G/SCM/Q2/KHM/2  
 
30 September 2021  
(21-7332) Page: 1/2 
Committee on Subsidies and Countervailing Measures  Original: English  
 
 
SUBSIDIES  
REPLIES TO QUESTIONS1 POSED BY THE UNITED STATES REGARDING  
THE NEW AND FULL NOTIFICATION OF CAMBODIA2 
The following communication, dated and received on 29 September 2021, is being circulated at the 
request of the delegation of Cambodia . 
 
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Question 1  
Cambodia's most recent WTO Trade Policy Review notes that qualified investment 
projects (QIPs) are eligible for "a deduction of 40% of the value of tangible assets used 
in production in their year of purchase or first year of use; import taxes exemption on 
production equipment, construction materials, and production inputs used to produce 
exports."  
a. Please explain why this program was not included in your notification to the 
SCM Committee.  
b. Why does Cambodia believe this program is not a prohibited export subsidy?  
Reply : 
a. The questioned program is not the subsid y as referred to in footnote 1 of the Arti cle 1 
(Definition of Subsidies), paragraph (a) (1) (ii)3, which mea ns that the exemption of an 
exporting product from duties or taxes borne by like product…shall not be deemed to be a 
subsidy.  
b. The questioned program is not a prohibited export subsidy but incentives for "qualified 
investment project ". It is not government 's financial contribution to foreign investors or 
foreign -owned enterprises, but rather an incentive scheme to promote private investment 
made by both local and foreign investors.  
It should  be reminded that Cambodia was categorized as one of the 46 Least Developed Countries 
(LDCs) on the UN list as recognized by WTO. Thus, as  an LDC, Cambodia enjoys the Special and 
Differential treatment under WTO Agreement, including exemption from the "prohibited subsidies " 
in accordance with paragraph 1 (a) of Article 3 (Prohibition) of the SCM Agreement, as well as 
paragraph 2 (a) of Article 27 (Special and Differential treatment of Developing Country Members) 
which referred to LDCs in Annex VII of the SC M Agreement.  
 
1 G/SCM/Q2/KHM/1.  
2 G/SCM/N/372/KHM . 
3 Footnote 1: "In accordance with the provisions of Article XVI of GATT 1994 (Note to Article XVI) and the 
provisions of Annexes I through III of this Agreement, the exemption of an exported product from duties or taxes 
borne by the like product when destined for domest ic consumption , or the remission of such duties or taxes in 
amounts not in excess of those which have accrued, shall not be deemed to be a subsidy."  G/SCM/Q2/KHM/2  
 
- 2 - 
 
 The SCM Agreement even recognizes that "(…) subsidies may play an important role in economic 
development programmes of developing countr y Member s", according to Article 27.1.  
It should also be noted that such incentive scheme s in questions have been established and provided 
to all eligible private investment projects, be it a project invested by Cambodian national, or a project 
invested by a foreign national, for more than twenty years to date in compliance with Cambodia 's 
Law on Investment promulgated in 1994 and its amendment in 2003. Cambodia used to notify to 
TRIMs and SCM Committee s and the instrument of notification is publicly available at:  
G/TRIMS/N/2/Rev.28/Corr.1, dated 6 November 2018 . 
Question 2  
Based on the State De partment 2020 investment climate statement, we understand that 
Cambodia has created special economic zones (SEZs) to further facilitate foreign 
investment; as of February  2020, there are 23 SEZs in Cambodia. These zones provide 
companies with access to lan d, infrastructure, and services to facilitate the set -up and 
operation of businesses. Projects within the SEZs are offered incentives such as tax 
holidays, zero rate VAT, and import duty exemptions for raw materials, machinery and 
equipment.  
a. Are any of the se incentives contingent on the export of manufactured goods?  
b. Please explain why this program was not included in your notification to the 
SCM Committee.  
Reply : 
a. Only import duty exemption for production inputs is contingent to export.  
b. Please refer to answer given to question 1 (b) above.  
Question 3  
The most recent WTO Trade Policy Review notes that "Incentives are accorded to specific 
sectors and activities, including the garment sector." Please explain why this program 
was not included in your notific ation to the SCM Committee.  
Reply : 
Please refer to the answer to the question 1 (b) above.  
Question 4  
The most recent WTO Trade Policy Review notes that "Manufacturing continued to benefit 
from tax  incentives, including corporate tax holidays, a special de preciation allowance, 
import taxes exemptions, and qualified investment project and special economic zones 
advantages." Please explain why this program was not included in your notification to the 
SCM Committee.  
Reply : 
Please refer to the answer to questio n 1 (b) above.  
In addition, under Article 6 of GATT 1994, the program s to provide the advantage to "manufacturing 
continued to benefit from tax incentives, including corporate tax holidays, a special depreciation 
allowance, import taxes exemptions, and qua lified investment project and special economic zones 
advantages " do not constitute subsidies or countervailing measures. Such fiscal incentives apply to 
all private investment projects that are categorized as qualified investment projects under 
Cambodia 's laws as mentioned above.  
 
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