Dear Editor,

The Phnom Penh Post reported that Asian markets were suffering from the latest crisis in the euro zone (“Asia stocks hit hard by Spanish downgrade”, April 30).

If present plans come to fruition, there will be a Cambodian stock market by January 2011 and, consequently, we may anticipate that it will be included in the list of exchanges suffering losses in similar situations in future.

The financial debacle of 2007-2008 underscored the fact that when stock markets fall, for whatever reason, the knock-on effects can be drastic even to those far removed from major financial hubs.

The latest volatility was prompted by a downgrading of Spanish sovereign debt made by Standard & Poor’s, one of the world’s pre-eminent rating agencies.

Major investors, from pension funds to investment trusts, still set great store in assessments made by these agencies, despite the dubious nature of their work before the collapse of Leman Brothers.

At the moment rating agencies are still receiving fees amounting to millions of dollars per annum for making “ratings surveillance” on CDOs (collateralised debt obligations).

Many of these instruments have lost most of their value despite being previously assessed by the agencies as being at a triple-A level.

The fact that the original ratings may have been very inaccurate does not affect this remuneration, which is made ahead of payments made to investors.

Last week the World Bank and the International Monetary Fund agreed to endorse an increase in the voting power of developing countries within the International Bank for Reconstruction and Development (IBRD).

It seems to me that the rating of national economies, especially of smaller states like Cambodia, would best be served by an independent body rather than a commercial company.

Perhaps the growing influence of representatives from developing countries in the IBRD will lead to the establishment of such a financially disinterested organisation.

Michael Hansen

Phnom Penh

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