Hoping to soon establish a stock exchange in Cambodia, Prime Minister Hun Sen issued an executive order Wednesday creating a working group to study the country’s future financial systems, according to a statement from the Council of Ministers issued Thursday.
The five-member working group, led by economist and lawyer Bit Seanglim, who serves as vice president for the council’s economic, social and cultural observer unit, is mandated to draft laws and regulations in order to create the Cambodia Securities and Exchange Commission, and eventually open a bond and stock market.
No time frame is mentioned in the order.
But the move is being called premature and unrealistic by economists and businesses.
“It’s a positive sign,” said economist Paul Freer with the International Management Investment Consultants. “But Cambodia certainly needs to strengthen human resources and develop lots of legislative framework.”
Laws of corporation, contract and bankruptcy need to be created first, and the private sector should develop a proper accounting system and transparent auditing procedures, Freer and other experts say.
Cambodia should also strengthen its own currency and stop relying on a US dollar-driven economy, they say.
“It’s premature because there is no corporate governance and no rule of law,” criticized a banker. “It would take at least five years.” Lonh Hay, member of the working group and deputy director general for the National Bank, defended the move, explaining that it is one of the prerequisites to be a full-member state of Asean.
“Asean initiated [a study] on financial systems in member countries, specifically how to develop stocks and bonds,” Lonh Hay said.
He said the Asean secretariat has requested that Cambodia provide the current status of the country’s financial systems in order to help such development.
“But unfortunately we have nothing to provide them,” Lonh Hay said.
According to the press release, the working group is required to research future financial markets in cooperation with the private sector and other government institutions.
The group must also seek financial resources and technical assistance from international donors to build the capacity of civil servants.
The Ministry of Finance recently restructured its organization and created the Financial Industry Department to study and control the country’s financial activities like casinos, lotteries, insurance and the anticipated stock exchange, ministry’s officials said.
Mey Vann, working group member and deputy director for the ministry’s new department, said his department and the National Bank started an initial study but acknowledged extensive efforts are necessary to develop an Asean-compliant financial system.