Informal Charge obstacle to SMEs in Cambodia

At the present time, Small and Medium Enterprises in Cambodia is getting hurt from informal charge, which is the main problem to make and extend business difficult. The level of informal charge is different from place to others. And it hinders nation’s economic growth and job creation.

Business Issue Bulletin of MPDF defines “Informal Charge” as unofficial extra payment made to government officials to obtain some kind of benefit for an individuals or business.

The 2006 Provincial Business Environment Scorecard (PBES) revealed that the informal charge exist on two distinct levels in Cambodia: micro level or small bribes are paid to government officials to obtain favorable official decisions, expedite bureaucratic procedures and pass regulatory inspections. While macro level, bribes are sometimes paid in one-off amounts during the bidding process for public procurement contracts.

Due to additional cost, the informal charge affects badly business in Cambodia, including reduction of business profitability and predictability. The environment of doing small business in Cambodia makes it difficult to survive and stand in market. That is because of spreading of corruption in government institutions.

Nisha Agrawal, Country Manager of World Bank, was quoted from Business Issue Bulletin, as saying that “Informal Charge raises the cost of doing business and makes it difficult for most business to survive and compete in the international environment. That is why the Cambodia economy remains so dependent on the garment sector and has not been able to diversify into many other manufacturing sectors such as footwear, electronics, or food processing. This narrow base makes Cambodia very vulnerable to extend shocks and also prevents the economy from creating the better paying jobs that are necessary. This in turn creates high levels of unemployment and frustration amongst young people in Cambodia who would like to find good jobs.”

Until now, long-awaited draft anti-corruption law is not passed by the National Assembly. In the past both international community and NGOs demanded government to pass draft law that is the effort to have it by government since 1994 in order to combat against corruption.