA VANNY,
Lecturer of LawBusiness and Legal 15
Relations with Owners and Shareholders
Employee Relations
Consumer Relations
Environmental Issues
Community Relations
By: VA VANNY,
Lecturer of LawBusiness and Legal 16
By: VA VANNY,
Lecturer of LawBusiness and Legal 17
By: VA VANNY,
Lecturer of LawBusiness and Legal 18
THE END
By: VA VANNY,
Lecturer of LawBusiness and Legal 19
Legal and BusinessBy: VA VANNY, Lecturer of Law
Master of Law
Tel: 070 70 80 66, 016 629 606
E-mail: [email protected]
Semester II, Academic Year: 2014-2015
Chapter 4
Small and Medium Enterprises
(SMEs) In Cambodia
Overview
In 2004 the Cambodian government formed the SME
Sub-Committee and the SME Development Framework
was created.
The framework is the first attempt by the government
of Cambodia to identify barriers and introduce
measures specific to promoting development of the
country’s SMEs.
A number of policies have been implemented and
recommended to overcome these obstacles to SME
development.By: VA VANNY,
Lecturer of LawBusiness and Legal 3
Small and medium enterprises (SMEs) are a crucial part
of the Cambodian economy, contributing to both
economic and social development.
SMEs drive industrial progress, improve an economy’s
ability to deal with shocks and are recognized as
breeding grounds of innovation.
By: VA VANNY,
Lecturer of LawBusiness and Legal 4
With the expansion of globalisation, manufacturing
SMEs everywhere are facing increasing international
competition and need to improve quality and
efficiency of output to international standards to
survive.
The Cambodian business environment needs
improving, and SMEs need developing, to be able to
compete with imports.
Creating a level playing field and encouraging SME
development will not only enable Cambodian SMEs to
compete successfully in their domestic market; it will
also pave the way for their involvement in exporting.By: VA VANNY,
Lecturer of LawBusiness and Legal 5
The Royal Government of Cambodia (RGC) has stated a
commitment to private sector led growth and
recognizes the importance of SMEs for sustainable and
equitable economic development as well as creating
employment, and reducing poverty.
By: VA VANNY,
Lecturer of LawBusiness and Legal 6
Although still at the very early stages of
implementation, the government has introduced a
range of policies focused on SME development.
Key to organizing SME development strategies has
been the forming of the SME Sub-committee in
2004.
By: VA VANNY,
Lecturer of LawBusiness and Legal 7
Definition of SMEs
By: VA VANNY,
Lecturer of LawBusiness and Legal 8
History of Cambodian SMEs
Following independence from the French in 1954 therewas a boom in the number of Cambodian industrialSMEs.
According to a 1958 government report, in the mid 1950s there were 369 registered SMEs operating in Cambodia. By 1958 there were over 1000.
Included in this group were assembly plants for Citroencars, motorcycles and sewing machines, two scooterfactories, soap factories, weaving factories, paper andsugar mills and a canning factory.
By: VA VANNY,
Lecturer of LawBusiness and Legal 9
These factories along with much of the country’s
infrastructure were destroyed as Cambodia got dragged
into the deepening regional conflict.
During the Khmer Rouge (KR) regime’s control of the
country from 1975 to 1979 all enterprises were
forbidden, and trade, markets and money were
outlawed.
By the early 1980s agro-industry food processing
activities, predominantly rice milling, had started
taking place under the cooperative sector.
By: VA VANNY,
Lecturer of LawBusiness and Legal 10
By the mid 1980s a host of small private enterprises
providing basic manufactured goods, such as fish
sauce, had emerged to meet growing domestic
demand.
Nationalized SMEs were sold or leased to the private
sector from late 1989, and in 1991 the government
introduced a full-scale privatization programmed.
Macro-economic stability had been largely achieved by
the late 1990s and basic infrastructure and institutions
had been rebuilt providing the platform for growth of
SMEs.By: VA VANNY,
Lecturer of LawBusiness and Legal 11
The number of Cambodian manufacturing SMEs has
increased steadily since the late 1980s. A National
Institute of Statistics (NIS) survey of industrial firms
shows that manufacturing SMEs in Cambodia doubled
between 1993 and 2000.
By the late 1990s registered manufacturing SMEs in
Cambodia had grown to number over 24,000, increasing
to nearly 29,000 by 2005.
