international business group assignment

8/11/2019 International Business Group Assignment

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INTERNATIONAL BUSINESS

Group Assignment(MGT 3215)

Name: Leong Huey Tyng I10006351

Wong Yan Kee I11008548Leong Shuh Jiun I11009185

Xu Qing Qing I11008892

Yong Hui Hwa I11009119

Kong Lai Yee I10006524

Section: 5I2

Lecturers name: Miss Wong Choon Fah


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Table of Content

Content Page

1.0 Executive Summary

2.0 Introduction

3.0 Introduce the country & reason

4.0 Factors that influences business opportunities

4.1 Political

4.2 Legal4.3 Social Culture

4.4 Economy

5.0 Potential Competitors in the industry

6.0 Strategies of company

7.0 Potential risk that company may face

8.0 Conclusion

9.0 Reference


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1.0 Executive Summary

Transportation affects a countrys economy sector enormously. With a good transport system,

people get access to various destinations and bring economics as well as social benefits. Hence, we

choose to enter into transportation sector. Proton Holding Bhd is selected as it is one of the largest

automobile manufacturers in Malaysia. Since we want to enter into South East Asia countries,

Cambodia is chosen after considering various factors such as product suitability, political, legal,

social-cultural and economic factors, potential competitors and potential risks. We have also taken

into consideration that Proton has entered Indonesia, Thailand, Brunei and Laos so we would want to

enter into a new country to gain more market share.

The Proton Holding Bhd is founded in 1983 as Malaysia automobile industry. At first, they

cooperated with Mitsubishi Motors to learn their technology and gain experience. Research and

development (R&D) is stressed by Proton and that is the reason Proton in gaining more and more

popularity nowadays. Proton Exora is chose for Proton to enter into Cambodia due to its relaxing

comfort, outstanding performance as well as safety features. As for country to enter, Cambodia is

chosen due to its fast track investment approval, competitive investment approval, simple

procedure to buy Protons products, social-cultural factors and large population, language used as

well as right-side drive.

In sum, we find that this assignment has helped us to develop critical thinking skills and has helped

us to apply what we have learnt. We manage to develop skills to analyze business environment,

understand the importance of analyzing foreign market and able to find out the business implications

of different environmental factors. We also learn to work in a team and make the assignment a

success together.


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2.0Introduction

When we start a business in foreign country, not only the type of company should we consider, but

also choose the most suitable product to its targeted market. After so many discussions, we have

chosen Proton Holding Bhd as our main company and the product of Protons Exoraas our primary

product to spread in foreign country. Here is the introduction about the company Proton and its

product-Proton Exora as our product to start business in foreign country.

Introduction of company, Proton

The Proton Holding Bhd which has a long history found in 1983 is a Malaysian automobile

manufacturer. At the early product development, Proton Company did not have any basics on the

production of cars, thus they firstly cooperated with Mitsubishi Motors. Nearly most of technologies

and parts were from Mitsubishi Motors at the beginning of development. With the help of Mitsubishi

Motors, the first model of Proton Saga began in September 1985. (Proton, 2012) After then, Proton

made a sustained effort to invest much more capital in the area of developing research and design

capabilities so that they could truly become independent in the automotive industry. In a way, Proton

Holding Bhd has already got the mature skills to produce high quality cars such as Persona launched

in 2007. (Proton, 2012) Nowadays, the Malaysian government is constantly paying attention to the

local early dominant carmaker-Proton and also grants some subsidies and low-interest loan to

support Proton. On one side, the Proton can gain competitive advantage to get subsidy from

government to strengthen their business for developing their own innovative product; on the other

side, they also borrow low interest loans from their government to expand their business further such

as foreign country investment. As a result, Proton Holding Bhd is an ideal company to invest

business in foreign country.

The introduction of product

Proton Exora which is a compact multi-purpose vehicle (MPV) model was launched on 15

April 2009. This type of automobile is mainly to meet Malaysias first homegrown MPV being an

ideal family vehicle. (Tan, 2011) Proton Exora which has multiple functions, good performance and


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high quality design includes advanced styling such as a touch screen portable GPS device, spacious

interior by adding maximum number of 7 adults as a new type of family vehicle. There are mainly 3

characteristics of Exora being mentioned as follow.

(i) Relaxing comfort

Proton Exora has a spacious interior with flexible seating arrangement and plush leather seats. When

we sit in the car, interior height and width will make us get comfortable feeling without limitation of

space. What more, the spacious space can bring a chance for people to get entertained to make sure

that people get all-around comfort. Besides, the spacious interior can carry 7 adults comfortably plus

luggage. Refer to the underpinning of Proton Exora, it has a monologue chassis with a 2,730mm

wheelbase.(Tan, 2011) When people drive the car, monologue chassis which can bring people a

superior ride make people drive as much comfortable as possible. Therefore, Proton Exora can truly

bring the relaxing comfort for driver or passengers.

(ii) Outstanding performance

Proton Exoras new 1.6L engine that was developed by Proton and Lotus engineers gets up to a

powerful 138bhp to a maximum of 151bhp. (Tan, 2011) The new engine is more efficient which

comes up to a 2.0L engine with less high fuel consumption. Therefore, customer will experience

powerful performance with Proton Exoras new engine; at the same time, they can save a fraction of

fuel consumption. It is the best choice for consumer to choose Proton Excra.

(iii) Safety features

Proton Exora includes an Antilock Brake System (ABS) to avoid skidding during an emergency

brake and anElectronic Brake Force Distribution System (EBD) (Tan, 2009). Those high-technical

systems can guarantee the correct amount of braking power which is able to send the correct wheels

depending on the current weight distribution of the car. Two front airbags and pre-tensioner seat

belts are set up for the front passengers so that it can truly help people get rid of the danger under the

emergent situation. Therefore, most of people would like to choose Proton Exora with high-technical

safety feature.
http://en.wikipedia.org/wiki/Anti-lock_braking_systemhttp://en.wikipedia.org/wiki/Electronic_brakeforce_distributionhttp://en.wikipedia.org/wiki/Airbagshttp://en.wikipedia.org/wiki/Seat_belt#Pretensioners_and_webclampshttp://en.wikipedia.org/wiki/Seat_belt#Pretensioners_and_webclampshttp://en.wikipedia.org/wiki/Seat_belt#Pretensioners_and_webclampshttp://en.wikipedia.org/wiki/Seat_belt#Pretensioners_and_webclampshttp://en.wikipedia.org/wiki/Airbagshttp://en.wikipedia.org/wiki/Electronic_brakeforce_distributionhttp://en.wikipedia.org/wiki/Anti-lock_braking_system


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3.0Introduce the country & reason

Cambodia, a country in Southeast Asia, has a potential opportunity to develop although it is

a poor developing country. In 2011 per capital income in Cambodia is rapidly increasing between

$2470 and $1040 even though this data is lower compared to other developing country. In Cambodia,

most rural households depend on agriculture and its related sub-sectors. So far, Cambodia major

exports are rice, fish, rubber and timber. Because Cambodia has the ability to maintain the domestic

food self-efficient, so they can gain more profits from export market. As a result, we select the

country with a good prospect to expand our business. There are several reasons which encourage us

to expand our business in Cambodia.

