Banking in CLMV: Things to know before making an investment

3/09/2012
SCB Economic Intelligence Center
Bangkok Post

As business opportunities open wider ahead of the launch of the Asean Economic Community (AEC) in 2015, the four less-developed economies, often referred to as CLMV (Cambodia, Laos, Myanmar and Vietnam) are among the most attractive for Thai investors.

At the onset of the journey for Thai companies looking to extend or relocate production to these neighbouring countries, awareness of the local financial services environment is critical to making the right business decision. Three important issues need to be explored: What is the landscape of CLMV banking industry? How convenient are fund transfers and foreign exchange? What kinds of services can Thai banks provide for investors in CLMV markets?

First, banking access in the CLMV markets is rather limited, which reflects the predominantly cash-based environment. Banking facilities are limited both in scale and in scope, even though the numbers of commercial banks are comparable to those in Thailand and Malaysia. There are fewer than four physical branches per 100,000 adults in CLMV, compared with 11 in Thailand, Malaysia and Singapore.

Japanese bank to sign cooperation deal with Cambodian bank

Xinhua | 2012-8-23

Sumitomo Mitsui Banking Corporation, one of the leading banks in Japan, will sign a memorandum of understanding with Cambodia's leading Acleda Bank on Friday for business cooperation, according to a press release from Acleda on Thursday.

Under the agreement, both banks will provide mutual support for their respective clients, in addition to their economic cooperation in such activities as loans, deposits, money transfer, cash management, and other trade finance services, said the press release.

Top Tycoon Arrested

Nguyen Duc Kien addresses a meeting with Vietnam Football Federation officials in Hanoi, Sept. 8, 2011. (AFP)

The arrest of one of Vietnam’s richest businessmen sends shockwaves through the country.

2012-08-21

Radio Free Asia

"The arrest is a good signal for the implementation of laws in Vietnam. It is a strong sign that [even] such rich people in Vietnam cannot evade legal punishment if they commit a crime"

Vietnam has arrested a top banking mogul on suspicion of undisclosed financial crimes, the government said Tuesday, putting a spotlight on the country’s beleaguered banking sector, state-linked corruption, and the need for reforms.

Nguyen Duc Kien, 48, a key shareholder in some of Vietnam’s largest financial institutions, was taken into custody Monday afternoon in Hanoi after police raided his home and seized documents.

The multimillionaire cofounder of one of the largest banks in Vietnam, the Asian Commercial Bank (ACB), was arrested for “illegal business activities” in connection with three private companies he chaired, the Ministry of Public Security said Tuesday.

Vietnam’s weak banking sector is poorly regulated and laden with bad debt stemming from years of high inflation and plunging asset prices.

Government of the Socialist Republic of Vietnam : Vietnamese-invested bank enters Top 5 in Cambodia [... thanks to Hoon Xhen!]

08/16/2012
By Ngoc Van
4-traders.com

VGP - After nearly 3 years of operation, the Bank for Investment and Development of Cambodia (BIDC), a subsidiary of the Bank for Investment and Development of Vietnam (BIDV), entered the list of the top five banks in Cambodia.

Addressing the inauguration ceremony of the new head office of BIDC in Phnom Penh on August 13, Mr. Nguyen Van Hien, BIDC General Director said the bank's total asset reaches nearly US$480 million, and its outstanding loans are over US$320 million.

With the establishment of the Phnom Penh branch, BIDC confirms its strong and firm operation in the Cambodian market, contributing its part to boosting the Cambodian economy, he said.

Cambodia's Banking Sees 31 pct Lending Growth

2012-07-24
Xinhua

Loan demands from Cambodia's banking industry had surged by 31 percent in the last twelve months thanks to the growing business activities in trade, real estate, agriculture and manufacturing, a central bank's senior official said Tuesday.

As of June 2012, the kingdom's 32 commercial banks had lent a total of 4.92 billion U.S. dollars, an increase of 31 percent from 3.75 billion U.S. dollars at the end of June last year, Nguon Sokha, director general of the National Bank of Cambodia (NBC), said, citing the NBC's data.

She said that 32 percent of the loan went to trade, 16 percent to real estate, construction and mortgage, 10 percent to agriculture, 9 percent to manufacturing, and the rest went to tourism and services sector.

