“Lifeblood of a capitalist economy” is what was called of the securities market by the very own Prime Minister Hun Sen, who is a big supporter of the government’s plan to set up the stock market in Cambodia (Postlewaite, 2007). The Prime Minister, when speaking of the significance of the financial market, said, “The introduction of a financial market is very important. It can help to mobilize financial resources for long term investment in social, economic and infrastructure projects in Cambodia” (Vannara, 2007).
Some items of the importance of the stock market for Cambodia are as:
1. Increased capital for businesses:
In current economic environment in Cambodia, banks only allow limited amounts for lending to entrepreneurs and businesspeople to build and expand their businesses. “[T]hey are hungry for capital that the banks—small themselves—can’t or won’t provide” (Postlewaite, 2007). Also, the lending rates are very high, making having access to capital for those businesspeople quite an “impossibility” (2007). Therefore, with the stock exchange in existence in Cambodia, access to capital can be made easier and thus businesses in Cambodia can do more of their activities and grow, which can influence the prosperity of Cambodia’s economy as a whole. Sok Kong, chairman of the private Sokimex Group, complained about the limited amount of money lent at high interest rates by local banks and hoped to list Sokimex on the new stock market so that Sokimex could use the capital to, for example, to “build more rooms for the tourists flocking to the Kingdom’s beaches and temples” (2007).
Likewise, the president and chief executive officer of Acleda Bank (“Cambodia’s leading microfinance lender”), In Channy, expressed his perspective of hoping to capitalize on the chance provided by the stock market to “raise money to expand this bank’s activities to many more villages” (Postlewaite, 2007). He was quoted as saying, “We want to list on the market so we can grow and grow. We need to raise capital. Investors need to be able to invest,…” (2007).
This will also be an effective attraction for investors in other countries to come invest in Cambodia, enlarging the economic activities in Cambodia.
2. Improved transparency, fairness and accountability in Cambodia
According to Huot Pum, “the future stock exchange would play a key part in getting rid of the evils of Cambodian economy” (Ros & Gouanvic, 2008). Indeed, to be listed on the stock market, enterprises must meet and satisfy specific requirements. They need to improve their accounting systems, for example by getting their financial reports official audited, so that it is more transparent to citizens, which is crucial for winning the public’s confidence and trust. In other words, the companies need to get rid of “corruption and come clean” (Ros & Gouanvic, 2008). In this way, corruption in Cambodia can be curbed and reduced, as agreed by Inpyo Lee, the director of the general commercial development project of Korea Exchange.
3. Improved financial standing of citizens:
Once transparency and accountability ensured, trust and confidence from citizens will be drawn and improved. This encourages Cambodia citizens to use their savings, which has always been hidden “under the mats,” and use them for their benefits. With their money invested in the stock market, there is a good chance they will make profits, which can be consumed to better their living conditions.
The financial markets would also provide a lot of job opportunities for Cambodians. They can work in stock-market related fields, from being staff in the institution itself to being independent arbitragers, speculators, and brokers. Besides, because stock exchanges invite foreign investments, Cambodian citizens can also work for those new businesses in Cambodia.
4. Cambodia’s increased independence of international aid
“Hang Chuon Naron, secretary general of Cambodia’s Ministry of Economy and Finance, told the Phnom Penh Post that he hopes a stock market will provide a more long-term source of finance than the foreign aid (around $600m annually) that the country is currently reliant upon” (The Asia File, 2008). He was quoted as saying, “We hope the stock exchange will provide longer-term finance compared to what we have relied on in the past, such as banks, national budgets, foreign aid and foreign investment. I think in five or ten years, the stock exchange will play a key role in strengthening Cambodia’s financial sector, but we must proceed carefully to build trust from our people and investors.”
Bibliography
Postlewaite, S. (2007, October 25). Coming soon: A Cambodian stock exchange. The BusinessWeek. Retrieved July 6, 2009, from http://www.businessweek.com/globalbiz/content/oct2007/gb20071025_950280.htm
The Asia File (2008, Oct 28). Is Cambodia ready for its own stock markets? Retrieved July 6, 2009, from http://blogs.telegraph.co.uk/finance/theasiafile/5492975/Is_Cambodia_ready_for _its_own_stock_market/
Vannara. (2007, June 13). Cambodia Stock Market Launches in 2009. Retrieved July 06, 2009, from http://vannara.wordpress.com/2007/06/13/cambodia-stock-market-launches-in-2009/
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