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Cambodia: Selected Issues

Author(s):
International Monetary Fund
Published Date:
October 2004
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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.

A. Background

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.

Table 1.Cambodia: Schedule for Enacting Law for WTO Conformity1/
200120022003200420052006
Judicial Reform
1Law Establishing the Commercial CourtExpected
2Ratification of the New York Convention on the Enforcement of Foreign Arbitral AwardsAdopted
3Commercial Arbitration LawExpected
4Ratification of the ICSID ConventionAdopted
5Civil CodeExpected
6Civil Procedure CodeExpected
7Criminal CodeExpected
8Criminal Procedure CodeExpected
Trade-Related Intellectual Property Rights (TRIPS)
1Law on Trademarks and Acts of Unfair CompetitionAdopted
2Law on Protection of Patent, Utility Models, and Industrial DesignsAdopted
3Law on Copyrights and Related RightsAdopted
4Law on Geographical Indications Including Appellation of Origin
Expected
5Laws on Layout Designs of Integrated CircuitExpected
6Law on Plant Variety ProtectionExpected
7Law on Protection of Undisclosed InformationExpected
Technical barriers to trade (TBT), and Sanitary and phytosanitary (SPS) measures
1Sub-degree on Inquiry Points for (1) Services, (2) SPS, and (3) TBTAdopted
2Sub-Decree on Animal QuarantineAdopted
3Sub-Decree on Plant QuarantineAdopted
Custom Valuation
1Custom CodeExpected
2Law on Rule of OriginExpected
3Law on Anti-dumping Measures and on Countervailing MeasuresExpected
Trade-Related Investment Measures (TRIM)
1Amendment of Law on InvestmentAdopted
2Law on Export Processing ZonesExpected
Financial Intermediation
1Negotiable and Payment Transaction LawExpected
2Accounting LawAdopted
3Insolvency LawExpected
4Secured Transaction LawExpected
5Securities and Exchange LawExpected
6Commercial Leasing LawExpected
Other areas
1Postal Service LawAdopted
2Water Supply LawExpected
3Water Resources Management LawExpected
4Telecommunication LawExpected
5Tourism and Entertainment LawExpected
6Civil Aviation LawExpected
7Merchant Shipping LawExpected
8Land Traffic Law (Highway Code)Expected
9Fisheries LawExpected
10Forestry LawAdoptedExpected
11Land LawAdopted
12Royal Decree on CooperativeAdopted
13Commercial Contracts LawExpected
14Commercial Agency LawExpected
15Competition LawExpected
16Law on Safeguard MeasuresExpected
17Law on Business EnterprisesExpected
Source: The Cambodia authorities.

Due to the political impasse, the expected dates of enactment are now delayed by about a year.

Source: The Cambodia authorities.

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.

C. Conclusion

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.

46Prepared by Sumio Ishikawa (Japan Bank for International Cooperation, formerly PDR) and Koji Nakamura (PDR).
47All reference on future dates, including 2004, shown in this chapter for adoption of laws may now be delayed by up to one year.
48The WTO Agreement on TRIM precludes measures that could restrict and distort trade. Reflecting the low income status of Cambodia, however, the illustrative list contained in its membership agreement includes provisions for requiring enterprises to use a certain amount of locally produced inputs (local content requirements) and to limit the volume/value of imports they can purchase or use relative to their exports (Trade balancing requirements).

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