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Cambodia will gain economic sovereignty and national pride, says Phillip Bank

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Han says the use of the local currency is on the rise. Supplied

Cambodia will gain economic sovereignty and national pride, says Phillip Bank

The demand for riel is changing with changes in the socio-economic climate of the Kingdom.

Phillip Bank Plc’s General Manager Han Peng Kwang says the usage of riel is more widespread as awareness is growing  - a clear testimony that the national currency is gaining popularity.

In an interview with The Post he explains the role of the riel and its challenges.

How do you rate the achievement of the usage of the local currency?

We opined that the usage of the local currency is gaining traction in the cities as evidenced by the posting of prices in riel in supermarkets and increasingly more restaurants and retail outlets.

Even big shopping malls like Aeon Shopping Mall, Bayon Supermarket, Lucky Supermarket and others are displaying their goods in riel besides US dollar.

At the local wet markets, it is now common for the vendors to quote the selling price in riel rather than dollar.

Furthermore, the usage of local currency in the rural areas are already prevalent and widespread showing that Cambodians are already comfortable transacting in riel. All these are evidence that riel usage is slowly becoming a norm in the market place.

How will the economy benefit if the riel is used instead of the US dollar?

It is a fact that high dollarisation has made Cambodia an attractive destination for foreign investments over the years and has given the economy much-needed stability after years of civil conflict.

However, it has also caused the country to be vulnerable to dramatic shifts in the international economy since Cambodia is not able to implement an effective monetary policies to manage the economy.

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Both the riel and dollar are still popular with traders in urban areas. Hong Menea

Therefore if the riel is widely used and accepted, then the regulator will have a stronger influence over its monetary policies in the country.

The control over monetary policies of a country if vested in the national authority can only be good for the economy. Besides being able to implement monetary policies, with usage of riel, the country will gain economic sovereignty, national pride and seigniorage.

What are the key sectors that will benefit if businesses switch to wider use of the riel?

Sectors that have high levels of consumer spending such as the retail sectors.  Another sector is the agriculture sector in Cambodia since the use of riel can be more transparent and reduce the cost of exchange rate which might affect their costs in the market.

Other local business will also benefits from this since the use of common currency will reduce other costs besides their production and employment.

Overall, since the public sector transacted mainly in riel such as EDC (Electrcite Du Cambodge), Water Authority and other ministries, therefore the private sector will benefit if they switch to using riel so that they will not incur any foreign exchange losses when they convert their dollar to riel when they transact with the public sectors.

Cambodia is an important member of Asean, would the move to adopt riel as the sole currency contribute to more intra Asean trade?

It depends on the extent of “tradability“ of the riel in the foreign exchange market.  Meanwhile, we opined that type of currency used by each country will not affect the intra Asean trade.

More important is to what extent is the integration between Cambodia and the rest of the Asean countries such as bilateral or multilateral free trade and investment agreements that will spur more trade between these countries.
In your opinion, as professional banker, how can the government promote the use of riel and who should be the target group?

Government could start to promote the use of riel to children and youth groups since they are the largest number of population in the country. Once they are used to it, from their generation onwards, the use of riel will be entrenched in their daily living and therefore will become the main currency in the future.

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Generally, transactions in the province are in riel. Heng Chivoan

The government can start with various youth campaign in promoting use of riel and youths will be motivated and encouraged to use them and help spread to their peers.

For now, government can introduce regulation such as the salaries of all employees are to be paid in riel, this inevitably will lead to the greater usage of riel. However, thought must be given to employers as it means they have to grapple with the foreign exchange fluctuations as they earn in dollars but spend much on staff costs in riel.

The National Bank of Cambodia has directed commercial banks to maintain 10 per cent of their loan portfolio in riel. How is this progressing?

We understand that all banks are working towards achieving this requirement and the banks have been working closely with the regulators in order to meet this objective.

Some banks are progressing well and some still have more rooms for improvement. For Phillip Bank, we are cautiously optimistic that we will meet the target within the timeframe given.
What are the main challenges for foreign banks if riel replaces the US dollar?

There will be an added risk dimension (that is) the foreign exchange between dollar and riel.

Content image - Phnom Penh Post
A money changer displays both notes. Heng Chivoan

Meanwhile, we opined that the challenges are not only faced by foreign banks but also local banks as currently, almost all the loans and deposits are denominated in dollars.

As a foreign bank, how is your organisation promoting the riel? Are staff salaries paid in riel?

We are promoting the riel by encouraging and persuading our retail and corporate customers to borrower in riel instead of dollars.

We are also supporting a few microfinance institutions vide wholesale lending to give them more working capital so that they can lend in riel to support the Cambodians living in the rural areas and villages.

We have also initiated a campaign to help promote borrowing in riel; for example, in our next campaign for Personal Loan, we will offer the loan in riel at only 15 per cent per annum while in dollars is 16 per cent per annum.

Regarding to staff salaries, we intend to convert a portion of the staff salary to be paid in riel as well.


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