Asia-Pacific, Development & Aid, Economy & Trade, Headlines

Cambodia Stock Exchange to Push Transparency

Marwaan Macan-Markar

BANGKOK, Jul 18 2011 (IPS) - Besides attracting international investors, Cambodia’s new stock exchange is expected to nudge this Southeast Asian country towards greater transparency.

When the Cambodia Securities Exchange (CSX) was officially launched on Jul. 11 there were no companies listed because of a drive to ensure that everything was above board.

“We want to assure full transparency,” says Huot Pum, the deputy director-general of the Securities and Exchange Commission of Cambodia. “Financial information has to be audited and disclosed regularly.”

“Companies listed on the stock exchange have to live up to international standards,” Pum explained to IPS during an interview in his Phnom Penh office. “The stock exchange is a good way of ensuring sound corporate governance. It could help set the tone for a better corporate culture.”

Trading is expected to begin later this year once the three state-owned firms that have announced plans to list on the CSX have met “international auditing standards.” The companies are Telecom Cambodia, the Phnom Penh Water Supply Authority and Sihanoukville Autonomous Ports.

Using the CSX to nudge the country’s small economic and financial sector go down the road to accountability cannot help resolve problems of poor governance, cautions the World Bank. “Stock markets are not a panacea for poor governance environments,” says Mathew Verghis, lead economist for Southeast Asia at the Bank’s regional office in Bangkok.

“So while the stock market can provide some incentives for improvement in governance, the international experience has been that the performance of the stock market will also be influenced by the governance environment in the country,” he told IPS.

That may explain why Cambodian activists championing better governance are as cautious about early expectations of the CSX as an agent to “help build trust” among the public and local corporate sector.

“There was optimism when Cambodia became a member of the WTO (World Trade Organisation in 2004) that the rule of law and the legal culture would improve,” said Yeng Virak, executive director of the Phnom Penh-based Community Legal Education Centre, a civil society organisation. “Many expected the business environment to improve because the country had to pass many laws and improve the legal structure.”

But Virak describes changes over the past seven years as cosmetic, including laws passed but selectively enforced. “Cambodia is a double-standard state: the rich and powerful continue to benefit from the system, while the poor and weak lose,” Yeng added in an interview. “What we have is ‘lawful’ plunder by tycoons in the government.”

Such a harsh assessment is mirrored in the annual reports of Transparency International (TI), the global anti-corruption watchdog. Cambodia was ranked 154th out of 178 countries monitored for graft in TI’s annual ‘Corruption Perception Index’ last year. It was a marginal improvement from the country’s 158th spot among 180 countries assessed by TI in 2009.

Cambodia’s regional neighbours ranked better, with Thailand at 78, Malaysia, 56, Indonesia, 110, and Vietnam, 116. The exception, military-backed Burma, or Mynamar, ranked as the second most corrupt country in the world..

Cambodian Prime Minister Hun Sen has been under pressure to end rampant graft that has come in the way of the country’s journey out of misery in 1991, the year the Paris Peace Accords were signed, ending nearly two decades of war, genocide, and internal conflict. The country of 14 million people still has over a third of its population living on less than one US dollar a day.

Development aid from the West has been pivotal for one of the region’s poorest countries. Hun Sen has been able to attract assistance despite his increasing authoritarian rule, and playing lip service to calls by donors to crack down on corruption.

Last year, Western donors pumped in 1.1 billion dollars in aid, an increase from the 950 million dollars given the previous year. Local and international human rights groups, however, criticised donor countries for rewarding a regime that has reneged on pledges of “good governance” and openly suppressed opposition parliamentarians, journalists and sections of civil society.

The Hun Sen administration has answered by playing up its economic successes, like hitting 10 percent economic growth over the past decade. Exports, led by the garment and tourism sectors, have helped the country’s foreign exchange earnings rise from 227 million dollars in 1991 to six billion dollars in 2010.

Kuy Vat, a young Cambodian property developer, who is among the beneficiaries of the country’s economic transformation, sees the new CSX as the “next natural step” in the country’s development.

“The stock market will become important as another source for us to raise capital to expand our business,” Kuy, president of the Phnom Penh-based VTrust Property, explained to IPS. “It will also deal with the problem of corruption, showing the way for Cambodian companies to be transparent, to pay taxes.”