ASEAN ECONOMIC FORUM. Trade in Services in Cambodia

ASEAN ECONOMIC FORUM Trade in Services in Cambodia Prepared by Samnang Chea, Denora Sarin and Hach Sok

INTRODUCTION Following the formation of its coalition government in mid-1993, Cambodia intended to reestablish itself as a democracy and a prosperous country. To support these political wills, a process of market-oriented policy was strengthened, and links were re-established with the international financial community. A very liberal investment law was promulgated in 1994. As a result, foreign investment has rushed in during the first years of reforms, boosting a rapid development of some emerging industries, such as the garment industry, wood industry, telecommunication, and tourism. External trade significantly expanded, and became the main source of economic growth and job creation. Since 1994, the amount of stocks of FDI in Cambodia is estimated to reach US$1.4 billion, of which about 50 percent has concentrated in industry (mainly in garment sector), 40 percent in services (mainly in tourism, transportation, and telecommunication), and 10 percent in agriculture (mainly in logging). Except for logging activities, FDI contributes, in general, positively to the country s human development. It is also estimated that FDI has generated a value added of about US$750 million (20 percent of GDP), and directly created 300,000 formal jobs (6 percent of total labour force) ever existed in Cambodia. In September 2003, Cambodia was agreed to become member of the World Trade Organisation (WTO). Under this accession, Cambodia committed to totally liberalise a large number of its services sector to other WTO members. Cambodia s government will extend this openness to all the ASEAN countries. Actually Cambodia provides the same treatment between ASEAN and WTO member regarding to the trade in services. At the meantime, in order to quickly attract FDI, Cambodia already totally opens Cambodian service market to foreigners. In fact, the current practice is more flexible and opened than the commitment. GAP BEWTEEN THE CURRENT POLICY AND GATS Cambodia started to integrate its economic into regional and global economic in the late 1990s. As the result, except for very few state own enterprises the country has liberalised and privatised almost all sectors. Thus Cambodia is de facto liberalised almost all sectors for trading in services. Therefore, it seems that the General Agreement on Trade in Services comes just to regulate the country trading system to be compatible with WTO. In principle, Cambodia has 5 years transitional period to implement the GATS, i.e. not latter than 1 January 2009. SAME TREATMENT WITH ASEAN AND WTO MEMBERS As stipulated above, Cambodia treats all the same. Thus currently there is no distinction between ASEAN and WTO members regarding the trade in services. As a result, the liberalisation of trade in services in Cambodia is largely in advance compared with other ASEAN countries. CAMBODIA'S COMMITMENTS UNDER GATS HORIZONTAL COMMITMENTS Cambodia scheduled horizontal restrictions on land ownership, and incentives conditional to training performance requirements. Non-Cambodian natural and juridical persons may lease but not own land. There is no specific distinction in the commercial presence for foreign investors. However, they shall have the obligation to provide adequate and consistent training to Cambodian staff, including for promotion to senior positions. The Presence of natural persons is unbound, except for measures concerning the entry and temporary stay. Entry visa for business visitors shall be valid for a period of 90 days for an initial stay of 30 days, which may be extended. Temporary residency and work permit is required for the natural persons in the categories defined under intra-corporate transferees. Such permits are issued for two years and may be renewed annually up to maximum of total five years. 2

In addition, Cambodia has committed to provide MFN exemptions that cover national treatment measures based upon co-production bilateral and multilateral agreements in Audiovisual Services, Land, Maritime and Internal Waterway Transport. SECTOR-SPECIFIC COMMITMENTS Under its accession to WTO, Cambodia has committed to liberalise its service sectors, excepted for some special cases. 1. BUSINESS SERVICES Legal services: Foreign lawyers can operate freely in Cambodia. The only requirement is commercial association with Cambodian lawyer and the restriction is they may not directly represent clients in court. Specialized medical services: These services are limited only to orthodontic services, oral surgery, and other specialized dental services. Provision of services is permitted through a joint venture with Cambodian juridical persons. Foreign equity participation is based on the negotiation between parties concerned Computer and Related Services There is no restriction applied in these sub-sub-sectors, the market are fully open, except mode (4) that the number of foreign employees working in a firm is subject to Cambodian Labour Law. There are currently no licensing or qualification requirements for computer and related services in Cambodia. Advertising services It is unbound until 1 January 2009. After that date the sector will subject to legislation in place. 2. COMMUNICATION SERVICES Courier services These services are limited to the provision of services on a contract basis for the delivery of letters, package and parcels. A number of foreign companies, such as DHL, TNT, OCS, UPS, and FedEx, have already provided courier services in Cambodia. Although this market is not yet regulated, these operators are required, in principle, to obtain a license from the Ministry of Post and Telecommunication (MPTC). The MPTC owns and operates the national postal system. The tariffs for main types of service are established by the MPTC on the basis of the consumer Price Index and the convention of Universal Postal Union (UPU). There are 40 Post Offices in Cambodia: One Postal Department and 6 Post Offices under its supervision; 23 provincial and town Cabinets and 10 district post offices. Total number of post offices in Cambodia is 40. The Post Offices in Phnom Penh provide all types of postal services as listed below. Six provincial cabinets provide Express Mail Services (EMS) and parcel services within and outside the country, as well as letter services; the remaining cabinets provide only letter services. Monopoly in providing postal services is granted to Cambodia Post for all mail transported which weighs 500grams or less. 3

