Inside the national budget draft law for 2002, there is an article that would allow the Ministry of Finance to transfer $10 million in government bonds to the Foreign Trade Bank of Cambodia—an article that would not only allow the bank to stay in operation, but would also signal the emergence of a financial sector, officials say
The article was contested by some lawmakers who feared the state-run bank could not compete with private banks, but proponents say it would help an already viable bank eventually earn money for the government.
“If there is good administration, with skilled people on the board of directors, it will be able to compete with private banks,” said Kuoch Ky, deputy chairman for the National Assembly’s finance committee.
Other lawmakers, led by Funcinpec lawmaker Keo Remy feared the $10 million transfer of bonds would be lost to bad business practices.
“The government is going to lose the money, similar to Royal Air Cambodge,” Keo Remy said, referring to the defunct national airline.
“Let the Ministry of Finance check the balance sheet for the past three years. Is it profitable or not? And No 2, take a good look at the competence of the management of the foreign trade bank. There’s no experience. So the business is going to lose,” he said.
Other economists suggested the bank would not have to compete with private banks right now. And, it would be more expensive for the government to dissolve it.
The best option, they said, is to ensure it is profitable and appeals to private investors—then sell it.
“They need to privatize it soon. The government needs to announce bidding and looking for the requirements and investors to run it,” Cambodian Institute for Cooperation and Peace Assistant Director Chap Sotharith said.
But, Chap Sotharith said, the treasury bill is “a new idea” that needs time to be digested by a public still are very distrustful of banks.
“The government and the banking sector need to build trust in the people in the public,” he said.
The treasury bond article, passed as part of the $687.1 million draft budget law by the National Assembly late Friday, would increase the Foreign Bank’s capital to the minimum requirements for a license.
But that does not mean it will privatize yet, economic experts said. The bank will remain state-run for now, as officials continue to train the staff and look for experienced managers, Foreign Bank Director Ouk Maly said.
The bank should remain at least 51 percent state owned, Kuoch Ky said.
“This company has been successful, and should be kept for the state because many clients trust the bank,” he said.
The International Monetary Fund and other agencies have pushed for the eventual privatization of the Foreign Trade Bank, which was originally a service branch for the National Bank of Cambodia. However, because the National Bank is also the government’s regulatory body, international lenders see this as a conflict of interest.
The Foreign Trade Bank took steps toward separating from the National Bank earlier this year by moving into a newly renovated building. But the chairman of the board for the FTB is still National Bank Governor Chea Chanto, with the National Bank’s secretary-general Sum Samnisith also on the board.
Officials are now looking for people to change on the board, Ouk Maly said.
The Foreign Bank also faced difficulties this year by facing closure under new banking regulations that call for an increase in minimum capital of $13 million, $8 million more than the previous law.
(Additional reporting by Pin Sisovann)