FINANCIAL SECTOR DEVELOPMENT
The financial sector including banking and insurance sectors and other relevant activities are in their starting stage and have played their crucial roles and the development of the national economy. The Royal Government of Cambodia has made its efforts to reform the financial sector in Cambodia that has been successful and so far obtained many big achievements. The sector is developed and generated increasing confidence.
The Royal Government has successfully implemented the first step of the 2001-2010 Financial Sector Development Blueprint by mobilizing all the financial resources to meet the needs in manufacturing and support economic growth.
In the financial sector, the Royal Government has strengthen law enforcement and supervise commercial banks through the issuance of new licenses together with increased capital requirements, initiate monitoring and control mechanism to develop single account. The Government is drafting other legislation in order to strengthen the confidence in the banking sector. In the rural financial sector, the Royal Government has strengthened micro finance institutions requiring them to abide by the laws to facilitate control and monitoring as well as to reduce interest rates. As a result, a number of MFIs have expanded their financial services and become commercial banks.
Achievements made include:
Introduction and implementation of on and off-site inspections to financial institutions
Liquidation of non performing banks
Privatization of the Foreign Trade Bank
Revision and improvement of existing rules and regulations to ascertain better and effective law enforcement
Monitoring and control banks performance with the Uniform Chart of Accounts that is in line with the International Accounting Standards
Financial Industry Development
The financial industry has remarkably developed since its inception in the early 1990s. It is made of big sectors such as Insurance and Capital Market. The Insurance sector was established in the early 1990s starting with the Cambodian National Insurance Company (CAMINCO) and in 1994 it was under the direct supervision of MEF. In 2002, 4 insurance companies that invested in the sector include Indochine, Forte, Asia, and Pana.
To achieve development MEF has formulated legislations, Sub-decrees, and Prakas to supervise the financial industry. Insurance premium increased from USD 5,487,087 in 2002 to USD 8,821,708 in 2003 with an increase equivalent to about 60 percent. On the other hand, the sales of insurance policies increased from 23,120 in 2002 to 28,297 in 2003. At the same time, the supply of insurance services has subsequently increased: from property to general travel insurance.
Concerning the capital market, the Royal Government has made its efforts and decided to form a Capital Market Task Force. The team has been very active in laying the foundation for capital market including the establishment of Capital Market Monitoring Mechanism and developing the activities of the officials of the Capital Market Office. The team has conducted inter-ministerial meetings to discuss the draft Law on the Issuance and transactions of Public Bonds.
National Accounting Council Development
The Law on Enterprise Accounting, Auditing and Their Professions that became effective led to the submission of the Sub-decree on the Establishment of the National Accounting Council to the plenary session of the Council of Ministers that was approved and signed by Samdech Prime Minister HUN SEN on March 03, 2003. On March 27, 2003, MEF issued a Prakas on the Assignment of the Board of Directors to the National Accounting Council that comprises of 13 members from state institutions and private organizations. So far the Board of Directors have convened many meetings to review and to discuss the 15 Accounting Standards and 10 Auditing Standards and on many other provisions.
Similarly, the draft Sub-decree on the Establishment of the Khmer Institute of Certified Public Accountants and Auditors (KICPAA) was also approved at the plenary session of the Council of Ministers and signed by Samdech Prime Minister HUN SEN on March 19, 2003. Due to the efforts made by the National Accounting Council as well as the International Accounting Standards Research Committee (IASRC) with the collaboration and Assistance from NGOs and the private sector, the 15 Accounting Standards and 10 Auditing Standards were approved on October 16, 2003.
IASRC, NAC, and KICPAA shall continue to study and research the remaining standards among the overall 43 accounting standards, and 20 auditing standards used worldwide to meet the requirement of the Cambodian Economy that is gradually taking off. Apart from that, a number of legal frameworks and institutions have been established as well, such as:
The implementation of the Cambodian Accounting and Auditing Standards
The establishment of a Commission to register licensed Certified Public Accountants and Auditors
Also, in order to develop and supervise the accounting profession so as to suit its development either within national or international framework, norms or rules are required for licensed certified public accountants and auditors, so that they can conduct these businesses in Cambodia. In response to such a need, NAC and KICPAA have jointly made efforts to produce the Code of Conduct for licensed certified public accountants and auditors through a Sub-decree that was approved at the plenary session of the Council of Ministers on June 03, 2005. Samdech Prime Minister HUN SEN signed the Sub-decree No. 83 on June 17, 2005.
The Sub-decree divided into 7 Chapters with 38 Articles with its major substance focused on Public Interests, Basic Principles for Accountants, Resolution of Conflicts on Code of Conduct, and Disciplinary Sanctions.
On top of that, NAC has tried to conduct training through a Perfect and Strict Training Program organized by CamEd which is a private vocational training organization. NAC and CamEd have conducted 6-generation trainings to 233 students (only for those who received scholarships from the Government). Of which, one session on Certified Accounting Technicians with 43 students and 5 sessions on Certified Public Accountants and Auditors with 190 students following ACCA’s curricula will receive their degrees from ACCA.
For Certified Public Accountants, training will require at least 3 years and go through a course of instructions directed at Accounting and Auditing Firms at least for 3 more years to become a CPA. Provisional results of generations 1, 3, and 4 have shown that there were at least 40-60 percent of civil servants who passed each course successfully and may receive the CPA degree in the near future.
In the short run NAC has much work to complete such as the verification of the name of registered companies and those that registered tax payments as the real regime; the dissemination of the Law on Enterprise Accounting, Auditing, and Their Professions, and Cambodian Accounting and Auditing Standards to students of tertiary education and companies that are conducting their business in the Kingdom of Cambodia; and the preparation of the Cambodian Syllabus for CPA.