1. "Fast-track" investment approval

The purpose of the Council for the Development of Cambodia (CDC) permits investors to process

one stage with one government body which is called "One Stop Service" investment centre that

offers the speediest approval response for foreign investors.(Cambodias.net 2007) During the

investment approval, the CDC provides information and application documents, evaluates and

processes investment applications in less than 45 days so that investors can quickly carry on their

business in foreign country. (Cambodias.net 2007) Whats more, the CDC also grants customs duties

and tax exemption, issues visas and work permits, and facilitates other downstream administrative

procedures. (Cambodias.net 2007) As a result, Protons business built in Cambodia not only can get

a application approval in a short time period, but also get money support from Cambodia government.

It is good policy that attracts foreign investment.

2. Very competitive investment incentives

So far, Cambodia has offered the best business incentive package in Southeast Asia in term of the

investment law. The following are the highlights of the new law:

The government sets full import duty exemption for foreigners opening their business in Cambodia.

(Cambodias.net 2007) It can reduce the overall costs for Proton importing some components

manufactured in Malaysia such as engine to Cambodia so that Proton can lower their total cost as a


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competitive advantage over local rival such as Toyota. Whats more, there is no withholding tax on

dividends. (Cambodias.net 2007) As shareholders in Proton, they can get more dividends through

investing more capitals to support Proton investing in Cambodia without deducing tax on dividends.

Certainly, there are no nationalization and price controls. (Cambodias.net 2007) Proton can get the

free opportunity to control its business without local government intervention. Moreover, there are a

great number of supplies in labour. So far Cambodia has a population of nearly 9 million people

which have 51% in the 'working age" group. (Cambodias.net 2007) Besides, the local labour costs

are lower compared to other South-east Asia countries and Proton can make full use of local labours

to improve Proton Exoras productivity. As a consequence, those are good business incentives that

Proton can build their own business strategy according to the demand from target market to seize

their market share.

3. Simple procedure

In Cambodia, most people use second car such as Toyota RAV4 car in their families due to its

reasonable price which is suitable for family and for traveling or work for long distance from time to

time. However, if people buy second car, it has complicated process where they need proper cars

document and copy of all related document, ID card and information. Buyer must validate the car

and sign on the agreement with the owner before they make a full payment with witness on the spot

(The Phnom penh Cambodia, 2012) So it should spend a lot of times to finish the transaction about

buying the second car. However, if we choose to buy a new car such as Proton Exora which also has

a simple transaction and Proton Exora have similar price and quality to Toyota RAV4. There is no

doubt that people may choose to buy a new car with simple transaction process. Therefore, Proton

can obtain more competitive advantage over its rivals.


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4.0Factors that influences business opportunities

4.1 Political

Over the years, Cambodias politics experienced dramatic changes. In the year of 1953,

Cambodia got independent from France, under the King of France, Prince Norodom Sihanouk.

After that, Cambodia got involved in the conflict between United States and Vietnam and the

destructive civil war when under Khmer Rouges rule. All these have brought high damages to the

country. The impacts are still can be seen now after so many years. (Economy and Politics of

Cambodia)

Finally, peace has come to Cambodia in 1993. A political system that is based on

multiparty democracy has established. It has known as parliamentary representative democratic

monarchy. It has provided the framework for assurance of good governance. Prime minister is the

head of the government, he is elected by the King while the King is the head of state. (Economy

and Politics of Cambodia)

The country, Cambodia now has political stability which attracts our attention to invest in

their country. It has transformed into a peaceful country with the improvement of social order,

stability, cooperation and development. Several key ministers are very experienced and wise in

facing all kinds of problems because of long-serving the in ministry. The Prime Minister Samdech

Techo Hun Sen, from time to time putting his effort on strengthening the judicial system, and

developing the countrys legal framework and institutions. His main reason is to attract foreign

investors by providing favourable business environment. (Invest in Cambodia)

Other than that, to attract foreign investors, the government has put in efforts to win the

hearts of foreign investors. They have solved all kinds of problems that related to business

investments that are local and foreign. For example, reimbursement of value-added tax for exported

goods, extension of tax holidays for garment factories, requirements for bank licensing, and the

extension of accommodation tax exemption for the tourism industry. (Investing in Cambodia)


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(Investment Risk In Cambodia)

Statistics are shown after a research is carried out to analyse the risks of doing business in

Cambodia. The research measured the risks according to certain variables but in this picture, we

will only focus on political risks as we need to equip our company with the knowledge of the

country we want to invest in, especially political as it will affect the business environment just a

blink of an eye.

We can see that there is reduction of risk from the year 2011 to the year 2012 especially on

external political risk. The grading system tells us that the lower the grade the risk has, the more

favourable the environment to do business. The external political risk has reduced. This has

indicated that Cambodia is now enjoying a more stable relationship between China, United States

and other major trading partners. These relationships have helped Cambodia to promoting inattracting other countries to invest in. Most importantly, the relationship between Thailand and

Cambodia has been restored as the problems that have lasted for years since long time have settled.

Therefore, Cambodia is definitely a safe environment for us to start our business there. (Investment

Risk In Cambodia)

On the other hand, domestic political risk has also slightly reduced. This indicates that the

political situation in Cambodia remains stable. Even though election is going to be held in the year


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end of 2012 and beginning of 2013. It seems that majority vote will still go to current government.

Thus, theres not going to have changes in business environment and this will definitely bring

assurance to the investors of our company. Besides that, government policies are consistent. The

policies are made to promote open economy to international world. The government is working

hard to open up its country for foreign investment. The main purpose is to improve the economic

growth and recover from the damage that has been done in last time. (Investment Risk In

Cambodia)

There is no zero-risk investment in the world. The corruption in Cambodia hurts the

business investment either from local or foreign countries. This has added on into business costs.

Usually bribes are functioning as a tool to connect the businessman with the local government

officers. It does not speed up administrative procedures like what happens in other countries.

