CAMBODIA’S planned stock exchange ought to consider allowing listings in both United States dollars and riels, according to Asian Development Bank Office of Regional Economic Integration Chief Economist Jayant Menon.
After being asked for advice by bourse officials, Menon said he recommended allowing listings in both currencies to foster investors’ interest, rather than using the exchange as a tool to meet the government’s long-term aim to “de-dollarise”, or transition from the dollar to the riel.
“It’s not the time to address dedollarisation, it’s the time to address the success of the stock exchange,” he said at yesterday’s Phnom Penh launch of an ADB-published book, Dealing with Multiple Currencies in Transitional Economies, which he co-authored.
“I don’t think trying to use the exchange as a de-dollarisation tool will help it at this fragile stage.”
Stock exchange officials have not yet said which currency will be used for listings.
Ministry of Economy and Finance Secretary of State Hang Chuon Naron said in a speech at the book launch that the ministry was primarily focused on promoting economic growth.
“While dollarisation is important, we have to focus on creating jobs” and promoting growth, he said. He added that long-term economic growth would allow an unenforced transition to the riel.
With the US greenback used in more than 90 percent of domestic transactions, Menon said, there was a temptation to view de-dollarisation as an issue of sovereignty, as widespread use of the dollar means that the US accrues revenue that would have been Cambodia’s if the riel were more widely circulated.
“There’s some justification in feeling this way, but we shouldn’t be overly focused on lost revenue,” he said. “There’s clearly a cost [to using the dollar], but benefits are much harder to measure.”
The Kingdom had come through the financial crisis relatively well, Menon said, and the large domestic reliance on the dollar may have been a factor in its economic success.
He said a gradual approach to de-dollarisation, rather than drastic reform, was best.