By: VA VANNY,
Lecturer of LawBusiness and Legal 12
With so many unregistered SMEs, it is difficult to
estimate the number of enterprises in Cambodia,
especially the number of very small businesses i.e. the
micro enterprise sector. Furthermore, predicting trends
in SME development is difficult due to the limited data
available on them.
However, it is very clear that the number of registered
SMEs has increased in the last few years and this trend
is bound to continue as Cambodia becomes more
integrated into the ASEAN and global economy.
By: VA VANNY,
Lecturer of LawBusiness and Legal 13
Main Features of Enterprises in
Cambodia
Micro, small and medium enterprises (MSMEs) account
for 99.9 percent of all businesses (503,008). Most
enterprises are concentrated in Phnom Penh and the
most economically active provinces of Kampong Cham,
Siem Reap, Battambang, Kandal and Takeo.
Majority of enterprises are in the service sector (85.8
percent), followed by manufacturing (14.1 percent).
By: VA VANNY,
Lecturer of LawBusiness and Legal 14
The overwhelming majority of enterprises (98 percent)
active within the service sector are micro firms. The
dominant subsectors are retail trade (60.2 percent),
food and beverage service activities (15.4 percent) and
wholesale and retail trade of motor vehicles and
motorcycles (5.2 percent).
By: VA VANNY,
Lecturer of LawBusiness and Legal 15
The main sectors in SMEs
Agriculture
Garment
Tourism
Food and Beverages
Construction
By: VA VANNY,
Lecturer of LawBusiness and Legal 16
By: VA VANNY,
Lecturer of LawBusiness and Legal 17
By: VA VANNY,
Lecturer of LawBusiness and Legal 18
The Roles of SMEs
SMEs play and important role in:
Creating Jobs (40%-50% of total employment)
Generating Income for low-income people and
vulnerable populations
Fostering Economic Growth, Social Stability, and
contributing to growth of dynamic private sector.
By: VA VANNY,
Lecturer of LawBusiness and Legal 19
SME’s Challenges and Constraints
High Regulatory Compliance Costs
Lack of a Clear and Market-Oriented Framework for SME
Development
Limited Access to Finance
An uneven playing field
Low productivity
Lack of access to information and customer markets
By: VA VANNY,
Lecturer of LawBusiness and Legal 20
How to Improve SMEs?
By: VA VANNY,
Lecturer of LawBusiness and Legal 21
ASEAN SME Policy Index
ASEAN SME Policy Index 2014 is one of the latest
publications by ERIA in collaboration with OECD. It
reviews, tracks and identifies SME policy development
and implementation, and can be used by governments
to compare policy experiences and analyze policy gaps
at national and regional levels.
By: VA VANNY,
Lecturer of LawBusiness and Legal 23
The Index calculates scores for eight policy
dimensions: institutional framework, access to
support services, cheaper and faster start-up and
better regulations, access to finance, technology and
technology transfer, international market expansion,
promotion of entrepreneurial education, and more
effective representation of small enterprises’
interests.
By: VA VANNY,
Lecturer of LawBusiness and Legal 24
Small and medium-sized enterprises (SMEs) are an
important driver for job creation and economic
growth in the ASEAN region.
As the ASEAN Economic Community moves towards a
higher level of market integration, new perspectives
are opening for these firms. Innovative and high-
growth SMEs, in particular, have an opportunity to
transform their business.
By: VA VANNY,
Lecturer of LawBusiness and Legal 25
To help SMEs fully tap these new possibilities, the 10
ASEAN member countries (Brunei, Cambodia,
Indonesia, Lao PDR, Malaysia, Myanmar, Philippines,
Singapore, Thailand and Vietnam) are taking steps to
stimulate SME growth. This includes extensive
structural reforms to enhance productivity, human
capital and enterprise performance.
The fact that small and medium enterprises (SMEs)
account for more than 96 per cent of all enterprises in
ASEAN shows their significance as the engine of growth
in the region.
By: VA VANNY,
Lecturer of LawBusiness and Legal 26
By: VA VANNY,
Lecturer of LawBusiness and Legal 27
SMEs in the region, however, are reported to have
difficulties in access to finance, technology, and
competitive markets. Entrepreneurship, compliance
with standards, marketing and management are also
some of the other problems faced by SMEs in ASEAN.
The strengthening of ASEAN SMEs requires
improvement of human resources, provision of access
to finance, technology and innovation, and market as
well as internationalization through policy support
measures, supplementary activities and appropriate
communication as well as providing access to finance
for start-up.