Cambodia's banking industry reports 8 pct lending growth in Q1

PHNOM PENH, May 21 (Xinhua) -- Loan demands from Cambodia's banking industry had surged by 8% in the first three months of this year thanks to growing economy and business activities, a central bank's senior official said Monday.

As of March 2012, the kingdom's 30 commercial banks had lent a total of about 4.69 billion U.S. dollars, an increase of 8% from 4.32 billion U.S. dollars at the end of last year, Nguon Sokha, director general of the National Bank of Cambodia (NBC), said, citing the NBC's data.

She said most of the loans went to the sectors of trades, agriculture, manufacturing industry, and hotels and tourism.

Sacrava's Political Cartoon: The 3rd

Cartoon by Sacrava (on the web at http://sacrava.blogspot.com)

Cambodia ‘ripe’ for money laundering [... so much for US anti-terrorism action in Cambodia!!!]

Thursday, 10 May 2012
Bridget Di Certo
The Phnom Penh Post

Cambodia is ripe for money-laundering and terrorist financing activities due to rampant corruption, banking-sector secrecy and an overall lack of financial transparency, a governance institute says in a report released this week.

The Switzerland-based Basel Institute on Governance has ranked Cambodia the third “highest-risk” country out of 144 listed for its failure to comply with anti-money laundering and counter-terrorism financing standards.

Cambodia’s ranking is based on standards and other “risk categories such as financial regulations, public transparency, corruption and rule of law”, according to the report’s authors.

Cambodia’s risk score is 8.46 out of 10, only slightly lower than Iran, which had the highest score at 8.57.

Moody’s to review Cambodia's banks for downgrades

Friday, 20 April 2012
Don Weinland
The Phnom Penh Post

Moody's Investor Services will review ACLEDA Bank and Cambodian Public Bank (Campu Bank) for potential downgrades, according to a release from the rating agency on Wednesday.

But the move comes primarily as a response to the global financial crisis and the rating agency’s attempt to realign sovereign ratings with that of banks, an official at Moody’s said.

The reviews and potential downgrades could be the final rating action in response to Moody’s policy change, Singapore-based analyst Christian de Guzman said by email yesterday.

Moody’s will review ACLEDA’s and Campu’s “bank financial strength rating”, both of which stand at a D, according to a statement issued late on Tuesday.

Cambodia/Islam: Cambodia Muslims Dream of Islamic Finance

PHNOM PENH, 21 Rabi al-Thani/14 March (IINA)-Aspiring to a better standard of living, Cambodia’s Muslims are dreaming of introducing the Islamic finance to the Buddhist country to lure investments from the Muslims-majority states in the Middle East and Asia.

“Most investors in the Middle East are certainly looking for Islamic-compliant business in countries that aren’t majority Muslim,” Ashraf Bin Md Hashim, head of consultancy at the International Sharia Research Academy for Islamic Finance, told the Phnom Penh Post on Monday, March 12.

“This could open an Islamic banking window here.”

Cambodian banks aim to ride agriculture boom

• Cambodian banks see strong deposit growth
• Agricultural investments may help loan market expand
• Foreign buyers interested, but market crowded

By Frederik Richter

PHNOM PENH, June 28 (Reuters) - Cambodian banks are hoping that a surge in agricultural investment will bring in the customers they need to take out loans and put to work the cash flooding into the frontier market's overcrowded banking system.

Cambodia, which is due to open a stock exchange this year, is attracting investment to rural areas as it seeks to move from exporting primary crops to milling rice and packaging seafood to sell abroad.

Foreign donors have vastly expanded rural road networks and firms from Vietnam, Thailand, Malaysia and beyond are scrambling to buy land and expand rubber and rice plantations.

But while the streets of Phnom Penh are cluttered with bank branches and cash machines, banks have ignored rural areas.

Taiwan Cooperative Bank to open Cambodia branch

Taipei, June 25 (CNA) - The Taiwan Cooperative Bank said Saturday it is planning to set up a branch in the Cambodian capital of Phnom Penh as part of its efforts to expand its presence in Asia.

The bank said as Cambodia, which belongs to the booming economic bloc, the Association of Southeast Asian Nations (ASEAN), has attracted a large amount of foreign investment, and the Phnom Penh branch will be used as a springboard for the bank to penetrate the country's financial market.

