Reform Needs Highlighted by FedEx Move

With US logistics giant FedEx having reduced its operations here in order to comply with Cambo­dia’s anti-corruption law, which prohibits the payment of bribes to public officials, the government yesterday said it would strengthen laws on taxation and excise.

Customs officials meanwhile distanced themselves from any responsibility regarding FedEx’s decision and provided little detail on how goods are cleared when entering Cambodia.

FedEx in February stopped ac­cepting shipments to Cambo­dia valued at more than $300 because of ingrained practices here that require companies to pay informal fees at the border, a practice now il­legal under Cambodian law.

CPP lawmaker Cheam Yeap, chairman of the National Assem­bly commission on banking and finance, said yesterday that some customs officials defied the law by taking bribes when clearing im­ported goods.

“We acknowledge that there are a small amount of customs of­ficials and other civil servants that violate the law and commit irregular practices by accepting bribes,” he said.

When told about the case in­volving FedEx, Mr Yeap said the government would “improve the service and bring in reforms to avoid misconduct harming investment.”

He claimed, however, that 95 percent of tax revenues from imported goods were legitimately collected by customs.

The anticorruption law, which was adopted last year, dictates that paying facilitation fees to public officials is punishable by between five and 10 years in jail. It also makes foreign companies operating here liable under foreign bribery laws in their own countries.

FedEx representatives said this week that the company would only recommence full operations in Cambodia once authorities modernize the clearance system for goods by publishing rates and properly invoicing duty payments.

When asked about the FedEx decision, Khieu Sam An, chief of customs at the Phnom Penh International Airport, said that the matter had nothing to do with customs.

“I am just in charge of collecting tariffs whenever the imported goods arrive,” he said. “For other problems, it is their [FedEx’s] internal affair.” Mr Sam An declined to comment when asked about the taxation rules on packages of more than $300, saying only that it was “technical work.”

Still, several logistics companies interviewed last week said they were forced to hire brokers to deal with customs officials so that they could avoid making payments that could be deemed illegal.

Uy Kosal, director of Phnom Penh’s customs and excise department, declined to comment and Pen Siman, director general of customs and excise, could not be reached.

Businesses are becoming aware that companies once free to pay facilitation fees in Cambodia are now bound by laws that prohibit this. Therefore, businesses say there is a need for the government to reform departments like customs and excise to ensure that businesses can operate with less risk.

“I believe that the government is already aware,” said John Brinsden, vice chairman of the International Business Club of Cambodia. “Whether they have the full political will to see it through, that is yet to be determined.”

“FedEx is a reinforcement of something they already know,” he added.

The overall picture among the business community is that there is recognition in the government that Cambodia must clean up its act or risk missing out on responsible investment.

In a May 2009 diplomatic cable released by the anti-secrecy organization WikiLeaks this week, the US Embassy in Phnom Penh highlighted the concerns of the business community when they gathered at a seminar.

“Participants highlighted the challenges they face to avoid corruption, claiming that ninety percent of Cambodians they encounter in business dealings (both government officials and business people) do not understand the concept of clean business,” the cable stated.

The cable also included comments by Bretton Sciaroni, an attorney and chairman of the American Cambodian Business Council, who said that Cambodia’s anticorruption law – at that point still not implemented – would “not be a panacea to eradicate the country’s corruption problems” due to “the lack of political will to employ existing legal tools to tackle corruption.”

 

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