Your Excellencies, Members of the Royal Government,
Your Excellency, Dr. Young-Tak Lee, Chairman and CEO of the Korea Exchange;
Your Excellency, Mr. Shin Hyun-Suk, Ambassador of the Republic of Korea to the Kingdom of Cambodia;
Your Excellency, Won-Dong Cho, Deputy Minister, the Ministry of Finance and Economy of Korea;
Your Excellency, Jeon Hong-Yul, Deputy Governor of the Financial Services Monitoring Committee of Korea,
Your Excellencies, Ladies and Gentlemen Distinguished National and International Guests!
Today, I am very delighted to be here with Your Excellencies, ladies and gentlemen, distinguished national and international guests at the launch of the «Cambodia Securities Market Project». I would like to take this opportunity to thank the Korea Exchange and the Ministry of Economy and Finance of the Kingdom of Cambodia for co-organizing this historical event.
It should be noted that Cambodia intended to establish its securities or stock market in 1995, but due to our weak banking system which cannot effectively complement the establishment of this market, we postponed the project and steered our priorities, instead to develop the whole financial sector development program which is sufficient, interlocking and complementary.
In implementing its reform programs, especially in the banking sector, the Royal Government of Cambodia have transformed from a mono-banking to a two-tier banking system by separating the function of commercial banks from the Central Bank, which now functions as monetary authority responsible for the effective and sound development of the banking system which is in response to the requirements of the national economy.
Until now, the banking sector has been strengthening itself gradually, due to the successful restoration of public confidence through the ratifications and strict enforcements of laws in this sector. I would like to take this opportunity to congratulate the Governor of the Central Bank, all officials of the Central Bank and all commercial banks that have cooperated closely to produce the present fruitful outcomes which will evolve alongside the national and international economic development.
The Royal Government is conscious that the national economic development will not be sustainable and cannot reach its growth potential without effective contributions from the financial sector. In this context, the Royal Government, with the technical assistance from the ADB, has adopted “Vision and Financial Sector Development Blueprint for 2001-2010” in 2001. This blueprint acts as an official long-term plan for the financial sector development and is part of an overall government reform agenda toward establishing a more market-based, open, and private-sector led economy.
Due to the necessity of developing the financial sector and in response to the present requirements of the national economy, the Royal Government has updated its “Vision and Financial Sector Development Plan for 2001-2010” by changing it to “Financial Sector Development Strategy for 2006-2015 (FSDS)”. The Royal Government is highly determined to implement this strategy to strengthen and modernize the financial system through developing legal frameworks, strengthening institutions, training financial professions, and developing financial services to support economic growth.
The commencement of the Cambodia securities market project is in accordance with the schedule as stated in the “Financial Sector Development Strategy for 2006-2015” which set the year 2009 as the starting year of the securities market. These also reflect a well-sequenced development of the financial sector based on realistic economic conditions and consistent with the development of a legal framework and financial infrastructures in Cambodia.
In addition to the above financial reforms, the Royal Government has undertaken with strong determination the reforms in various sectors within the framework of the “Rectangular Strategy” for Growth, Employment, Equity, and Efficiency and the “National Strategic Development Plan (NSDP)”. These efforts have taken deep root in the socio-economic foundation of Cambodia and provided impetus for rapid economic development.
Clearly, despite major challenges faced by the regional and global economy and the unfavorable natural disasters in the country, Cambodia has achieved remarkable macroeconomic stability and economic progress, with robust economic growth reaching unprecedented rates on average of 11.4% per annum in the last three years. This was one of the highest growth rates in the emerging economies in Asia. As a result, the average per capita income almost doubled from US$288 in 2000 to US$513 in 2006.
Political stability, which is Cambodia’s highest priority, plays a crucial role in the rapid increase of bank deposits – from 9.5% of GDP in 2000 to 18.5% of GDP in 2006 – attests to growing public confidence in the sector, the transparency and the equal level of playing.
In 2006, the banking system has contributed US$ 500 million to finance economic development. This is the first time in our history that bank financing reaches the same level of the financing provided by our development partners. Though, with this size of financing provided by banks and development partners, it is still not sufficient to fulfill enormous capital demand of the Cambodian capital-hungry economy for investment in all sectors. Therefore, the Royal Government sees a new option of financing the national economy, namely securities or stock market, which is a mechanism employed to directly mobilize capital between savers and those in need of capital.
