Rampant corruption has paralyzed private businesses and is hampering economic growth in Cambodia, the World Bank said Thursday in a damning report about the country’s bribe-ridden investment climate.

The report said four-fifths of 800 companies surveyed across Cambodia acknowledged “the necessity of paying bribes” in order to do business.

The “unofficial payments” are “frequently, mostly, or always required” and cost the firms “an average of 5.2 percent of total sales revenue,” more than twice the amount in Bangladesh, Pakistan and China, said the report.

“The message from the survey is one of weak rule of law, bureaucratic costs, and corruption. Cambodia firms identify corruption as their leading constraint,” it said.

Government bureaucracy has also hampered growth. A private firm has to spend 94 days trying to get clearance to start a business in Cambodia, 30 days longer than in Vietnam and 52 days longer than in Thailand, the report said.

Firms are subject to an unusually high number of inspections, averaging 16 per year, second only to Pakistan. “Time tax” associated with government inspections is high and second only to China, it said.

“Trade facilitation practices in Cambodia stand out in having high official and unofficial costs, delays, uncertainty, and discretion – a critical problem for a country that must rely on exports for growth,” the report said.

The World Bank recommended a list of sweeping reforms to stimulate growth, including a call for the government to eliminate “overlapping and obsolete” agency roles and shifting them “from a culture of control to a culture of facilitation.”

The large number of inspections and required licenses and shipment documents has to be radically reduced, it said. “Currently, over 45 documents – most requiring the same basic information – are required to import one shipment,” it said.

“Any trade-led private sector development strategy depends on efficient trade facilitation,” it said.

The report followed a dreary assessment of Cambodia’s economy last week by the International Monetary Fund, which said growth will slow to 1.9 percent in 2005 from a projected 4.3 percent this year because of corruption and stringent regulations.

Robert Hagemann, the IMF’s representative in Cambodia, said few countries rank worse than Cambodia on indexes measuring perceptions of corruption.

Forbes (Associated Press), August 11, 2004