By: VA VANNY,
Lecturer of LawBusiness and Legal 28
Cambodia’s scores on all policy dimensions are below
regional averages and the lowest among ASEAN
countries, informing policymakers and stakeholders
that more needs to be done to overcome the barriers
to SMEs’ competitiveness and productivity given
regional integration.
There was scepticism about Cambodia’s scores being
lower than those of Laos and Myanmar as some
participants had experienced more difficulty doing
business in Laos than in Cambodia.
By: VA VANNY,
Lecturer of LawBusiness and Legal 29
By: VA VANNY,
Lecturer of LawBusiness and Legal 30
The Cambodian government could use
ASEAN regional integration as a platform
for reforms, seizing opportunities to
strengthen sectors and subsectors that have
competitive advantages.
By: VA VANNY,
Lecturer of LawBusiness and Legal 31
THE END
Legal and BusinessBy: VA VANNY, Lecturer of Law
Master of Law
Tel: 070 70 80 66, 016 629 606
E-mail: [email protected]
Semester II, Academic Year: 2014-2015
Chapter 5Investment and Investment
Environment In Cambodia
By: VA VANNY,
Lecturer of LawBusiness and Legal 2
Overview
Private sector development and investment to enhance
export-led, pro-poor growth is and has been a key
priority of the Royal Government of Cambodia (RGC) for
many years.
2012 marks a turning point led by FDI inflows of $1.5
billion, up from $900 million in 2011.
To promote private sector investment, important private
sector legal and regulatory reforms and measures have
been implemented already at the national level, many
under the umbrella of meeting Cambodia’s WTO
obligations. By: VA VANNY,
Lecturer of LawBusiness and Legal 3
RGC is committed to strengthening selected export
value chains in part by stimulating the requisite
foreign and domestic investment through investment
promotion, facilitation, and improvements in the
business environment.
To promote private sector investment, important
private sector legal and regulatory reforms and
measures have been implemented already at the
national level, many under the umbrella of meeting
Cambodia’s WTO obligations.By: VA VANNY,
Lecturer of LawBusiness and Legal 4
Global and National Contexts
Global, regional, and national investment trends
combine to create a complex backdrop against which
Cambodia’s attempts to stimulate growth and
diversification through increasing investment will
play out.
According to the newly released UNCTAD’s 2013
World Investment Report, global FDI fell by 18
percent to $1.35 trillion in 2012, with the inflows to
developed countries experiencing a significant drop.
By: VA VANNY,
Lecturer of LawBusiness and Legal 5
For the first time, developing countries took the
lead, attracting more FDI than developed economies.
While developing regions witnessed a small overall
decline in FDI inflows, the least developed countries
saw a 20 percent increase in FDI flows in 2012.
Cambodia, Myanmar, and Viet Nam are particularly
bright spots for labor-intensive FDI.
By: VA VANNY,
Lecturer of LawBusiness and Legal 6
FDI inflows to ASEAN increased by 2 percent in 2012,
with multinationals from Japan and elsewhere
increasing their FDI in the region.
This is partly due to opportunities resulting from
ongoing regional integration, including the prospect of
ASEAN Economic Community (AEC), in particular in
emerging frontier economies, such as Vietnam,
Myanmar, Lao PDR, and Cambodia.
By: VA VANNY,
Lecturer of LawBusiness and Legal 7
Cambodia continues to attract a strong flow of foreign
investment and witnessed a 73 percent gain in FDI
inflows from 2011 to 2012.
Preferential market access, low wages, a beneficial
geographic location, an open investment and trade
regime, political stability, and steady economic growth
among other factors have been cited as driving these
investment decisions.
Cambodia’s economy has remained strong with real GDP
growth at 7.3 percent in 2012 and projected at 7.2
percent for 2013.By: VA VANNY,
Lecturer of LawBusiness and Legal 8
Overall, the financial system has been resilient to shocks,
an generally withstood the global economic downturn.
Diversity of financial services has been growing fast with
the following developments recently noted: (a) trading at
the Cambodia Securities Exchange started in 2012; (b)
three life insurance companies, in addition to general
insurance businesses, were established in the past year;
and, (c) one financial leasing company opened up under
the supervision of the National Bank of Cambodia.
By: VA VANNY,
Lecturer of LawBusiness and Legal 9
The RGC has been preparing actively to enhance the
business environment for public–private partnerships
to meet the huge financial requirements of the
infrastructure needed for the country’s growing
economy.
With development partner support, the RGC has an
ambitious range of initiatives under way to
strengthen the legal, regulatory, and institutional
environment for public–private partnerships.