Therefore, our company must prepare the business cost that will occur. (Cambodia 2012

Investment Climate Statement)

Other than that, the institution is weak due to large and inefficiency bureaucracy. There

are too many government departments and officers but administrative work is still slow. Theofficers are not efficient enough to get all the administrative work done. This has caused slowing

down of all the procedures that are related to doing business in the country. Rules and regulation

that are made by government are unclear and meaningless. Our company must have good planning

while we are investing in the country. This plan will definitely include time and cost that are going

to spend in the process of setting up the business in Cambodia. This planning work will help the

companys work smoothly and be more efficient while investment is being carried out. Time and

cost will be reduced on the company side as all the problems are predicted and solutions are

already prepared. (Investment Risk In Cambodia)


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4.2 Legal

1. Structure of the Judiciary System

For judiciary system in Cambodia, it consists of two main components which are power,

institution and actors. (khmerrough.com) For power, it is influenced by three components which are

judiciary, legislation and executive. The definition for judiciary is the part of a country's

government which is responsible for its legal system and which consists of all the judges in the

country's courts of law. On the other hand, legislation is defined as a law or set of laws suggested

by a government and made official by a parliament (Cambridge Dictionaries Online, 2011) which

executive is defined as the part of a government that is responsible for making certain that laws and

decisions are put into action (Cambridge Dictionaries Online, 2011). The performance of the 3

powers is monitored by media.

As for institutions, it consists of constitutional council, supreme council of magistracy,

courts and departments of prosecution and ministry of justice. (khmerrough.com) For the last

component which is actors, it is made up of judges, lawyers, prosecutors and notary. These people

play a vital role in maintaining justice in Cambodia. (khmerrough.com) Hence, we can observe that

Cambodia has a proper judiciary system. This gives confidence to Proton to invest in Cambodia.

2. Transparency of the Legal System

The laws of Cambodia are clearly stated and it can be downloaded in either English or

Khmer language in Internet. (GoCambodia.com) As for language used in court, the parties are free

to agree on the language or languages to be used in the arbitral proceedings. If the parties fail to

agree on this, the arbitral tribunal shall decide the language or languages to be used in the

proceedings. Any documentary evidence might be ordered by the arbitral tribunal with a translation

into language or languages agreed upon by the parties or decided by the arbitral tribunal. Hence, if

there is any disputes that need to settle in court, we can choose English language to be used in the

arbitral proceedings. English is an international language and we believe that the court would allow

us to English in the proceedings. As for documentary evidence, since it can be ordered by the


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arbitral tribunal to translate into language or languages agreed, we would have no difficulties in

understanding the documents.

Thinking on behalf of Proton, the availability of laws in Internet and language used in

courts is undoubtedly an additional point for us to invest in Cambodia. This is because everyone

can access to Cambodias laws easily and it is transparent. Other than that, it is a good news that we

can choose the language used in courts. Since English is an international language and we

understand language, we can always request to use English in court.

3. Legal Aid Service by International Bridges Justice (IBJ)

International Bridges Justice (IBJ) is committed to protect the basic legal rights of citizens

in developing countries so that all citizens are able to have competent legal representative, are

protected from unfair punishment and are treated fairly. (Ibj.org, 1990) In Cambodia, IBJ helps in

training Cambodias lawyer and concentrating on the development of legal aid service. The

rebuilding of the legal infrastructure is carrying by IBJ in Cambodia. (Ibj.org, 1990)

Since we are doing business in Cambodia, we focus on the land law issue such as illegal

land distribution which is also handled by IBJ. Other than that, seeing that we will be sending

employees to Cambodia, a good criminal law is vital to ensure that our employees safety is

guaranteed. With the help of IBJ, the criminal law of Cambodia is improved so we have confidence

in investing in Cambodia. (Ibj.org, 1990)

4. Corruption

In 2011, Cambodia was ranked byTransparency Internationalas 164th in the world by

perception of corruption. Its better rank than Mynmar in Southeast Asia. (Transparency

International, 2012) However, the president of the Federation of Association for Small & Medium

Enterprises of Cambodia, Te Taingpor commented that Cambodia will raise the awareness of the

public regarding the importance of minimizing corruption.
http://cpi.transparency.org/cpi2011/results/http://cpi.transparency.org/cpi2011/results/http://cpi.transparency.org/cpi2011/results/http://cpi.transparency.org/cpi2011/results/


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Officials who accept bribes might be jailed for up to 15 years if found guilty under the

Anti-Corruption Law. (Business Anti-Corruption Portal, 2012) This law also enables

anti-corruption council as well as anti-corruption unit to investigate bribes cases. A five-year plan

including mandatory asset declarations are adopted starting from year 2010 to combat corruption.

(Business Anti-Corruption Portal, 2012)

One of the very good examples is Top Chan Sereivuth, the former prosecutor of Pursar

province was sentenced into 19- year jail and was charged US $100 after being found guilty of

extortion money, illegally detaining businessman and corruption together with his two bodyguards

according to The Straits Time. The two bodyguards, Chhit Vuthy and Ro Samnang were sentenced

into 16 and 15 years jail respectively. (2012 AFP,2012)

For any businesses, a corruption free business environment is important. It is the

corruption free business environment that allows companies to compete in a fair way. For Proton,

business ethnics are stressed and we focus on producing the best quality of products and services to

meet the demand of customers. Hence, to compete with other automobile manufacturers in a fair

manner, the corruption rate must be low. This proves that Cambodia government is putting effort incombating corruption so we will give Cambodia a chance in this matter.

5. Type of Business Organization in Cambodia

The types of business organizations available in Cambodia are branch office, commercial

representative office, branch office, joint stock company, limited liability company, partnership

(both general and limited), limited liability company and sole proprietorship limited company.

Below are the characteristics of the business organizations in Cambodia. (GoCambodia.com)

(i) Branch Office

An office which is set up by foreign company in Cambodia to carry out commercial activity is

called as branch office. The parent company have the authority in selecting the management people.

It can carry out all the commercial activities such as buying and selling goods and services. The


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method of production is fully controlled by its parent company. As for liabilities, the debts of a

branch office are under the responsibility of both branch and parent company. (GoCambodia.com)

(ii) Commercial Representative Office (CRO)

Eligible foreign investors are allowed to establish CRO to help in the sourcing of local products

and services in order to gather information for its parent company. It is treated as the same legal

entity from its parent company. CRO is treated as a cost centre which means it does not gain direct

profit (TechTarget 2012) and derive no income from its activities. The examples of CRO are

research and development (R&D) departments, Marketing departments and customer contact center.

(TechTarget, 2012)

(iii) Joint Stock Company

It is a company in which all stockholders are unknown to the public. It must be formed with at least

7 shareholders. As for the minimum issued capital, it must have at least 100 million riets which is

equivalent to RM7792.97 at a principle value per share of at least 10,000 riels or RM7.79. As for

Board of Directors, three of them must be the shareholders of the company. (GoCambodia.com)

(iv) Limited Liability Company

It is a company in which the shareholders of a limited liability company have limited liability.