Telecommunication Services Cambodia has committed to open its market for telecommunication services starting no later than 1 January 2009, with the requirement for local share holding of up to 49%. However, Cambodia has undertaken the obligations contained in the Telecom Reference Paper upon accession. Communications services have grown very rapidly during the past several years, and that the market for such services will continue to expand rapidly in the period ahead. The market for mobile telephony has undergone a rapid transformation, leading to growing selection of services and products for businesses and the population. Currently six operators, including Cambodia Telecom are providing mobile service in Cambodia. Growing competition among operators has forced one operator (Tricelcam) to withdraw from the market by 2000 and is now replaced by a new operator (S Telecom). We observe that another company (Camtel) is struggling just to survive. Cambodia, being a very young economy, seeks to create a good investment climate to potential investors, to encourage longterm investments, which are only possible when certain level of return on their investments can be ensured. Presently, the legislative base in the area of telecommunications is under preparation. In the absence of legal provisions governing licensing procedures for the establishment of new operators, each application is being reviewed on a case-by-case basis, taking into account the needs for further development of the network infrastructure, the expected coverage and the customer base, etc. 3. CONSTRUCTION AND RELATED ENGINERING SERVICES Despite huge potential which could be generated from the construction business in the future, Cambodia has committed to allow foreign firms to establish in the country without any restriction. The services across border are however not allowed. The number of foreign employees working in a firm is subject to Cambodian Labour Law. 4. DISTRIBUTION SERVICES Cambodia will formally open its distribution services market starting 31 December 2008. At the meantime, the market is de facto open. 5. EDUCATIONAL SERVICES Cambodia will formally open its market for education services starting 31 December 2008. Same as for distribution, the market is de facto open, at the meantime. 6. ENVIRONMENTAL SERVICES In all areas of environmental services as classified under the GATS, Cambodia welcomes foreign investment and services in these services areas. However, making the sector commercially viable is not feasible given the low earning capacity of the population. In such situation, government is compelled to provide services within the limited resources available and on a non-commercial basis. The legislation is well developed in the area of environmental protection, including the Law on Environmental Protection and Natural Resources Management, sub-decree on Environmental Impact Assessment Process, sub-decree on Water Pollution Control, sub-decree on Solid Waste Management, sub-decree on Air and Noise Pollution Control. 7. FINANCIAL SERVICES All insurance and insurance-related services Insurance activities are regulated by the Insurance Law, adopted in 2000 and the Insurance Sub- Decree adopted in 2001 for the implementation of the Insurance Law. 4

There is no life insurance market in Cambodia to date. None of the insurance companies that have applied for a license in the area of insurance has applied for the provision of life-insurance services. Cambodia made a commitment only for mode 3 where the establishment of commercial presence with 100% foreign own is allowed. The services must be provided through insurance company. Cross border supply is unbound except for marine, aviation, and transport insurance which will be allowed January 1, 2009 or once a law has been passed, the appropriate regulations in place and a local firm authorized, whichever comes first and thereafter, none. Some provision has been made for Reinsurance. All insurances company must reinsure 20% of their total risks with a national reinsurance company called Cambodia Re. until 31 December 2008. Insurance contracts less than or equal to USD 500,000 must be reinsured locally until 31 December 2008. Insurance companies are free to choose where and with which company to reinsure all other risks. Banking and other financial services In addition to commercial banks, specialized banks and insurance companies, a number of microfinance institutions are currently operated in Cambodia. Some NGOs (about 90 operating to date), which started their operations with humanitarian activities, provide also some sort of financial services by issuing credit and promoting savings especially among their members. There is no specific law/regulation to govern non-bank financial institutions. So far, no non-bank financial institution has applied nor approached officially Cambodian authorities to provide such services. Perhaps this relates to the fact that the financial sector in Cambodia is still in its early stage of development and under reform process. A government regulation (Prakas) on Licensing of Rural Credit Specialized Banks came into effect in January 2000. During 2002, with the aim of strengthening micro-finance institutions and specialized banks, two more Prakas have been issued on Loan Classification and provisioning Applicable to Specialized Banks and Licensed Micro- Finance Institutions, and on Onsite/Offsite Inspection Procedures. The former is aimed at classifying different types of loans and establishing the necessary credit provision while the latter addresses procedural aspects related to the examination of the banking activities in terms of their compliance with the relevant provisions of laws and regulations. A draft law on Capital Market has been prepared in 1997. In accordance with the financial sector development strategy "Financial Sector Blueprint 2001-2010", the Asian Development Bank is expected to provide technical assistance to review and finalize this draft. As of 30 September 2002, the banking sector in Cambodia included 13 commercial banks, of which one State-owned bank, 9 privately-owned banks, and 3 foreign-owned banks (two of which were subsidiaries). The Law on Banking and Financial Institutions (LoBFI) and subsequent regulations guaranteed foreign banks rights and obligations equal to local banks. There was no restriction regarding foreign ownership of banks. The scope for the operations of banks and financial institutions are set out in the LoBFI, which includes among others leasing, guarantees and commitments under signature, etc. However, at the moment banks are mainly focusing in the area of acceptance of deposits and lending. A financial institution can be locally incorporated in Cambodia or be a branch of a foreign bank. There are no separate regulations to govern foreign bank branches. Both local banks and foreign banks are subject to the same prudential and supervisory procedures. The LoBFI has no specific provision regarding the supply of financial information and advisory services. So far there has been no request from banks to carry out this service. 8. HEALTH RELATED AND SOCIAL SERVICES The Law on hospital services has been adopted and the sub-decree has been passed. However, a number of specific questions on establishment and the operation of hospitals need to be clarified 5

