ADB BOND MARKET GUIDE FOR CAMBODIA
A s the Kingdom of Cambodia became a lower middle-income country and opened its doors to the world for trade and investment, a stock and bond market at international standard is being developed.
To help Cambodia develop this stock and bond market called Cambodia Security Exchange (CSX), the Asian Development Bank (ADB) published a guideline entitled “ASEAN+3 Bond Market Guide Cambodia” to provide practical and detailed information concerning the investment climate, rules, laws, opportunities and characteristics of the Cambodian bond market.
Cambodian Legal System
Cambodia’s legal system inherits from the French civil law tradition, due to the fact that the country was a protectorate of France for one hundred years (1853-1953). Many relevant laws and regulations regarding stock and bond market have been promulgated since 1990s and continue to be revised and readjusted to the requirement of modern financial market.
The Constitution is at the top level of the Cambodian legal system, followed by Kram (laws or decrees) that represent the fundamental laws debated at the parliament. Anukret (sub-decrees) are issued by the Council of Ministers and signed by the prime minister with the purpose of detailing Kram in a particular area of legislation. Prakas (official declaration) are issued by ministries in order to detail the implementation of Anukret. Whereas Guidelines are issued by regulatory authorities to further detail the implementation of Prakas.
Cambodian Financial Market Authorities
The Ministry of Economy and Finance (MEF) is at the top level in terms of power to control, regulate, and develop the Cambodian financial and capital market such as insurance, market, bonds, lotto games, lotteries, casinos, retirement funds, and other financial reserves.
The MEF delegates its power of control to the Securities and Exchange Commission of Cambodia (SECC) to supervise and regulate the stock and bond market in the country. The SECC was launched on 23 July 2008 following the Law on the Issuance and Trading of Non-Government Securities promulgated in 1997. At the MEF, the Financial Market Division was assigned to create the necessary legal environment suitable for a possible future governmental bond market.
The National Bank of Cambodia (NBC), established in December 1954, after Cambodia gained independence from France, is responsible for issuing and implementing monetary policy. The NBC also has the power to regulate and supervise banks, MFIs, interbank market, and payment systems in the kingdom. The NBC was founded based on the organic law “Law on the Organization and Conduct of the National Bank of Cambodia”, promulgated in 1997.
To date, the necessary legal framework concerning corporate bonds is Prakas on Public Offering of Debt Securities, Prakas on Accreditation of Bondholders Representative, and Prakas on Accreditation of Credit Rating Agency. As the result, a corporate bond market is ready for investors to issue bonds at will.
Challenges and Opportunities
The bond market is something very new to many Cambodian people. To share experiences and knowledge of bond market with the public at large, the SECC is cooperating with bondholder representatives to educate people to develop a bond market leading to reliable practices and standards. For instance, the SECC has been issuing Prakas as part of the legal framework for the corporate and bond market in view to accredit bondholder representatives.
A key objective in the Cambodian bond market is to encourage local companies to be listed on the CSX for them to issue bonds. Hence, the regulation concerning the disclosure of financial information is very crucial for investors to have access to the listed companies’ performance.
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