A partner in the Phnom Penh office of one of the global chartered accounting firms says Cambodia’s primary challenges are taxation enforcement and educational development.
Irish chartered accountant Theo Laverty, a partner in Grant Thornton, says officials of Cambodia’s government can learn a lot by being open to advice from international stakeholders.
“If the government wants more money in the coffers, they’ve got to do more enforcement. From an advisory perspective, the companies and the regulators should continue to be open to advice from the international stakeholders,” Laverty said.
While it is natural for accounting firms to pay taxes required by law in every jurisdiction, Laverty says the government needs to enforce the collection of taxes from businesses more in order to have the revenue to pay for the necessary functions of government.
“We think the development of the financial sector is critical to successful investment and a credible stock exchange. I think the regulatory environment for foreign investors is not bad, but I think there are challenges in enforcement.”
Laverty said Malaysian investors had shown keen interest in the development of Cambodia’s stock exchange and that Singapore stock exchange experts in his own firm were available to work with Cambodian companies preparing for IPO listings.
“Our Singapore office is directly involved with this office, and we have experts who have been working with Singapore stock exchange for a long time, and that expertise is available to Cambodian companies.”
Certified by the Irish Institute of Chartered Accountants, Laverty works with local partner Darith Khun, who is ACCA certified. The Grant Thornton operation has 35 people in the same building as EMAXX on Norodom Boulevard.
Following a merger with local firm K Professional Accountants in August, Grant Thornton acquired 12 professional staff.
“I think with any integration, there is a settling in period, but we’re over that now,” Laverty said.
Cambodia has a chance to catch up with more developed countries in a shorter period of time, Laverty says.
“When you’re coming from far behind you can run very fast and catch up with the rest. In the same way I think Southeast Asia and the ASEAN countries can be compared to Europe, which also has various countries, cultures and languages.
''Within Europe each country has its strengths and specialties. I think the countries in ASEAN will go in the same direction,” he said.
Cambodia has to invest in the private and public interest in the agriculture, tourism and manufacturing where it wants to have strength, Laverty says.
“Cambodia has to continue to promote a foreigner-friendly investment environment and there are competitors like Myanmar.”
Laverty said when Grant Thornton hired fresh graduates in Cambodia; they had to invest three years in training. He says there’s a direct correlation between the quality of education and productivity.
“I think the biggest challenge Cambodia faces are those in the education system. When we hire graduates here, we have to invest three years in training. Education links directly to business-primarily in productivity, efficiency and effectiveness,” Laverty said.
Laverty previously worked for Grant Thornton in Vietnam where he said the education system was more developed than in Cambodia.
“Coming from Vietnam where the education system is further ahead, people are much more ready for work when they graduate and they also learn quicker,” he said.
Describing how his firm, Grant Thornton differs from other accountancy and management consultants, Laverty said the main product was auditing.
“We are giving credibility to numbers, assets and liabilities. We can evaluate financial statements. The next part is the business advisory world, where you’re helping companies improving their business, or exiting from the business.”
Laverty said systems were the most important aspect of any business.
“What we have found very successful is putting systems in place for our clients where they can record transactions and help make decisions quickly which is critical for financial reporting, bringing in investors, listing on the stock exchange, and everything else,” he said.
He said as business owners wanted to build a car that anyone could drive.
“You can get out at any point and someone else can get in a take it down the road. When you’re putting good systems and structures in place, you’re actually building your vehicle.You have to build the systems well because that’s where the value sits,” he said.
“If you’re left with a vehicle with no systems, no policies, that vehicle is worthless.”
Comparing Grant Thornton with competitors, Laverty said “Our competitors will measure how fast the car is going, whereas we will help put the parts in place, adapting to situations and giving good advice at the right time.”
Another skill, he said was being able to mediate between people who had different interests and objectives and helping balance those interests so everybody could work toward the same goal.
“Whether its contract negotiation or an internal matter, we can mediate and negotiate fairly well.”
Born in a Catholic family in Belfast, Northern Ireland in 1980, Laverty studied at Queen’s University in Belfast, and then did a four-year apprenticeship with a local company in Belfast.
He qualified as a chartered accountant in 2004 and moved to Grant Thornton UK, based in London, worked there for about five years, focusing on property and construction.
In 2008, he moved to Vietnam with Grant Thornton to concentrate on three UK-listed Vietnam Investment Funds, including the Vina Capital portfolio.
In the middle of 2011, Laverty moved to Phnom Penh to reopen Grant Thornton’s office here.
“We were originally here since 2004 in a joint venture, and we’re reestablished now with international-standard services and personnel.”
Laverty said a typical scenario of business would be a foreign investor for whom Grant Thornton could find a good local partner and investment opportunity.
“Our clients are typically regional investors in various sectors like real estate, construction, hospitality, and manufacturing, some of whom have been here for a few years, and some of whom are just moving into the market at the moment.”
He said Grant Thornton would provide audit or market entry services which often includes outsourced finance, accountancy and advisory services including valuation, feasibility studies and financial and tax due diligence.
Headquartered in London, Grant Thornton has a presence in 110 countries, and more than 30,000 employees worldwide. Grant Thornton is independently owned in each country. They have to abide by Grant Thornton standards set by headquarters.
“We’re unlike the big four accounting firms, because they are very focused on the multi-nationals and the largest locals. Grant Thornton is more focused on medium sized companies like family businesses that will grow into corporates.
''Along that path they need help with structuring, putting systems in place, and putting governance in place,” Laverty said.
“Grant Thornton is really about helping medium sized companies get to the next step. That’s why our tagline is an instinct for growth,” he said.
“We have a close relationship with clients, actively involved in helping them make decisions. Our typical clients are owners managing their own businesses. When they make a decision to go into a second or third country, they want people who they’ve worked with before, who they trust.”
He said typical clients would be companies with less than 100 employees.
“The Grant Thornton practices in Malaysia, Singapore and Vietnam all have a direct interest in Cambodia. Those firms have several hundred employees and they have an interest in investing in Cambodia.
''I and other senior staff are helping with information on the ground. We have to work closely with the firms to make sure they get consistent service,” Laverty said.
To contact the reporter on this story: Stuart Alan Becker at [email protected]