Minimum 2 and maximum 30 shareholders are allowed in Limited Liability Company. Businesses

such as financial institutions and insurance companies are not allowed to be incorporating as a

limited liability company. It has a minimum paid up capital of 20 million riels which is equivalentto RM15532.78 at a principle value per share of at least 20,000 riels or RM15.53.

(GoCambodia.com)

(v) Partnership

In Cambodia, two forms of partnership which are general partnership and limited partnership can

be formed. For general partnership, it is formed between two or more persons who have shared

unlimited liabilities which mean all general partners have the risk their personal assets in case the


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company goes into bankruptcy and cannot pay back the debts. As for limited partnership, it is

formed by one or more general partners who have unlimited liability and a few limited partners

who have limited liability. Only the name of general partners will appear in the name of business.

(vi) Sole Proprietorship Limited Company

Only one shareholder is found in sole proprietorship limited company. This type of company can be

either managed by the shareholder himself or an individual appointed by the shareholder himself. If

it is registered in registered office in Cambodia and has at least 51 percent of its shares owned by

Cambodian nationality will be able to own land in Cambodia. Only Cambodian citizen can become

the Chairperson of the Board of Directors while other directors can be foreigners.

(GoCambodia.com)

In conclusion, after considering all types of business organization, we made up our mind

to set up Protons branch office in Cambodia. The reason behind is we want to have fully control of

the directors as for branch office, the Head Office has the authority to manage and control the

branch office by selecting its own directors. Another reason for us to choose branch office is branch

office in Cambodia is permitted to can control the buying and selling of goods, the signing of

contract, the services rendered and so on. As a car manufacturer, we want to take control on where

to get the raw materials as well as resources. The products and services provided must be as good

as what Protons headquarter offered. Hence, we would enter Cambodia through branch office.

6. Rights to Private Ownership

There are no restrictions for foreign companies to establish and own business in Cambodia.

The law on land, 2001 of Cambodia provides a guideline for individuals and corporation to own

land in Cambodia. Under the law only Cambodia citizens and companies which have 51 percent of

its shares are owned by Cambodias citizen or Cambodia Company. (AAA Advisors Ltd -

Accounting, Auditing & Advisory Services, 2012)

Under the law, foreign investors are allowed to use long term land lease to own buildings.

Previously, no foreigners are allowed to own land but from what we see today, Cambodia has


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progressed as it provides an alternative which is to use long term lease for foreign investors to own

land but. Proton do not choose to use long term lease as using long term lease would require us to

have 51 percent of shares owned by Cambodias citizen or Cambodia Company. (AAA Advisors

Ltd - Accounting, Auditing & Advisory Services, 2012)

Under the law as well, the Council for the Development of Cambodia can approve

qualifies investors to own buildings on leased property. Since Proton is focusing on improving the

transportation in Cambodia, we can approach the council and apply to become a qualified investor

to own buildings on leased property.

It is good news for Proton because we can apply to become a qualified investor. Since we

plan to manufacture at Cambodia, Cambodia has given us the green light to own land at Cambodia.

7. Protection of Property Rights

Being a member of the World intellectual Property Organization (WIPO) and the Paris

Convention for the Protection of Industrial Property (State.gov 2010), Cambodia follows rules and

regulations to protect property rights. Land laws and the Law on Copyrights and Patent and

Industrial Design are designed to protect property rights. The law on land, 2001 of Cambodia

provides a guideline for individuals and corporation to own land in Cambodia. Under the law,

foreign investors are allowed to use long term land lease to own buildings. Previously, no

foreigners are allowed to own land but from what we see today, Cambodia has progressed as it

provides an alternative which is to use long term lease for foreign investors to own land. Cambodia

(2012 Investment Climate Statement, January 2012)

Under the law as well, the Council for the Development of Cambodia can approve

qualifies investors to own buildings on leased property. Since Proton is focusing on improving the

transportation in Cambodia, we can approach the council and apply to become a qualified investor

to own buildings on leased property.

It is good news for Proton because as long as we have long term land lease, we can have

our own building there and we can apply to become a qualified investor. Since we plan to


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manufacture at Cambodia, Cambodia has given us the green light to own building using long term

land lease.

As for intellectual property rights (IPR), Cambodia adheres to World Trade Organization

(WTO) commitments as Cambodia is a member of it. To meet the requirement of WTO, the law

concerning marks, trade names and acts of unfair competition was approved by the Cambodian

National Assembly. For your information, WTO had extended the deadline to 2012 for Cambodia

on November 9, 2005 to fully comply with WTO rules and regulations. (state.gov 2012)

It is year 2012 and next year is already year 2013. In a very near future, the deadline for

Cambodia to comply all the rules and regulations such as to enforce copyright laws and patents set

by WTO on intellectual property rights will reach. Hence, Proton will not need to worry that when

we set up a branch office at there, our intellectual properties are violated by irresponsible third

parties. (state.gov 2012)


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4.3 Social culture

When we enter into a foreign country to start direct foreign investment, we need to focus on the

social-culture which can show us a countrys culture to help us know if the country has potential

development. Our companys product is very suitable for Cambodia as it matches the social culture.

1. Population

According to the Cambodias statistic in 2011, it has an estimated population of 14,805,358 people,

of which 51% are in working age group higher than those of Tha iland, South Korea, and India. It

can prove that Cambodia has a plenty of labour supplied for us to utilize. There is no wonder that

choosing Cambodia as Protons direct foreign investment is the best choice to further expand

protons business.

2. Language

In recent years, many younger Cambodians and those in the business field have gradually studied

English. The tourism industry is the countrys one of greatest popular industry, English is widely

spoken and taught at a large number of schools because of a great number of tourists from

English-speaking countries. As a consequence, we can hire some local technicians to produce

Protons Exora by communicating with English and Protons car industry will manage more

efficiently.

3. Rightside drive

Cambodia follows a keep-to-the-right rule drive derived fromFrance.In another words, Cambodia

has the same rightside drive as Malaysia. Therefore, Proton does not need modify its module of

Proton Exora according to the same rule of right-side drive with Cambodia. It can help Proton save

certain of design capability fees to reduce cars cost. As a result, Proton will set a lower price to get

a competitive advantage over local rivals.
http://en.wikipedia.org/wiki/Francehttp://en.wikipedia.org/wiki/France


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4.4 Economy

Cambodia has emerged as a high growth economy in recent years. This has made many

investors as well as corporations from all around the globe are being attracted to have investment

project with this country. Cambodia had slowly transformed from a centrally planned economy

country to a free-market economy in 1993. Instead of controlling and planning for the country what

to produce, how to produce, the Cambodia government has taking effort in promoting private

investment and encouraging with several institutional and economic reforms.

