III.External Sector Issues
Chapter 6. Cambodia’s Accession to WTO46
75. This chapter reviews the various reforms that will be introduced in connection with Cambodia’s WTO accession. The large number of laws that are expected to be enacted by the Nation Assembly in the next few years will put in place a sound legal infrastructure conducive for economic activity in Cambodia. However, the benefit of these reforms will, of course, only be realized with full enforcement of the legal framework.
76. WTO ministers approved Cambodia’s Membership Agreement on September 11, 2003. However, in view of the political impasse following the July 2003 elections that prevented parliament from convening, the General Council of the WTO agreed to extend the deadline for ratification of the agreement by the Cambodian parliament from March to September 2004. With the formation of a new government in mid-July 2004, it is expected that the National Assembly will ratify the accession agreement before the deadline.
77. As part of the WTO accession package, the Cambodian authorities committed to adopt 46 pieces of legislation, of which 14 pieces have already been adopted (Table 1). The remaining laws, originally envisaged to be adopted during 2004–6, will now most likely be adopted during 2004–07.47 These legislations are aimed at providing a fair and predictable business environment. They are important for attracting foreign investment, especially in countries like Cambodia where governance is a serious problem, as they will help provide a predictable and transparent investment environment.
|1||Law Establishing the Commercial Court||Expected|
|2||Ratification of the New York Convention on the Enforcement of Foreign Arbitral Awards||Adopted|
|3||Commercial Arbitration Law||Expected|
|4||Ratification of the ICSID Convention||Adopted|
|6||Civil Procedure Code||Expected|
|8||Criminal Procedure Code||Expected|
|Trade-Related Intellectual Property Rights (TRIPS)|
|1||Law on Trademarks and Acts of Unfair Competition||Adopted|
|2||Law on Protection of Patent, Utility Models, and Industrial Designs||Adopted|
|3||Law on Copyrights and Related Rights||Adopted|
|4||Law on Geographical Indications Including Appellation of Origin|
|5||Laws on Layout Designs of Integrated Circuit||Expected|
|6||Law on Plant Variety Protection||Expected|
|7||Law on Protection of Undisclosed Information||Expected|
|Technical barriers to trade (TBT), and Sanitary and phytosanitary (SPS) measures|
|1||Sub-degree on Inquiry Points for (1) Services, (2) SPS, and (3) TBT||Adopted|
|2||Sub-Decree on Animal Quarantine||Adopted|
|3||Sub-Decree on Plant Quarantine||Adopted|
|2||Law on Rule of Origin||Expected|
|3||Law on Anti-dumping Measures and on Countervailing Measures||Expected|
|Trade-Related Investment Measures (TRIM)|
|1||Amendment of Law on Investment||Adopted|
|2||Law on Export Processing Zones||Expected|
|1||Negotiable and Payment Transaction Law||Expected|
|4||Secured Transaction Law||Expected|
|5||Securities and Exchange Law||Expected|
|6||Commercial Leasing Law||Expected|
|1||Postal Service Law||Adopted|
|2||Water Supply Law||Expected|
|3||Water Resources Management Law||Expected|
|5||Tourism and Entertainment Law||Expected|
|6||Civil Aviation Law||Expected|
|7||Merchant Shipping Law||Expected|
|8||Land Traffic Law (Highway Code)||Expected|
|12||Royal Decree on Cooperative||Adopted|
|13||Commercial Contracts Law||Expected|
|14||Commercial Agency Law||Expected|
|16||Law on Safeguard Measures||Expected|
|17||Law on Business Enterprises||Expected|
Due to the political impasse, the expected dates of enactment are now delayed by about a year.
Due to the political impasse, the expected dates of enactment are now delayed by about a year.
78. The Ministry of Commerce and Negotiation Team for WTO Accession of Cambodia compiled work programs for WTO accession. It identified 101 working programs and assigned them to each relevant ministry with a specific deadline. However, progress has been slow due to a lack of local technical capacity and a lack of coordination among ministries.
B. Key Reform Areas
79. The reforms are expected to strengthen five aspects of private sector activity. They will: (i) provide a transparent legal basis for commercial activities and simplify dispute resolution; (ii) ensure that property rights are upheld; (iii) protect consumer from unsafe products; (iv) facilitate a smooth functioning of external trade; and (v) promote financial intermediation.
- To strengthen the judicial system relating to commercial activities, the authorities have committed to: (i) ratify a Law in establishing Commercial Courts, (ii) adopt Civil Code and Civil Procedure Code, (iii) introducing a new Criminal Code and a new Criminal Procedure Code, and (iv) enacting a Law on Commercial Arbitration. Commercial courts are aimed at improving the procedures for settling commercial disputes, which are currently settled on a voluntary basis under the auspices of the Chamber of Commerce. The new Civil Code will establish the ground rules for individuals and businesses that are important for the creation of stable and predictable legal environment. The adoption of the civil and criminal Procedures Code will enable enforcement of contracts, and thereby help strengthen the rule-of-law. The law on commercial arbitration provides the enforcement mechanism of the United Nations Convention on the Enforcement of Foreign Arbitral Awards (“New York Convention”) that was ratified by Cambodia in 1960. Together with the ratification of the International Center for Settlement of Investment Disputes Convention (“ICSID convention”) in 2001, the introduction of the law on commercial arbitration will help businesses reduce costs and the risks of unfair treatment in commercial disputes.
