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May 29, 2014

Investment Law Update

By Bretton G. Sciaroni, Senior Partner, Sciaroni & Associates
Industrial Development Policy Consultation - A Prelude to LOI Amendment
As mentioned in the previous client notification issued in April, the Royal Government of Cambodia will revise the Law on Investment (LOI) only after consideration and adoption of an Industrial Development Policy (IDP). This sequencing of legislative enactments was announced by H.E. Sok Chenda, Secretary General of the Council for the Development of Cambodia (CDC) and Senior Minister attached to the Office of the Prime Minister at a meeting of the Working Group on Law, Tax and Governance on February 19, 2014. (The Working Group is part of the system of consultation between the Royal Government and the business community under the aegis of the Government-Private Sector Forum, the preeminent public-private dialogue mechanism in Cambodia.)
In furtherance of the objective of enacting an Industrial Development Policy, a consultation was held with the business community at the CDC on March 17, 2014. H.E. Sok Chenda unveiled the draft Industrial Development Policy 2014-2024. Numerous parties had a role in creating the document, including the Supreme National Economic Council (SNEC), a governmental think tank, and the Ministry of Industry. The meeting was the first of a series of consultative sessions with members of the private sector.
The 23-page document outlined the current industrial issues of the Cambodian economy, challenges of industrial development, and objectives and targets for the IDP. According to the draft IDP:
The key thrust of IDP is to provide a version, policy framework and implementation arrangements to develop a competitive industry in Cambodia – contributing to sustained robust growth, full employment and high income. Its specific agenda is to address structural challenges in industrial development and facilitate investment in key industrial infrastructures. Its approach is to focus on diversification and competitiveness – attracting new industries, retaining more value added, and exploiting new potentials. 
In the draft IDP paper, a number specific issues are addressed, including foreign direct investment (FDI), industrial zoning, SME upgrading and modernization, export promotion and trade facilitation, financing, and technology transfer. In reviewing the draft IDP, it is clear that its adoption logically should precede the amendment of the Law on Investment as a considerable portion of the IDP’s objectives and recommendations concerns attracting FDI. The LOI and CDC are concerned to a large degree with bringing in FDI, so the adoption of an overarching governmental policy should inform the amendment of the law.
The advocacy of an IDP should come as no surprise to those following the economic policy development of the Royal Government of Cambodia. The draft IDP was foreshadowed in the Rectangular Strategy: Phase III, the basic policy document of the Royal Government for the fifth mandate. Released in September 2013, two chapters of the Rectangular Strategy discussed the need for a policy to support industrial development. Paragraph 93 specifically references the need for an IDP, and paragraph 103 lists a number of the elements that are later given more detail in the draft IDP document.
As mentioned previously, the Royal Government is currently promoting consultation with stakeholders, including the private sector. As announced by H.E. Sok Chenda at the March 17 consultation, the aim to is adopt the IDP by June, 2014. Therefore, anyone who has questions, comments or recommendations concerning this matter should submit them to the secretariat of the Working Group on Law, Tax and Governance at wgd-ltg@ibccambodia.com. Any submissions will be passed to the Royal Government.
Sciaroni & Associates
Sciaroni & Associates is a leading legal and investment advisory firm serving SEAsia since 1993 with offices in Cambodia, Laos and Myanmar.  The firm provides experienced advice and business insights to multinational corporations, local companies, governments, economic think tanks, global development investment funds and international NGOs in accordance with international standards. For more information contact info@sa-asia.com


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Sciaroni & Associates is a leading professional and investment advisory firm doing business in Southeast Asia since 1993. Based in Cambodia with legal offices in Laos and Myanmar, we provide experienced advice and business insights to many of the world’s leading companies, governments, economic think tanks, global development funds, international NGOs and the Royal Government of Cambodia in accordance with strict international standards.
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