1. 1 Bond Market Development in Cambodia 07-08 April 2007, Shanghai, China Socheat MEY Ministry of Economy and Finance, Cambodia

2. 2 Contents Key Player in Cambodia’s Financial Sector 4’I perspective Legal Infrastructure for Government Bond Market Broadening Investor Base Potential Issuers Intermediary Ways forward

3. 3 Key Players in Financial Sector 1. Banking Sector  Dominate financial System in Cambodia 2. Insurance Sector  4 insurance companies provide general insurance services, operating in Cambodia.  Life insurance is a major institutional investor in government bond market 3. Capital Market  No equity and securities market, no securities firm 4. Inter-Bank/Money Market  No

4. 4 4’I for Government Bond Market Development 1. Infrastructure  Prospective regulatory Framework: Regulator: MEF (1 st M Regulated institutions  Law on Government Securities Approved and promulgates  Draft law on issuance and trading of Non- Government Securities Approved by Council of Minister Submitted to Assembly for adoption

5. 5 4’I for Government Bond Market Development (cont.) Draft Sub-degree on Government Securities Issuance strategy: government securities may be issued to syndicate or underwriters, will receive fees for their underwriting Liquidity support: MEF may provide subscriber or underwriters with short-term purchase financing. Is this provision viable and practical?

6. 6 4’I for Government Bond Market Development (cont.) 2. Investor: development investor base  Institutional investor: National Social Security Fund ( Law on Security, 2002) Life insurance: a JV company will be establish. Commercial Banks: commercial Banks can be major source for government securities. However, in Cambodia commercial banks are not allow to hold government securities as reserve assets at central bank. This constraint makes commercial banks hesitate to substantial invest in government securities.

7. 7 4’I for Government Bond Market Development (cont.)  Government saving bond: Allow individual access to the instrument 3. Issuer  Many public entities involved in infrastructure and public utilities businesses, such as port, road, water supply, electricity,…  Need huge finance for mid and long-term investment  For SOEs, however, prior consultation with the MEF is need bond issuance

8. 8 4’I for Government Bond Market Development (cont.) 4. Intermediaries  Given the fact that, the present non-bank financial institution is not highly developed yet, within the sort-term practice, will be eligible as syndicate members or underwriters? Commercial banks are potential for this.  In case of government saving bond, the distribution channel? Central bank? Post office? Please, note that central bank and post office have branches in almost provinces and municipalities.

9. 9 Way Forward Design a training master plan for investor, issuers and intermediateries Launch education campaign for these players Continue to develop necessary regulation and policy for bond market

10. 10 Thank You