1. Under-penetrated economy

When compared to other countries like Vietnam and Thailand, Cambodia is still

considered as an under-penetrated economy with growing domestic consumer market. The word

under-penetrated means that the market is still new and has less businesses operating in it .Thus

if we could set up our business there then we might be able to gain some first-mover advantages

such as higher profit or greater market share. According to an research that reported 61% of

Cambodian are under 25 years old, so this exceptionally youthful demographic there will also

ensure a rising domestic demand. (The Phnom Post, 2012)

Some analysts and economists even made their assumption that with workforce

participation, household formation and urbanization will all contribute to the robust growth of

Cambodia for the next decade. Besides, the GDP per capita had increased twice as well which

signified a rising purchasing power of the people in the Kingdom. (Leopard Capital.2008-2012)

2. Strategic Location

The location of a country will affect its attractiveness to become an investment country.

Cambodia gains advantage in this aspect as it is located at the heart of South East Asia, which is a

region that is experiencing enormous economic growth for several decades.

Cambodia is sandwiched between Thailand and Vietnam which these two countries have a

better and more developed economies that will indirectly facilitate the economics of Cambodia. At


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the same time, it is also the midway between China and India thus this is very beneficial as these

two countries are the most important growth area of 21stcentury. (Leopard Capital.2008-2012)

3. Improvement of Transportation Connectivity

On the other hand, the transportation system of a country is also very important as it will

influence the cost of doing business there .Cambodia is basically connected by road system with

Thailand, Laos and Vietnam but waterway are still an vital supplement to the roads as the country

is not very well-established yet. Since the transport system is not advanced and complete hence this

will indirectly increase our cost of doing business there. In order to improve on this aspect, the

country had decided that all key road and bridge that connecting with neighboring countries like

Vietnam and Thailand will soon be upgrade.

Unlike technology-advanced countries such as Japan and South Korea, Cambodia only has

two rail lines, one is extending from Phnom Penh to the Thai border while the other one is from

Phnom Penh to Sihanoukville. In the hope to attract more foreign direct investment, Cambodian

country is currently put in a lot of effort as the railroad system is being rehabilitated while their

container sea port in Sihanoukville has been modernized and expanded. Meanwhile, Cambodia

government had also opened three new international airports to ease the travel of businessmen and

the transfer of cargos and containers. (Leopard Capital.2008-2012)

4. Low Labor Cost

It is relatively low cost to invest in Cambodia when compared to Thailand and Vietnam as

the younger generation in these two countries are increasingly prefer to get a white-collar jobs for

themselves which will gradually increase the cost of labor. Then we should look for other

alternatives like this new emerging country, Cambodia.

The workers here are more diligent and easily motivated as a single working opportunity is

consider very precious for them. Hence they are willing to work even though the task is tough.

Thus it is very beneficial for us to employ them and train then then work for us with low cost but

high productivity.


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The lack of skilled workforce is not a big obstacle for us as the country is currently

initiating a lot of intensive on-the-job training for its people to make them more

well-equipped .Besides ,we can also bring our own management team and senior workers to

Cambodia and give training to them. This might seem to be costly but actually it is better in a way

that the Cambodias workers are lack of experience hence it is easier for them to absorb what we

teach them just like a white paper that can be easily be occupied by writing or drawing .(Royal

Consulate General of Cambodia ,2011)

5. Attractive Incentives

The Cambodian government proactively support and welcome foreign direct investment

by offering a variety of attractive incentives for investors that will manufacture and sell products in

their country. The first incentive is the import tax exemption for construction materials and

production equipment. For instance, since we are going to set up our own business there so we are

under domestic manufacturing industry for the type of industry and will get exempted from the

import tax for construction materials and production equipments.(Phnom Penh Special Economic

Zone, 2012)

The second incentive is about the ease of opening a capital account in Cambodia and the

advantage of repatriation of profit. Repatriation of profit means that the profit that we had gained in

Cambodia can be converted and transfer back to Malaysia. Although the national currency in

Cambodia is Riel, the US dollar is widely used in business and daily life in Cambodia. With several

regional banks have opened in recent years, making it even easier for investors to move funds in

and out of the country as well as open a capital account in Cambodia. (Leopard Capital,

2008-2012)

The third incentive is the Government-Private Sector Forum will help to reduce obstacles

and inefficiencies in our operation in Cambodia. This body will always be there and ready to bring

government and private sectors together to talk about all issues and find appropriate solutions

which benefit all. (Leopard Capital, 2008-2012)


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6. Unleveraged Financial Position

The sovereign credit rating of Cambodia has remained unchanged and unleveraged since

they are first received by the Kingdom in 2007. Moodys presently rated Cambodias long-term

debt at B2 while Standard and Poors rating is B+. Both rating indicate that this country has an

ideal speculative investment prospect. Cambodia also has relatively low levels of sovereign,

corporate, and consumer debt due to well-capitalized and conservative banking system. (Leopard

Capital, 2008-2012)

7. Largely dollarized economy

Other than having an unleveraged financial position, Cambodia also has a very largely

dollarized economy, which minimizes foreign exchange risk for a lot of foreign investors. This type

of economy can help to stable monetary and fiscal responsibilities as well. Moreover, Cambodia is

focusing and working very hard in increasing trade integration. For example, Cambodia has been a

member of WTO and ASEAN, and above all Cambodia has duty free or preferential export access

to most developed economies. (Leopard Capital, 2008-2012)

8. Taxation

Cambodia has a more lenient tax regime compared to most neighbouring countries.

Corporate tax rates are low, and filing requirements are simple and streamlined. In addition,

Qualified Investment Projects can benefit from attractive tax breaks, as determined by the CDC.QIP is an investment project which has received a so-called Final Registration Certificate (FRC) by

the Cambodian investment board or other relevant government authorities. (Global Legal Resource,

1995-2012)

9. Special Economic Zones

Special Economic Zones have recently been introduced to Cambodia. This zone is just like

what we are now having in Malaysia so called as Free Industrial Zone; one good example is Bayan


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Lepas which located in Pinang. All industrial activities are brought together into one special

development under the auspices of the SEZ. Each zone contains a production and service area and

may also include a residential area to accommodate workers.

SEZs offer a one-stop service for imports and exports, with government officials stationed

on-site to provide administrative services. Applications to establish factories within the SEZs are

dealt with on-site as well as all administrative clearances, permits, and authorisations. Businesses

within the SEZs also benefit from a number of fiscal advantages, including income tax, customs,

and VAT breaks.

Since the adoption of the sub-decree establishing economic zones, the government has

approved 21 SEZs, located along the border with Thailand and Vietnam, Sihanoukville and Phnom

Penh. Of the 21, six have commenced operations. (Global Legal Resource, 1995-2012)


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5.0Potential competitors

PROTON and PERODUA are the two Malaysian National automobile companies.

