A future broker? Until Cambodia's stock exchange gets up and running, lottery tickets and gambling are punters' only alternatives.

Government and private sector representatives expressed near-unanimous support at

a May 30 presentation at the Sunway Hotel on initiatives to create a Cambodian stock

exchange (CSE) by as early as the end of 2003.

The presentation's approximately 200 participants heard a progress report by Dr.

Bit Seanglim, Chairman of the Securities and Exchange Regulation Working Group, and

urged the government to hasten the implementation of the legal framework necessary

for the successful launch of a Cambodian stock market.

"I'm totally pro-stock market [because] I think its the future of Cambodia...

no one can stop it [being created], not even the Minister of Finance," said

panel member Chris Ho, General Manager of Phnom Penh's Monorom Holiday Villa. "It's

the future of Cambodia, especially within Asean and the fact that the Vietnam Stock

Exchange started a few months ago means that Cambodia must establish a securities

exchange as well."

First mooted by the government in 1995, the creation of a stock market was hailed

as a key element in poverty reduction, economic development and the introduction

of international business and accounting practices in the Kingdom.

"Cambodia in the medium term needs [a stock exchange] and by creating one there

will be more pressure to solve the country's problems such as the need for a minimum

of accounting standards, transparency and auditing," said panel member Peter

Koppinger of the Konrad Adenauer Foundation. "A stock exchange is a good mechanism

to create a new mechanism of clean business."

Dr. Bit Seanglim also emphasized the role a stock exchange could have in creating

and nurturing a still-nascent Cambodian middle class.

"Cambodia has a young population but it will grow old fast and the government

needs to provide another avenue for people to invest their savings," he said.

Seanglim told the meeting that the first companies chosen to be listed on the exchange

would come from a short list of the top 200 companies in Cambodia.

Although Cambodia's draft securities law has passed its first simple review by the

Council of Jurists in May, Seanglim distanced himself from initial predictions that

the new CSE could be operational by 2003, stressing that "serious" public

and private sector education was necessary prior to the start of trading.

"A stock exchange is not a casino, it's a place where all information has

been disclosed by all companies and it's not a game of chance, it depends on research

and analysis," Seanglim said.

"I think we might need at least three years after the [securities] law is finished

for education and training."

The need for training and education was also emphasized by Kottinger, who said that

"crucial problems" in Cambodian business culture needed to be addressed

in order for the CSE to succeed.

"There's a need for a change in the culture of companies who want to be listed

[including] a complete upgrade of accounting methods and orientation," Kottinger

said. "At the moment, to be fair, the advantages of being non-transparent are

so huge it will be difficult to attract companies [to join the CSE]."

Participants at the seminar also questioned whether Cambodia's shaky legal framework

and institutionalized official corruption made the current timing in preparing for

a stock exchange inappropriate.

However Isabelle Allen, a spokesperson for the International Securities Consultancy,

a private company which specializes in assisting countries to develop stock exchanges,

said such concerns could delay indefinitely the creation of the CSE.

"Every country [when preparing the creation of a stock exchange] is different,

but all think their problems are insurmountable, that the laws aren't right and there

is corruption, etc," Allen said.

"Îf we wait for the legal structure to be in place we'll lose a lot of

time...it's better to start early and start small and learn the business when you're

small."

According to Allen, a speedy creation of stock exchange depended on political

will to expedite the passage of a securities law and a review and upgrade of banking,

contract and company law to international standards,

"It's possible to put a stock exchange in place before the legal structure,

but ultimately the legal structure is necessary for investor confidence," she

said.

"There's no reason a Cambodian stock exchange couldn't be operational by 2003

provided we get started now."

While much more conservative in his estimates on how quickly a stock exchange might

become operational ("We have a long way to go"), Koppinger also cautioned

against pessimism about the feasibility of a CSE.

"Vietnam is a good example [for Cambodia to follow]," Koppinger said. "They

have the same mess of corruption, bad legislation and wrong culture in state enterprises,

but they established their stock exchange last year."

Seanglim also noted the necessity of overhauling Cambodian laws to pave the way for

the creation of a stock exchange, but added that once in operation the stock exchange

itself would promote transparency and "clean" business practices.

"A stock exchange helps good governance by requiring full disclosure. If not,

people will get sued," Seanglim said. "A stock exchange can assist companies

to learn how to do business by international standards."

Chris Ho echoed Seanglim's sentiments on the economically therapeutic value of a

stock exchange.

"It'll be a prestige to be listed and a chance to get back the money [that companies]

have invested here," Ho said, urging that the private sector take the initiative

in the CSE's formation and self-regulation of its operations.

"We want to get all companies interested to create a [private sector stock exchange]

working group to discuss problems such as how to meet listing requirements,"

Ho said.

"I want [the stock exchange] yesterday, but there are currently not enough companies

that meet listing criteria, such as having three years of continuous profit, so I

think it will take a minimum of 2 1/2 to three years to establish."