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New exchanges in Laos, Cambodia offer wider choice for investors
Investors eyeing opportunities in Southeast Asia will have a wider
choice, as new stock exchanges open in Laos and Cambodia.
But experts said it may take some time for them to attract foreign funds.
One
reason is that there are still gaps in regulations. In addition, local
companies will require time to adjust to the listing environment.
Frontier
economies such as Indonesia and the Philippines have been the apple of
some investors’ eye as they look to tap into growth in emerging
economies.
Laos, which has enjoyed average GDP growth of around 8
per cent for the last four years, launched its exchange earlier this
year with two listed companies and a few in the pipeline.
Experts
said it could hold some potential but it will take some time for the
market to be sweet enough for international investors to take a bite.
William
Greenlee, country managing director (Lao PDR) of DFDL Mekong, said:
“The rules that are available at the moment, they are quite extensive,
(but) there are some holes – you have the general framework guidelines
of what they have to do; however there needs to be more detail added and
that will come.”
Industry watchers said that it will take some time for local companies to adjust to listing rules and requirements.
Mr
Greenlee said: “I think they are moving slowly. The state-run companies
that are going to be listing in the future, you have a telecom
(company) that is rumoured to be listing soon, and you have Lao
Airlines, you have a cement company – (they) all are very good assets as
far as we know…maybe in a year or two, when these large international
companies that have local entities, when they may list, that is what I
am looking forward to.
“In Laos, for a company to operate, it
must have a Lao entity, it must have a subsidiary, so those are the
entities I think in the next couple years once they see that the
exchange is operating well and that there is transparency, there is
certainty. I think that is when we will see the stock exchange really
picking up some steam.”
Officials said that this is also a challenge in Cambodia as most businesses are family run.
Cambodia is set to open the doors of its exchange in July, with three state-owned enterprises the first to go public.
Kao
Thach, deputy director general of the Securities and Exchange
Commission of Cambodia, said: “From the issue side, they need to
restructure, most of the companies are family orientated, so they need
to restructure to have a board, and they need to convert from the
Cambodian accounting standard to IFOS, which we (will) put into
operation by end of this year – that is a big challenge for them.”
While trading in Laos may be primarily in KIP, the exchange is open to other trading options.
Vathana
Dalaloy, acting secretary general (Lao PDR) of the Securities and
Exchange Commission Office, said: “We open it to both domestic and
foreign investors and at the same time, we also need quality.
“However,
whether we will be successful or not in the next five years is more or
less up to our policy, our human resources and also the legal framework,
and in order to meet those objectives, that is why the government has
decided that we need to upgrade our security exchange decree into a
security law, and that needs to be completed by next year.”
Experts
said that they expect traditional sectors such as agriculture, mining
and the services sectors to be drivers of the fledgling exchanges.
– CNA/ms
Ezecom buys wholesale firm
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| Ezecom CEO Paul Blanche-Horgan speaks to reporters from The Post in February. Photo by: Marisa Reichert |
acquired 100 percent of the shares of Cambodian wholesale fibre company
Telcotech.
Ezecom Chief Executive Officer Paul Blanche-Horgan
said that Telcotech brought a complementary strategic vision and product
technologies to his company, and the combined companies would deliver
greater value, in a statement announcing the purchase.
“By joining forces, we have a vast opportunity for further growth based on mutual strengths,” he said.
“We
are continuing to improve and provide the Cambodian people
worldwide-quality services, whilst reducing costs and making internet
more available and affordable throughout the country.”
Ezecom
runs a fibre network aimed at business and retail customers, as well as
offering data centre, VoIP and other telecommunications services, the
statement said.
Telcotech also controls a fibre network within
Cambodia, but is also the sole Cambodian member of the Asia American
Gateway submarine cable network consortium.
The AAG totals some
20,000 kilometres of high bandwidth submarine cable, connecting
Southeast Asia to the United States along with other major fibre
networks, according to Telcotech.