By: VA VANNY,
Lecturer of LawBusiness and Legal 10
FDI Trends and Policies FDI in Cambodia began in the mid-1990s and expanded
sharply after the conclusion of a comprehensive trade
agreement with the United States that granted Most
Favored Nation (MFN) treatment to Cambodian
exports.
Following the UN-sponsored national elections in 1993,
Cambodia took an outward-looking approach and
focused on liberalizing its economy.
Cambodia joined ASEAN and the ASEAN Free Trade Area
in 1999, allowing it to import and export goods and
services within the region with lower duties and taxes.By: VA VANNY,
Lecturer of LawBusiness and Legal 11
In 2004, Cambodia acceded to the WTO, which
expanded trading opportunities between Cambodia
and the rest of the world.
Together with these developments, Cambodia
focused on updating its legal and regulatory
framework and adopting new laws and regulations to
facilitate and promote investment, trade, and
business.
By: VA VANNY,
Lecturer of LawBusiness and Legal 12
The 1994 Law on Investment established the Council for
the Development of Cambodia (CDC) – the major
decision-making body for private and public sector
investment. The CDC is chaired by the Prime Minister and
composed of senior ministers from various government
departments.
In 2003, to simplify licensing schemes and make them
more transparent, predictable, and nondiscretionary, the
original Law on Investment was amended substantially by
the Law on the Amendment to the Law on Investment.
By: VA VANNY,
Lecturer of LawBusiness and Legal 13
As the Law on Investment stipulates, FDIs are treated in a non-
discriminatory manner except for land-ownership, which is stated
in the Constitution, and allowed to invest freely in many areas.
Under the current Law on Investment, the investors, who are
given Final Registration Certificates, will be entitled to various
incentives.
In addition, the Cambodian government has been improving their
investment facilitation services. For example, the Government
decided in 2005 to establish the Cambodian Special Economic
Zone Board (the CSEZB) under the CDC to promote the special
economic zone (SEZ) scheme in Cambodia.
By: VA VANNY,
Lecturer of LawBusiness and Legal 14
By: VA VANNY,
Lecturer of LawBusiness and Legal 15
By: VA VANNY,
Lecturer of LawBusiness and Legal 16
By: VA VANNY,
Lecturer of LawBusiness and Legal 17
Responsible Organization
The Council for Development of Cambodia (CDC) is
the sole and One-Stop Service organization
responsible for the rehabilitation, development and
oversight of investment activities.
The CDC is responsible for the evaluation and the
decision-making on all rehabilitation, development
and investment project activities (Article 3,
“Amended Law on Investment”).
By: VA VANNY,
Lecturer of LawBusiness and Legal 18
However, the CDC shall submit for the approval of the Council of Ministers any of thefollowing investment projects (Article 11, “Sub-Decree No.147 on the Organizationand Functioning of the Council for the Development of Cambodia”).
Capital investment of US$ 50 million and above
Politically sensitive issues
Exploration and the exploitation of mineral andnatural resources
Possible negative impact on the environment
Long-term development strategy
Infrastructure projects such as projects on the basisof Build-Own-Transfer (BOT), Build-Own-Operate-Transfer (BOOT), Build-Own-Operate (BOO) or Build-Lease-Transfer (BLT)
By: VA VANNY,
Lecturer of LawBusiness and Legal 19
Outline of Investment Approval Scheme
“Amended Law on Investment” of 2003 was made to adoptthe automatic approval system of the investment projects,which must be completed within 31 working days after thereceipt by the CDC or PMIS of the investment proposal, unlessthey are among the fields prohibited in the negative list orinvestment project related to the national interest/environmental sensitivity.
An investment approval will be issued not to an investor orinvesting enterprise but to a project. A project whichreceives the investment approval is called a QualifiedInvestment Project (or “QIP”).
By: VA VANNY,
Lecturer of LawBusiness and Legal 20
The investment incentives are granted automatically
to a QIP.
The CDC is expected to act as One-Stop Shop and
obtain all of necessary licenses required from
relevant ministries entities listed in the Conditional
Registration Certificate (CRC) for investment on
behalf of the investment applicant.
A QIP may be in the form of a joint venture. A joint
venture may be formed between Cambodian entities,
between Cambodian entities and foreign entities or
between foreign entities.