further. The general approach is towards opening the market access to direct ownership and management and operation by contract of such facilities on a for fee basis. However, the primary objectives of the Government are to achieve the access to the essential medicine for the poorest populations and to improve and ensure the quality of medical services. The private market for hospital services is very small with only 3 private hospitals operating in Phnom Penh (population is above 1 million). The purchasing power of the people is very low and the burden for providing medical services is on the public establishments. Public hospitals are trying to adopt the so-called cost recovery system, which is not functioning smoothly at the moment yet. 9. TOURISM AND TRAVEL RELATED SERVICES Tourism is one of the key economic sectors in terms of contribution to value added in GDP, employment and second most important source of foreign currency in the economy. Cambodia has only recently prepared a draft national plan with the assistance form ADB concerning the policy and strategy on sustainable development of tourism sector and is currently preparing the draft Law on Tourism. This draft law, among other provisions will also, establish conditions for the operation of the travel agencies and tour operators. The overall policy in Cambodia is to help and encourage business initiative and local investment in the area of lower-end hotels and guesthouses and to support the development of the network of travel agencies, which would provide important employment and business opportunities to locals. There is no restriction for foreigners to engage in 3 star/or higher hotel business except the number of foreign employees working in a firm is subject to Cambodian Labour Law. Foreign equity participation limited to 49% for travel agencies and Cambodian nationality requirement for tourist guides. 10. TRANSPORT SERVICES Cambodia has drafted a law on maritime and merchant shipping to regulate maritime services activity, which is de facto free at the meantime. Concerning Air Transport Services, Cambodia applies only one restriction limiting foreign capital to only 49%. With regards to Road Transport Services, Cambodia applies only a restriction on cross border supply which requires commercial presence. The road transportation activity is dominated by numerous small and medium companies, which are contributing to the creation of employment. It is important to continue provide scope for business opportunities to local service providers. At the same time, technology and knowledge are important, and the establishment of joint ventures with participation of foreign capital could facilitate attainment of this objective. 6

A. HORIZONTAL COMMITMENTS APPLICABLE TO SECTORS LISTED IN THE SECTORAL PART OF THE SCHEDULE Subsidies (3), (4) Unbound for subsidies, including for research and development. Tax measures (1), (2), with respect to direct taxes Land (3) Non-Cambodian natural and juridical persons may lease but not own land. Commercial presence (3) Investors shall have the obligation to provide adequate and consistent training to Cambodian staff, including for promotion to senior positions. 7

Presence of natural persons (4) Unbound except for measures concerning the entry and temporary stay of a natural person who falls in one of the following categories: (4) Unbound, except for measures affecting the categories referred to under market access. Business visitors A natural person who: - enters Cambodia for the purposes of participating in business meetings, establishing business contacts including negotiations for the sale of services and/or other similar activities; - stays in Cambodia without receiving income from within Cambodian sources; - does not engage in making direct sales to the general public or supplying services. Entry visa for business visitors shall be valid for a period of 90 days for an initial stay of 30 days, which may be extended. 8

Presence of natural persons Persons responsible for setting up of a commercial establishment: Persons working in an executive or managerial position, as defined below, within a juridical person, who are responsible for the setting up, in Cambodia, of a commercial presence of a service provider of a Member when: the representatives are not engaged in making direct sale or supplying services; and the service provider has its principal place of business in the territory of a WTO Member other than Cambodia and has no other representative, office, branch or subsidiary in Cambodia. Intra-Corporate Transferees Natural persons who have been employed by a juridical person of another member for a period of not less than 1 year and who seek temporary entry to provide services through a branch, subsidiary and affiliate in Cambodia and who are: Executives: without requiring compliance with labour market tests, persons within an organization who primarily direct the management of the organization, exercise wide latitude in decision-making, and receive only general supervision or direction from higher-level executives, the board of directors, or shareholders of the business. Executives would not directly perform tasks related to the actual supply of a service or services of the organization. 9

