Page 1 PROJECT INFORMATION DOCUMENT (PID) APPRAISAL STAGE Report No.: AB1551 P roject Name Cambodia Trade Facilitation and Competitiveness Region EAST ASIA AND PACIFIC Sector Other domestic and international trade (100%) Project ID P089196 Borrower(s) ROYAL GOVERNMENT OF CAMBODIA Implementing Agency Royal Government of Cambodia HE Kem Sithan, Secretary of State Ministry of Commerce 20 A&B Norodom Blvd Phnom Penh, Cambodia www.moc.gov.kh Environment Category [ ] A [ ] B [X] C [ ] FI [ ] TBD (to be determined) Date PID Prepared April 13, 2005 Date of Appraisal Authorization April 19, 2005 Date of Board Approval June 2, 2005 1. Country and Sector Background Cambodia is among the world’s least developed countries. It is characterized by: · Deep poverty. According to the NPRS, 36 percent of the total population of 13.1 million lives below the poverty line of US$0.46-$0.63 per day; a third of this population have access to an improved water source; one third is illiterate; half of young children are underweight. · The legacy of conflict. Decades of conflict, ruinous policies and embargo destroyed the institutional fabric of civil society and commerce. Cambodia’s challenge is compounded by the legacy of internal conflict that not only depleted the country’s reserves of human talent on which entrepreneurship is based, but also disrupted the continuity of social institutions and formal and informal rules that provide the framework for trade and investment. The economic landscape reflects this lack of key institutions. It also reflects an attempt by the Government to fill the institutional vacuum through administrative measures that have largely not worked, and created opportunities for corruption. Basic public services and infrastructure are absent for most Cambodians. · Narrow growth based on an extremely small formal private sector. The majority of the population is rural, and linked to subsistence agriculture. An estimated 80 percent of families headed by someone employed in agriculture are poor. According to the 2001 labor force survey, manufacturing employs less than nine percent of the workforce. A large share of the private sector operates informally, contributing minimally to the tax base and facing limited access to finance and trade. · Extreme dependence on one export sector, and substantial risks. The remarkable growth of the garment sector from 1997 to 2001 demonstrated the potential impact of private sector development on poverty. Garment sector exports grew from $28 million in 1995 to approximately $2 billion in 2004, employing over 270,000. By the end of 2004, Cambodia had become a top 20 garment exporters to the US. However, the quota system under which Cambodia’s exports emerged has ended, giving way to a competitive marketplace in which China is rapidly increasing share. Cambodia now faces significant risks because garments comprises 4/5 th of its exports. · Poor infrastructure. Cambodia’s infrastructure coverage is the lowest in the East Asia region, contributing to high cost, poor quality services and limited access to markets. There is no power grid, a lack of adequate highway and rail service, and high port costs. Competition is minimal in all sectors, lowering quality and Page 2 raising costs. The services that exist are mainly concentrated in urban areas, and the rural population suffers f rom lack of access to markets, from unsafe and unreliable water and dependence on traditional biomass energy. Future growth in such sectors as agroindustry and tourism are particularly sensitive to infrastructure. · Declining FDI over the past decade. FDI has been on a secular trend downward since 1996, when inflows reached nearly $300 million. FDI inflows for 2003 were $87 million (WDI). Policy Environment and Institutional Performance To supp ort the Government’s reform objectives, the World Bank conducted an Investment Climate Survey in 2003 of 502 enterprises in 10 sectors in five major Cambodian cities: Phnom Penh, Siem Reap, Kampong Cham, Sihanoukville, and Battambang. These enterprises ranged in size from micro (fewer than 10 employees) to large (over 100 employees) and included both domestic firms and those with foreign ownership. In addition to the main survey, a survey of 200 rural non-farm enterprises was conducted, evenly divided between rural firms around Battambang, Kampong Som, Kampong Chhang, and Kratie. The key findings were that: · Excessive regulation and weak institutions contributed to low productivity levels. The Investment Climate Survey found that total factor productivity and labor productivity are low in comparison with Bangladesh, India, China, and Pakistan. Some key factors that contribute to low productivity include corruption, weak rule of law, informal practices and complex and costly regulation. Cambodia’s unique history has resulted in economic openness, and yet administrative controls that are a heavy and costly burden to Cambodia’s private sector. · Vulnerability to corruption. These administrative measures create frequent interaction between public officials and firms, and therefore enable corruption to take place. In the World Bank’s Investment Climate Survey of 502 urban firms, 82% of respondents reported that they pay bribes, and 71% of large firms suggest such payments are frequent. · Trade