Yesterday, Blanche-Horgan told The Post it was the international exposure offered by the AAG that most attracted Ezecom.
“The main reason for buying the company was the AAG cable, which is really important for Cambodia,” he said.
The
deal with Telcotech also increases Ezecom’s national coverage area by
40 percent, he said, though he declined to disclose the pricetag for the
deal.
Blanche-Horgan also said that consumers will see Ezecom’s
coverage area grow and product prices come down in about six months,
admitting though that implementation “will take time”.
Reducing
costs is a major step toward bringing internet services to Cambodia’s
rural poor, which is also a central goal of Ezecom, the CEO said.
Blanche-Horgan
said he wants to see connectivity brought to outlying villages and
communes as a way to boost development in the country.
“Because the future of Cambodia, as far as I’m concerned, is internet,” he said.
Officials at Telcotech couldnot be reached for comment yesterday.
Mobiles wait to consolidate
roadblocks are preventing rapid consolidation among the Kingdom’s eight
active players, according to industry insiders.
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| Customers mill about beneath umbrellas advertising various mobile service providers in Phnom Penh yesterday. Photo by: Pha Lina |
and Star-Cell merged at the beginning of the year, further mergers and
acquisitions may take longer than many expect, as insiders point to
too-high valuations and a lack of synergy among some market players.
“I’m
not sure it’s going to look any different by the end of this year,”
Hello Chief Executive Officer Simon Perkins said of the country’s mobile
telecoms sector.
“People think that the businesses are valued much more than they really are,” he said.
That
sentiment has been echoed by others in the industry. Some CEOs have
told The Post that until those valuations come down, consolidation is
less likely to happen.
Smart Mobile CEO Thomas Hundt wrote that
given the present market environment in Cambodia, the real valuations of
many companies may be below their shareholders’ original investment.
Consolidation in these circumstances would then lead to write-offs, according to Hundt.
“That is likely the biggest obstacle for further consolidation,” he said.
But
at the same time, some Cambodian telecoms have the backing of
deep-pocketed shareholders, which allows them to wait for better prices
or forego an acquisition entirely, Hello’s Perkins said.
For
Hello, that shareholder is Malaysia’s Axiata Group, while Viettel, a
subsidiary of the Vietnamese military, owns Metfone, Thaicom controls
Mfone, and Vimpelcom runs Beeline.
Cambodian conglomerate Royal
Group owns CamGSM, which operates under the Cellcard brand, though
Telkom Indonesia officials said earlier this month it intended to buy a
51 percent stake in the company. No deadline has yet been given for the
deal.
Perkins said the industry was closely watching a potential deal for CamGSM.
Marc
Einstein, a telecoms analyst with Frost & Sullivan in Tokyo, agreed
that valuations weighed on Cambodia’s mergers and acquisitions market,
but he also stressed it would be some time before the industry shrunk as
expected.
He said the Kingdom’s high level of competition
reduces a company’s earnings visibility, leaving buyers wary of making a
move. Volatility in subscriber numbers and revenues per user adds to
that concern, he said.
Einstein also said most companies entering
the market have a medium- to long-term outlook, which further slows any
short-term M&A activity.
He predicted it would take five to 10 years before three to four “sustainably-profitable operators” were left in the market.
“Consolidation in telecom is something that takes years, not months,” he said.
Mark
Hanna, Chief Financial Officer at Royal Group, the owner of CamGSM,
said there may come a point where some investors stop putting money into
their companies, as some of them continue to operate at a loss.
As
a result, he said the case for consolidation was less compelling then
the possibility a number of Cambodian telecoms may simply close their
doors.
“There might be one or two deals,” Hanna said, “But companies will fold.”
Smaller
firms lack the critical mass of subscribers that would make them
attractive takeover targets, limiting possible mergers, Hanna said.
Also, many companies’ market shares overlap, he said.
Different
telecoms’ cell-phone towers and other infrastructure already operate in
the same areas, meaning the buying company wouldn’t gain any additional
coverage with an acquisition.
