Korea Exchange Paying Price for Slapdash Report

When the Korea Stock Exchange (KRX) finished setting up the Cambodian Securities Exchange (CSX) in 2010 and looked further afield to help establish a bourse in Laos, it decided to do so with somewhat less effort—20 pages less to be precise—a decision it is now paying a heavy price for.

Korean lawmaker Lee Sang-Kyu has lifted the lid on the KRX’s shoddy preparation for the Lao Securities Exchange (LSX), revealing that the Korean company ripped off the last 20 pages of a report, initially compiled for the CSX by a Korean think tank, and used it in its feasibility study for Laos, the CSX’s chief operating officer confirmed Tuesday.

“The problem is that the KRX receives a parliamentary inspection every year and one congressman said that some parts of the Laos report are exactly the same. From page 71 to 90 it is the same as the Cambodian feasibility study,” said Ihnsoo Lee.

“I don’t know why they did that,” he said. “They must have done the wrong thing.”

The online publication Business Korea on Tuesday reported that the KRX, which has a 49 and 45 percent stake in the Laos and Cambodian exchanges, respectively, has been incurring hefty losses in Laos: $466,068 in 2011, $1.18 million in 2012 and $1.21 million last year.

Mr. Lee said both Cambodia’s and Laos’ bourses are not pulling in enough investors to make a profit.

“We are still losing money. We are losing more money in Laos than Cambodia…because in Cambodia the KRX spends less money than it spends in Laos,” he said.

Though both stock exchanges have sputtered so far, John McGinley, managing partner of Mekong Strategic Partners, an investment and advisory fund, said it was a mystery why the Korean firm would decide not to write two different studies for two differing economies.

“The Laos economy remains centrally planned and tightly controlled by the state at multiple levels, also within Laos there is a significant amount of SOEs [State Owned Enterprises]. Typically in an emerging market stock exchange, SOEs provide the initial pipeline of firms being listed,” Mr. McGinley said via email.

“Cambodia on the other hand is clearly not a communist country and has a very free market economy,” he added.

“All of these differing factors you would think would warrant the effort and energy of writing a separate country report.”

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