It gives me great pleasure to submit this article on behalf of the British Business Association of Cambodia.

After decades of war and a turbulent recent political history, the Kingdom of Cambodia has resumed its place on the international stage and has expressed its determination to participate in the economic dynamism in South East Asia and in particular the Mekong region. As a result, and over the past few years, Cambodia has joined the Association of Southeast Asian Nation (ASEAN), acquired “Most favoured Nation (MFN)” status from the USA and gained Generalised System of Preference (GSP) privileges from twenty-eight other developed countries. Furthermore and perhaps most notably, Cambodia has acceded to the World Trade Organisation (WTO) as the first Least Developed Country (LDC) member. On the back of these achievements, the Royal Cambodian Government has placed new emphasis and given new impetus to promoting the country as a destination for foreign direct investment.

In order to streamline the administrative procedures and to adapt to the changes in the global economic environment, the Cambodian authorities have also revised their Investment and Taxation laws. Previous legislation was adopted in 1994 and was deemed as no longer relevant for modern day Cambodia. Therefore Cambodia is putting itself on the right track in terms of investment polices to attract more foreign investment. It has been careful to balance the need to generate revenue with the desire to attract foreign investment.

Key factors and good reasons to invest in Cambodia in my opinion (having been based in Cambodia for ten years and seven months) are:

• Location – Cambodia is geographically located in the heart of Southeast Asia, which has become one of the most dynamic and vibrant elements of the World Economy. It has direct port access to the South China Sea and land and connections to the thriving economies of Vietnam and Thailand.
• An open economy – Cambodia has one of the most open economies in the region. The Index of Economic Freedom, compiled by the Heritage Foundation in the United States, ranked Cambodia 35th among 170 countries in 2003, on a par with Japan. Cambodia’s closest neighbours such as Thailand Vietnam and Lao People’s Democratic Republic were ranked 40, 135 and 153 respectively. Key factors influencing this ranking were fiscal burden, regulatory barriers, labour market restrictions and trade policy.
• Natural resources and access to cheap and trainable labour. There are natural resources in Cambodia that have not yet been utilised to their full potential, including, possibly, natural gas deposits. There are also man made resources to exploit such as the Angkor Temple complex which has huge tourism potential. The people of Cambodia offer a work force that can be easily trained and which has a good command of the English language.
• Direct dialogue and a pro-investor Government. Transparency within, and access to, the relevant authorities within the Government are good. The platform for this was laid in the year 2000 when the Government at the highest level established the Private Sector/Government Forum, which meets every six months. During the interregnum between these plenary meetings involving the Prime Minister and his Cabinet on the one hand and private sector representatives on the other (including from the international business community), various working groups meet monthly to iron out and work on key issues.
• Donor recognition and confidence. This is demonstrated by the support for trade integration and foreign investment initiatives, which has been stated by the major donors at the annual Consultative Group meeting between the Cambodian Government and the international community.

Despite these positive elements, there are still issues of concern for potential investors in Cambodia. The three most critical areas, in my opinion would be the:

• Regulatory framework and legal and judicial reform. This is a vital area that needs to be addressed quickly to help develop investor confidence. Initiatives are needed inter alia to develop the capacity of the existing judicial system, including the training of Court officials, and to establish a dedicated Commercial Court to help develop arbitration capacity.
• Combating corruption and smuggling. Early and real action needs to be taken to promote ethical standards, regulations and enforcement.
• Expediting the Governance Action Plan (GAP). A firm commitment coupled with visible political will is needed to help to improve the governance framework in Cambodia. Reforms in the legal and judicial system, enhanced public sector fiscal governance, public administration reform and the need to combat corruption are some of the immediate priorities.