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New Study Compares the Business Environment in Cambodia’s 10 Most Economically-Active Provinces and Municipalities

The results of a study comparing the business environments of Cambodia’s ten most economically active provinces and municipalities were announced today in a seminar for 200 representatives from government, private enterprise, donor agencies and the media.

Phnom Penh, October 26, 2006 — This survey, the 2006 Provincial Business Environment Scorecard (PBES), is a joint initiative of the International Finance Corporation’s Mekong Private Sector Development Facility (IFC-MPDF) and The Asia Foundation, with funding from the Australian Agency for International Development (AusAID). Click here to view the Summary Report in pdf format (1.1MB).

According to the 2006 PBES, which is based on interviews with 500 business leaders in 10 provinces, the eastern border provinces of Kampong Cham and Svay Rieng have the best business environment. These are followed in descending order by Kampong Chhnang, Kampot, Kandal, Banteay Meanchey and Battambang. Those lowest ranked were the capital, Phnom Penh, Siem Reap, and Sihanoukville.

The seminar stressed that no province excels in all areas. Even top-ranked Kampong Cham scored poorly on indices related to unofficial charges, pro-activity of authorities, and resolution of disputes. Priority areas for improvement in all ten provinces were costs of starting a business, property rights, transparency (specifically access to information on regulations), participation in policymaking, informal charges, and crime prevention.

His Excellency, Suy Sem, Minister of Industry, Mines and Energy thanked IFC-MPDF and The Asia Foundation for conducting the PBES this year and committing to conduct this for at least two more years. “This is very valuable assistance. An annual survey that ranks provinces on the business-friendliness of their policies, regulations and services will encourage local officials to be more responsive to the needs of entrepreneurs. This will lead to a better business environment, greater investment and ultimately to job creation and a reduction in poverty.”

Dorothy Berry, IFC’s Vice President for Human Resources and Administration, congratulated the Ministry of Industry, Mines and Energy, and the Ministry of Commerce for their endorsement of the survey. “Research worldwide shows that for business environment reform to succeed, it must be implemented effectively at the sub-national level. If communication between national and local authorities is weak and local authorities lack the resources to implement reforms, these reforms will not succeed.”

Recognizing this, IFC and other development agencies, including The Asia Foundation, have been surveying business environments in developing countries and helping authorities to simplify regulations at the provincial or municipal level.

“This, says Dorothy Berry, “is where complex, costly and time consuming regulations take their toll on the businesses that must comply with them.”

As examples of successful reform, Dorothy Berry cited the cities of La Paz in Bolivia, and Quezon in the Philippines. “In La Paz, after just one year of simplifying business registration with IFC assistance, the time to get an operating license became 13 times faster. As a result of this and other improvements, the number of registered businesses rose by an astonishing 20%. In Quezon City, much faster times for obtaining business licenses and permits means that the number of permits issued rose by almost 70%. Quezon City businesses also reported more satisfaction with municipal services and less corruption. The municipality gained too, with revenues rising by almost 40%.”

Roderick Brazier, Country Representative of The Asia Foundation, stressed the important role the private sector, and especially small and medium enterprises, play in reducing poverty. “Across Asia sometimes as many as 99% of non-farm workers are employed by SMEs. Helping the small business sector to grow more effectively, reduces poverty by creating jobs for poor Cambodians. Conversely, obsolete or unclear regulations, cumbersome administrative procedures, or bureaucratic red tape and corruption, stifle the growth of small businesses and prolong poverty.

“IFC-MPDF and The Asia Foundation hope that the PBES results will encourage the public sector to improve policies by adopting good practices from high-scoring provinces. We also hope that business owners and business associations will use the data contained in these findings to encourage officials to improve their performance. In our work on similar surveys in Indonesia, the Philippines and Vietnam, we found that publicity about the surveys encouraged a large and influential audience to pay attention to business environment issues for the first time.”

Her Excellency Lisa Filipetto, Australian Ambassador to Cambodia stated, “It is our hope that the PBES scores will enhance the dynamic for change at the local level, for both the public and private sectors, by strengthening the demand for an improved business environment and improving the ability of provincial authorities to supply the conditions to satisfy that demand.”

Several development agencies have already indicated interest in assisting provincial authorities to improve economic governance in order to meet private sector demand for a better business environment and through this improve economic growth and increase incomes for Cambodia’s poorest people.

About The Mekong Private Sector Development Facility
The Mekong Private Sector Development Facility (IFC-MPDF; www.mpdf.org) is a multi-donor funded initiative set up by the International Finance Corporation in Vietnam, Cambodia, and Lao PDR, to reduce poverty through sustainable private sector development. The Facility works through six interrelated programs that seek to improve the business environment; develop the financial sector; improve managerial capacity; and increase sustainable business practices in three sectors that are central to economic growth and poverty reduction – tourism, agribusiness, and garments. IFC-MPDF’s donors are the Asian Development Bank, Australia, Canada, Finland, IFC, Ireland, Japan, New Zealand, the Netherlands, Norway, Sweden, Switzerland and the United Kingdom.

For more information, contact:
Ann Bishop (012-931-244)
Sok Meng (012-812-841)
Phone: (855-23) 210 922
Fax: (855-23) 215 157

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