facilitation processes are particularly constraining, with the second longest clearance times after Pakistan and some of the highest observed incidence of unofficial costs in any ICA. Within Cambodia’s regulatory environment, import and export processes were identified as having the highest unofficial costs at the time of the survey (June 2003). The Bank’s 2003 Value Chain Analysis found that the cause of high trade costs was not related to any one particular institution, but rather the cumulative impact of overlapping institutions, each of which required streamlining. · Weak governance of public-private partnerships and concessions. The private sector represents the best opportunity for infrastructure development given financial and human resource constraints and the need for efficiency. However, consumers will only accrue the benefits of private participation if there is competition and transparency. However, private infrastructure transactions suffer from a lack of clarity over roles and responsibilities within and between various government agencies with respect to PPI design, procurement, approvals and implementation, a general lack of transparency in the handling of dealings between the public and private sectors, and specifically in the negotiation and management of specific contracts between government and investors, from the initiation of a potential project through the construction, implementation or transaction to the operation of the project — few if any concession agreements or negotiated contracts have been made available for audit or public scrutiny. The consequences of these problems include non-bankable projects, higher than necessary prices to consumers in the Cambodian economy, and a lack of information on the value-for-money received by the public and the RGC from infrastructure projects, due to the inability to assess and allocate revenues, risks and profits in concessions. · A lack of a credible judicial system. Progress is being made in enacting commercial laws and adopting related regulations, but judicial system capacity, remuneration and integrity are not yet being addressed in any adequate way. The inability to enforce laws and contractual rights and obligations in a predictable, transparent and efficient fashion has restricted the ability of the financial sector to expand services to even 10% of the private sector, and continues to undermine investor confidence. Judicial decisions are seen in the private sector as arbitrary and subject to capture. Page 3 P olicy Reforms in Support of Trade Facilitation & Competitiveness 1. Cambodia now faces an historic opportunity to change its growth path. Cambodia is faced with a growing, stable, and integrating East Asian region, macroeconomic stability, and new market opportunities afforded by its successful bid to become the first Least Developed Country to be invited to join the WTO. Beyond WTO, the ASEAN Free Trade Area and China Early Harvest measures provide Cambodia with an increasing number of market access opportunities free of tariffs. This provides a good context to undertake a second generation of reform focused on enabling broad- based growth. However, without also addressing “behind the border” investment climate constraints, the extent to which market access can be converted to employment gains is sharply limited. 2. The Government has elaborated a private sector development strategy. In August 2004, the Government released its Rectangular Strategy, in which it committed to “broaden the base of growth by strengthening governance to attract investment and ensuring competitiveness.” 1 In February 2005, the Government further described its platform as (i) trade facilitation, by rationalizing government agencies that impose high costs and delays on the private sector and reducing transaction costs; (ii) promotion of market infrastructure and deregulation; (iii) enhancing market access and access to information; (iv) institution building and enhanced Rule of Law; and (v) promoting small and medium-sized enterprises. Key features of this strategy are listed below: · Implementing WTO commitments and promoting exports are cornerstones of the Government’s strategy. Cambodia’s Protocol of Accession commits the country to low bound tariffs, phased implementation of the agreements on Trade Related Intellectual Property Rights (TRIPS), Trade Related Investment Measures (TRIMS), the Telecom Reference Paper, and opening key service sectors, and use of WTO-compliant trade measures (pricing, tariffs, fees, subsidies and customs measures inter alia ) in exchange for MFN treatment by all members. To take advantage of market access, a new National Export Strategy is being developed with support of the International Trade Center Gevena (ITC), which focuses on expanding the base of exporters to include agro-industry, handicraft, aquaculture and organically-certified products. · Evolving legal framework. Legal and judicial reform has been an area of slow progress over the past five years, but there are indications that CY05 may see the development of a more conducive regulatory framework. At the time of writing, the following laws had either already been presented to Parliament or were in an advanced stage of the drafting process: the Company Law, the Insolvency