Presence of natural persons Managers: Without requiring compliance with labour market tests, natural persons employed by a juridical entity and who possess knowledge at an advanced level of expertise or proprietary knowledge of a juridical entity product, service, research, equipment, techniques, or management, and who primarily direct the organization or a department of the organization; supervise and control the work of other supervisory, professional or managerial employees; have the authority to hire and fire or recommend hiring, firing or other personnel actions; and exercise discretionary authority over day-to-day operations. They do not include first-line supervisors, unless the employees supervised are professionals, nor do they include employees who primarily perform tasks necessary for the supply of the service. Specialists: Natural persons, who are expected to have a university degree or its equivalent, employed by a juridical entity and whose qualifications and expertise are not available in the Kingdom of Cambodia or those who are seeking work in fields in which Cambodians are in short supply. Temporary residency and work permit is required for the natural persons in the categories defined under intra-corporate transferees. Such permits are issued for two years and may be renewed annually up to maximum of total five years. 10

B. SECTOR-SPECIFIC COMMITMENTS 1. BUSINESS SERVICES A. Professional Services (a) Legal services (3) In commercial association with Cambodian law firms 1, and may not directly represent clients in courts. horizontal section. (4) Unbound, except as indicated in the horizontal section. The only requirement is commercial association with Cambodian lawyer and the restriction is they may not directly represent clients in court. Foreign legal consultancy on law of jurisdiction where service supplier is qualified as a lawyer (including home country law, third country law, and international law). (b) Accounting, auditing, bookkeeping, except must have commercial presence in Cambodia for auditing services. horizontal section (4) Unbound, except as indicated in the horizontal section. * Accounting Law was expected to approve by the Parliament in November 2002 1 If legal services provided in foreign law and international law, the commercial association with Cambodian law firms is not required. 11

(c) Taxation services (d) Architectural services (consulting, planning or design services) (e) Engineering services (f) Integrated engineering services (g) Urban planning and landscape architectural services horizontal section horizontal section. horizontal section. (4) Unbound, except as indicated in the horizontal section (4) Unbound, except as indicated in the horizontal section. (4) Unbound, except as indicated in the horizontal section. 12

(h) Specialized medical services Dental services These services are limited only to orthodontic services, oral surgery, and other specialized dental services. (1) Unbound (3) Provision of services is permitted through a joint venture with Cambodian juridical persons. Foreign equity participation is based on the negotiation between parties concerned horizontal section. (1) Unbound (3) Unbound (4) Unbound, except as indicated in the horizontal section B. Computer and Related Services (a) Consultancy services related to the installation of computer hardware (b) Software implementation services (c) Data processing services (d) Data base services horizontal section. (4) Unbound, except as indicated in the horizontal section. There is no restriction applied in these sub-sub-sectors, the market are fully open, except mode (4) that the number of foreign employees working in a firm is subject to Cambodian Labour Law. There are currently no licensing or qualification requirements for computer and related services in Cambodia. (e) Other 13

E. Rental/Leasing Services without Operators (a) Renting and leasing of studio recording equipment horizontal section. (4) Unbound, except as indicated in the horizontal section. F. Other Business Services (a) Advertising services (1), (2), (3) Unbound until 1 January 2009. After that date subject to legislation in place horizontal section (1), (2), (3) Unbound until 1 January 2009. After that date subject to legislation in place 4) Unbound, except as indicated in the horizontal section Cambodia will undertake commitment after 1 January 2009, following development of the necessary legislation and regulations. 14

(b) Market research services (c) Management consulting services (d) Services related to man. Consulting (e) Technical testing and analysis services horizontal section. (4) Unbound, except as indicated in the horizontal section. These services do not have supporting legislation in place, and no strategy has been prepared in terms of their future development. Fully aware of the important role that these services play in the economic development, the Government of Cambodia considers that at the present stage it can undertake a few commitments in these services sectors. (h) Services incidental to mining Exclusively covers consultancy on a fee or contract basis relating to mining and oil field development (j) Services incidental to energy distribution horizontal section. (4) Unbound, except as indicated in the horizontal section. Exclusively covers only consultancy services related to the transmission and distribution on a fee or contract basis of electricity, gaseous fuels and steam and hot water to household, industrial, commercial and other users 15

(k) Placement and supply services of Personnel (q) Packaging services horizontal section. (4) Unbound, except as indicated in the horizontal section. 16

2. COMMUNICATION SERVICES B. Courier Services Cambodia Post has a monopoly in postal services for all mail transported weighing less than 500 grams 17