Cambodia represents the huge potential market to enter. The expansion into Cambodia will lower

Proton and Peroduas business risk through market diversification.

Perusahaan Otomobile Nasional Berhad (PROTON) was incorporated on 1983. The company

has come a long way from mere car assembler to integrated car company. While, Perusahaan Otomobil

Kedua Sdn Bhd (PERODUA), established in 1993, is a joint venture company between Malaysian and

Japanese partners and the two other joint venture partners of Perodua are Daihatsu Motor Co. Ltd. and

Mitsui & Co. Ltd both of Japan. Proton is considered the first or early mover compared to Perodua

where it was publicly listed on the Kuala Lumpur Stock Exchange (KLSE) currently known as

BURSA on 1992.

Both corporation of PERODUA and PROTON are competitors which producing variety of

automobiles such as MPV model, SUV model, SEDAN models and etcetera. PERODUA has

introduced a new variant of its MPV called Alza SR. SR stands for Smart Ride and this is an entry

level variant positioned below the Standard and Advanced spec while for the competitor, PROTON

has also produced Proton EXORA which is also categorized as MPV.

The strength of Perodua is when it comes to customer services and welfare. Natural disaster

such as flood is commonly happens in Cambodia. Perodua provides Flood Damage service while in

the event of breakdown due to flood, the member or Perodua customer shall be entitled to

reimbursement for the towing services up to a certain limit of payment in Cambodia. Vehicle isrepaired at Perodua Workshop in Cambodia. Maximize the wealth and welfare of the customer brings

advantages for Perodua compare to Proton.

However, lately, Perodua has issued a new loan for the product. Since much of sales are

done through bank loans, the new rules which are based on disposable income rather than gross

income have seen the approval rate of people wanting to buy a Perodua car dip but the problem is

compounded by the fact that most of the customer there, a lot of them farmers and small traders, are


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not salaried people and it's difficult for them to come up with the necessary documents or financial

statement demanded by banks these days. The situation at the Perodua plant belies a bigger problem

that has been caused by a lower loan approval rate after the responsible lending guidelines came into

force this year. The delays and dragging the process of borrowing loan from bank had affected the

demand of Perodua vehicles. Perodua now have to keep stock and its here where inventory has built

up. Perodua has to re-strategize if it intends to keep its market share.

Proton has a different business model than Perodua but there are definitely areas that the

carmakers can collaborate. The different business model will not make a merger between the two

national carmakers possible.


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6.0Strategies

1. Understand their rules and transportation

Firstly, according to the rules of Cambodia, they drive car on the right-hand side of the road,

which means the driver sits on the left hand-side of the car. For Malaysia, driver sits on the

right-hand side of the car and drive on the left-hand side of the road. In order to sell our

productProton Exora which is the product of Malaysia; we need to change the drivers seat into

left-hand side to follow their rules. (Brian Lucas, 2011)

2. Entry mode: Strategic alliance

2.1 Benefit of strategic alliance

To enter the Cambodia market, we tend to use strategic alliance and manufacture our

product at Cambodia which means work together with local companies by sign a legal agreement to

share access to their technology, trademarks or other assets. We will cooperate with local spare-part

companies to save our material cost and also it helps us to understand better their law and the way

they doing business in Cambodia. It is the most efficient and effective way to reach Cambodian

buyers by having a local partner as they have the market knowledge and established network in their

own country. In Cambodia, personal relationships can be the key to successful business transactions.

In addition, by using strategic alliance, we can share the benefits among firms to share the costs,

risks, and profits of business operations. And also we can narrow our internal focus and specialize in

selected areas, relying on our partners to specialize in others areas of functional or technical

competence. In the process, we share the risks of specialized investments, reduce internal complexity

and administrative costs, and achieve greater adaptability and responsiveness to the environment. It

allows us to share the resources or capital, and the customer relationship which has been build, more

ability to raise fund and more talent to manage the business. Lastly, cooperate with spare part

business might increase the sales volume of our product since it is convenient for our customer to

having maintenance or repair in their own country. (Evangeline Marzec) (Daboub, Anthony J,

2002)


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Besides that, corporation tax in Cambodia is 20% which is lower than Malaysias 28%. By

considering the import tax of vehicle into Cambodia which is 70%, it is a high cost for us to import

our product into Cambodia. But if we manufacture our product in Cambodia, import raw materials

only charge 7% and for the equipment and machinery, it charge 15%. Compare to all those cost,

produce in Cambodia is better than export our product into Cambodia. Also, their labor cost is quite

low due to the illiteracy problem and high population. Besides that, the GDP of Cambodia is keeping

increasing and has a great potential to develop in the future. Based on research, it grows to 6.7% in

2011 compare to 2010 which is 6% and it will continue growing in the future. (2009) (Camlinks,

2009)

Cambodia is an agricultural based country which is not advanced in industrial area, so there

is a great potential for us to gain a high market share in Cambodia since there is not so much

competitors in automobile area. Based on research, there is lack of public transportation in Cambodia,

so it is not convenient for the people there to transport themselves in daily life. So Cambodia will

import motor vehicle from other countries to support their transportation.

2.2 Entry risk

Besides the advantages of strategic alliance, there are also some risks for us to use this entry

mode. Firstly, we cannot earn the whole profit. The profits need to be split and shared by both

companies. Sometimes, it has the problem and conflict between both company that how to share the

profits. Thus, it is essential for us to discuss and state clear the ratio of profits to be shared by both

companies when doing contract with the partner. Furthermore, the knowledge of the company need

to be shared and the technology will be learned by the partners. The learning opportunities may not

be symmetrical which means one firm may learn more than the other. It might be risky that after the

partner learn our technology, they might start their own business instead of continue cooperate with

us. So which means when we go into strategic alliance, we must trust each other in order to make

sure that the relationship can be continued. Thirdly, due to specialization in our own areas, we might

lose the chance to learn new things and become more dependent to our partner. Besides that, the

culture of our company might not be same with our partner, which mean the way and the behavior of


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doing business might not be same. For example, the rules and practices of our company might not

same with our partner, this might create conflict within us due to the different opinion during the

management of the business. We are not able to control our partner behavior and this might influence

the relationship of each other and the efficiency of the work. (Daboub, Anthony J, 2002) For

example, the alliance of Renault and Volvo fail due to six points, there are misalignment of operating

and senior managers, path dependence, alliance recontracting, leadership style, cultural differences

and time. (Nina Rakowski / Martin Patz, 2007)

2.3 Our partner

Our company decided to have a strategic alliance with 212 Kim Heng Car Spare Part Shop

which located at No 212 Oknha Tep Pan (St.182), Phnom Penh, Cambodia. Based on the survey, our

partner is a biggest spare part shop and has a good reputation in their country, and they already set

their business in Cambodia for 10 years. Our partner have variety brand of spare part and also our

product brand spare part. Besides that, our partner has many skilled-employees, and they are full of

experience in this field. They do sale the spare part of the car and provide maintenance and repair

services for their customers. According to the feedback of their customers, they are satisfied with the

services that provided by our partner and the quality of their product. Furthermore, our partner also

has a strong fundamental in their business and their financial condition is stable. Therefore, our

company make the decisions that cooperate with 212 Kim Heng Car Spare Part Shop in Cambodia.