Law, Secured Transactions Act, Civil Code, the Law on Commercial Arbitration, Sub-Decree on Economic Concessions and Law establishing a Commercial Court. Drawing attention to the pressing issues of transparency and reliability in the implementation of the law, in March 2005, the Prime Minister took initial steps to crack down on judicial corruption . · A Twelve-Point Plan of investment climate reforms. The Prime Minister appointed a Special Inter- Ministerial Task Force (SITF) to respond to the findings of the Investment Climate Assessment. In June 2004, the SITF defined an integrated program of reform to reduce unofficial costs and clearance times, while increasing public revenue. It determined, inter alia, to create a cross-agency Reform Team, consolidate inspection mandates across agencies, introduce selective inspections based on risk criteria, reduce documents to a Single Administrative Document, introduce a Single Window process, and reengineer and automate procedures. At present, five of the twelve actions have been implemented, and the remainder is being implemented on a schedule through December 2005 (see Box 1). Importantly, within the Twelve-Point Plan, the Ministry of Commerce has substantially reduced the cost and time required to register a business. The cost to register has been reduced by over $400, while the Minimum Deposit Requirement has been reduced from US$5,000 to US$1,000. · Redefining the Role of CamControl. Cambodia Import Export Inspection and Fraud Repression Department (CamControl) has long been recognized as a source of redundancy with CED. As part of the Trade Facilitation Reform program, the Government with EU support conducted a review to examine the role of CamControl and how the Government can discharge its important regulatory responsibilities, while maintaining and/or further 1 “Our Hope, Our Strategy, Our Actions” Keynote Address , Seizing the Global Opportunity Conf., Feb 11, 2005. Page 4 improving its contribution to the overall trade facilitation objectives. The main options considered are merging C amControl functions with the CED, and creating an FDA within the Ministry of Health, or in MOC. · Customs reforms. As part of WTO accession, Cambodia prepared a new Law on Customs consistent with the R evised Kyoto Convention that addresses a number of discrepancies with modern international practices including in valuation, staff remuneration, inspection and audit. This Law was forwarded to the National Assembly with a target passage date of July 1, 2005. The RGC’s pace on delivering on WTO commitments has been mixed. · Streamlining trade documentation. The Government, with EU, and has completed technical work that would introduce an enhanced customs declaration to serve as a Single Administrative Document, replacing 45 documents that are currently involved in an import transaction. Streamlining documentation is a proxy for reengineering the information flow, an essential prerequisite for ICT. This reform specifically included the elimination of the Economic Police Permit, Export License and Import Permit, the withdrawal of the Officially Certified Invoice, the consolidation of inspection, rather than multiple agencies inspecting independently, the conversion of Certificate of Origin from pre-shipment to post-shipment. B OX 1: T WELVE P OINT P LAN : G OVERNMENT C OMMITMENTS TO I MPROVE THE I NVESTMENT C LIMATE AND T RADE F ACILITATION - J ULY 2004 – D ECEMBER 2005 Action 1. Establish a Cross-Agency Trade Facilitation/Investment Climate Reform Team Action 2. Establish Transparent Performance Measurement including Private Sector Monitoring. Action 3. The trade facilitation process, including all licenses, procedures and documents, will be reviewed to remove overlaps and unnecessary approvals. Following the reengineering, a Single Administrative Document will b e implemented and other documents progressively eliminated . Action 4. Introduce an overall risk management strategy to consolidate and rationalize all examination requirements of the different control agencies Action 5. A strategic review of the role of CamControl will be launched to more productively deploy the organization’s unique knowledge of quality control processes and make optimized use of inputs and resources from other agencies, such as the CED. Action 6. A Single Window process to manage trade facilitation will be piloted in the Port of Sihanoukville by December 2005. The Trade Facilitation process, once streamlined, will be automated by December 2005. Action 7. The Government will introduce a WTO compatible flat fee for service, and the service will be defined by a service-level agreement. The fee structure will be public. Action 8. Streamline the process and reduce the cost of incorporating with the Commercial Register, which is maintained at the Office of the Clerk of the Commercial Court, and costs an average of $630 and 30 days. Action 9. Streamline the process notification of the Ministry of Labor to start hiring employees, which costs $250 and 30 days to complete. Action 10 . Harmonize registration for VAT, income tax and company registration using the same form and resulting in the same unique identifier. This would facilitate information sharing across agencies. Action 11. Implement a national award to promote good