The board of directors of the bank has approved the plan to establish the Cambodia foothold, but no information about an exact timetable for the plan was forthcoming.

Banking System Shows Signs of Recovery

Ros Sothea, VOA Khmer
Phnom Penh Wednesday, 07 July 2010

“2009 was a very hard time for us, where we had large deposits but little lending.”

The total amount of deposits in Cambodia’s 28 banking institutions recorded a jump in the first part of the year, a positive sign of recovery following the 2008 economic crisis, an industry leader said Monday.

Banks posted $3.6 billion in deposits in the first five months of the year, a 13 percent increase from the same period in 2009. Loan disbursements increase 8 percent, to $2.7 billion, for the same period.

That’s a signal of healthier banks, In Channy, CEO of Acleda Bank, a leading lender in Cambodia, told “Hello VOA” Monday.

“2009 was a very hard time for us, where we had large deposits but little lending,” he said. “But this is a good sign this year, when our economy is going better and the demand for loans is growing.”

Agriculture, garments and tourism were all driving growth in the economy, he said.

One concern, however, is that the banking sector has not grown at pace with the country’s total GDP.

“The banking sector would be considered to be growing rapidly only when the amount of deposits is at least equal to the total GDP of $10.3 billion,” he said. “But up to 2009, our deposits were only 30 percent of GDP.”

Still, the number of people banking is growing, up to 1.1 million in 2009, a 38 percent increase from the year before.

“What we should do next is train and educate our people to understand more about the banking system,” he said.

Financial and Banking Methodology Helps Cambodia to Sustain

6/10/2010
By Jose Roy
Toboc.com

Cambodia's World Bank country manager Qimiao Fan on Tuesday said that Cambodia’s financial and banking regulations have assisted the country to sustain during the tumultuous times of global economic uncertainties. While addressing the workshop on corporate governance, the World Bank official said the success of Cambodia's finance industry was proof that improving corporate governance worked.

Qimiao apprised Cambodia's financial and banking methodology has particularly helped many of Cambodia's commercial banks and micro-finance institutions to raise their standards of corporate governance, which eventually got rewarded with greater investments. Likewise, Chea Chanto, governor of the National Bank of Cambodia opined the recent bad experience of the world financial crisis taught Cambodia the hard way about how the failure of bank and financial system could impact livelihoods.

Chanto also told that Cambodia has learned a lot from the Asian financial crisis, and the National Bank of Cambodia has taken a series of measures to better supervise and regulate the banking and financial system in the country. Banks have an overwhelmingly dominant position in the country's financial system, representing more than 90 percent and are extremely important engines of economic growth, he added.

In contrast, it should be recalled that Qimiao had said in the recently concluded Cambodia Development Cooperation Forum (CDCF) "transparency and accountability in the management of public finances and natural resources" were critical issues. This reference was in line with the international watchdog organization, Global Witness, which slammed donors last week for continuing to hand over huge sums of aid money, despite evidence of widespread corruption and mismanagement of public funds. Overseas donors continued to pledge financial support on the controversial Land Management and Administration Project, or LMAP that supposed to have rendered many homeless.

CIMB Applies For Banking Licences In Vietnam, Cambodia

KUALA LUMPUR, March 29 (Bernama) -- CIMB Group Holdings Bhd has applied for new banking licences in Vietnam and Cambodia, group chief executive Datuk Seri Nazir Razak said Monday.

"We have applied for licences in Vietnam and Cambodia, that's all for the moment. But CIMB does have strategies for all other Asean markets," he said.

However, he did not reveal the details of the application or when the outcome is expected. CIMB Group's regional arms are CIMB Bank, CIMB Niaga in Indonesia and CIMB Thai.

He was speaking to reporters after a signing ceremony between CIMB Group and Japan Bank for International Cooperation for a US$300 million fund facility for businesses across Asean.

Asked about the group's dual listing on the Stock Exchange of Thailand, Nazir said it was expected to take place by mid-June this year.

"The process under the FRS139 accounting standard requires us to announce our first-quarter earnings before the submission. That is why the timing is such," he said.

Nazir also did not confirm or deny if the group was working on the relisting of Bumi Armada Bhd when asked, saying: "We are interested in nice transactions."

