An important component of a supportive institutional framework is the capacity of the country's public agencies, both economic and financial, to plan and implement the policies, laws and regulations affecting the private sector. The Royal Government's institutional structure of investment policies and strategies is entirely focussed on the Council for the Development of Cambodia, (CDC), which is the highest decision-making level in defining the framework for investment strategies and accepting or rejecting investment proposals in concrete cases The Cambodian Investment Board (CIB), an operational arm of the latter, receives and evaluates investment proposals made by individual or corporate investors or submissions made in response to Governmental appeals to. investors, and submits each case, with its own technical and economic evaluation, to CDC.

The Cambodian Investment Board is also in charge of investment promotion at home and abroad; in order to better attract foreign investment it has undertaken a comprehensive competitive advantages studies and has also launched promotional campaigns in major business centers and worldwide through an advertising campaign. In this sense, the most important function of the Board is that it constitutes a one-stop- service for investors offering them all the necessary information, assistance and guidance for obtaining as quickly as possible the necessary registration, authorizations or tax exemptions. The Board is as well at the investors' disposal, whenever needed, to facilitate the setting up of their businesses.

CDC as the executive agency of the Royal Government and have also the following responsibilities:

(i) to be the Etat Major and the "one-stop service" of the Royal Government responsible for the rehabilitation, development and investment activities.

(ii) to guide the preparation and the conception of development frameworks and strategies for Cambodia in cooperation with the relevant institutions.

(iii) to coordinate the international community, bilateral/ multilateral organizations and NGOs in order to sensibilize them with the country's economic framework and strategies and the priorities of the National Programme to Rehabilitate and Develop Cambodia for the sake of utilizing international aid for practical purposes.

(iv) to facilitate and coordinate interministerial activities, as well as the activities of the ministries and institutions involved with donor countries, organizations and investors.

(v) to provide guidance in the utilization of public and private resources in the development process of Cambodia.

(vi) to facilitate and, streamline administrative procedures for donor countries and investors.

(vii) to review and decide all the matters pertaining to the rehabilitation and development and other public sector investments through the "one stop service" mechanism of CDC.

(i) a capital investment of at least USD 50 million.

(ii) politically sensitive issues.

(iii) the exploration and the exploitation of mineral and natural resources.

(iv) possible negative impact on the environment.

(v) long-term strategy.

(vi) the concept of Build-Owned- Transfer (BOT) or Build- Owned-Operate-Transfer (BOOT) or Build-Owned- Operate (BOO) or Build-Lease-Transfer (BLT).

The First Prime Minister and the Second Prime Minister as Co- chairmen, the Senior Minister in charge, of Rehabilitation and Development as Vice-chairman, and the Senior Minister in charge of Culture, Arts, Land Use and Urbanization, the Minister of Public Works and Transports, the Minister of Foreign Affairs and International Cooperation, the Minister of Economy and Finances, the Minister of Planning, the Secretary-General of CDC, the Secretary-General of the Cambodian Rehabilitation and Development Board, and the Secretary-General of the Cambodian Investment Board as members.

THE MOST IMPORTANT FUNCTION OF THE BOARD IS THAT IT CONSTITUTES A ONE-STOP-SERVICE FOR INVESTORS OFFERING THEM ALL THE NECESSARY INFORMATION, ASSISTANCE AND GUIDANCE FOR OBTAINING AS QUICKLY AS POSSIBLE THE NECESSARY REGISTRATION AUTHORIZATIONS OR TAX EXEMPTIONS

The Law on Investment promulgated in August 4, 1994 opened up all economic sectors, including State-owned enterprises, for private and investment initiatives. Article 12 of Chapter 5 of the Law on Investment makes available incentives to encourage investments in such important fields as:

(1) Pioneer and/or high technology industries;
(2) job creation;
(3) Export-oriented,
(4) Tourism industry; (5) Agro-industry and Transformation industry;
(6) Physical infrastructure and energy;
(7) Provincial and rural development;
(8) Environmental protection, and
(9) Investments in Special Promotion Zone (SPZ) as shall be created by law.

