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

11. Private Sector Development

245 Chapter 11 Private Sector Development The main motivator of industrial development, wealth creation and accumulation is the private sector. While much progress has been made in reviving the private sector after the Khmer Rouge regime it is yet to exhibit the dynamism of private initiative which has been the hallmark of the outstanding economic performance of the Southeast Asian countries in recent years. There are constraints and roadblocks which prevent it from playing an even greater role in development policy performance. Manufacturing activities are by and large located in the private sector. The average annual growth of manufacturing industry’s value added was 15.4% per year during 1994-2008. This is at variance with the behavior of the index of production for the formal manufacturing sector which shrank during this period. An explanation could be that in this period, the contribution of manufacturing to GDP came from the informal manufacturing sector The size of the enterprise provides a basis for analyzing Cambodia’s corporate sector. Three large groups of enterprises can be distinguished from this perspective: large businesses, small- and medium-sized businesses, and micro-businesses of the informal sector. The first three groups viz, large, medium and small businesses comprise the modern sector and engage in commercial scale activities. The broad definitions and distinguishing characteristics of each group are as follows: Modern sector (SME Development Framework, 2005, p. 13): • Big businesses: The company could be privately owned or State-owned. Privately owned big businesses are often a branch or partner of a foreign company. Big business is generally defined as having more than 100 permanent employees or having more than US$500,000 in capital invested, excluding land. • Medium-size enterprises: In general these are funded by family capital and organized in a modern way. They generally employ from 51 to 100 workers with an annual turnover between US$250,000-US$500,000. They can be physically located, since they occupy fixed sites, are registered with the appropriate authorities, keep regular accounts, and often try to keep their identity distinct from that of the principal owners or promoters. • Small-size modern enterprises: These enterprises are defined as those employing between 11-50 workers, with assets of between US$50,000-US$250,000. 246 Informal sector: • These businesses usually produce traditional products including cottage industry and handicrafts. They include micro-enterprises which can be further categorized based on criteria such as the amount of accumulated capital, added value, potential for growth into a modern business, or the career path or profile of the entrepreneurs. Microenterprises are those businesses, which employ less than 10 employees, with less than US$50,000 in assets, excluding land. In general, each group of business faces characteristic development constraints not necessarily shared by the other groups. Table 11.1. Number of Establishments Ranked by Province in 2009 Source: National Institute of Statistics, 2009 According to the recent Establishment Survey conducted by the National Institute of Statistics, Cambodia has 375,095 establishments and the number of establishments per 1,000 persons is 28.0 establishments. Thus, Cambodia has relatively fewer establishments 55,802 43,787 38,791 27,431 26,563 20,998 19,384 19,278 18,259 15,586 13,889 13,345 12,190 9,999 7,795 7,609 5,130 4,733 3,857 3,683 2,656 1,904 1,637 789 Phnom Penh Kampong Cham Kandal Takeo Prey Veng Siemreap Battambang Kampong Thom Kampong Speu Banteay Meanchey Kampong Chhnang Kampot Svay Rieng Pursat Kratie Sihanoukville Preah Vihear Koh Kong Ratanak Kiri Oddar Meanchey Stung Treng Pailin Mondul Kiri Kep 247 for its population size (Indonesia 22.7 millions and 102.3 and Laos 209 thousands and 37.4 respectively). These establishments are by and large small and informal. Meanwhile, the smallest province was Kep with 789 establishments or 0.2% to the national total perhaps reflecting the fact that its area is the narrowest in all provinces, followed by Mondul Kiri (1,637 or 0.4%), Pailin (1,904 or 0.5%), Stung Treng (2,656 or 0.7%), and Oddar Meanchey (3,683 or 1.0%). These five provinces are located in the northern or eastern part of the country except Kep. Although Kep was the smallest, there are three large-scale industries: hotel, salt producing, and fish sauces. In Pailin, there were five largescale industries: casino, guesthouse, restaurant, quarrying, and selling...