16), spanning concerns about inflation (mainly in 2008) and concerns about external demand (mainly in 2009).

50. **The level of taxation is not seen as a major constraint** . This is confirmed both through surveys (Figure 16) and case studies, such as the Doing Business indicators (World Bank, 2008f).

51. **However, the complexity of regulations and the poor administration of tax and regulatory requirements are an important burden on firms** . Senior management spends a high 9 percent of its time dealing with government regulation requirements (World Bank, 2008d). Despite some improvements over the past few years, tax, customs, and business registration continue to have overly complex regulations and processes. The impact of the regulatory burden was evidenced by the major acceleration in company registration generated by the simplification of business registration processes in 2005-06 (World Bank, 2008d). It is also evidenced by the large informal sector.

52. **The absence of credible dispute resolution mechanisms is also a constraint** . Even established firms complain about it. In fact, they have several strategies to cope with the risk of disputes: for instance having sales pre-paid or maintaining very large inventories (Figure 18) protect them from the risk of a dispute (and from the unreliability of logistics services in the case of inventories). Between 2003 and 2007, losses due to labor disputes have increased from 2.6 to 6.0 days of production per annum and per establishment (World Bank, 2008f). More generally, the poor legal environment is evident from the high degree of self-enforcement of contracts (e.g. by pre-paying contracts), which is an important constraint for foreign investors.

**Figure 18: Firms have strategies to avoid using courts for commercial disputes**

<!-- Start of picture text --> a/ Share of Sales that are Pre-Paid (%) b/ Days of Inventory of Most Important Input<br>Cambodia Cambodia<br>2007, 20.7 2007, 40.7<br>Cambodia 2003 Cambodia 2003<br>Th Vi La Th ViLa<br>- 10.0 20.0 30.0 40.0 50.0 - 10.0 20.0 30.0 40.0 50.0 60.0 70.0 80.0<br><!-- End of picture text -->

**Figure 19: Corruption remains a major concern for firms**

a/ Firms Identifying Corruption as a Severe Constraint (%) b/ % of Firms Expected to Make Informal Payments to Public Officials (to “Get Things Done”) <!-- Start of picture text --> Cambodia Cambodia<br>2007, 51.7 2007, 84.1<br>Cambodia 2003 Cambodia 2003<br>La ViTh La Vi<br>- 20.0 40.0 60.0 80.0 100.0 - 20.0 40.0 60.0 80.0 100.0<br><!-- End of picture text --> _<u>Note: The box represents the 25</u>_<sup>_th_</sup> _and 75_<sup>_th_</sup> _percentiles of the distribution and the middle line the median. The extremes of the bar represent the minimum and maximum of the distribution. Cambodia’s performance in 2003 and 2007, as well as Lao, Thailand, and Vietnam are displayed. Source: World Bank (2008d)._ 53. **Established firms report “corruption” as their main concern** (Figure 16 and Figure 19). There are multiple facets of corruption: (i) at the service delivery level (with bribes for registration, licenses, utility connections, customs, courts, taxation; etc.); (ii) in public procurement (both small and large contracts); and (iii) in gaining favor for policy decisions. As 22