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 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 Linkages as 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 Cambodia Litigation: 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 20

21 For contact: Dr. Sok Siphana (855) s: Any questions ?