ANZ Royal CEO Stephen Higgins sat down with Post business reporter Don Weinland this week to discuss banking and business in Cambodia, as well as the country’s government policy. 

Higgins will leave his post at ANZ Royal this month but says he will stay in the country.

What can the National Bank of Cambodia (NBC) do to relieve the banking sector of over saturation?

There should be a cap on the number of bank licences. New banks should be forced to buy an existing licence. That way it helps clean up some of the small players that frankly don’t do much in the market here. We never see them out there. We don’t know what their reason for being here is. The NBC still needs to supervise them. It means [the NBC] needs resources to do that ... I wouldn’t have thought you would need many more than 10 [banks] in this market.

What will the banking sector look like in five years?

Not too dissimilar from today. You’ll still have the four big banks. Everyone else will still be fighting over a small amount of share. If you look back over the past five years, the market share for ANZ, ACLEDA, Canadia and Cambodia Public Bank has been pretty similar. There are a lot more banks now, but they’re fighting over the same 30 per cent. The big four have about 70 per cent and they have for a long time. They’ll keep that.

What do you make of recent increases in Cambodia’s debt to China?

Provided it’s improving the productive capacity of the country, then that’s a good thing. Cambodia needs more electricity. These hydrodams are clearly good for the country … For the most part, Chinese investment is directed toward infrastructure. Cambodia needs that. Loans for general government use, I’d be a bit more concerned about. It’s an area that’s a little hazy. The fact that we’ve seen different estimates on debt levels from the PM, the Ministry of Economy and Finance and the NBC doesn’t do a lot for one’s confidence in how they’re managing their total debt load.

What have you made of Vietnam-owned Metfone’s rapid expansion in Cambodia’s telecoms sector since 2009?

They have clearly been very aggressive. The extent to which this is a government policy decision versus a genuine business decision, I’m not sure.

Does financing for rice production and export pose any challenges to the 2015 goal of exporting 1 million tonnes of rice?

It will be a little bit of a challenge. Larger rice millers that have contracts to sell the rice, and regular suppliers, they will have no problem getting financed. Those that struggle to get financed are those that don’t already have someone to buy their rice. If we know that they can sell the rice, and they have the price locked in, they have the volumes locked in … it’s relatively low risk. If they don’t have a buyer, it can be an issue. Particularly, the smaller millers don’t have that.

One of the things that I have maintained the government should do is establish a rice marketing board that actually goes and buys the rice from all these millers at a certain grade. This becomes the export channel to overseas buyers. For us, it takes a lot of risk away because we know someone is going to buy the rice.

One of the issues is foreign buyers are going to be buying in bulk and they want a certain quality. And there’s only a small number of millers who are actually able to provide that. Most millers, because they haven’t invested in the right equipment, they simply cannot provide the volume and the quality of rice … To me, finance is not the main constraint here.

Where has government policy toward business and investment been unsuccessful?

If you were to compare Cambodia with just about any other country at a similar stage of development, and look at human rights, business environment and general government policy, you would actually struggle to find the country where the government is doing a better job. We often forget that. And we often get frustrated at things that are happening: the corruption issues. But you can’t disassociate that from where the country’s at in its stage of development. If you were to go next door, to any of the three country’s next door, you would have to say that Cambodia is a better place to do business.

Corruption is still a problem. Customs is an area that still needs a lot of focus. They need to invest a lot more in eduction, but in teachers. There’s no point in building all these schools and then not paying your teachers enough ... Government salaries in general: far too low. When you pay people that small amount of money, you’re naturally going to get corruption.

One of the issues is, many government officials have basically paid for their positions. Some have to take out a loan to do it, and they need to get a return on that. You won’t see corruption end here overnight. It’s will take a generation for it to really change.

Analysts have questioned the Cambodian government’s ‘political stability’ sales pitch to investors abroad. What do you make of it?

The CPP has quite a strong majority. The political stability here for me is not a factor while the prime minister is healthy. I think the concern is, who would be the successor if anything was to happen to him. He’s a very dominant person. If he wasn’t there, I think there would be a great deal of nervousness.