Hanna said gaining another
company’s frequency is one of the only positives from a merger right
now, such as if a second-generation wireless operator bought a company
that operated a third-generation network.
That was the case in
the Smart-Star Cell merger, where Smart gained a 3G license, while
taking a 75 percent stake in the merged company.
But Smart CEO
Hundt also said that the two companies’ market footprints were
complementary, creating “an immediate substantial coverage add-on.”
“Both
companies were relatively young with limited legacy, which supported a
fast and swift integration,” he said, adding: “Smart sees itself ready
for further consolidation as an active participant.”
Dragonair highlights tourism in look at Siem Reap
the airline is considering expanding to the tourism centre of Siem Reap,
according to Cathay Pacific Southeast Asia General Manager Anna
Thompson.
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| Anna Thompson, general manager of Southeast Asia for Cathay Pacific, at the Dragonair office in Phnom Penh. Photo by: Sovan Philong |
“We have 1,372 seats a week from Phnom Penh to Hong Kong, which works out at 196 a day,” she said.
“It’s not just Cambodian nationals taking up the seats, foreign tourists are also important to the numbers.”
The
carrier is also considering expansion plans for the Kingdom. “We are
looking into the idea of flying to Siem Reap and have the flying rights
to do so, yet we need to assess the market potential for tourism,” she
said.
She also highlighted Cambodian authorities as particularly welcoming of expansion plans.
“We
find in countries like Cambodia they’re quite open to increases in
flights, as they want to increase tourism, whereas some other countries
tend try to control it a little bit more,” she said. However, Dragonair
Phnom Penh based Manager Nicolas Masse emphasised there were no concrete
plans at this stage, as Phnom Penh currently serves as the main gateway
to Cambodia for cargo, business and leisure.
Of the passengers
flying to Hong Kong, around one third stay in the city, while the
remainder head to the other 141 destinations the carrier serves, he
said.
“We see a lot of traffic to Europe, which has become very
popular, especially Paris and Amsterdam, while Australia continues to be
a popular destination,” he said. “Toronto has a large Cambodian
presence, leading to traffic in both directions, which is why we plan to
increase the seat number this month.”
Other popular destinations
include the United States; New York and Los Angeles, while in Asia;
Manila, Jakarta, Osaka and Tokyo are all frequented by travellers
originating in Cambodia.
Some 1,291 people residing in Hong Kong
visited the Kingdom in the first quarter of 2011, along with 55,891
visitors originating in China – a 36.6 percent increase on the same
period 2010, according to Cambodian Ministry of Tourism statistics.
Uncorking domestic demand
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| Photo by: WILL BAXTER |
Phnom Penh’s Wat Botum park yesterday. Vendors said they were attempting
to encourage Cambodians to use more domestically manufactured products.
Yin
Lang, owner of a perfume company, said participating in the exhibition
was a good way to introduce her Love You products to Cambodians.
“Cambodian
people are becoming more interested in Cambodian-made products,” she
said, adding she specifically targeted teenagers and foreigners for her
products.
Sok Chenda, owner of Chamkardong Soy Sauce makers, said it could be a challenge competing with foreign-made goods.
“Competing
with foreign goods requires better packaging techniques … as
[Cambodians] think the quality of local products is lower than that of
foreign products.” SIEAM BUNTHY
Cambodia eyes Filipino market
Break for byline/break for normal. Nascent rice exporting industry is eager to ship, offering to undercut competitors.
with the Philippines that could result in the country’s fledgling
rice-export industry competing with Thailand and Vietnam for contracts
to supply the world’s largest importer.
Minister Hun Sen offered to sell rice at lower prices than competitors
in a meeting with Filipino President Benigno Aquino, according to a
Cambodian government aide. The offer was made in return for investment
in Cambodia’s under-developed agricultural sector, said Srey Thamrong,
an adviser to Hun Sen, who was present during the talks in Jakarta on
May 7.