3. Strategy when doing business in Cambodia

3.1 Sales promotion

Firstly, most of the Cambodian is poor and low educated, so they prefer economical cars and

is more affordable for them which mean they are sensitive towards the price. In order to attract their

attention towards our product when we first produce our product at there, we will have some sales

promotion campaign such as giving discount coupon and lucky draw. For sales promotion campaign,

the participant who wins the 1stprice in our lucky draw contest can get a free new Proton Exora and

for another 10 winners will get discount coupon to buy our cars. This is also a way by using


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word-of-mouth if the winner feel satisfy with our product, they will recommend our product to their

relative and friends. With this sales promotion, it will easily build our image in our potential

customers mind and may get higher market share. It is quite attractive towards our market since it is

economical, affordable and our cars have seven seats as we know they are high population in

Cambodia usually in a big family. In additional, our product maybe is still new for Cambodian, by

lowering down our price, it may encourage the customers try and know more our product.

3.2 Advertising

Advertising is also an effective way for us to promote our product in Cambodia such as

newspaper, radio and television. According to a public survey on radio programming conducted by

the International Republican Institute (IRI), FM105 and FM103 are the most popular radio stations in

Cambodia whereas the most popular television channel is CTN. It is easy for us to approach our

potential customers and get the attention of them. (2010)

3.3 Set a branch office in Cambodia

In order to manage and able to control the business in Cambodia, we will set a branch office

in Cambodia and send our manager to Cambodia who has the experience and skillful enough to help

our business there and dealing with those work and transactions. It is also a good opportunity for us

to learn their culture and the way of doing business. By setting a branch office in Cambodia, parent

company able to know the problem and condition of the business in Cambodia and solve it faster and

properly. In addition, branch office may provide training to the labor to become a skillful worker to

maintain the quality of our product.

3.4 Provide after-sales-service

There are only certain brands of spare part shop in Cambodia especially Toyota have the

most spare part and this make the Toyota car be the most popular car in Cambodia. In order to solve

this problem, we will provide after-sales-services and warranty to our customers if our product have

occur some problem, this might bring a lot of convenient to our customers and lower down their

worry about difficult to have an maintenance on their car.


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7.0Potential Risk

Perceptions of Cambodias Business Environment RisksGradeGrades

1.0 Political risk in Cambodia

Cambodia is a country that enjoys political stability and has a government that welcomes

dialogue with the private sector. It is a very open economy with a business-friendly government. This

is a country that has enjoyed stable macroeconomic development and has a firm vision for medium

and long term economic growth.

Investors have been impressed with the commitment of the RGC (Royal Government of

Cambodia) in getting modern commercial laws in place, as evidenced by the progress that has been

made both before and after Cambodia's accession to the World Trade Organisation (WTO). The

Royal Government has been implementing serious reforms in all sectors, including Public Financial

Management Reform, Financial Sector Development, Private Sector Development and Governance

Reform including land management, administration and legal and judicial reforms. All aimed at

improving the business and investment climate through trade facilitation and increased private sector


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participation in physical infrastructure and the development of small and medium enterprises (SMEs).

Having achieved steady growth and successes over the past several years, Cambodia is now

confident that we are on the verge of a bright future, full of optimism and hope.

1.1.1 Corruption

However, in general, Cambodias inefficiency to reduce poverty and to provide better

infrastructures and health care is primarily due to corruption. It is a very serious political problem in

Cambodia. Corruption is the simply means the private benefit of a few power officials at the

expenses of the people. Even more basically corruption is simply the theft of the peoples money.

Military conflicts and political strife isolated Cambodia from global trends that have profoundly

reshaped some of its neighbors, and then UNTAC and subsequent events thrust the country abruptly

into the modern world. Survival corruption is a way of life for the poor, and a succession of

medium and large-scale corrupt acts are the ticket to wealth for the politically powerful. (Narak Sem,

2009)

A significant portion of revenues received by the RGC (Royal Government of Cambodia)

are legal under Cambodian law or in accordance with international agreements. Businesses pay taxes,

customs duties and fees, buy licenses and share revenues from natural resource concessions.

International donors provide concessionary loans and grants, and offer technical assistance, training,

infrastructure and commodities. According to available reports, donor resources provide about half of

Cambodias national budget, and as much as one tenth of gross national product. However, it is

important to understand that even legal payments to Government can be tainted, diverted and

manipulated in numerous ways. Businesses are routinely assisted in reducing their formal tax

burdens or customs duties after paying bribes. Thus, legal import of the number of vehicles has

increased fivefold. Just for this one product, a large smuggling industry must necessarily be in place,

providing significant payments into the illicit system. International firms are forced to take local

partners, who provide little more than occasional fixer services in return for a significant share of

profits. No one outside the system knows what proportion of earnings go to pay taxes, what

proportion go to international businesses as excessive profits, and what proportion are transferred to


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foreign bank accounts.

Some observers have argued that such payments are taxes in another form. While there

is some truth in this observation, this form of corruption places businesses in a legally and morally

ambiguous position, tainted by their own actions, and readily subject to additional, irregular

exactions from officials. The costs to citizens-at-large are even greater. Low formal tax payments

lead to poor health and education services and second rate infrastructure. And because of potential

foreign and indigenous investors refuse to do business in Cambodia, few jobs are created, and

additional legal revenues are foregone. Due to the high corruption in business market, PROTON

CORPORATION have to pay with unnecessary payment to enter PROTON EXORA, this will cause

the original price of the car rises.

1.1.2 Election

Furthermore, domestic political risks are higher this year than one year ago mainly because

commune elections will be held shortly and National Assembly elections are scheduled to be held

soon. This means there will be some changes in leadership at both the local and national level. The

opposition parties in a very weak position to win seats away from effectively a one-party,

authoritarian state. This is incorrect, but the government faces an on-going challenge in political

system to observers inside and outside the country. (Political Risk, Jan 2012)

2.0 Economic risk in Cambodia

The global financial and economic crisis is the latest in a series of external shocks to hit

Cambodia in the space of about two decades, following on from the food crisis that struck in 2006

and the Asian financial crisis of 1997. Wrestling with the effects of these three crises has represented

a major feat for Cambodias post-conflict economy. The global financial crisis hit Cambodia through

its second-round effects on trade, private capital flows and, ultimately, the countrys growth sectors.

