Grant Thornton today officially opened its new office in Phnom Penh, marking the company’s second foray in the Kingdom. Managing Partner Kenneth Atkinson spoke to the Post about the opportunities he sees in Cambodia, as well as the present business environment. Interview conducted and edited by Tom Brennan.
What motivated you to open an office in Cambodia now?
We did have a joint venture here going back to 2003, although it was very limited in its activities. … and we really want to really expand the Grant Thornton presence here … particularly into advisory services and tax, which are becoming more relevant, more important with the introduction of the stock market, of course.
Can you talk about your former joint venture with Arthur Law and Associates and why it dissolved?
To really get to where we wanted to be and where Grant Thornton International wanted us to be, we would have had to restructure the relationship, and essentially we couldn’t agree on how to restructure that relationship. So we agreed the best thing was that we go our separate ways.
What opportunities do you see for Grant Thornton in the Cambodia Securities Exchange?
Well, obviously, in the short term I don’t think there are going to be huge opportunities, and I think the opportunities that are there are primarily going to sit with PricewaterhouseCoopers and KPMG. But as smaller companies, mid-cap companies, start to look to come to the market, we believe there are going to be a lot of opportunities for advisory work, both in terms of helping them prepare for listing and also reporting, accountant’s work.
But having said that, that is not our main market focus. Our main market is the same as it is generally worldwide, which is privately held business, which is over 50 percent of Grant Thornton’s [business].
What opportunities do you see given Cambodia’s tax regime?
Certainly from what we’ve seen in a very short space of time, there are significant opportunities in tax advisory, particularly in the area of transfer pricing because Cambodia doesn’t have transfer pricing regulations. The tax laws have a lot of provisions regarding allocation of costs and they’re open to interpretation.
What is transfer pricing in laymen’s terms?
It’s basically where an organisation sets up a subsidiary in Cambodia to manufacture [goods] and they export those goods either to the parent or to a related company. And obviously there’s the potential there to arbitrarily allocate costs between different entities to minimise profits in a high-tax jurisdiction and maximise profits in a low-tax jurisdiction.
What is your outlook for foreign businesses in Cambodia as they adjust to the new Anti-Corruption Law?
Of course, it’s going to make life quite challenging, particularly in the short term as people figure out how to deal with this. But I think the view of most foreign companies that we’ve spoken to, particularly professional service firms – lawyers, accountants – is just to point out to officials that there are these anti-corruption laws now. Not only the laws here, but of course, I’m from the UK, which has got … the UK Bribery Act, which is far more stringent than the [US] Foreign Corrupt Practices Act. With the FCPA, one was always comfortable making facilitation or customary payments, but these days you’ve got to be extremely careful, even in terms of the amount of entertainment that you provide to people, officials or prospective business partners.
What is your reaction to the government’s plan to have only Cambodian accountants approving company financial statements by 2014 is realistic?
I think the principle of Cambodians signing off on financial statements in their country is a good one. I think we’ve also got to be conscious that we live in an international environment, and there are a lot of cross-border opportunities for individuals to move … the question is … will they be able to bring through enough people to be able to implement what they really want to implement? …
So is 2014 realistic?
To be honest, I don’t think so. But it depends on to what extent they want to limit the necessity for companies to have statutory audit.