President Aquino told Hun Sen he would appoint a team of government
officials to negotiate the arrangement.
National Food Authority to Phnom Penh early last month as part of the
Aquino government’s plans to diversify and reduce spending on rice
imports that hit 2.25 million tonnes last year, the highest in the
world.
[of imports],” NFA chief of staff Gilbert Lauengco told the Phnom Penh
Post in April. Shipments would start ”at the very latest next year”,
he added, although the exact amount and price the Philippines would pay
Cambodia is yet to be agreed.
Congress earlier this year the country paid an average US$630 per tonne
for rice imports in 2010, or $1.42 billion overall, which represented
more than 44% of the Philippines $3.47 billion trade deficit for the
year.
stocks and improved domestic production in the Philippines, according to
government projections, providing tropical storms do not damage crops
as has happened in the past in the typhoon-prone country. A Department
of Agriculture report showed Philippines rice stocks reached a record
3.08 million tonnes by April 1, up 8% on the same period last year,
while rice production climbed an annualised 16% in the first quarter to
just over 4 million tonnes.
just 860,000 tonnes this year after the new Aquino government accused
its predecessors of over stockpiling rice, a move likely to further
diminish opportunities for the country’s two main suppliers Vietnam and
Thailand as Manila also looks to add Cambodia as a lower-cost
alternative.
200,000 tonnes from Vietnam this year as part of a rice-supply deal
with Hanoi, while Thailand is set to be the main supplier of the
country’s reduced-tariffs programme with an agreement to ship 98,000
tonnes.
struggled to compete with Vietnam to supply the grain to the Philippines
after shipments of 500,000 tonnes in 2008 dwindled to 80,000 tonnes in
2009 before climbing again to more than 200,000 tonnes last year. In the
past Thailand has said it hopes to ship half a million tonnes of rice
per year to the Philippines.
rice from Cambodia, say analysts. The Thai Rice Exporters Association
estimates Cambodia supplies up to 1.5 million tonnes of paddy to Vietnam
every year, which is then processed and shipped on as official export
produce to markets including the Philippines. But during the talks in
Jakarta, Mr Aquino reportedly told Hun Sen that Manila was ready to
”remove the middleman” _ Vietnam _ resulting in lower import prices
for the Philippines should Cambodia become equipped to process and ship
the necessary quantities of rice, which is not yet the case.
moment and that is Cambodia’s best option while the necessary downstream
structures and logistics are not yet in place,” said Korbsook Iamsuri,
president of the Thai Rice Exporters Association.
request for the necessary investment in Cambodia’s underdeveloped
agricultural industry, subject to a formal agreement.
it still has a long way to go before it can turn a paddy surplus
estimated at just under 4 million tonnes this year into processed rice
of a quality ready for shipment given inadequate infrastructure, high
electricity prices and a lack of financing options in the industry.
Cambodia to postpone Thai expo slated for next week in Phnom Penh
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| Photo: by Dap-News |
planned for next week in Phnom Penh, saying it is not the right time to
hold such an expo.
“Due to recent restrictions on border
trade by Thai military region 2, I am of the opinion that this is not
the right time to promote Thai products in Cambodia,” Cambodian Commerce
Minister Cham Prasidh said in a letter to Thai embassy in Phnom Penh on
Friday.
Cambodia’s decision is a response to the 2nd Thai
Army command’ s order on Tuesday to halt a further exports of fuel and
other products into Cambodia, claiming the Cambodian military may need
them to support their troops in operations against Thai forces along the
disputed border.
“The export ban will last until the border
situation really returns to normal,” the Bangkok Post online reported,
citing the order letter of the 2nd Army command.
On
Wednesday, Thailand announced that it would organize the second largest
scale expo of Thai products in Phnom Penh from May 19-22.
“We cannot guarantee the reaction of Cambodian visitors to such exhibitions after Thai’s behavior,” Cham Prasidh said.