corporate citizenship in the private sector. Action 12. Monitoring and Reporting will take place through the Private Sector Forum . Page 5 · A Policy on Private Participation in Infrastructure and Law on Concessions is being considered at the Council of Ministers. In the PPI/investment climate area, the Government has defined a clear process for planning, approving, awarding, negotiating, and managing PPI investment, and has enshrined this revised process in a new Concessions Law and subdecree which is currently under review at the Council of Ministers f ollowing extensive consultations with the private sector. Trade Facilitation: Institutional R eform & Automation Legal Transparency Transparency & Investor Confidence REGIONAL Recovery Export-led Growth & Diversification Broader Growth & Employment Export Market Access F und COMPLEMENTARY REFORMS GOALS Long clearance times Institutions Vulnerable to corruption Unclear PPI Regulatory Environment Lack of Trade Support Institutions Non-transparent Transactions Lack of credible Legal Institutions CONSTRAINT High clearance costs Narrow Export Base Customs Law Single Admin. Document (EU) CamControl Review (EU) Risk Mgmt Strategy (AusAID) WTO Accession Tariff Reform National Export Strategy (ITC) Ag. Quality Improvement (AQIP) Better Factories (ILO) Gov’t Concessions Law UNIDO Concessions UNCTAD “Blue Book” Gov’t Amended LOI Electricity Law Water Law Commercial Court Company Law Insolvency Law Commercial Arbitration PROJECT RESPONSE PPI Governance ASEAN Market Integration WTO Market Access BILATERAL China Early Harvest EU Everything B ut Arms OPPORTUNITY · New investment promotion strategy. The Council for Development of Cambodia (CDC)’s Cambodian Investment Board (CIB), as Cambodia’s investment promotion agency, is currently undergoing the process of re-defining its role as a result of the Amendment to the Law on Investment, which was approved by the National Assembly in February 2003. The Amended Law on Investment explicitly moves the CIB toward serving as a facilitative and promotional agency, with many evaluative and regulatory functions replaced by automatic systems. FIAS and MIGA are currently helping CDC define a new corporate strategy including goals and objectives, the strategies and resources it will use to achieve these and the performance measurements by which it will assess its progress and success. · Merit-Based Pay Initiative (MBPI). The Government is introducing, on a pilot basis, differentiated compensation based on performance and merit in the context of Public Financial Management (PFM) in the Ministry of Economy and Finance. A team comprised of the Ministry of Commerce, Customs & Excise Department and Port Authority has been tasked with proposing a framework, using the MBPI framework developed by MEF, by 20 May 2005. It will be funded, in part by user fees. · Acceleration of the judicial reform process . The RGC’s avowed Legal and Judicial Reform (LJR) Strategy 2 outlines seven broad objectives that are aimed at improving access to, and the quality of, Cambodia’s legal and judicial services. The third of these objectives requires the “provision of better access to legal and judicial information by promoting dissemination of basic legal knowledge through official publications, electronic media and information folders and ensuring easy accessibility to all legal and juridical information for legal practitioners and any other interested party”. And, in accordance with the LJR Action Plan formally adopted by the RGC in November 2004, acceleration of the LJR process is to occur in part by making “the improvement of access to legal and judicial information” an “operational priority” of the RGC in 2005-2006. 2 The Strategy was formally adopted by the RGC’s Council of Legal and Judicial Reform in June 2003. Page 6 2 . Objectives The objective of the Project is to support the Recipient’s strategy to promote economic growth by reducing transaction costs associated with trade and investment, introducing transparency in investment processes and facilitating access of enterprises to export markets. Indicator Baseline Measure The share of firms reporting corruption as a moderate, major or severe problem declines by 10%. 74% in 2003 ICA Follow-up Investment Climate Survey in 2006/2007 A 50% reduction in the number of documents required to clear imports. 45 Cross-agency process map, Performance Monitor ing System Share of export shipments that are physically inspected less than 40% by December 2006. 100% Performance Monitoring System 50% reduction in time required to clear import shipments. 6.5 days Performance Monitoring System The enabling environment facilitates integration of new firms into the global economy, as indicated by the number of firms preparing draft export development plans. Zero Fund manager reports. Transparency / accountability introduced into PPI. Number of PPI contracts publicly disclosed and subject to competitive procurement processes. Zero-few Gradual increase to 80% of transactions by year 5. Number of judicial decisions publicly disclosed. Zero-few 50% of commercial cases in Supreme Court and Court of Appeals Response time on investor inquiries. 