On other development, Nazir said CIMB Group has a strong capital base and it could fuel its units CIMB Niaga and CIMB Thai if the need arises.

He said CIMB Bank's total capital now was in excess of 15 per cent.

"If CIMB Niaga and CIMB Thai feel that their growth trajectory need more capital, we are quite comfortable in supplying it," Nazir said.

On the other hand, both units were also capable of funding their own operations via bonds as opposed to equities, he said.

CIMB Thai, which has announced a rights issue of RM300 million, is also in the process of selling its "bad loans" to the group's unit that manages such loans, said its chief executive officer Subhak Siwaraksa.

It is also disposing three non-core assets for a total of RM22 million to the group, which includes a car rental firm as part of its restructuring exercise, he said.

Asked if CIMB Thai will remain listed after the dual listing of the group, Subhak said : "For now we will stay listed. Especially with the capital-raising, we will be around for some time."

Separately, CIMB Niaga's president director Arwin Rasyid was quoted by a news report as saying that the unit planned to sell sub-debt of US$300 million by June to boost its capital and repay debts.

Lenders look to Cambodian market

Shinhan Khmer Bank, right, opened in October 2007, while Kookmin Bank Cambodia opened in May 2009. Both banks have been working hard to attract more Cambodian customers instead of members of the Korean expat community - the traditional clientele of Korean banks operating abroad. By Kim Joon-hyun

January 19, 2010
JoonAng Daily (South Korea)

Until about 10 years ago, few Korean companies imagined that Cambodia - an impoverished Southeast Asian country ravaged by decades of internal conflicts - would become one of the top destinations for local banks looking to step onto the global stage.

But the situation has radically changed since then, and a growing number of Korean financial companies are starting to view the country as a promised land with vast growth potential.

With competition becoming increasingly cutthroat and even self-predatory in Cambodia, Korean firms are finding that localization is the key to survival and success in a market that some optimistic experts hail as the next Vietnam.

Kookmin Bank, Korea’s largest lender by assets, is one of most aggressive foreign firms in Cambodia and has been beefing up its localization efforts since it took a foothold in the country last year. The bank set up a locally incorporated unit, called Kookmin Bank Cambodia, last year and has been working hard to increase the bank’s brand awareness among locals.

At 5 p.m. on a recent Friday, some 20 Cambodian employees gathered at the branch office in downtown Phnom Penh to attend a seminar led by Kim Eung-nam, vice chief of the Cambodian unit. Kim holds the weekly seminars to train local employees about basic and advance-level banking operations.

“This is not a mandatory event, but everyone attends it every week regardless,” Kim said. “They are so eager to learn.”

The weekly seminar has an important long-term goal: help local employees learn enough about the company and the industry so that they can become senior managers one day.

“We have emphasized repeatedly that the bank, though formed by Koreans, is a Cambodian company,” said Jang Ki-sung, the head of Kookmin Bank Cambodia.

Jang said he plans to let one of the Cambodian employees head the bank’s second branch in the country, which Kookmin plans to open next year. He also promised a fat bonus for everyone if the bank produces profits this year, hoping it will serve as an incentive to work harder.

In another effort to nurture leadership among local employees, Kookmin in 2007 hired a handful of locals in several countries it wanted to enter in the future - including Cambodia - before it set up operations in those nations. The company brought the employees to the bank’s headquarters in Seoul to participate in training programs that lasted over a year.

Fast-forward three years, and two of those initial hires are working at Kookmin Bank Cambodia’s private banking division as managers.

Among the 1,226 banking accounts that have been opened via the Cambodian unit through last November, 663 of them - or about 55 percent - belong to locals as opposed to Korean expats and businessmen operating in the country.

About 70 percent of the bank’s total loans also were made to Cambodians, a rarity for a foreign unit of a Korean bank that has long catered to expats.

“It is premature to judge whether or not we have been successful here since this bank was officially established in May of last year,” Jang said. “But at least we have a good start.”

Other Korean banks are tapping the market as well. Shinhan Bank, for instance, was one of the pioneers in Cambodia, setting up a unit in the country called Shinhan Khmer Bank in October 2007. Lee Jae-joon, the head of Shinhan Khmer, boasts that 80 percent of the unit’s loan borrowers are local Cambodians.