Courier services These services are limited to the provision of services on a contract basis for the delivery of letters, package and parcels horizontal section. (4) Unbound, except as indicated in the horizontal section. A number of foreign companies, such as DHL, TNT, OCS, UPS, and FedEx, have already provided courier services in Cambodia. Although this market is not yet regulated, these operators are required, in principle, to obtain a license from the MPTC. The MPTC owns and operates the national postal system. The tariffs for main types of service are established by the MPTC on the basis of the consumer Price Index and the convention of Universal Postal Union (UPU). There are 40 Post Offices in Cambodia: One Postal Department and 6 Post Offices under its supervision; 23 provincial and town Cabinets and 10 district post offices. Total number of post offices in Cambodia is 40. The Post Offices in Phnom Penh provide all types of postal services as listed below. Six provincial cabinets provide Express Mail Services (EMS) and parcel services within and outside the country, as well as letter services; the remaining cabinets provide only letter services. Monopoly in providing postal services is granted to Cambodia Post for all mail transported which weighs 500grams or less. * Postal Services Law. Adopted at the CM and submitted to the Parliament in December 2001. This law was expected to approve by the parliament 20 June 2002. 18

C. Telecommunication Services Commitments are taken consistent with "Notes for Scheduling Basic Telecom Services Commitments" and "Market Access Limitations on Spectrum Availability" (a) Voice telephone services (b) Packet-switched data transmission services (1) Services provided only over the circuits leased from Telecom Cambodia. Starting no later than 1 January 2009: None (1) Services provided only over the circuits leased from Telecom Cambodia. Starting no later than 1 January 2009: None Cambodia undertakes obligations contained in the Reference Paper attached hereto no later than 1 January 2009. (c) Circuit-switched data transmission services (d) Telex services (e) Telegraph services (f) Facsimile services (g) Private leased circuit services (3) Provided exclusively by Telecom Cambodia. Starting no later than 1 January 2009: None, except subject to requirement for local share holding of up to 49%. horizontal section (3) Provided exclusively by Telecom Cambodia. Starting no later than 1 January 2009: None (4) Unbound, except as indicated in the horizontal section Although precise quantitative information is often lacking, it is clear that communications services have grown very rapidly during the past several years, and that the market for such services will continue to expand rapidly in the period ahead. * Telecommunications Law Draft under review by the Ministry of Post and Telecommunications; Submission to CM is expected in October 2003 and to the Parliament in December 2003. This law was expected to approve by parliament in June 2004 19

(h) E-mail (i) (j) Voice-mail On-line information and data base-retrieval (k) Electronic Data Interchange (l) Enhanced/value added facsimile services, incl. store and forward, store and retrieve. horizontal section. (4) Unbound, except as indicated in the horizontal section. Cambodia has committed to open its market for fixed lines telephony services starting no later than 1 January 2009 subject to requirement for local share holding of up to 49%. However, Cambodia has undertaken the obligations contained in the Telecom Reference Paper upon accession. (m) Code and protocol conversion (n) On-line information and/or data processing (including transaction processing) 20

(o) Other services: - Mobile services horizontal section (4) Unbound, except as indicated in the horizontal section. The market for mobile telephony has undergone a rapid transformation, leading to growing selection of services and products for businesses and the population. Currently six operators, including Cambodia Telecom are providing mobile service in Cambodia. Growing competition among operators has forced one operator (Tricelcam) to withdraw from the market by 2000 and is now replaced by a new operator (S Telecom). We observe that another company (Camtel) is struggling just to survive. Cambodia, being a very young economy, seeks to create a good investment climate to potential investors, to encourage long-term investments, which are only possible when certain level of return on their investments can be ensured. Presently, the legislative base in the area of telecommunications is under preparation. In the absence of legal provisions governing licensing procedures for the establishment of new operators, each application is being reviewed on a case-by-case basis, taking into account the needs for further development of the network infrastructure, the expected coverage and the customer base, etc. 21

3. CONSTRUCTION AND RELATED ENGINERING SERVICES A. General Construction Work for Buildings B. General Construction Work for Civil Engineering C. Installation and Assembly Work D. Building Completion and Finishing Work E. Other (1) Unbound (4) Unbound except as indicated in the horizontal section (1) Unbound* (4) Unbound except as indicated in the horizontal section Due to the huge potential which could be generated from the construction business in the future, Cambodia has committed to allow foreign firms to establish in Cambodia. The services across border are not allowed. The number of foreign employees working in a firm is subject to Cambodian Labor Law. 4. DISTRIBUTION SERVICES A. Commission agents services (1), (2), (3), (4) Unbound (1), (2), (3), (4) Unbound Cambodia will negotiate taking commitments after 1 January 2009, following transition period necessary to develop legislation and regulations. Cambodia will open its market for these types of services starting 31 December 2008. Unbound due to lack of the technical feasibility. 22

B. Wholesale trade services Cambodia s market is de facto open. - Wholesale trade services of radio and television equipment, musical instruments and records, music scores and tapes. (4) Unbound except as indicated in the horizontal section. (4) Unbound except as indicated in the horizontal section. 23