“Therefore, I have issued instructions to the Department of Trade
Promotion under the Ministry of Commerce to contact the organizers of
the Thai exhibition 2011 to postpone the said event until more favorable
time comes,” added the minister.
Jiranan Wongmongkol,
director of the Thai embassy’s Foreign Trade Promotion Office in Phnom
Penh, which is the event organizer, said Friday that the embassy has
received the letter and agreed to cancel the event.
“We have no choice, we have to postpone the event,” she said. “We don’t know when it will be re-arranged.”
Cambodia and Thailand has border dispute just a week after
Cambodia’s Preah Vihear temple was listed as World Heritage site on July
7, 2008. Thailand claims the ownership of 4.6 sq km of scrub next to
the temple.
Since then, both sides have built up military
forces along the border, and periodic clashes between the two countries’
soldiers have resulted in the deaths of troops on both sides.
The latest flare-up occurred from April 22 until May 3 at the 13th
century Ta Moan temple and Ta Krabei temple in Oddar Meanchey province,
leaving 19 people, on both sides, killed and nearly 100, 000 civilians
evacuated for safe shelters.
Footwear-factory body to form
represent the industry and attract buyers and sellers, said Garment
Manufacturers Association in Cambodia Chairman Van Sou Ieng.
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| Commerce Minister Cham Prasidh speaks during a Ministry of Commerce meeting in Phnom Penh yesterday. Photo by: Pha Lina |
initiative would allow footwear factories to act collectively in a
similar manner to garment factories in GMAC, he said yesterday on the
sidelines of a Ministry of Commerce meeting.
“We want them to set
up an independent association, letting them work together and
understand the issues among its members,” he said.
Garment
manufacturers had trouble solving problems before the industry body was
set up in 1999, he said. GMAC is a mandatory organisation for Cambodian
garment factories that export.
“The association provides a single
voice to deal with the issues we confront. The government protects us
and gives us ideas for us to improve our businesses – especially it
helps buyers trust us.”
Minister of Commerce Cham Prasidh said
during the meeting that exports of footwear products increased gradually
year on year despite the crisis.
“Although the crisis hit us,
the footwear industry did not decline – it still rose while the garment
industry dropped, meaning that we have the ability to improve and grow.”
The
Kingdom had 36 footwear factories at the end of 2010, in a year that
saw it export some US$172 million worth of footwear products, he said.
The industry has exported $65 million worth of footwear in the first
quarter.
Total production of footwear ought to hit $250 million
in 2011, as four or five large factories have been approved to begin
production this year, according to the minister. The new factories are
thought to employ between 3,000 and 5,000 additional workers.
The Kingdom had a total of 273 garment factories at the end of last year, he said.
Three footwear factories are already a part of GMAC, according to Van Sou Ieng.
He said he was not sure whether a separate footwear body would set up an independent association or stay with GMAC.
“[Yesterday’s]
meeting, we held discussions with the footwear factory owners. We don’t
know yet whether they will want to be our members, or set up on their
own.”
The final meeting to set up the association will be held next month, he said.
“If they join with us, we will change the name to Footwear and GMAC.”
Banks welcome Microfinance Institutions
Microfinance Institutions in the Kingdom, following an announcement that
the National Bank of Cambodia had granted a deposit licence to
VisionFund Cambodia.
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| A transaction takes place yesterday at Prasac MFI in Phnom Penh. Prasac is one of at least seven MFIs that have obtained deposit licences. Photo by: Pha Lina |
receive a deposit licence, and has announced interest rates on certain
deposits as high as 10 percent – higher than what many commercial banks
offer in Cambodia.
But commercial banking officials say MFIs
target different markets, and offer a way to extend banking to the
Kingdom’s large unbanked population.
ACLEDA Bank President In Channy said he applauded the decision to grant deposit licences to MFIs.
“If
more MFIs can receive deposit taking licenses from the NBC, it means
they can increase the flow of money into the financial system.”
Rather than people storing money at home, it could be put to use in loans, which generate revenue, he said.
