The head of Cambodia's new Korean-owned Best Specialized Bank says the sector is insulated from global market turmoil and insists that fears of a drop in Korean investment are unjustified
DESPITE the economic crisis gripping South Korea, the head of a newly-opened Korean bank says that Cambodia offers a safe haven from the international turmoil.
"The bank specialises in providing loans, and 20 percent of the bank's profits will be go towards developing education, health and culture in Cambodia," said Shin Hyun-kyu, chairman of the Best Specialized Bank.
Korean Ambassador Shin Hyun-suk also said the Kingdom has been largely spared from the global financial crisis. But he warned that falling global demand and asset shortages have begun to hit Cambodia's garment and tourism sectors, which have driven the country's double-digit expansion for the past five years.
He added that Korean investment in Cambodia grew to US$830 million last year, making Cambodia the sixth-largest investment destination for Korean companies.
In the first half of 2008, Korean investment in Cambodia increased to $860 million.
He added that Korean investment has refocused from the garment sector to real estate and construction, but has now also turned attention to the banking sector.
"To date, Korea has opened four commercial banks and one specialised bank in Cambodia," Shin said.
Tal Nay Im, director general of the National Bank of Cambodia, said Best Specialized is the sixth specialised bank to open in Cambodia, and NBC hopes the bank will be an active loan provider for small and medium business and agriculture enterprises.
"Even though Korea faces financial crisis, it is still investing in the banking sector in Cambodia. This reflects their trust in Cambodia's banking future," said Tal Nay Im.
She said local banks have not been affected by the global financial crisis because they remain relatively isolated from international finance.
"So far, the banking sector in Cambodia has not been affected by the global financial crisis because our banking system hasn't been integrated into global banking.... The fact that we don't have a stock market also shelters us from the shocks," she said.
She added that the National Bank of Cambodia has set out measures to counter the crisis by raising commercial banks' cash reserve requirements from eight percent to 16 percent in order to increase liquidity. Commercial bank reserves were raised from US$13 million to $37.5 million, and specialised bank reserves from $2.5 million to $7.5 million.
The bank also restricted lending on real estate to not more than 15 percent of the total loan portfolio.
South Korea has been hit hard by the financial crisis and the Korean won is Asia's worst-performing currency this year.
Tal Nay Im said that to date, there are 22 commercial banks and six specialised banks in Cambodia.