C. Retailing services - Wholesale and retail sales of motor vehicles; - Sales of parts of motor vehicles; - Sales of motorcycles and related parts. For supermarkets and large department stores only 2 : - Food retailing services; - Non-food retailing services, excluding sales of pharmaceutical goods, medical and orthopaedic goods. - Retailing services of radio and television equipment, music instruments, music scores, and audio and video records and tapes. (4) Unbound except as indicated in the horizontal section 2) None (4) Unbound except as indicated in the horizontal section 2 Large supermarkets and department stores are those of floor space no less than 3,000m 2. 24

D. Franchising services (1), (2), (3), (4) Unbound (1), (2), (3), (4) Unbound Cambodia will negotiate taking commitments after 1 January 2009, following transition period necessary to develop legislation and regulations. E. Other - Retail sales of motor fuel (4) Unbound except as indicated in the horizontal section 4) Unbound except as indicated in the horizontal section 5. EDUCATIONAL SERVICES A. Higher education services Cambodia s market is de facto open. B. Adult education C. Other education services (4) Unbound except as indicated in the horizontal section. (4) Unbound except as indicated in the horizontal section 25

6. ENVIRONMENTAL SERVICES A. Sewage services B. Refuse disposal services C. Sanitation and similar services D. Other services - Cleaning of exhaust gases - Noise abatement services - Nature and landscape protection services - Other environmental services not included elsewhere (4) Unbound except as indicated in the horizontal section (2) (4) Unbound except as indicated in the horizontal section In all areas of environmental services as classified under the GATS Cambodia welcome foreign investment and services in these services areas. However, making the sector commercially viable is not feasible given the low earning capacity of the population. In such situation government is compelled to provide services within the limited resources available and on a non-commercial basis. The legislation is well developed in the area of environmental protection and includes the Law on Environmental Protection and Natural Resources Management, sub-decree on Environmental Impact Assessment Process, subdecree on Water Pollution Control, sub-decree on Solid Waste Management, sub-decree on Air and Noise Pollution Control. 26

7. FINANCIAL SERVICES A. All insurance and insurance-related services 27

(a) Life insurance services (b) Non-life insurance services (1) Natural or juridical person can enter into contract only with the insurance companies licensed to carry out insurance business in the kingdom of Cambodia, but services must be provided by financial institutions licensed as insurance companies in Cambodia. horizontal section. (4) Unbound, except as indicated in the horizontal section. Insurance activities are regulated by the Insurance Law, adopted in 2000 and the Insurance Sub- Decree adopted in 2001 for the implementation of the Insurance Law. There is no life insurance market in Cambodia to date. No Cambodian or foreign company is providing life insurance services in Cambodia. None of the insurance companies that have applied for a license in the area of insurance has applied for the provision of life-insurance services. Cambodia made a commitment only for mode 3 where the establishment of commercial presence with 100% foreign own is allowed. The services must be provided through insurance company. Cross border supply is unbound except for marine, aviation, and transport insurance which will be allowed January 1, 2009 or once a law has been passed, the appropriate regulations in place and a local firm authorized, whichever comes first and thereafter, none. 28

(c) Reinsurance and retrocession (d) Services auxiliary to insurance (including broking and agency services), except companies must reinsurance 20% of their risk in Cambodia Re. Insurance contracts of total sum insured of less than or equal to USD 500,000 must be reinsured locally until 1 January 2009., except companies must reinsure 20% of their risk in Cambodia; horizontal section. (4) Unbound, except as indicated in the horizontal section. Reinsurance: All co-insurances company must reinsure 20% of their total risks with Cambodia Re. until until 31 December 2008. Insurance contracts of total sum insured of less than or equal to USD 500,000 must be reinsured locally until 31 December 2008. Insurance companies are free to choose where and with which company to reinsure all other risks. Additional Commitments Cambodia needs to make the necessary amendments to ensure that all the necessary preconditions are in place for strengthening of the reinsurance market by 31 December 2008. Cambodia places no restriction on cross border supply. horizontal section. (4) Unbound, except as indicated in the horizontal section. 29

B. Banking and other financial services The following commitments refer to commercial banking only (except accounting law). 30