- To protect intellectual property rights, the Cambodian authorities have already adopted and are drafting a series of legislation in line with the Trade Related Aspects of Intellectual Property Rights (TRIPS) Agreement. The areas covered are copyright, trademark, geographical indications, industrial designs, patents and layout designs of integrated circuits. The parliament adopted the Law on Trademarks and Acts of Unfair Competition in 2001, the Law on Protection of Patent, Utility Models, and Industrial Designs in 2002, and the Law on Copyright and Related Rights in early 2003. The Law on Geographical Indications is expected to be adopted in 2004, and the Law on Layout Designs of Integrated Circuit in 2005. Cambodia agreed to comply with TRIPS no later than the beginning of 2007. Some NGOs have raised concern that the ongoing reform in this area may contradict the agreement reached in Doha where the least-developed member countries were excluded from the obligation to implement the section of the patent under TRIPS before 2016, particularly in the area of the patent for pharmaceutical products.
- To ensure the safety of manufactured and agricultural products, the authorities are committed to fully implement the Technical Barriers to Trade (TBT) Agreement starting on January 1, 2007, and the Sanitary and Phytosanitary (SPS) Agreement starting on January 1, 2008. This requires the authorities to develop technical regulations and conformity assessment procedures as well as to train staffs for their implementation. “Inquiry Points” need to be established to notify the WTO of new technical regulations and publish them in accordance with the TBT and SPS Agreements. To serve as Cambodia’s TBT Inquiry Point, the Department of Industrial Standards of Cambodia was established in the Ministry of Industry, Mines and Energy by a sub-decree in June 2002. The National Codex Committee at the Ministry of Commerce will serve as Cambodia’s SPS Inquiry Point.
- To facilitate external trade and to ensure conformity with WTO requirements, the draft Law on Customs was adopted by the Council of Ministers in December 2002, and is expected to be approved by the Parliament in 2004. Cambodia’s current custom valuation system is considered not to be in compliance with the Agreement on Implementation of Article VII of the General Agreement on Tariffs and Trade of 1994 (“Custom Valuation Agreement”). Duplication of work by customs agencies, red tape, delay in processing of documents, and over-valuations or inconsistent valuation were all concerns raised by the WTO Working Party. Accordingly, the Law on Customs: (i) specifies the customs valuation mechanism; (ii) provides a clear statement of importers’ obligations and responsibilities; (iii) reduces the scope for discretion when granting exemptions; (iv) authorizes the Minister to establish procedures and requirements through regulation; (v) spells out clearly the powers and obligations of customs officers, (vi) provides a transparent and clear set of penalties, (vii) facilitates the use of electronic commerce; and (viii) clearly specifies custom tariffs.
- Provisions for Custom Valuation Agreement relating to transparency, confidentiality, right of appeal, sureties for the release of merchandise, and the accompanying interpretation notes will be implemented at the time Cambodia accedes to the WTO. However, the phasing-out of “minimum custom values” and the use of the valuation mechanism may be somewhat delayed. The present use of minimum custom values will be replaced by “transaction values.” The authorities were concerned that the move to transaction values could potentially reduce government revenue, and thus requested a transition period until January 1, 2009, when Cambodia will fully implement the Custom Valuation Agreement.
- The Amended Law on Investment was enacted in February 2003, and a sub-decree to this law is being prepared with the assistance of the World Bank and FIAS. Although the amended law improves transparency by clearly defining procedures for granting exemptions, the scope of exemptions was expanded. A sub-decree to establish an industrial zone in Koh Kong was issued in February 2002, and a draft law on Export Processing Zone is expected to be approved by the National Assembly in 2004. The authorities are committed to ensuring that the measures taken under these laws will be consistent with the Agreement on Trade-Related Investment Measures (TRIM).48
- To comply with the principles and provisions of the General Agreement on Trade in services, Cambodia’s authorities have prepared and are preparing several laws to promote financial intermediation. The Accounting Law, aimed at improving financial reporting, including reporting of profits for tax purposes, was enacted in 2002. With technical assistance from the Fund, the authorities have prepared the draft Negotiable Instruments and Payments Transactions Law to reduce payment system risk by eliminating legal uncertainties and to provide a firm foundation for a modern payment system. The law is expected to be enacted in 2004. The absence of a legal basis for secured transactions makes it difficult for banks to provide collateral-based lending. The authorities are preparing a draft Secured Transaction Law to be enacted by the National Assembly in 2004. It will establish a bare bones framework authorizing a property owner to use his or her business property as security for a business loan. To ensure orderly and effective insolvency procedures, the authorities are preparing an insolvency law, which is expected to be approved by the National Assembly in 2004.
80. It is expected that WTO accession and the associated legal reforms will contribute to establishing a favorable business environment in Cambodia. However, legal reforms by themselves are not sufficient. Enforcement of these laws and training sufficient legal staff both in the private and government sectors are needed.