The Royal Government will also be taking new financial, fiscal and non-fiscal measures completing the incentives already granted to new investors; these measures, together with the establishment of commercial courts and organs of arbitration to resolve disputes and litigations, etc., will be instrumental to create an investment climate proper to the promotion of national and foreign private investment.

PRIVATE SECTOR DEVELOPMENT

While private initiative and investment are envisaged to be the engine of Cambodian growth, it is considered that the present embryonic state of the country's private sector is such that the mere provision of a facilitating environment, while necessary, will not itself be sufficient to prompt a significant expansion for some years. The early policy initiatives, such as the tax provisions of the Investment Law etc., must be complemented by other, imaginative policies and programmes to accelerate the development of the private sector.

While the Royal Government has neither the interest nor the means to prop up fledgling or inefficient firms, it does wish to explore such ideas as the establishment of a "Development Fund" to channel domestic savings into micro-enterprises and to support Cambodian participation in the privatization of State- owned enterprises. Other areas to be explored include the more widespread and systematic use of labour-intensive technologies, especially but not exclusively in construction activity; and a private sector "institute" to link, guide and advise the Government, business community and academia. The Government would welcome technical assistance to investigate these and related ideas, and thus to turn them into reality.

PRIVATE SECTOR ORGANIZATIONS

With the steady inflow of foreign investments into the country, the private sector, though organizationally is still at its infancy stage, begins by default to get organized with a view to have, through collaborative action between government and private sector, a collective influence on the policy and institutional environments of Cambodia. To date, a Corporate Club whose members include major investment companies was formed and met on a regular basis on issues affecting their business. Other smaller informal networking groups of small businessmen also met throughout the Capital City. Several national business newspapers and smaller business associations newsletters were published providing a forum for expression, education, and business information sharing and contacts. The first Yellow Pages Directory and the Business Directory are also in circulation.

The Royal Government, for its parts, has showed that its welcoming support and encourage such collective endeavors. With the upcoming adoption by the National Assembly of some of the legislations relating to the Code of Commerce the following associations will be formed, including among others: (a) representative organizations such as chambers of commerce,, and small industry associations; (b) professional associations which uphold standards and educate their members (e.g., associations of accountants, auditors, engineers, managers, etc); (c) garment associations; and (d) resource mobilizing and allocating bodies such as .stock exchanges and private financial institutions.

PRIVATIZATION OF STATE-OWNED ASSETS

The objectives of all developing countries are to address the needs of its people, particularly in eradicating poverty, and to create a positive, but sustainable, growth. From that generated wealth the Government must assure that there is a more equitable redistribution. The Royal Government's overriding objectives of the Privatization programme is two-fold. The first one is to ensure a successful drive to shift state-run enterprises into private hands to power economic growth and make some services more efficient with the minimum dislocation of workers. Through that process the Government hopes to minimize paying for infrastructure costs, reduce its debt servicing ratio, save in salaries and pensions then paid by private sector, and take off civil servants from the government's payroll.

The Royal Government plans to achieve privatization at all stages in a controlled and regulated manner either as a shareholder or as a regulator, whether the privatization is to be effected with Government "holding a commanding stake (as in utility privatization) or by means of Build-Operate-Transfer [B.O.T], B.O.O.T [Build-Own-Operate-and- Transfer], and B.L.T [Build-Lease- and-Transfer] contracts. Through adequate legislation put in place before privatization, it also ensures transparency as the public can monitor whether or not the privatized project is being property managed in accordance with very clearly spelt out laws in the relevant legislation.

The second one which is the "'Raison d'Etre" of privatization is ultimately to benefit the people. The Kingdom of Cambodia wants to take this objective one step better, by enrolling the people in the "harvest of yields' so to speak, more directly and more quickly. Through the creation-of an independent National Development Trust Fund [created by statute] which will hold all the government equity in privatized entities, it can issue, against the equity, a "Unit Trust" type instrument in small easily transferable and affordable denomination for sale to any citizen.

