The Royal Government of Cambodia recognizes the paramount important of implementing principle of good governance as a factor which must be at the hart of a concession process in Cambodia. Consistent with the Government Triangle Strategies on transport to achieve privatization of Royal Railway of Cambodia (RRC); the Ministry of Public Works and Transport have issued the below Policies and as endorsed by The Prime Minister, for Restructuring of the railway in Cambodia to develop a railway concession which will yield a productive outcome for the people of Cambodia, the Government and the private investor. The policies are:

Principal 1: The Government recognized that an efficient and cost effective railway system in Cambodia with private sector management will offer transport services competitive with other transport modes, which will contribute to regional trade and integration.

Principal 2: The Government recognized that rehabilitation of the railway's northern and southern lines and reconstruction to connect to the Thai rail system are important priority needs to improve operating capacity and reliability. To that end, funding will be sought or provided by the Government for the required rehabilitation and reconstruction.

Principal 3: The Government recognized that sustainability of the railway system in Cambodia requires systemic reform and restructuring of the institutional character of the railway, coupled with a transfer of control and operational responsibility for the railway system to a suitably qualified private sector operator, in order to achieve a commercial and sustainable outcome within the context of the Cambodian and regional markets for rail transport services.

Principal 4: A Rail Operating Company, to be owned and operated by a private concessionaire, will granted exclusive rights to provide rail services on the present rail infrastructure under a concession agreement. The concession agreement will be protected by law and will bind the parties for the duration of the agreement and not be subject to change without the consent of both the Government and the Concessionaire. The concession agreement will include a mechanism to accommodate the reasonable national security concern of the Government.

Principal 5: The Government is committed to promote all appropriate measures to attract and sustain private investment in railways operations services. These include the enactment of a Railway Reform Law or other legislation which will establish the legal basis for and protect the concession agreement and contain provisions which will simplify and facilitate the investment framework and remove barriers to competition. In addition, the Government will encourage the development of fair modal competition in the transport sector by the enforcement of existing restriction on road vehicle load limits.

Principal 6: The Government will ensure that safe and reliable rail transport operations and services are provided and regulated through an open and transparent process centered on the concession agreement and approved safety plan which shall be awarded after a process of international competitive bidding based on best international practice. In order to assure potential investors that the concessioning process will be open and fair to all pre-qualified bidders, the Government, in consultation with the Asian Development Bank, will use a transparent procurement process for the concession which complies with international best practice for transactions of this nature.

Principal 7: The Government will monitor the Railway Operating Company's compliance with the agreed concession arrangements to ensure adherence to health, safety, labour and environmental requirements, including requiring the concessionaire to prepare, maintain and comply with an approved safety plan which shall form part of the concession agreement and be enforced in accordance with its terms. The concession arrangement will entitle either party to resolve disputes concerning the terms of the concession agreement by international arbitration, the decisions of which may be enforced within or outside Cambodia.

Principle 8: The pricing of railway services shall not be regulated nor shall the operator be compelled by any act, decree or resolution of the Government to operate services which fail to meet commercial standards of profitability and return on investment. This will be explicitly stated in the concession agreement. If the Government decides that non-commercial passenger services operation are required for social reasons on part or all of the railway infrastructure, the concession agreement shall provide how this Public Service Obligation shall be provided and compensated.

Principle 9: The concession fee shall be determined by transparent competitive bidding between pre-qualified eligible bidders and shall be based upon objective criteria which shall be determined by the Government with the intention of attracting maximum participation through fair and open competition.

Principle 10: In order to ensure that funds are available to meet its debt servicing obligations under the railway rehabilitation project and to facilitate the financing future capital works to extend the railway networks, the Government shall establish a Property Development (PD) entity and make available to it the right to rent and develop designated parcels of the land assets of the RRC. Such land shall not be required for railway operations and will not be alienated from State ownership. The PD entity shall be structured in accordance with principles of good governance, transparency and accountability, with the preferential dedication of its net revenues to meet the rehabilitation debt service obligations of the RRC until such debt is fully discharged and thereafter with the subordinate dedication of the balance of net revenues to provide funding for future capital works for the railway.

Principle 11: A Concession Management Unit shall be formed within the Ministry of Public Works and Transport to manage the concessioning procurement arrangement and the ongoing management relationship with the concessionaire through the life of concession, together with responsibility for the management of the rehabilitation of the railway system. The Director and staff assigned to the Concession Management Unit shall have appropriate project management, engineering and administrative skills.

Principle 12: The Government shall ensure that, consistent with an understanding reached with the Asian Development Bank concerning its readiness to offer a concessionary loan for partial financing of the rehabilitation of the railway system, the resettlement of persons who may be affected by the proposed rehabilitation of the railway system shall be achieved in a manner consistent with the ADB's Resettlement Guidelines.

Principle 13: The Government shall negotiate a revised cross-border railway transport agreement with the responsible authorities in Thailand as soon as possible. The objective shall be to finalise an agreement prior to the consideration by the Asian Development Bank of the proposal to provide the rehabilitation concessionary loan in 2006.

Principle 14:  The Government shall create and maintain an internet website dedicated to the commercial promotion of the reformed railway system. In order to create public awareness of the restructuring and rehabilitation process and to facilitate the open and transparent publication of all relevant information including these policy principles, the Government shall cause to be posted on such website all relevant legislation and association legal documents, the provisions of all procurement documentation including decisions regarding pre-qualification and the award of the concession contract. The website shall be advertised as open and available to all for the purpose of expressing and opinion on or seeking information about the reformed railway system.

THE OFFICAL DOCUMENT ON THESE POLICIES WAS SIGNED ON 17 JULY 2006 BY THE FORMER MINISTER OF THE MINISTER OF PUBLIC AND TRANSPORT; H.E. SUN CHANTHOL.