Foreign
Trade Bank Takes First Step Toward Privatization
The state-owned Foreign Trade Bank will move to a new location Monday,
making the physical split from its parent entity, the National Bank
of Cambodia, as it moves toward privatization.
To fund the switch from public to private---and meet the $13 million
capital requirement in the new banking law--the government is
planning to sell bonds for the Foreign Trade Bank.
A committee composed of officials from the Ministry of Finance, the
National Bank and the Foreign Trade Bank is studying the issue.
A senior official of the Finance said the joint committee will study the
legality of issuing bonds, the interest rates and denomination of
the bonds, and the nominal value of Foreign Trade Bank’s shares
for the next four months.
The government should be ready to issue bonds by the end of June, he
said. An International Monetary Fund expert will come to Cambodia at
the end of the month to discuss the bond proposal, he said.
Financial experts have questioned the prudence of issuing bonds to
raise capital something Cambodia has never done. The government will be
asking people to buy bonds for the bank with the promise of a higher
return than a savings account. It has not been determine if or how
the bonds will be guaranteed.
Experts say there are many questions to be settled before issuing bonds.
There needs to be a legal framework to regulate the financial
instrument and the market. How
to determine interest rates and target buyers are other issues to be
resolved.
Senaka Fernando, country manager of PriceWaterhouseCoopers, said the
government also needs to boost Cambodians' trust in the country’s
banking and financial system.
The many years of civil unrest, he said, destroyed the banking system and
people's faith along with it. “Who is going to buy such government
bonds? The Cambodians don't trust banks," he said. "The government needs first to convince "
Cambodians about the financial system.†| 
