The future confidence in Cambodia’s much-anticipated stock market depends greatly on the levels of transparency and accountability among the country’s listed businesses, officials said Tuesday at a workshop on the stock exchange.
Representatives from Cambodia’s leading financial institutions and government officials gathered in Phnom Penh on Tuesday to discuss the demand for internationally compliant accounting and auditing standards ahead of the launch of the stock exchange for which the government has still not set an official date.
Finance Minister Keat Chhon said at the workshop that complying with international accounting standards—a list of requirements set out by the independent International Accounting Standards Board in London—was the underlying foundation for companies to build up their reputation on both the local and international stage.
Without this foundation, the risk of “fraud could have a severe impact on the company, public and the national economy, such as with the case of Enron and Worldcom in the United States,” he said, referring to two major US companies that were exposed as corrupt in 2002.
“In the stock market, only reputation and confidence are important,” he told reporters at the event. “The main thing is to prepare the companies for when it happens.”
Despite the hopes for a more transparent and financially apt business community in the country, experts say that there is still much to do until companies, especially the smaller ones, are fully compliant with international accounting standards.
Ngy Tayi, under secretary of state of the Finance Ministry and chairman of the National Accounting Council, said “some gaps need to be filled in order to meet the standards” and Cambodia still has to “modernize and amend accounting standards” that are currently in place to fully comply with international ones. He also explained that companies with capital of $75,000 or more could qualify to be listed on the stock market.
Mr Tayi said that if firms did not comply with the standards when the stock market opens, they could face a fine of between 5 million and 10 million riel, or $1,250 and $2,500, and those deemed responsible could face up to two years in jail. “For those who have not started, you should try to implement the procedures now,” he warned.
The discussions come just days after local NGOs announced the launch of the Cambodians for Resource Revenue Transparency coalition—a working group that will strive for transparency within the country’s extraction industry. It also comes at time of renewed hopes of increased trade with the US after the White House announced that Cambodia had been removed from the so-called blacklist of the US government’s export finance agency.
According to Kuy Lim, senior manager at PricewaterhouseCoopers Cambodia, major work was still needed to translate international accounting standards into Khmer—a process that will popularize the requirements—as well as a severe lack of trained corporate accountants in the country could pose major challenges to the successful implementation of international training standards.
However, Charles Vann, executive vice president of Canadia Bank, said that the transition for companies going from trading independently to being listed on the stock market would be rather smooth.
“All the banks and more or less all the companies which will be listed already comply with international standards,” he said.
Mr Vann added that despite the lack of qualified accountants in Cambodia, assistance from private firms like PricewaterhouseCoopers and Ernest & Young would help get the country up to speed.
“Whichever the company listed, they will need to comply with all the standards weather they like it or not,” he said. “I think the stock market is one of the main fundraising arms that can help bring more off-shore funding to the economy.”