That’s not to say everything is rosy for these companies: The industry is still relatively new, corruption in the country is rampant and there’s a severe lack of relevant funding options. Also, most of deposits are of the short-term nature, posing a big challenge for banks when it comes to managing their deposit pool.

“Corporate balance sheets are considered very unreliable, meaning we can’t lend on a non-collateral basis,” said Lee of Shinhan Khmer.

Jang echoed that sentiment, saying such lingering uncertainties are the reason why global banking giants like HSBC and Citibank have yet established a presence in Cambodia.

Maybank Plans To Open Another Branch In Cambodia

KUALA LUMPUR, Jan 4 (Bernama) -- Malayan Banking Bhd (Maybank) plans to open one more branch in Cambodia by end of its current financial year ending June 30, 2010.

Its head of international, Abdul Farid Alias, said the bank recently added the seventh branch to its network in Cambodia, located at the Toul Kork District in Phnom Penh.

"This latest branch completes the four new branches we had planned to open this year," Abdul Farid said in a statement Monday.

"We are pleased to be able to expand our network to provide to the growing community in the capital city, including the local as well as Malaysian and Singaporean companies with operations in Cambodia," he said.

"We are targeting for Maybank Toul Kork to turn around in the second year of operation. The branch will meet the banking needs of the community in the vicinity, focusing on the commercial and retail sectors," Abdul Farid said.

He said with the seven branches and improving economic conditions in Cambodia as well as in the region, Maybank remained optimistic of the country's growth prospects.

The new branch provides retail and commercial banking services, including deposit and placement, trade finance, remittances, foreign exchange and mortgage.

It offers a range of financial services to the district consisting of affluent residences, government ministries, universities and commercial businesses.

Maybank opened its first branch in Cambodia in 1993 located at Kramoun Sar Phnom Penh and Maybank Toul Kork is the sixth branch located in Phnom Penh.

Its other branches in Phnom Penh are Maybank Kramoun Sar, its main branch, Maybank Teukthla, Maybank Mao Tse Toung, Maybank Chabar Ampov and Maybank Olympic. The bank also has a branch in Siem Reap.

The latest branch expands Maybank's international network to over 1,750 offices located in Indonesia, the Philippines, Singapore, Cambodia, Brunei, Vietnam, China, Hong Kong, Bahrain, Pakistan, Papua New Guinea and Uzbekistan, and financial centres in New York and London.

Khmer Intelligence News - 23 December 2009

KHMER INTELLIGENCE NEWS
23 December 2009

CPP rescuing Canadia Bank and Foreign Trade Bank (2)

The ruling CPP is spending an increasing amount of money to prevent Canadia Bank and its subsidiary Foreign Trade Bank from collapsing under a mountain of bad debts resulting from the property market crisis. Hun Sen’s wife and children are major shareholders of the two banks. Accounting tricks (window-dressing) have so far helped hide the banks’ real situation. Earlier this month, the International Monetary Fund said Cambodia must undertake "critical actions" to strengthen its battered banking system, including better supervision by the central bank and faster implementation of measures to boost banks' minimum capital requirements.

Business as usual for Thai fishermen in Cambodia (2)

In spite of the increasing tension between Cambodia and Thailand, Thai trawlers continue to fish in Cambodia’s territorial waters as usual after corrupt Cambodian local authorities in Koh Kong province resumed issuing licenses to fishing boats from the neighboring country earlier this month. The resilience of the fishing, smuggling and gambling (casinos along the border) businesses show that Cambodia’s feudalistic patronage-based political system cannot afford to sever multi-faceted trade relations with Thailand.

Sam Rainsy to go to Hanoi (2)

In a statement issued earlier this week, opposition leader Sam Rainsy said he would not show up at any Cambodian court to face “criminal” charges for uprooting tentative markers at the border with Vietnam because “it’s useless and meaningless to defend yourself before a servant. You’d better address the master.” However, he said he would accept to be tried before a Vietnamese court in Hanoi because “my trial is a political one first ordered by Vietnam’s government.” He would then “denounce the unfair 1985 border treaty signed by a puppet regime” and would “invoke the 1991 Paris Peace Agreements on Cambodia and its provisions on Cambodia’s independence, sovereignty and territorial integrity.”