Its overall impact has been all too clear. From being one of the fastest-growing economies in the

world, Cambodia is now poised to suffer one of the steepest contractions in output in developing

East Asia. In the decade before the crisis, the country experienced significant reductions in poverty,


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whereas the number of poor Cambodians is now expected to increase.

There have been indications that the Cambodian economy has already bottomed out and is

now on the rebound, but there is significant downside risks involved in this upturn. The fate of the

garment sector, the economys sole major export driver, remains uncertain, having lost

competitiveness in the global post-quota environment. The government has not had the fiscal

capacity to deliver a bigger and sustained stimulus, and the effectiveness of some of its responses has

been of concern.

2.1 Poor Infrastructure

The biggest economic risk that Cambodia faces is poor infrastructure where going into 2012

and 2013 will be the high cost of electric power. The country is increasing its power generation

capacity rapidly and the supply of electricity is much more reliable than it used to be. But the

continuing high cost of electricity is hurting the countrys competitiveness by undermining other

advantages like the low cost of labor. If Proton sets up the manufacturing factory in Cambodia, it will

burden the corporation term of high set up cost, for example, Proton might have to build its own

electric power to monopolies and supply electric power to manufacture the production. Another

words, Proton will also have double taxation to get power supply, all this will force the cost of

production rise. (Political Risk, Jan 2012)

3.0 Legal risk in Cambodia

As Cambodia transforms into a free-market and democratic society, its legal system has also

seen significant change. For an investor seeking to do business in Cambodia, it is important for

Proton Corporation to understand not only the current difficulties of the legal system but also its

future opportunities. The government has committed itself to reforming the legal system. Its

priorities are upgrading the legislative process, making the judiciary more transparent and bolstering

structures for alternative dispute resolution.

The Royal Government will make further strides on the path of trade liberalisation aimed at

the free movement of goods and services within the country and between Cambodia and her trading


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partners; creating access for Cambodian products, without barriers and obstacles, to extensive

regional and world markets. This will create opportunity to avail of economies of scales and bring

other benefits to the Cambodian economy in terms of an increase in investment, jobs, income and

economic growth as a whole. All these are critical to reduce poverty among our people.

The Royal Government will pay particular attention to the further integration of Cambodia

into the region and the international community by pursuing membership of Asia-Pacific Economic

Cooperation (APEC) forum and participating in the building of the Asean Community. All

ministries/agencies are expected to fulfil the duties of Cambodias membership of the WTO by

adopting laws and regulations and ensure their effective enforcement to meet the requirements of the

WTO. The Royal Government will promote the implementation of new measures including:

establishing a National Productivity Centre in order to improve productivity and reduce production

costs; establishing a National Standards Institute to ensure that product quality conforms with

regional and international standards; establishing national testing laboratories for physics, chemistry,

micro-biology and mechanics in order to evaluate quality and set prerequisite criteria for products;

strengthening an industrial property rights protection mechanism in order to promote innovation,

adoption of new techniques and new technology; imparting training to improve skills; and,

strengthening the relevant legal framework.

3.1 Weak Judiciary

A bad situation is exacerbated by an extremely weak judiciary and the absence of the rule

of law. The legal system in Cambodia remains ineffective, despite 16 years of promises, the

government has still not passed any new criminal law, anti-corruption law, or other protection of

human rights. Commercial and criminal codes and associated procedural codes are being developed

with international assistance, but the process is extremely slow. Numerous NGO efforts are under

way to develop basic legal services for the weak and poor, and defend the public interest against

predatory elites. But this work is barely under way. Some progress is being made in training judges

and prosecutors, but the number of competent legal professionals continues to be woefully

inadequate. Court proceedings are simultaneously over-complex and dilatory, with most judges


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responding to political pressure. Low ranking court personnel profit from cumbersome

administrative procedures. Despite scheduled salary increases for judges, their legal income will

continue to be well below what they can extract from placing court rulings up for sale. Ordinary

Cambodians distrust the legal system, including the formal courts. The police and other enforcement

bodies are also seen as corrupt.

3.2 Land Law

According to the new constitution of 1993 and the Land Law of 2001 five main categories

of property on land can be distinguished as private land, state public land (all areas need for public

services such as roads, river banks, etc.), state private land (all other areas owned by the state),

communal land and indigenous land.

Land ownership for the investments shall be vested in natural persons holding Cambodian

citizenship or in Cambodian Entities. Foreigners are not allowed to own land in Cambodia (Land

Law 2001), but only the property and buildings on the land. A Proton corporation shall be deemed to

be of Khmer nationality if the company has a place of business and a registered office in Cambodia

and more than 51% of the voting shares of the company are held by a natural or legal person of

Khmer nationality. The use of land for investment can be permitted in the form of a concession, with

unlimited long-term leases or limited short-term leases.

In late December 2005, the ELC sub-decree was established, defining a mechanism to grant

state private land through a specific ELC contract to a concessionaire to use the land for agricultural

and agro-industrial production. For an ELC, which can be granted to private or investment

companies, it must have been classified and registered in the Land Register as state private land,

complying with the necessary legal procedures.

In addition, the granted land concession must be exploited within 12 months after issuance

of the concession and it will be cancelled or withdrawn if the conditions are not complied with or do

not fulfill the conditions stated in the concession charge book. Until September 2008 the Ministry of


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8.0Conclusion

After we have completed the market research on the economy of Cambodia, we had come to

a stage where everyone is agreed to invest in this country after comparing on the cost and benefit of

doing business there. Although the transportation system and the pace of developing is a bit slower

when compared to other developing countries such as Thailand and Vietnam, we still believed

Cambodia has it is own advantages and has bright prospect in future. So if we take this move to

invest in Cambodia before other automobile companies come in, we might gain some first-mover

advantage such as higher profit and greater market share.

Initially we planned to invest in Indonesia but after knowing that Proton already established

its brand loyalty there, we decided to explore with other country that have not been ventured by

Proton yet to give each and every of us a new experience. Fortunately, we had chosen Cambodia to

be our ideal choice and gave us a chance to know this country better rather than just a poor

developing country. Cambodia provide financial information aids, established legal system and

improving economic which all these will guarantee a good investment chance for investor .

In short, all the data that we have accumulated and analyzed showed that the benefit is

outweigh the cost of doing business there. So we will invest in Cambodia with our product, Proton

Exora which meet with the local requirement such as the right-side drive and set up our business

there.


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