Indeed, securities market is the lifeblood of capitalist economy which will actively contribute to mobilizing financial resources to finance the national economy, and to ensure sustainable economic growth.
In order to establish the securities market, law on “Issuance and Trading of Non-Government Securities” has been drafted and will serve as the fundamental law to establish the Cambodia Securities and Exchange Commission (SEC), which will act as the regulator of the securities market. Then, this commission will arrange necessary rules or regulations for the establishment of the securities market, in which investors will trade securities, which is known as the stock market.
In addition, there are other specific laws that form a necessary legal framework for the operation of the securities market such as: Law on Commercial Enterprises; Law on Corporate Accounts, their Audit and Accounting Profession; Law on Negotiable Instruments and Payment Transactions; Secured Transactions Law; Law on Commercial Arbitration; Law on Civil Procedures; Law on Criminal Procedures; Civil Code; Criminal Code; Law on Financial Leasing and Law on Insolvency.
As another important contribution to this effort, the Royal Government established the National Accounting Council in 2003, based on “Corporate Accounts, Their Audit and Accounting Profession Law”, to prepare a national accounting standard which is consistent with the International Accounting Standard. This adoption has been completed and applied to all companies since 2005. Moreover, the Kampuchea Institute of Certified Public Accountants and Auditing (KICPAA) was established in 2003 to provide training courses to Cambodian certified public accountants (CPAs) and auditors who will play an important role in ensuring corporate accountability and transparency which are the fundamental requirements of the securities market.
In its securities market development goals, the Royal Government of Cambodia has selected a strategic partner, the Korea Exchange, one of the leading stock exchanges in the world, to help us establish the securities market in Cambodia. This partnership was born during the state visit of H.E. Roh Moo-hyun, President of the Republic of Korea, to Cambodia on 19th – 22nd November 2006.
Although the work required to be done represents great challenges, I believe that with their determined commitments, efforts and, especially with high responsibility of H.E. Senior Minister Keat Chhon, Minister of Ministry of Economy and Finance and the Korean counterpart, Cambodia will be able to successfully materialize the vision of establishing the Cambodian Securities Market in 2009, as scheduled in the FSDS.
We still have more work that need to be done to establish the securities market. Let me share some of my recommendations surrounding the establishment of the securities market in Cambodia:
1- There must be active contributions from the banking sector. These banks must act as financial intermediaries, securities investment advisors, or securities brokerage companies which are new businesses in Cambodia and the banks themselves must be prepared to compete in the new businesses for their own as well as the national benefits.
2- The implementation of accounting and auditing systems must be done effectively, which in turn will bring about accountability, transparency, good governance, and fair competition in the market. Subsequently, these factors will increase public confidence amongst securities investors in the future.
3- Also, all companies including the state-owned enterprises must modernize their management to ensure transparency, accountability, and good governance which are the major factors leading to additional resource mobilization through issuing shares in the future securities market like other developing countries.
4- Financial statements of listed companies must be fully and fairly made public so that investors can make a well-informed decision. This will protect them from abuses and fraudulent acts such as preventing price manipulation, banning insiders from trading securities based on the internal information that has not yet become public, i.e. inside-trading.
A sufficient and competitive financial system but sound and cautious one will play an important role in the national economic development by ensuring effective financial resource mobilization and distribution.
Building a financial system is a highly demanding task which requires responsibility, patient and long-term work with clear policies agenda. We have made a firm step toward achieving this task, as in a proverb that goes “a journey of a thousand miles starts with one step”.
Taking this opportunity, I urge all relevant institutions, particularly the Ministry of Economy and Finance, the National Bank of Cambodia, the Ministry of Commerce, the Council of Ministers, the Ministry of Justice, and other relevant institutions as well as the private sector to cooperate closely with one another to make the securities market establishment project successful.
I would like to express my profound gratitude to the Government of the Republic of Korea that has strengthened this strategic partnership through KOICA and the Korean Exchange, for supporting the securities market establishment project, especially for providing training courses on securities market for 3 years from 2007 to 2009 which is financed by its USD $1.8 million grant.
I would like to wish Your Excellencies, ladies and gentlemen, distinguished national and international guests the 5 Gems of Buddha Blessing. On this proud occasion, may I now declare the launch of “Securities Market Establishment Project.”