10% reduction per year The higher level objectives are to increase the private sector’s contribution to poverty reduction through growth, export diversification and improved service delivery. The reforms to be funded by the project originated in the policy dialogue surrounding the Investment Climate Assessment in which governance-related constraints were seen as the most severe obstacles to private sector-led growth. The reforms focus on using transparency, competition, regulatory streamlining and market-based standards to increase confidence and improve private sector’s capacity to make investment and trade decisions. The reforms will help Cambodia convert the market opportunities afforded by WTO to jobs by streamlining and reengineering trade institutions, helping local firms meet international market standards, engage the private sector to increase the efficiency of public service delivery through the introduction transparency, competition and accountability into private participation in infrastructure provision. 3. Rationale for Bank Involvement Trade facilitation reforms are positively associated with increased trade and GDP growth, while investment climate reforms more broadly are associated with decreasing corruption, increasing formalization of business, increased growth and public sector revenue. Wilson, Mann and Otsuki (2003) found that if below-average APEC members could increase trade facilitation performance half-way to the APEC average, inter-APEC trade would increase by $254 billion. UCTAD (2001) found that a 1% reduction in the trade facilitation costs could increase Asian GDP some $3.3 billion. Given the end of MFA, any cost reduction associated with trade facilitation would also have the effect of making the garment sector more competitive, and in the long-term contributes to diversification. The operation supports Cambodia’s results-based Country Assistance Strategy (CAS) The CAS includes a pillar on Private Sector Development which defines results in removing governance impediments to growth. The proposed operation is aligned against three results. On 13 July 2004, the Bank received an official request for a project to finance the reform. 4. Description Component 1. Trade Facilitation Component. The application of appropriate IT to border management activities can significantly streamline operations, improve the level of transparency and accountability and facilitate the achievement of all border related government objectives. The project will finance (a) an electronic Single Window Page 7 integrating all trade facilitation agencies, including the deployment of ICT for automation of Customs functions, l inked to complementary improvements in systems, procedures and developments in the organizations involved in product clearance (b) adherence to the Kyoto Convention including the adoption of a risk management capacity; (c) a design of a merit based pay system for Cambodia’s trade regulatory agencies; and (d) the development of an Integrity Action Plan for CED based on a self assessment. Component 2. Export Market Access Fund. The component will finance (a) technical support to the Ministry of Commerce’s Department of Export Promotion to establish the exporter technical assistance window, and (b) a technical assistance matching grant facility that would cover 50% of the cost of achieving market standards, or evidence of compliance with those standards. The EMAF would offer its services solely in response to private sector demand on a nondiscriminatory and a first-come-first served basis. An initial survey suggests demand from at least 100 enterprises. The Garment Manufacturers’ Association of Cambodia (GMAC) is expected to apply for $600,000 cofinancing over three years to finance the International Labor Organization’s Better Factories campaign in order to achieve Core Labor Standards. Component 3. PPI and Investment Component. The PPI and Investment Component will finance a program of capacity building to implement the Law on Concessions and the Amended Law on Investment. The objective of the technical assistance is to improve the organizational capacity of the Ministry of Economy and Finance, Council for Development of Cambodia, National Audit Authority, infrastructure regulatory bodies such as the Electricity Authority of Cambodia, and infrastructure line Ministries to manage and deliver of PPIs transactions that are conducted fairly, transparently, competitively and in the public interest. The Investment Promotion sub-component is aimed at supporting the CDC and CIB to adopt strategies that streamline the process of foreign direct investment, and that enhance the attractiveness of Cambodia as an investment destination through improvements in the regulatory environment as well as in factor markets. The program consists of three distinctive activities: (a) appointment of a local long-term resident advisor; (b) a series of 5-days training workshops for 15-20 CIB staff on subjects like investment generation and facilitation; and (c) installation of IT system. Component 4. Legal Transparency Component. This Component will finance (a) the establishment and maintenance of a website in the Khmer language to make readily available to the public the final judgments of all cases in the Supreme Court and in the Court of Appeal; (b) the establishment and maintenance of a website to ensure the electronic publication of all Cambodian