“It
is good for the whole industry, because MFIs have a lot of branches at
the grassroots level, which can broadly mobilise funds.”
Although
ACLEDA has the largest network of branches in Cambodia, In Channy
downplayed competition concerns, claiming increased choice was important
for customers.
An NBC prakas, on licensing of microfinance
deposit-taking institutions, requires the institution to have minimum
paid-up capital equal to 10 billion riel (US$2.4 million), along with
strong financial conditions and sound management.
So far, at
least seven MFIs have received deposit licences – Amret, Sathapana,
Hattha Kaksekar, AMK, Credit, Prasac and now Vision Fund, according to
Cambodian Microfinance Association Chairman Chea Phalarin.
He said it was important to build customers’ confidence to increase deposits at MFIs, adding they were already on the upswing.
Competition among MFIs was starting to grow, he said.
“The
more competition, the more improvements the sector tries. The more
competition, the more benefits customers receive,” he said.
Canadia Bank Vice President Dieter Billmeier also said he encourage more MFIs to upgrade their businesses.
“I welcome the decision of the NBC to grant a ‘deposit taking license’ to another MFI,” he wrote.
“They
literally ‘teach’ the rural population how to save money for ‘not so
good’ times like sickness or funerals or for education fees of sending
their children to rural schools.”
Foreign Trade Bank of Cambodia
Chief Executive Officer Gui Anvanith wrote that commercial banks and
MFIs have different target markets.
“Commercial banks and MFIs are covering essentially different geography and different customer segments,” he said.
Bank of China launch
Saturday, a move that officials said would assist in the support of
large-scale Chinese investments in the Kingdom.
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| Finance Minister Keat Chhon prepares to cut a ribbon during the opening ceremony of the Bank of China on Saturday in Phnom Penh. Photo by: Heng Chivoan |
held at Sofitel Hotel, which was attended by 300 local and Chinese
businessmen, officials highlighted the benefits of the opening for the
Kingdom.
“It will provide advantages and positive inputs to
Cambodia to boost its banking industry and help the economy grow,” said
Minister of Economy and Finance Keat Chhon.
He also called for
BoC to help develop the country’s agriculture sector, which he said was
“one of the four pillars supporting the country’s economic growth”.
Bank
of China is among the four largest banks in China, with total assets
over US$1.7 trillion and a presence in 31 countries around the world.
National
Bank of Cambodia Governor Chea Chanto said the bank’s presence
reflected the confidence of Chinese investors in Cambodian market, as
well as progress in the banking industry.
“It will bring new technology and innovative banking products to develop Cambodian banking industry,” he said.
Chea
Chanto highlighted growth in the domestic banking industry, as total
deposits in 2010 reached US$4.16 billion while the amount of loans
increased 26.7 percent to $3.18 billion.
Meanwhile, he said the nonperforming loan rate dropped to 3 percent as of the end of last month.
Of the 14.3 million people living in Cambodia, 1.35 million have used its banking system, he said.
BoC
Executive Vice President Yue Yi stressed the importance of economic
cooperation between Cambodia and China at the press conference.
“It is in line with the policy of China to help develop Cambodia’s economy,” he said.
He
said BoC would finance initiatives such as infrastructure projects,
hydropower dams, agriculture and special economic zones, as well as
serve as a settlement, clearance and remittance center for the Chinese
yuan. The BoC will also play an active role in Cambodia’s planned stock
market, he said.
Cheng Chang Jiang, Bank of China Phnom Penh CEO,
said Cambodia’s financial market is relatively small at the moment but
has lots of room to expand.
ACLEDA Bank President In Channy
downplayed competition concerns, and highlighted the new sources of
capital, technology, and experience the Bank of China brought to the
Kingdom.
“I think that it’s not competition for us because we’re
focusing exclusively on financing small, medium and large businesses.
They target large financing projects such as hydropower and
infrastructure,” he said.
Khmer Breaking News 