(a) Acceptance of deposits and other repayable funds from the public. (b) Lending of all types, including, inter alia, consumer credit, mortgage credit, factoring and financing of commercial transaction; (d) All payment and money transmission service, including credit, charge and debit cards, traveller cheques and bankers drafts., except deposits from the public must be reinvested in Cambodia (3) Only permitted through authorized financial institutions as banks horizontal section. In addition to commercial banks, specialized banks and insurance companies, a number of and micro-finance institutions are currently having operations in Cambodia. Some NGOs (about 90 operating to date), which started their operations with humanitarian activities and began focusing on poverty reduction in line with a government policy introduced in 2000, provide also some sort of financial services by issuing credit and promoting savings especially among their members. There is no specific law/regulation to govern non-bank financial institutions. So far no non-bank financial institution has applied nor approached officially Cambodian authorities to provide such services. Perhaps this relates to the fact that the financial sector in Cambodia is still in its early stage of development and under reform process. horizontal section. A Prakas on Licensing of Rural Credit Specialized Banks came into effect in January 2000. During 2002, with the aim of strengthening micro-finance institutions and specialized banks two more Prakas have been issued: Prakas on Loan Classification and provisioning Applicable to Specialized Banks and Licensed Micro- Finance Institutions, and Prakas on Onsite/Offsite Inspection Procedures. The former is aimed at classifying different types of loans and establishing the necessary credit provision while the latter addresses procedural aspects related to the examination of the banking activities in terms of their compliance with the relevant provisions of laws and regulations. A draft law on Capital Market has been prepared in 1997. In accordance with the financial sector development strategy "Financial Sector Blueprint 2001-2010", the Asian Development Bank is expected to provide technical assistance to review and finalize this draft. As of 30 September 2002, the banking sector in Cambodia included 13 commercial banks, one of which was a State-owned bank, 9 privately-owned banks, and 3 foreign-owned banks (two of which were subsidiaries). The Law on Banking and Financial Institutions (LoBFI) and subsequent regulations guaranteed foreign banks rights and obligations equal to local banks and there was no restriction regarding foreign ownership of banks. The scope for the operations of banks and financial institutions are set out in the LoBFI, which includes among others leasing, guarantees and commitments under signature, etc. However, at the moment banks are mainly focusing in the area of acceptance of deposits and lending. A financial institution can be locally incorporated in Cambodia or be a branch of a foreign bank. There are no separate regulations to govern foreign bank branches. Both local banks and foreign banks are subject to the same prudential and supervisory procedures. The LoBFI has no specific provision regarding the supply of financial information and advisory services. So far there has been no request from banks to carry out this service. 31

8. HEALTH RELATED AND SOCIAL SERVICES 32

A. Hospital services Ownership and management of private hospitals and clinics only, except at least one director for technical matters must be Cambodian horizontal section. horizontal section The Law on hospital services has been adopted and the sub-decree has been passed. However, a number of specific questions on establishment and the operation of hospitals need to be clarified further. The general approach is towards opening of the market access to direct ownership and management and operation by contract of such facilities on a for fee basis. However, the primary objectives of the Government are to achieve the access to the essential medicine for the poorest populations and to improve and ensure the quality of medical services. The private market for hospital services is very small with only 3 private hospitals operating in Phnom Penh (population is above 1 million). The purchasing power of the people is very low and the burden for providing medical services is on the public establishments. Public hospitals are trying to adopt the so-called cost recovery system, which is not functioning smoothly at the moment yet. 33

9. TOURISM AND TRAVEL RELATED SERVICES 34

A. - Hotels - Restaurants (1) Unbound* for hotels of 3 stars or higher. horizontal section. 3) Permit is granted taking into account characteristics of the area 3 (4) Unbound (4) Unbound, except as indicated in the horizontal section (1) Unbound* (3) Unbound (4) Unbound Hotel services: There is no restriction foreigner to engage in 3 star/or higher hotel business except the number of foreign employees working in a firm is subject to Cambodian Labour Law. Tourism is one of the key economic sectors in terms of contribution to value added in GDP, employment and second most important source of foreign currency in economy. * Tourism Law was expected to summit to the Council Minister in March 2003 and to the parliament in April 2003. This was expected to approve by the parliament in November 2003 Cambodia has only recently prepared a draft national plan with the assistance form ADB concerning the policy and strategy on sustainable development of tourism sector and is currently preparing the draft Law on Tourism. This draft law, among other provisions will also, establish conditions for the operation of the travel agencies and tour operators. 3 The main criteria are: the number of and impact on existing restaurants, historical and artistic characteristics of the location, geographic spread, impact on traffic conditions and creation of new employment. 35

B. Travel agencies and tour operators services, except foreign equity participation limited to 49% for travel agencies horizontal section. (4) Unbound, except as indicated in the horizontal section. C. Tourist guides services horizontal section. Cambodian nationality requirement for tourist guides. (4) Unbound, except as indicated in the horizontal section The overall policy in Cambodia is to help and encourage business initiative and local investment in the area of lower-end hotels and guesthouses and to support the development of the network of travel agencies, which would provide important employment and business opportunities to locals. 36

10. TRANSPORT SERVICES A. Maritime Services 37

International transport (Freight and passengers), excluding cabotage. (1); (2); (3); and (4) Unbound (1); (2); (3); and (4) Unbound Where not otherwise made available to the international maritime transport suppliers pursuant to Article XXVIII (c) (ii), no measures shall be applied which deny reasonable and nondiscriminatory access to the following services: 1. Towing and tug assistance; 2. Provisioning, fuelling and watering; 3. Garbage collecting and ballast waste disposal; 4. Emergency repair facilities; 5. Lightering and water taxi services; 6. Ship agencies; 7. Custom brokers; 8. Stevedoring and terminal services; 9. Surveying and classification services; Additional Commitments Cambodia has drafted a law on maritime and merchant shipping. * Merchant Shipping Law Being drafted by the Ministry of Public Works and Transports; submission to the CM is expected in November 2004 and to the Parliament in December 2004. This law was expected to approve by the parliament in February 2005 38

