Lack of Funds Tops Business Complaints

Many small- to medium-sized Cambodian manufacturers consider corruption normal, and instead blame a lack of available operating funds and market information for hindering business, according to a recently released survey.

Sixty-three Phnom Penh-area businesses were profiled for the survey, the first to focus strictly on Cambodian-owned enterprises.

The survey was conducted by the Mekong Project Develop­ment Facility, a donor project managed by the World Bank group Inter­national Finance Corporation.

“We usually talk about poor infrastructure, lack of cheap electricity and rampant corruption as problems for private investments,” said Don Boring, the MPDF program officer who co-authored the report.

“It is surprising to learn that none of them were cited [as the] top three problems.”

Instead, manufacturers most frequently cited insufficient operating capital as being particularly problematic for their businesses. The survey concludes that a weak banking system only adds to cash flow problems—from daily money needs to long-term investment.

Of those surveyed, 38 percent have never used banking services at all and two-thirds have not tried to get bank loans, saying it is a waste of time.

Manufacturers complained of a lack of information on global markets, key technologies, commodity prices and government regulations, which prevents them from being able to competitively market their own products or prepare future business plans.

Those surveyed also said having to compete with smuggled imports threatens their businesses.

The surveyed businesses are all legally-registered by Cambodian owners operating within a 30 km radius of Phnom Penh and employing 20 or more people. Business managers were interviewed at length in Dec 1999.

The majority of surveyed firms are owned by ethnic Chinese and were established by entrepreneurs lured to the area by potential profits.

Only one in 10 manufacturers surveyed was female. Less than a quarter of managers interviewed had a college degree. Two-thirds had previous private sector experience.

The largest percentage of those surveyed produced goods like bricks, tile or cement. The garment industry, and food or beverage businesses are also well represented in the survey.

Respondents said they have increased their labor pool by 25 percent annually during the past few years and experienced a median revenue of $150,000 in 1999. Garment business said their median revenues reached as high as $200,000 in 1999.

According to the survey results, two-thirds of managers consider connections to any specific political party unnecessary to business. However, they admitted bribes are commonly paid to see that business goes smoothly.

More than 80 percent of the managers interviewed said their businesses are frequently visited by various officials—from district-level police officers to senior ministry officials—and that bribes are paid to allow businesses to break some regulations or for protection.

Only seven of the 63 managers said corruption is a major problem for their operations.

“Corruption is generally seen as a fact of life in Cambodia’s business environment,” the survey concluded.

Boring said he hopes the survey results can be used to identify areas of the business sector that most need government and donor support.

MPDF is now wants to hold intensive training sessions for credit officers of commercial banks in hopes of promoting commercial loans to local businesses.

MPDF, which helped establish the Rice Miller Associations and the Bricks & Tiles Maker Associations, will encourage more business associations to be established. Boring said these associations could aid the exchange of  business-related information and become powerful lobbies for pro-business regulations from the government.

 

 

 

 

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