Read full statement in English at http://tinyurl.com/y99gv8w

80 percent of the population live below adjusted poverty line (2)

Statistics on poverty in Cambodia are misleading. Excerpt from World Bank report “Cambodia: Halving Poverty By 2015?” published in 2006 : “The latest survey shows that now 35 percent of Cambodians live below the national poverty line, down from an estimated 47 percent a decade earlier.” But the World Bank’s methodology in defining poverty line obviously clashes with realities of poverty in Cambodia. Costs of living have dramatically increased over the last few years and several public services have been recently privatized. Many farmers have lost their land. Today, virtually nobody can survive on only 50 US cents (2,090 Riels) a day, which is at best a starvation line. In the Philippines and most developing countries in Asia and Africa, poverty line is estimated at 2 US$ a day. With a similar yardstick, at least 80 percent of Cambodia’s population of 14 million would be rightly considered as poor or extremely poor.

Former Resident Representative fired from ADB (2)

Mr. Urooj Malik, a former Resident Representative in Cambodia, has been recently fired from the Asian Development Bank following allegations of corruption. Mr. Malik’s case is reminiscent of that of Mr. Bonaventure Mbida-Essama, a former Chief of World Bank Cambodia Resident Office, who has since left the World Bank. In a lawless country like Cambodia, the local authorities are very good at tempting and corrupting representatives from international financial institutions and other aid agencies.

[End]

IMF warns action needed on Cambodia's banks, economy must diversify

Wed, 09 Dec 2009
DPA

Phnom Penh - The International Monetary Fund said Cambodia must undertake "critical actions" to strengthen its battered banking system, including better supervision by the central bank and faster implementation of measures to boost banks' minimum capital requirements. In a report released late Tuesday following a September visit by an IMF team, the fund's directors said problems inherent in Cambodia's banking sector had been exacerbated by the global economic crisis which had hit the overinflated property market.

Among those problems were inadequate supervision by the authorities, weak risk management by banks when assessing creditworthiness, and excessive credit growth.

The IMF said in its accompanying staff report that "the authorities should strictly enforce corrective actions plans and urge banks to bring forward compliance with new minimum capital requirements ahead of the end-2010 deadline."

But the fund said that its stress on rapid implementation of some banking reforms is not shared by the government.

It also said the central bank must recruit more staff to ensure it can properly monitor the country's banks.

Officials from the Ministry of Economy and Finance and the National Bank of Cambodia were unavailable for comment.

Looking at the broader Cambodian economy, the IMF noted that average annual growth of 8 per cent over the past decade had helped cut the poverty rate from half of the population in the 1990s to around one third today.

The IMF maintained its previously reported estimate that the economy would shrink 2.75 per cent this year and experience modest growth of 4.25 per cent in 2010, although it made it clear that growth next year remains uncertain.

The fund again called on the government to diversify its growth base away from the four pillars of agriculture, garment manufacturing, tourism and construction. The last three, which contributed the bulk of the past decade's economic growth, have been hit hard by the global economic crisis.

IMF says Cambodia should strengthen banks

Wednesday, December 09, 2009
ABC Radio Australia

The International Monetary Fund has called on Cambodia to strengthen its banking system as the country struggles to pull out of a deep recession.

An IMF report - issued after talks with Cambodian authorities - says the recession and a sharp decline in property prices have further weakened the banks.

Now as the economy recovers, the IMF says Cambodia should safeguard its macroeconomic stability and reinforce the banking system.

The IMF projects Cambodia's economy will contract by 2.7 per cent this year before recovering to a growth of 4.3 per cent in 2010.

Cambodia had enjoyed strong growth in the years leading up the global financial crisis.

"Following a decade of high economic growth - 8.0 per cent per year on average -- and significant poverty reduction, Cambodia's economy has been hard hit by the global crisis," the IMF said.

Plunges in the export and tourism sectors also caused a slowdown in construction, which along with falling agriculture prices, depressed rural incomes in one of the world's poorest countries.

A shrinking economy and declining property prices have exacerbated strains caused by weak risk management, earlier supervisory lapses, and excessive credit growth.

The IMF encouraged Cambodia to continue strengthening its banking supervision.

"Immediate priorities should include strict enforcement of the new asset classification regime, prompt implementation of corrective action plans, development of a comprehensive bank restructuring framework, and increased supervision capacity," it said.