C. Air Transport Services - Aircraft repair and maintenance services - Selling and marketing of air transport services. Cambodia applies only one restriction in theses sub-subsectors - only 49% capital can be owned by foreigner. - Computer Reservation System Services. horizontal section. (4) Unbound, except as indicated in the horizontal section. 39

F. Road Transport Services 40

(a) Passenger transportation (b) Freight transportation Cambodia applies only one restriction on cross border supply which requires commercial presence. (c) Rental of commercial vehicles with operator horizontal section. 3) None (4) Unbound, except as indicated in the horizontal section. This area of road transport is dominated by numerous small and medium companies, which are contributing to the creation of employment. It is important to continue provide scope for business opportunities to local service providers. At the same time, technology and knowledge are important and the establishment of joint ventures with participation of foreign capital could facilitate attainment of this objective. This condition is attached in the spirit of the GATS Article XIX.2 and the need to realign development and trade objectives. 41

(d) Maintenance and repair of road transport equipment (e) Supporting services for road transport services horizontal section. (4) Unbound, except as indicated in the horizontal section. G. Pipeline Transport Services (a) Transport of fuels (b) Transport of other goods (1) Services must be provided through a contract of concession granted by the State on case-by- cases basis. (1) Unbound Cambodia made commitment on both sub-sub-sectors. (3) Unbound (3) Services must be provided through a contract of concession granted by the State on case-by-cases basis. (4) Unbound, except as indicated in the horizontal section. horizontal section. 42

REFERENCE PAPER Scope The following are definitions and principles on the regulatory framework for the basic telecommunications services. Definitions Users Essential facilities mean service consumers and service suppliers. mean facilities of a public telecommunications transport network or service that: (a) are exclusively or predominantly provided by a single or limited number of suppliers; and (b) cannot feasibly be economically or technically substituted in order to provide a service. A major supplier is a supplier which has the ability to materially affect the terms of participation (having regard to price and supply) in relevant market for basic telecommunications services as a result of: (a) (b) control over essential facilities; or use of its position in the market. 1. Competitive safeguards 1.1. Prevention of anti-competitive practices in telecommunications Appropriate measures shall be maintained for the purpose of preventing suppliers who, alone or together, are a major supplier from engaging in or continuing anti-competitive practices. 1.2. Safeguards The anti-competitive practices referred to above shall include in particular: (a) (b) (c) engaging in anti-competitive cross-subsidization; using information obtained from competitors with anti-competitive results; and not making available to other services suppliers on timely basis technical information about essential facilities and commercially relevant information which are necessary for them to provide services. 2. Interconnection 2.1. This section applies to linking with suppliers, providing public telecommunications transport networks or services in order to allow the users of one supplier to communicate with users of another supplier and to access 43

services provided by another supplier, where specific commitments are undertaken. 2.2. Interconnection to be ensured Interconnection with a major supplier will be ensured at any technically feasible point in the network. Such interconnection is provided: (a) (b) (c) under non-discriminatory terms, conditions (incl. technical standards and specifications) and rates and of a quality no less favourable than that provided for its own like services or for like services of nonaffiliated service suppliers or for its subsidiaries or other affiliates; in a timely fashion, on terms, conditions (incl. technical standards and specifications) and cost-oriented rates that are transparent, reasonable, having regard to economic feasibility, and sufficiently unbundled so that the supplier need not pay for network components or facilities that it does not require for the service to be provided; and upon request, at points in addition to the network termination points offered to the majority of users, subject to charges that reflect the cost of construction of necessary additional facilities. 2.3. Public availability of the procedures for interconnection negotiations The procedures applicable for interconnection to a major supplier will be made publicly available. 2.4. Transparency of interconnection arrangements It is ensured that a major supplier will make publicly available either its interconnection agreements or a reference interconnection offer. 2.5. Interconnection: dispute settlement A service supplier requesting interconnection with a major supplier will have recourse, either: (a) (b) at any time or after a reasonable period of time which has been made publicly known to an independent domestic body, which may be a regulatory body as referred to in paragraph 5 below, to resolve disputes regarding appropriate terms, conditions and rates for interconnection within a reasonable period of time, to the extent that these have not been established previously. 3. Universal service Any Member has the right to define the kind of universal service obligation it wishes to maintain. Such obligations will not be regarded as anti-competitive per se, provided they are administered in a transparent, non-discriminatory and competitively neutral manner and are not more burdensome than necessary for the kind of universal service defined by the Member. 44