Foreign Investment in Agriculture in Cambodia CDRI Working Paper ...

Based on responses from the two companies, 6 five factors stood out as key hindrances
to investment applications and operations in agriculture in Cambodia. First, land tenure and
securing a lease agreement remain a challenge. One company claimed it took several transactions
to complete the leasing arrangement. In other instances, land brokers were the cause of land
disputes between local communities and the company. The second problem relates to unclear
guidance as to which institution a firm should approach to obtain a business licence. It took
one firm two months to have its ELC approved by MAFF by using the right Cambodian broker,
without whom it would have taken more than two years. Third, law enforcement remains weak.
Fourth, administrative procedures are still long but somehow acceptable. Finally, dispute
settlement and problem-solving mechanisms are seriously limited. For instance, there is no
department in a specific ministry to help investors deal with problems arising during application
for a business licence. Note, though, that firms do not see paying tips to public officials as a
bad thing or a major problem, as it helps speed up the application process and firms accept that
public servants’ salaries are low.
In response to the above obstacles, firms recommended that the government consider
adopting computerised investment or business licence application procedures and other related
administrative procedures in order to reduce paperwork, time and cost and make it easier for
firms to deal with problems during application. Firms also recommended setting up a feedback
department in each responsible ministry to help investors address problems arising during
application or operations.
No business model or contract arrangement between firms and farmers has been
introduced. In practice, firms buy maize from farmers at the market rate without entering into
any future contract. Farmers either get their produce to the factory gate or sell it to brokers, who
later sell it to factories or firms. Using brokers is more common, particularly when brokers are
the farmers’ creditors.
Overall, despite a certain number of barriers, the two investors interviewed appeared
to be supportive of the business environment in Cambodia. They said that Cambodia, as a
developing country, has many steps to take in order to improve its investment environment,
some of which are highlighted above.
6 It is crucial not to make generalisations using the results of these discussions, as a sample of two out of 59
companies does not give a true picture across the sub-sectors. This evidence should therefore be viewed as
anecdotal.
22 Foreign Investment in Agriculture in Cambodia