Sunday,2007-09-16: A Stockmarket – not an Administrative, but a Political Challenge
The Mirror, Vol. 11, No. 525
During this week, it was revealed that now a decision had been taken, based on an offer from South Korea to cooperate in this matter, to start with the establishment of a Stocks and Bonds Market. This information does not come as a complete surprise. High ranking government officials had expressed their hope repeatedly that this would happen in the not too distant future. The Minister of Economy and Finance disclosed to journalists that “the government is responsible for organizing all necessary preparatory steps, planning to spend approximately US$10 to US$15 million,” while the chairperson of the Commission of Economics, Finance, Banking, and Audit of the National Assembly, mentioned that a draft law on issuing and trading stocks and bonds had already been sent by the Royal Government to the National Assembly as a document dated 19 March 2007. Important details about the source of these millions have not been reported, especially how much of this money is to come from Cambodia – and then from where – and how much is expected to come from Korea – and then whether it is partly a donation or a loan, and if it is a loan, under what conditions is it given. It is surprising that very often, when the media carry reports about large amounts of finance coming from abroad, there is no clarity about this important element: is it a donation, or a credit which will have to be paid back sooner or later? The reasons given for the creation of a stock market are obvious, they are the same as in any other country: to collect capital from the public, in order to gain additional financial resources for long-term investments, to increase the productivity of the economy, as one important aspect of further strengthening the national economy. In the present report, the Minister of Economy and Finance points out that a stock market is a first for Cambodia, and therefore needs not only courage – ‘If we don’t jump into the water, we won’t be able to swim’ – but also careful preparation. In this respect, only one field is mentioned: the training of human resources to manage the new tasks, especially to develop the necessary staff capacities for the Cambodian Securities Commission. But there is a second field which needs probably even more preparation: the way in which businesses operate and in which the government provides the necessary transparency and stability, so that the investors, who are to commit their financial resources into stocks and bonds, gain the confidence in the businesses looking for capital, and into the supervision of their financial performance through the newly to be created Cambodian Securities Commission. It is on this background that the warning voices have to be understood, which, in principle, welcome the establishment of a stock market, but point also to its dangers for investors, if a competent and strict supervision by the Cambodia Securities Commission would not be guaranteed. If not, it would be doubted that people will entrust their investments into stocks and bonds, and those who do invest, would operate under the danger that instead of gains, they may encounter losses. Companies where 600 or 1,000 workers are on an extended strike would probably have difficulties to sell shares, or their shares already sold would surely depreciate in value. And forestry companies, about which it is reported “No Official Dares to Suppress Forest Crimes [by big traders and powerful people] in Stung Treng” could hardly get approval from a professionally working Securities Commission, if they would try to find financing through stocks. The report about the reluctance of investors to put money into the CamKo City developments – “ Who will take hundreds of millions dollars to throw them away into uncertainty?” – after the public has seen that the buildings of the Long Chhin Company were destroyed “adhering to the law” is another example that the creation of a stock market is not so much a question of having competent staff for the Cambodian Securities commission. During the years when the Long Chhin Company did build up its constructions – if it was not adhering to the law, how could it operate for several years? It is a question whether or not the Cambodian economy will work transparently and more or less according to economic forces, and whether economic dynamics will continue to operate within a clear, and also enforced, legal framework. Or whether many non-economic factors will continue to prevent transparency, and intervene in business affairs. The Minister of Finance and Economy is right: there is a lot of work and time necessary, before stocks can be issued and traded in Cambodia.