In this way the citizen becomes, through the "Unit Trust", a beneficial of the privatization and earning an income at the same time, the privatized entity deals only with the one body, the National Trust, and not with thousands of shareholders, and the National Trust itself, if run by professional manager of repute can redeploy its income and invest, even internationally, to obtain 'better yield for its "shareholder", the citizen. The National Trust itself will become a major financial player and may even be used as a vehicle of fiscal policy or even as vehicle for mobilizing its funds for use in important section of the nations economy such as agriculture. The Government has reaffirmed its commitment to relaunch the process of privatization of state-owned enterprises to the public sector through two measures namely: the adoption and the announcement in December 1994 of a declaration on the privatization policy, and the approval by the National Assembly of the legal and institutional framework necessary for the undertaking of the privatization program during of its vote of the 1995 Law of Finances.

The government declaration identified various aspects concerning the policy of privatization, and implementation mechanisms for the transfer of state-owned enterprises and other public assets to the private sector. It extends the scope of privatizations to the totality of state-owned industrial and commercial enterprises (autonomous enterprises and administrative services); it defines methods of privatization as well as the roles and functions of the concerned institutions, namely: supervisory ministries, the Interministerial Committee in charge of Privatization which will supervise all operational aspects of privatization (evaluation of assets, staff reduction plan, conditions of contracts.. preparation of tender documents, and selection of preferred tenders, etc.), and the Council of Ministers as the final decision maker. It also calls for the setting up of a "Special Account" in the National Treasury to handle all financial operations resulting from privatizations. The declaration equally specify applicable procedural rules for the operations of privatization, and announces measures that will be taken to promote the program and to stimulate the expansion of the private sector, notably: consolidation of the appropriate legal framework to the development of commercial transactions, and placement of regulatory mechanisms concerning competition and protection of the intellectual property rights. The declaration also identifies a calendar of events for the year 1995 in which the government has, already, planned to privatize two big enterprises, namely: the "Compagnie Kampuchea de Carburants" (CKC) and the "Compagnie d'Import-Export" (KANTEPEXIM).

THE NEW YORK CONVENTION ON THE RECOGNITION OF FOREIGN ARBITRAL AWARDS OF 1958

In seeking to encourage foreign investors, the Royal Governments have in recent months taken steps to introduce new laws and practices relating to international arbitration and otherwise to promote their countries as favourable environments in which to settle international disputes. The reasons are not difficult to fathom. In order to sustain economic growth Cambodia must look to foreign investment in the face of fierce competition from their neighbours, and in order to encourage that investment, they must persuade foreign businessmen that, in the event of disputes, they can provide the means by which those disputes can be resolved quickly and fairly, and that they have the machinery in place to allow a judgment or award made against one of their nationals to be enforced against its assets.

In the international context, but particular where Asia is concerned, litigation will rarely be an acceptable method of resolving an international dispute. Neither party is likely to want to submit to the court of the' other -party's state because of the perceived risk of bias. Moreover, few Asian countries have a legal or judicial framework which is capable of resolving international business disputes in a fair, reliable and efficient manner. There is sometimes the option of agreeing to submit to the court of a neutral venue. However, even that can be fraught with difficulties; for example, there will often be doubts over whether the court in question will accept jurisdiction over a dispute which has little or no connection with its country and over its ability to determine a dispute governed by foreign law. But it is in the area of enforcement that the real attraction of arbitration becomes apparent. The international enforceability of court judgments rests largely upon a network of bilateral treaties which, in the case of many countries, provides poor international coverage. For example, Thailand has no such treaties in place and Hong Kong has entered into no such arrangements with any of its three most important trading partners, China, Japan and the USA. In contrast, the multilateral New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards of 1958 ("the New York Convention"), to which approximately 100 states, including Cambodia have acceded on January 5, 1960, provides the means by which an arbitral award can be widely enforced internationally and the Convention has been instrumental in establishing arbitration as the primary method of securing binding solutions to international commercial disputes.

