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Wednesday, September 24, 2008

Minding Cambodia's bottom line

Since 1995, Senaka Fernando, a senior manager at the Cambodian branch of financial services giant PricewaterhouseCoopers, has observed the rise of the Cambodian economy

When did PricewaterhouseCoopers (PwC) start in Cambodia?
We follow our clients. The entrance of a major client into the Cambodian market, British and American Tobacco, prompted us to come here in 1995.

Who were PwC's clients in the early days?
After the passage of the foreign investment law in 1994, foreign investors gradually started to trickle, and if you look at our revenue numbers from '95, '96, '97 they were always on the rise. Even though there wasn't much inflow of commercial clients in the beginning, the donor money kept flowing to Cambodia and we helped manage their projects. Donors look at us to see the projects they fund are properly managed and there's financial transparency. They would give money to a ministry, which would set up a project implementation unit whose finances we would manage.

Is it difficult to set up a company in Cambodia?
It is quite easy to set up a company here. If you want to set up a 100 percent foreign-owned company, you can, unlike with some other countries in the region where you sometimes have to enter a joint venture with a local partner.

Who are PwC's clients?
We get referrals from our PwC network saying we have a client that's coming to Cambodia to look for real estate, set up a factory, set up a bank, and we give them advice on the investment environment. In recent years we've been working a lot with property management, banking, hotels, casinos, and the most recent trend in growth has been in financial services, construction and real estate. The diversity is becoming wider. We advise them on how to set up - how to structure a company and how to tax plan - and once they are in operation we do audits.

The central bank also happens to be an audit client. There aren't many countries in the world where we do an audit of the regulator. If you take the Asean region, it's only Cambodia. When we audit the National Bank, we audit them like any other client. It is part of the whole transparency process because it is in the national bank's constitution that they need to be checked and audited.

Do you ever decline clients?
We have a long checklist to go through before accepting a client. One classic example where we reject is when someone comes in for an audit with two sets of books - one for internal purposes and one for tax purposes where they manipulate the numbers. That's a trigger point for us to decline the client. Most of the time when we turn down clients it's because they don't want to give us the information about their numbers and accounts upfront.

Do you use a country-specific auditing approach in Cambodia?
We have one audit approach, which we will follow in the United States, in Cambodia, in Afghanistan. Depending on certain factors, we may do some extra work. For example, in a country like Cambodia when, say, constructing or purchasing a school for an aid-funded project, there will be extra work done to see how the biddings are awarded because that can be especially tricky.


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DONORS LOOK AT US TO SEE THE PROJECTS THEY FUND ARE PROPERLY MANAGED AND THERE’S FINANCIAL TRANSPARENCY.

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What are your clients' major concerns?
[Currently] inflation, but it is difficult to get information on inflation in Cambodia.... More generally, the legal system - the enforcement of laws and code systems - is one of the major concerns for any foreign investor coming here. That's the first thing they ask about. Most of the basic laws are already there - the law on commercial enterprise, the law on secure transaction. There is also a whole checklist of laws the government needs to pass to comply with the World Trade Organisation. If they pass all of those pieces of legislation, the legal network will be there. But enforcement of the law is really crucial.

We're trying to address some of these concerns in the Private Sector Working Group, where stakeholders get together with the government. We raise issues to the government on behalf of our clients and some of the clients participate directly in the working groups. For example, smuggling, corruption - these are issues that are being discussed in the working groups in an ongoing basis.

What industry has the largest room for growth?
Agriculture, because that's a huge market that hasn't been properly tapped into. We have been contacted by the Kuwaiti Investment Fund about investing in agriculture in Cambodia.
There hasn't been much investment in agriculture in Cambodia and the land is fertile here.

What are your clients most excited about?
The growing purchasing power of local people because you see a middle class emerging - especially for the beverage and mobile phone industries. When you see our clients' numbers, you see a consistent trend in growth.

Will you be providing services to the upcoming Cambodian Stock Exchange?
I think they would want us to audit. That's what we do in many other countries, like in Vietnam. When people are going to be listed, there is certain advisory work that we help our clients with. We have had inquiries from some of the companies thinking of joining. The listing requirements have not yet been published. The Ministry of Economy and Finance know that accounting firms will have to play a crucial role for the stock exchange.

Interview by Brendan Brady
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Cambodia: Ruling Party Dominates New Parliament

The Cambodian People's Party's efforts by cheating on the vote, intimidating people's liffe, threatening lives, Killing lives, stealing parliamentary seates are finally paid off and continuing for the next pushes for Cambodia. They always said criminals are usually lucky, that is just in Cambodia.

PHNOM PENH, CAMBODIA: Cambodia's newly elected lower house of parliament held its inaugural session Wednesday (24 Sept) that saw the ruling party's already firm grasp on power grow even tighter in the impoverished Southeast Asian nation.

Prime Minister Hun Sen's party now holds 90 of 123 seats, ensuring that the Cambodian People's Party will have a free hand in virtually all legislative matters.

"They have been ruling the country single-handedly, and they still are," said Ou Virak, director of the nonprofit Cambodian Center for Human Rights. "Their one-party rule is just more legitimate than before."

An election on 27 July election handed Hun Sen's party 17 seats beyond the 73 it already held, further cementing the CPP's majority.

Ou Virak and other rights activists say the virtual one-party system risks damaging the country's fragile democracy and giving unfettered power to Hun Sen, a former Khmer Rouge soldier who has dominated the country's politics for decades.

They say the ruling party's supremacy will weaken an already limited system of checks-and-balances and make it more difficult to voice dissent and air grievances about social injustices.

Hun Sen is a former soldier in the Khmer Rouge movement that wreaked havoc in Cambodia when it held power from 1975-1979. He has been at the center of the country's politics since 1985, when he became the world's youngest prime minister at age 33. He has held or shared the top job ever since, bullying and outfoxing his opponents to stay in power.

The parliament will vote Thursday ( 25 Sept) on a new Cabinet _ an exercise seen only as a formality given the domination of Hun Sen's party.

King Norodom Sihamoni presided over Wednesday's event at the Nation Assembly, and called for the lawmakers to "succeed in fulfilling your duties for the great benefit of our nation." Sihamoni is a constitutional monarch who holds no executive power.

The lawmakers were dressed in green silky wrapped skirts and white turtleneck, long-sleeved shirts _ the traditional Cambodian outfit used in functions attended by the king.

The Sam Rainsy Party, Cambodia's main opposition group, has 26 seats in the parliament. The other three smaller parties hold combined seven seats. (AP)

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