1 Business Partnership for SMEs in the ASEAN Economic Community Opportunities from Cambodia and Thailand SMEs: By Dr. Sok Siphana Managing Partner of SokSiphana&associates.

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Business Partnership for SMEs in the

ASEAN Economic CommunityOpportunities from Cambodia and Thailand

SMEs:

By Dr. Sok Siphana

Managing Partner of SokSiphana&associates

And Advisor to the Royal Government of Cambodia

Bangkok, 17 November 2014

Brief background of the Presenter

Managing Partner of the law firm of SokSiphana&associates

Chairman of the Board of Cambodia Development Resource Institute (CDRI), Cambodia’s oldest and prominent independent research institute.

OTHER IMPORTANT ADVISORY POSITIONS

Advisor to the Royal Government of Cambodia attached to:

the Deputy PM and Minister of Foreign Affairs HorNamhong

the PermanentDeputy PM KeatChhon at CDC on development and economic policy matters, particularly focused on private sector development

the Supreme National Economic Council

Cambodia Representative to the ASEAN High Level Task Force to Strengthen ASEAN Secretariat and Related Organs

Eminent Person for the Lower Mekong Initiative

Member of the ASEAN Task Force on Substantive Issues 2012

ASEAN India Eminent Person Group Co-Chair

ASEAN Cambodian Sherpa to G20

The AEC in 2015

The realization of the AEC in 2015 will no doubt open up greater opportunities for socio-economic growth and Cambodia’s integration strategy could be guided by the AEC’s four main pillars of:

(1) a single market and production base; (2) a competitive economic region; (3) an equitable economic development;

(4) integration into the global economy.

Free Flow of Goods

Reduce cost in doing business;

Give more certainty; Broader

networking & Greater market

potential

Increase protection for

investors through

improved investment rules

12 Priority Integration

Sectors

Greater Competitive Advantage

(ASEAN resource based and labor

intensive is appropriate for manufacturing)

Towards a Single Market & Production Base

Free Flow of Services

Free Flow of Investment

Reduce cost in doing business

& Give more certainty

The AEC for Cambodia

Benefits of AEC

Towards Integration into

Global Economy & Supply Chains

Lower cost for doing business

(lower transportation cost); Greater

market potential; and Greater

market access

The AEC for Cambodia

Cambodia 1995: Wood products

Source: Atlas of Economic Complexity

Cambodia 2010: Mainly textiles

Rectangular Strategy II: Private Sector Development and Export  

Cambodia 2015: More Industry and technology

Source: Atlas of Economic Complexity

Rectangular Strategy III: Draft Industrial Development Policy  

FDI acts as a Driver for Industrial Transformation

Foreign Direct Investment acts as a driver for industrial transformation, drives the national economy and enhances a country’s industrial performance.

The GMS Economic Corridors – Regional Linkagesas Opportunities for Business Partnerships

What does AEC mean to SMEs?

What should SMEs do to these challenges?

Trade in AEC

NTM/NTB, NSW, ROO, business matching and networking, logistics

Investment Opportunity in AEC

Investing & operating, advisory (rules &regulations, tax, financial), partnership opportunities, MRA

“Single market & production base”

(ASEAN citizen & ASEAN firm)

SMEsDevelopment

Tech. upgrading, innovation, information, capacity building, standardization

Success SMEs in AEC: constraints & challenges

on goods, services, investment

“Competitive, Equitable, Integration”

The Roles of SMEs

Political Stability: Stability in Governmental Leadership Political Stability has led to Security

Cambodia’s Established Track Record

Legal & Regulatory Reform:

A. Investor Friendly Environment since 1993 100% Foreign Ownership of Companies Quick and Easy Company Registration Procedure No Restrictions on the Transfer of Funds No Foreign Ownership of Land, but

Long Term Leases and Concessions (equal treatment for Cambodian nationals and foreigners)

Strata Title

20% Maximum Profit Tax Rate on Earnings Easy to Obtain Work Permits for Foreigners

Legal & Regulatory Reform:

B. Investment Law: Enacted in 1994, Amended in 2003, in the process to be

amended again to make it more attractive Expedited Registration Procedure Tax Holidays Waiver of Import Duty on Construction Material and

Equipment. Waiver of Import Duty on Raw Materials for 1st Year of

Operation. No Nationalization

Cambodia’s Established Track Record

Legal & Regulatory Reform:

C. Accession to WTO (2004): Intellectual Property Laws:

Trademarks (2001) Patents (2002) Copyright (2003)

Law on Commercial Enterprises (May 17, 2005) Law on Negotiable Instruments (September 19, 2005) Law on Commercial Arbitration (March 6, 2006) Law on Government Bonds (November 20, 2006) Law on Secured Transactions (April 6, 2007) Law on Customs (June 22, 2007) Law on Concessions (October 4, 2007) Law on Insolvency (October 16, 2007) Law on Financial Leasing (May 27, 2009)

Cambodia’s Established Track Record

Legal & Regulatory Reform:

D. Other Laws Enacted by the Royal Government: Labor Law (1997) Banking Law (1999) Property Law (2001) Stock Market Law (2007) Civil Code (2007) Anti-Corruption Law (2010)

Bilateral agreement on the promotion and protection of investments between the Kingdom of Cambodia and the Kingdom of Thailand

Cambodia’s Established Track Record

Reasons to invest in Cambodia

Open economy Sound Macroeconomic Environment Competitive Investment Incentives Low Labor Cost Access to ASEAN and World Markets Preferential Trading Status Strategic Location

Negative Aspects of Doing Business and Investment

Corruption Courts & Dispute Resolution

Arbitration Law

High Cost of Doing Business Electricity Expensive

Lack of Regulations Difficulty of Due Diligence

Dispute Resolution in CambodiaLitigation: A three tiered court system characterized by: Limited Resources Significant backlog of cases Limited number of attorneys

Specialized Dispute Resolution Mechanisms Land Disputes: National Authority for Land Disputes Collective labor disputes: Statutory Arbitration Council General Labor Disputes: No specialized Labor Court Commercial Disputes: No specialized Commercial Court

Alternative Dispute Resolution Strong tradition of conciliation of disputes Commercial Arbitration Law (provides for National Commercial Arbitration Centre); Commercial contracts generally provide for arbitration outside of Cambodia (e.g.

ICC, Singapore International Arbitration Centre) Cambodia is a party to the New York Convention on Recognition of Foreign

Arbitral Awards and has adopted domestic legislation implementing terms of the Convention.

Due Diligence in Cambodia

Lack of Substantial Public Records Ministry of Commerce Tax Department Cadastral Office

Licenses – not necessarily publicly available (e.g., telecommunications, mining, etc.)

Credit Agency established No Court Records available in a systematic and

transparent manner. Newspapers? Annual Reports

Business Types

Sole Proprietorship Partnership

Limited Partnership General Partnership

Company Limited Liability Company Public Limited Companies

Subsidiary Branch office Representative office

THANK YOU

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For contact:Dr. Sok Siphana

(855) 98 666 323emails:

[email protected]@yahoo.com

Any questions ?