By: VA VANNY,
Lecturer of LawBusiness and Legal 21
Investment Incentives
Investment Incentives Granted to a Qualified
Investment Project (QIP)
Investment Incentives Granted to a Project in SEZ
(Chapter 4, the SEZ Sub-Decree)
Incentives Entitled to Specific Fields
By: VA VANNY,
Lecturer of LawBusiness and Legal 22
Investment Incentives (QIP)
The main incentive offered to QIPs is profit tax exemption (profit
tax is usually 20 percent) for a specific number of years (typically
six years plus a “priority period.)
Alternatively, QIPs can elect to use a special depreciation
allowance (more attractive for capital-intensive projects) which
allows a deduction of 40 percent of the value of tangible assets
used in production in their year of purchase or first year of use.
QIPs are exempt from import taxes on production equipment,
construction materials, and production inputs (the latter only in
cases where used to produce exports.)
By: VA VANNY,
Lecturer of LawBusiness and Legal 23
By: VA VANNY,
Lecturer of LawBusiness and Legal 24
Investment Incentives (ZES)
Profit tax exemption for nine years
Import duty exemption for equipment for
constructing the zone
VAT exemption
No foreign exchange transfer restrictions
Guarantees against nationalization and price
fixing.
By: VA VANNY,
Lecturer of LawBusiness and Legal 25
Investment Incentives (Specific Fields) Import duty reduction or exemption and the government-
borne VAT scheme (VAT exemption) have been introduced on
various agricultural materials such seeds, breeds or residues
and agricultural machines including tractors. : Prakas No.390
(MEF) on Adjustment to Customs Duty and Imposition of VAT
borne by the State.
QIPs in the area of agriculture and agro-industry may obtain
incentives in the form of a priority period of tax exemption on
profit for three (3) years.
VAT on the imported production input and equipment of
supporting industry, who serves to the export of garment,
textile or footwear, shall be exempted.By: VA VANNY,
Lecturer of LawBusiness and Legal 26
Investment Guarantee
A foreign investor shall not be treated in any
discriminatory way by reason only of the investor being
a foreign investor, except in respect of ownership of
land.
The Royal Government shall not undertake a
nationalization policy that would adversely affect
private properties of investors in Cambodia.
The Royal Government shall not fix the price or fee of
the products or services of a QIP.
By: VA VANNY,
Lecturer of LawBusiness and Legal 27
The Cambodian Government shall permit investors to purchase
foreign currencies through the banking system and to remit
abroad these currencies for the following purposes:
Payment for imports and repayment of principle
and interest on international loans
Payment of royalties and management fees
Remittance of profits
Repatriation of invested capital
By: VA VANNY,
Lecturer of LawBusiness and Legal 28
Limitation on Foreign Investment
Ownership and Use of Land: Ownership of land by investors for
the purpose of carrying on a QIP shall be vested only in natural
persons holding Cambodian citizenship or in Cambodian entities
but the use of land shall be permitted to investor, including
concessions, unlimited long-term leases and limited short-term
leases that are renewable.
Employment of Foreigners: A QIP is entitled to obtain visas and
work permits for the employment in Cambodia of foreign
citizens as managers, technicians and skilled workers, if the
qualification and expertise are not available in Cambodia
By: VA VANNY,
Lecturer of LawBusiness and Legal 29
Investment Procedures
By: VA VANNY,
Lecturer of LawBusiness and Legal 30
Advantages of Investing in Cambodia
ASEAN membership offers regional trade benefits
WTO member since 2004 increasing trade integrations
Duty free or preferential export access to most
developed economies
Among Asia’s lowest labour cost and a dynamic
workforce
Favorable investment environment.
By: VA VANNY,
Lecturer of LawBusiness and Legal 31
Constraints of Investing in Cambodia
Ineffective Legal Framework
Energy Supply
Transport Logistics Bottlenecks
Trade Facilitation
Skill Shortages
By: VA VANNY,
Lecturer of LawBusiness and Legal 32
The Impacts of Investing on Cambodia’s
Development
FDI contributes to the host country, not only by
providing the much-needed capital for investment
but also by enhancing job creation and
managerial skills and transferring new and
superior technology. All of these ultimately
contribute to economic growth and development.
By: VA VANNY,
Lecturer of LawBusiness and Legal 33
Augmenting Domestic Resources
FDI and Trade Promotion
Employment and Poverty Alleviation
Skills and Technology Development
Community Development
By: VA VANNY,
Lecturer of LawBusiness and Legal 34
THE END
By: VA VANNY,
Lecturer of LawBusiness and Legal 35