laws, related regulations and draft legislation in the commercial law field, broadly defined; and (c) training to utilize the established systems. A link will be established between this site and other relevant websites, including, most importantly, the website of the Ministry of Commerce and to the legislation and the subsidiary legislation (i.e. decrees and sub-decrees), as referred to in the judgments. Publication of such information will contribute to increasing confidence in the capacity of the appellate courts to interpret, apply and enforce Cambodian laws generally and the commercial legal framework in particular in a fair and consistent manner. An increase in confidence in the transparency and predictability of judgments will reduce the risk now associated with private domestic and foreign investment. 5. Financing Source: ($m.) BORROWER/RECIPIENT 0.33 IDA GRANT FOR POOREST COUNTRY 10.00 Total 10.33 6. Implementation Partnership with donors. The World Bank leads a donor sub-working group on trade facilitation. This working group includes seven other donors who coordinate policy and have achieved a division of labor with respect to implementing the 12-Point Plan of investment climate reforms. The European Union, with its Multilateral Trade Assistance Project, has supported the streamlining of documentation necessary to introduce a Single Administrative Document, as well as the review and redefinition of the role of CamControl. AusAID, with its Cambodia-Australia Technical Assistance Facility (CATAF) has provided important support to help implement a risk management strategy. The IMF and JICA have led the work of reforming the Customs and Excise Department, while UNCTAD and UNIDO have been extensively involved in reform of investment and PPI. Export diversification work has been led by the International Trade Center and GTZ. Page 8 P artnership with the private sector . The private sector has played a critical role in demanding and defining the reforms financed by the proposed project. The Government-Private Sector Forum includes an Export Processing and Trade Facilitation Working Group, co-Chaired by the Sr. Minister of Commerce and the Chairman of the Garment Manufacturers’ Association. It has been raising and discussing key issues throughout the duration of the Bank’s engagement. The project will utilize existing coordination structures established by the Government as its management structure. In August 2004, Prime Minister’s Decision No. 12/2004 created a Special Inter-Ministerial Task Force (SITF) on Trade Facilitation and Investment Climate, Chaired by the Minister of Economy and Finance and Vice- Chaired by the Minister of Commerce. On 26 July, 2004, following the formal creation of the new Government, the Prime Minister signed Decision 44/2004, formalizing this as the Government’s focal point for reform of the investment climate, trade facilitation, SME promotion, and PPI – the Steering Committee on Private Sector Development. The Government established the Trade Facilitation Subcommittee, Chaired by the Sr. Minister of Commerce, as well as the Investment Climate and PPI Subcommittee, Chaired by the Sr. Minister of Economy and Finance. Project Management Units. In each key agency (Customs & Excise Department, Ministry of Commerce, Council for Development of Cambodia, and Ministry of Justice) a project manager will be named to supervise the daily implementation of the Project activities. Executing Agency. Given that over 80% of funds will be utilized to finance the Trade Facilitation and the Market Access Components managed by the Ministry of Commerce, the Government has nominated the Ministry of Commerce as the Executing Agency. Reform Team (Project Coordination Unit). The Government’s Reform Team will be response for coordinating project tasks, executing all procurements and preparation of Quarterly Management reports that the Executing Agency will provide to the Bank and other donors. Procurement. Particular attention will be given to procurement arrangements to ensure that the project is executed in a timely, transparent, efficient and integrated approach. Procurement of works, goods and services under the project will follow World Bank Guidelines. All procurement will be executed by the Reform Team, on behalf of the other PIUs. This team’s capacity will be strengthened to ensure that staff has adequate skills and competence. 7. Sustainability The sustainability of the technical capacity financed by the project will depend on (a) the government’s political will to enforce policies supported by the project through positive and negative incentives; (b) the ability to finance, after the project, maintenance of the investments. Positive and negative incentives to maintain policies will be established through government’s policy messages, enforced by sanctions placed on civil servants who violate policies, appropriate performance-based remuneration and promotion of staff who promote policies. This will require intensive, ongoing policy dialogue with and within government, a robust monitoring system whose results are available to the public, and donor collaboration. 