Reform Financial Sector in Cambodia

By Sok Lak

To develop a competitive, integrated and efficient financial system that is regulated and supervised and efficiently mobilizes savings to finance and also support private sector growth, the workshop on “Financial Sector Development Strategy 2011-2020” launched on July 29^th in Phnom Penh in order to achieve recent financial reforms.

H.E. Keat Chhon, Deputy Prime Minister and Minister of Economy and Finance (MEF) and Chairman of the Economic and Finacial Policy Committee, said that last decade the financial sector in Cambodia, especially banking sector, has developed and is standing firmly even though it was hard hit by the pressure of the World Financial crisis in 2008-2009.  “These successes have been quickly expanding the scope of the sector with high speed of diversification with larger scale.” At the same time, the non-banking sector including insurance, securities and pensions is also progressing faster than expected, he added.

The Royal government has launched the Public Financial Reform Program with an object to build budge credibility through the issuance of effective management of public debts, expansion of spending; strengthening good governance, and management of financial risks, so the practical and responsive of this new strategy might take place in the future.

H.E. Chea Chanto, Governor of the National Bank of Cambodia (NBC) and Chairman of the Financial Sector Development Steering Committee, said that the government recognized the need to update the “financial sector development strategy” once again due to the rapid growth of the current financial sector and based on new experience, challenges and lessons in the region and the world.

“A series of active consultations between Asian Development Bank (ADB)’s experts and relevant line ministries and agencies especially the Ministry of Economy and Finance, the Ministry of Commerce (MOC), the NBC and the Securities and Exchange Commission of Cambodia (SECC) were conducted while NBC play a facilitating role,” he stressed.

He mentioned that the implementation so far has indicated that financial sector development is an important tool that make financial sector reform a priority of the government in the country’s poverty reduction and development efforts.

The Financial Sector Development Strategy 2011-2011 is developed by the technical working group led MEF, NBC, SECC, MOC and close cooperation with ADB while the Economic and Financial Policy Committee has made decision by asking the Steering Committee of Financial Sector Development to update “The Financial Sector Development Strategy 2006-2015”.

According to NBC showing that the first financial sector development strategy was being prepared in 2000 which it was still in infant stage of development with 12.5% as ratio of broad money (M2) to Gross Domestic Product (GDP). During the update of the FSDS 2006-2015 in 2006, the ratio increased to 20.5%. Currently the ratio increased to 34.3%, tripled that of the ratio in year 2000. This indicator reflects the scale of progress as well as deepening of financial sector in the Cambodian Economy.

Source: The Southeast Asia Weekly, July 24-30, 2011, Vol. 5, Issue 30, Page 2