World Bank Approves $10 million Grant to Help Cambodia Streamline Investment, Promote Transparency and Economic Growth Contacts: Bou Saroeun Email: sbou@worldbank.org Phnom Penh, June 3, 2005 -- The World Bank’s Board of Directors approved the Cambodia Trade Facilitation and Competitiveness Project to promote economic growth by reducing transaction costs associated with trade and investment. The project, which is financed by a $10 million grant from the International Development Association, as well as $330,000 from the Kingdom of Cambodia, also aims to introduce transparency in investment processes including infrastructure concessions, and facilitate access of enterprises to export markets. “Cambodia has an historic opportunity to take advantage of the opportunities offered by the WTO and the ASEAN Free Trade Area,” said H.E. Cham Prasidh, Senior Minister and Minister of Commerce “This project provides a platform for reducing the obstacles our businesses face in converting enhanced market access into enhanced trade, employment growth, and ultimately, greater poverty reduction. By reducing the cost of importing and exporting, the project will help our garment industry weather the storm of international competition, and lay a foundation for increased exports from all sectors.” The project builds on last year’s Investment Climate Assessment and the resulting Twelve-Point Plan of Investment Climate Reforms, developed by the Government. The report highlighted the extremely high cost and long periods of time required to import and export products, characterized by a manual process of over 40 documents to import a product, and 60 to export, involving six Government Ministries. Following the Prime Minister’s Decision 44 which created a Steering Committee on Private Sector Development, the Government has worked over the past year on implementing the reforms. Achievements, supported by the World Bank and a number of donors including the European Commission and AusAID, include removal of much of the documentary burden, removing several agencies from the clearance process, and reforming CamControl to remove overlaps and redundancies with other agencies. “The reforms over the past year directly address some of the key challenges facing both the Government and the private sector,” said Magdi M. Amin, Sr. Private Sector Development Specialist and Task Team Leader. “The project will further that work by using transparency, competition, and regulatory streamlining to improve the private sector’s capacity to make investment and trade decisions, and to increase the efficiency of public service delivery. The technology investments will help cement these reforms and make the interface between the Government and private sector faster and less vulnerable to corruption. These changes will save time and money that businesses can use to focus on competition and growth.” The project will accomplish this by focusing on four specific areas: Trade Facilitation – The project will create an electronic “Single Window” through which an exporter or importer will be able to discharge all trade regulatory requirements. In particular, it will automate key functions of the Customs and Excise Department, and link Customs, the Ministry of Commerce, the Port Authority of Sihanoukville and others through a technology network. It will replace the dozens of manual documents with a single electronic interface, eventually to include payment systems. This will be led by the Ministry of Commerce and the Customs and Excise Department. Export Market Access Fund (EMAF). The project will create a $1.6 million matching grant fund that exporters can use to cover half of the cost of developing new export markets, and particularly on achieving market standards required to export. This will be managed by the Ministry of Commerce’s Department of Export Promotion. Private Participation in Infrastructure and Investment Promotion. This component will help implement the Amended Law on Investment, which streamlines foreign investment processes and reduces them to a 28-day cycle. It also supports the proposed Law on Concessions, which will help the Ministry of Economy and Finance, Council for Development of Cambodia, National Audit Authority and regulatory bodies such as the Electricity Authority of Cambodia, manage and deliver privately provided infrastructure projects that are conducted fairly, transparently, competitively, and in the public interest. This will be implemented by the Council for Development of Cambodia. The Legal Transparency Component will finance a Khmer language website to publish the final judgments of all Supreme Court and Court of Appeals’ cases; a website on all Cambodian laws, related regulations and draft legislation in the commercial law field, broadly defined; and training to use the established systems. This will be implemented jointly by the Ministries of Justice and Commerce. “The project comes at an important time,”said H.E. Keat Chhon, Senior Minister and Minister of Economy and Finance. “The challenge of ensuring increasing growth and employment could not be more urgent for the garment sector and for the rest of the economy. We are committed to full and successful implementation through the Private Sector Development Steering Committee, and through careful collaboration of all of our agencies.” “This project supports one of the key pillars of our new Country Assistance Strategy for Cambodia for 2005-2008 that was endorsed by the World Bank Board last month, on May 12. With the expiry of quotas for the garment sector, it is essential that Cambodia urgently takes the necessary steps to improve its investment climate and reinvigorate its prospects for growth. Without that, there can be no hope for poverty reduction. Together with other partners, we are very pleased to be providing support to Cambodia’s efforts to diversify its economy and stimulate new sources of growth” said Nisha Agrawal, Country Manager for the World Bank in Cambodia.