The scheme of the New York Convention is strikingly straightforward Article 1 (1) provides:

"This Convention shall apply to the recognition and enforcement of arbitral awards made in the territory of a state other. than the state where the recognition and enforcement of such awards are sought, and arising out of differences between persons, whether physical or legal. It shall also apply to arbitral awards not considered as domestic awards in the state where their recognition and enforcement are sought "

It is a comer stone of the Convention that it does no permit any review of the merits of an award to which it applies. Recognition and enforcement of an award may be denied only upon the following grounds:

(i) that the parties were under some incapacity or the arbitration agreement was invalid; that the party against whom enforcement is sought was denied a fair hearing;

(ii) that the arbitrators exceeded their authority or lacked jurisdiction over the subject matter of the dispute (although the non-offending part of the award may still be allowed to stand); that there were procedural irregularities;

(iii) that the award is not yet binding on the parties or is otherwise invalid according to the laws of the country in which the award was made;

(iv) that the subject matter of the disputes is not arbitrable according to the laws of the state in which enforcement is sought;

(v) that the recognition or enforcement of the award will be contrary to the public policy of the state in which enforcement is sought.

THE SEARCH FOR A SUITABLE ARBITRATION VENUE

In deciding upon the suitability of arbitration venue, the following factors are likely to be of primary importance:

(i) The parties should be free to select arbitrators and counsel of their choice.

(ii) As to arbitrators, it will sometimes be the case, usually because of disagreement between the parties, that a sole arbitrator or the chairman of a three-member tribunal must be appointed by the institution under whose auspices the arbitration is being conducted or, in the case of ad hoc arbitrations, by the agreed appointing authority. The appointee will often be a resident of the state in which the arbitration is to take place, so that it will be important for the parties to evaluate the likelihood of securing an experienced and competent arbitrator by reference to the local pool of talent available. In cases where one of the parties is persuaded to agree to arbitration in the other's country, that party may also wish to consider the prospect of the institution or appointing authority choosing a foreign 'neutral' arbitrator as opposed to one of its own nationals.

(iii) The parties and their chosen arbitrators should be free to conduct the arbitration without undue court interference; in particular there should be no review mechanism to detract from the finality of the award.

PREFERRED INTERNATIONAL ARBITRATION CENTRES IN ASIA

Without seeking to establish an order of preference, both Hong Kong and Kuala Lumpur are attractive regional arbitration venues, for the following reasons:

(i) both have arbitration laws which allow the parties to an arbitration a significant level of autonomy over the manner in which the arbitration is to be conducted without undue court interference;

(ii) both countries are parties to the New York Convention, so that awards may in their respective territories are widely enforceable abroad;

(iii) the parties have complete freedom of choice with regard to both arbitrators and counsel, and, in particular, there are no restrictions in relation to residency requirements or nationality;

(iv) each country has a modem and efficient arbitration centre - respectively, the Hong Kong International Arbitration Centre and the Kuala Lumpur Regional Arbitration Centre - which are well placed to administer arbitrations by providing first class facilities for the conduct of proceedings and by acting as appointing authorities if the parties so choose. In connection with their role as occasional appointing authority, each maintains a Panel comprising an international selection of arbitrators; for example the AC currently has a list of 127 names from 20 different nations.

With regard to Hong Kong, many businessmen are concerned about the uncertainties surrounding 1997 and how these might affect arbitrations conducted in Hong Kong after that date.

ARBITRATION WITH CAMBODIAN AND ASIAN CHARACTERISTICS

Historically, confrontational methods of dispute resolution such as arbitration and litigation have played only a minor role in the development of dispute resolution in the country. Cambodian people, are far more familiar with concepts such as conciliation and mediation and will often go to great lengths to avoid the breakdown of a business relationship, something which they regard as inevitable once arbitration proceedings are started. Moreover, whereas "Westerners" tend to think of a problem in terms of the parties' strict legal rights and obligations laid down in the contract, Cambodians and Asians are more inclined to be guided by concepts of fairness and equity which lead to an expectation either that the strict terms of the contract should not be enforced or that the contract should be re-negotiated according to changing circumstances. The spirit of negotiation and compromise which typifies the approach of Cambodian and Asian people to dispute resolution permeates the process of arbitration also, and this is evident from the way in which various sets of arbitration rules feature, provisions which are clearly designed to encourage mediation/condition or at least some form of third party assisted negotiation during the arbitral process.