Cambodian Economy: Charting the Course of a Brighter Future - A Survey of Progress, Problems and Prospects

10. Industrial Sector - An Overview

233 Chapter 10 Industrial sector- an overview After achieving independence in 1953, Cambodia pursued a mixed economy model in which both State property and private property were recognized and allowed to coexist. Agriculture, light industry, and commercial services were left to the private sector, while heavy industry and finance were controlled by the public sector. Large SOEs were created in the 1960s. At that time, Cambodia pursued an import substitution policy in light industry and agricultural product processing industries, which enjoyed strong protection, government subsidies, and were often allowed to function as monopolies. 10.1. State-Owned Enterprise The government of the People’s Republic of Kampuchea (PRK), formed in 1979, inherited from the Khmer Rouge regime an economy where private property had been destroyed with much of the production apparatus in ruins. Industrial enterprises were State property. In the early 1980s, the centralized management system was gradually made more flexible, the production structure evolved with a market orientation, and the private sector officially recognized in 1985 began to play an increasingly important role in the economy. With private sector’s revival by early 1989, nearly 90% of medium and large-size industrial enterprises had begun to produce again. However, State-Owned Enterprises (SOEs) formed the core of the Cambodian industry. In late 1989, the authorities of the People’s Republic of Kampuchea instituted a new regime of financial autonomy for SOEs, which were required to be financially selfsufficient . This meant that they would no longer receive subsidies for operations and no capital loans. However, they would keep all of their net profit and would pay to the State only half the amount of the loan amortization due from them. They would have to borrow from banks at market rates for their working capital and investment needs. In theory, they would function like commercial businesses in a market economy. Further, they would be subject to the same taxes as private businesses. From 1989 onwards, the government launched a program of State disengagement in industry, encouraging privatization in all sectors. The goal of this policy was to supply businesses with the capital necessary to get them back into shape, modernize, and expand, and allow them to acquire modern management methods and technologies. Moreover, the leasing out and transfer of businesses was a source of budget revenue. 234 Table 10.1. State-Owned Enterprises in 2008 (in million riels) Source: Ministry of Economy and Finance. At present there are several types of SOEs. According to the Law on the General Status of SOEs, promulgated by Preah Reach Kram of June 17, 1996, SOEs are classified into three categories: State-owned companies (with 100% public capital), public institutions with an economic purpose, and semipublic companies (Joint Venture) in which the State or businesses with public capital hold separately, severally, or jointly with other public No. Name of enterprise Assets Own capital Total staff Financial year 2006 Total reve‐ nue Total ex‐ penditure Profit 1. Agricultural Input Company 21,948 21,278 49 2,827 2,773 54 2. Sihanoukville Autono‐ 473,187 467,094 1,032 97,015 87,181 9,834 3. Phnom Penh Autono‐ mous Port 108,473 105,017 465 18,469 12,772 5,697 4. Kampuchea Shipping Agency & Brokers 24,387 22,574 148 9,090 4,630 4,460 5. Green Trade Company 45,272 41,850 194 7,152 7,184 (32) 6. Cambodian National Insurance Company 31,933 29,470 60 4,547 4,045 502 7. Printery 29,367 29,154 145 11,046 10,130 916 8. Telecom Cambodia 228,633 185,937 617 81,982 55,947 26,035 9. Royal Cambodian Rail‐ ways Company 3,951,329 3,948,159 1,609 7,830 9,294 (1,464) 10. Engineering and Pub‐ lic Works Lab 1,717 1,283 24 422 502 (80) 11. Phnom Penh Water Supply Authority 555,218 434,609 568 78,512 58,650 19,862 12. Electricity of Cambo‐ dia 589,404 348,297 2,180 613,600 601,259 12,341 13. Rural Development Bank 65,057 30,416 49 4,043 2,708 1,335 Grand Total 6,635,566 6,145,020 19,149 1,129,930 1,008,764 121,166 235 institutions more than half of the social capital or voting rights. A public institution with an economic purpose is a legally constituted public body with financial autonomy, and...