8. Lessons Learned from Past Operations in the Country/Sector Ascertain political will . The reforms financed by the proposed project have wide-ranging implications for both public institutions and private sector behavior. As such, they require strong political will to be achieved. The project has incorporated these lessons through sequencing decisions that demonstrate such political will – such as passage of enabling legislation, removing CamControl from routine inspections and streamlining documents – ahead of project approval without using conditionality. The approach has also created venues for very broad dissemination and consultation, such as the Seizing the Global Opportunity conference. The need for a cross-agency perspective. The key problems in trade facilitation presented themselves as issues – such as high unofficial payments - that could easily be interpreted as caused by the Customs & Excise Department, which has recognized the need to improve its performance and has developed a plan to that end. However, through Page 9 a value chain analysis, the problem was recognized as involving both internal issues within departments, problems o f role clarity across agencies, and problems of information sharing and coordination both across agencies and in the interface with the private sector. Reengineer processes ahead of ICT investment . One of the broad and enduring lessons from technology investments around the world are that much of the efficient gain resulting from ICT investment is from simplification and streamlining of underlying process rather than from the technology itself. A corollary of this point is that processes should be streamlined and information flows simplified before technology investments. The project has incorporated this point through mapping of the full process involving all relevant agencies, elimination of process overlaps, and sharing a Single Administrative Document across all relevant agencies. Address incentives and financial sustainability . Many ICT investments have failed due to weak incentives to use the new system. The proposed project addresses this question through adoption of the merit-based pay initiative funded through a WTO-compatible fee on transactions. 9. Safeguard Policies (including public consultation) Safeguard Policies Triggered by the Project Yes No Environmental Assessment ( OP / BP / GP 4.01) [ ] [x] Natural Habitats ( OP / BP 4.04) [ ] [x] Pest Management ( OP 4.09 ) [ ] [x] Cultural Property ( OPN 11.03 , being revised as OP 4.11) [ ] [x] Involuntary Resettlement ( OP / BP 4.12) [ ] [x] Indigenous Peoples ( OD 4.20 , being revised as OP 4.10) [ ] [x] Forests ( OP / BP 4.36) [ ] [x] Safety of Dams ( OP / BP 4.37) [ ] [x] Projects in Disputed Areas ( OP / BP / GP 7.60) [ ] [x] Projects on International Waterways ( OP / BP / GP 7.50) [ ] [x] 10. List of Factual Technical Documents World Bank 2004: Seizing the Global Opportunity: An Investment Climate Assessment and Reform Strategy for Cambodia . Washington, DC: The World Bank. _____. 2003a. Cambodia: Legal and Judicial Sector Assessment . Washington, DC: The World Bank. _____. 2003b. Towards A Private Sector -Led Growth Strategy for Cambodia - Volume 1: Value Chain Analysis . Washington, DC: The World Bank. International Labor Organization. 2002. “Second Synthesis Report on the Working Conditions Situation in Cambodia's Garment Sector.” World Bank and Asian Development Bank. 2003. Cambodia - Enhancing Service Delivery through Improved Resource Allocation and Institutional Reform: Integrated Fiduciary Assessment and Public Expenditure Review. Washington, DC, The World Bank. World Bank and the Public-Private Infrastructure Advisory Facility. 2002. Private Solutions for Infrastructure in Cambodia: A Country Framework Report. Washington, DC, The World Bank. Trade Facilitation and Economic Development: Measuring the Impact. John S. Wilson, Catherine L. Mann, and Tsunehiro Otsuki. World Bank Policy Research Working Paper 2988, March 2003. European Union Multilateral Trade Assistance Project for Laos and Cambodia (EU MULTRAP), Strategic Review of CamControl Digby Gascoine, Phnom Penh, February 2005. Page 10 European Union Multilateral Trade Assistance Project for Laos and Cambodia Final Report: Review and R ationalization of Trade Documentary Requirements, Ian James Scott, February 2005. Streamlining Trade Facilitation: A Recommendation for Comprehensive Trade Facilitation Reform in Cambodia. SMS Cambodia, Consultant to World Bank, October 30th, 2003. Project Concept Note Aide Memoires Royal Government of Cambodia Prime Minister’s Decision No. 12/2004: Special Inter-Ministerial Task Force (SITF) on Trade Facilitation and Investment Climate. Prime Minister Decision 44/2004 SSR dated 26 July 2004. Steering Committee for Private Sector Development, dated 26 July 2004. Decision 46 SSR, 11 August 2004. Establishes Three Sub-Steering Committees relating to Investment Climate and Private Participation in Infrastructure; Trade Facilitation; and Small to Medium Enterprises. Draft Law on Concessions, Draft Customs Law, Draft Sub decree to the Amended Law on Investment 11. Contact point Contact: Magdi M. Amin Title: Sr. Private Sector Development Spec. Tel: (202) 458-4216 Email: mamin2@worldbank.org 12. For more information contact: The InfoShop The World Bank 1818 H Street, NW Washington, D.C. 20433 Telephone: (202) 458-5454 Fax: (202) 522-1500 Web: http://www.worldbank.org/infoshop