Three forex giants hold sway
Airports fare well in ICAO audit, official says
ARECENT study on the role of Cambodia’s moneychangers found that three private forex traders control twothirds of the total demand for riel currency and exert more influence on foreign currency exchange rates than the central bank, raising the possibility of collusion in fixing rates.
Leng Soklong, an economic researcher at the National Bank of Cambodia (NBC), said during a presentation late last month that the behaviour of just a few large moneychangers in Phnom Penh directly and indirectly influences the operating costs of various economic agents and is the main factor in determining forex rates in other parts of the country.
According to his study, Role of Money Changers in Dollarization: Evidence from Survey, 66 percent of moneychangers said they relied on Phnom Penh-based moneychangers to determine their daily foreign currency exchange rates, compared to just 6 percent who used the NBC’s exchange rates as their benchmark.
“They [moneychangers] have a nationwide network, so they can allocate currency based on the demands of the economy, and they also have influence on the exchange rate transmitted by the central bank,” he said.
According to the study, three big Phnom Penh-based moneychangers, who he did not name, dominate the market and appear to be the main determinant in establishing the daily forex rates observed across the country.
“If there is possibility for collusion or speculation, we don’t know yet,” he said. “We will have to study that.”
NBC director-general Chea Serey explained that three big moneychangers dominate the market in terms of volume and value because local commercial banks conduct very limited foreign exchange transactions.
However, she said in the past two years that trend is rapidly changing, with banks taking up a more central role in forex markets as the result of reforms aimed at promoting tax collection through the banking system.
She expressed scepticism that private parties could manipulate the exchange rate, which she said was determined by market forces.
“Collusion is unlikely because the profit is very minimal and may not justify the cost of doing so,” she said yesterday, adding that forex rates respond to changes in supply and demand.
However, she said that official NBC exchange rates announced each morning influence the rates posted by moneychangers, though this is only one of many factors.
“This official exchange rate is mostly used for government transactions, while private transactions will rely on market rates determined by banks and moneychangers,” she said.
She added that while the NBC has the authority to intervene in forex markets when necessary, it does not “control” the exchange rate, leaving it to the market to decide.
Seing Lim, general manager of Ly Hour Money Exchange, one of the biggest moneychangers in Cambodia, dismissed the possibility of collusion, claiming that her company’s rates were set according to the total circulation or riel in the market and daily exchange rates posted by the central bank.
The company, which operates 10 branches in the capital, also works closely with moneychangers in the provinces, many of which exchange currency at the company’s branches, Lim said.
“We cannot [collude over rates], it is impossible,” she stated, adding that the market was too big for one or a few moneychangers to control, and the central bank would take firm action against any who try.
“We run our money exchange business with professionalism, and we are always fair and faithful in our business,” she added.
Lim Koa Try, owner of Try Im Money Exchange in Phsar Nath in Battambang province, said he sets the company’s daily exchange rates based on the rate supplied by moneychangers in Phnom Penh, and not according to those of the central bank.
“We always follow the exchange rate from the big moneychangers in Phnom Penh,” he said. “I don’t work directly with NBC, so we never follow their rates.” AN INSPECTION of Cambodia’s airports last week by a visiting delegation from the UN’s International Civil Aviation Organization (ICAO) turned up only minor issues, all of which are easily correctable, a senior aviation official said yesterday.
Si nn Chansere y Vut ha, spokesman for the State Secre t ar i at of Civi l Aviation ( SSCA), s a i d pre l i minar y results of the ICAO audit, which inspected international airport facilities in Phnom Penh and Siem Reap between October 20 and 28, were generally positive.
“Following the audit, we received a ‘fair-good’ rating from ICAO” he said.
“The full comprehensive report will be released after 60 days, and we hope that ICAO will give us enough time to correct the issues,” he said.
Vutha declined to provide any details on the issues raised, but said the ICAO typically grants audited civil aviation bodies two years to correct the issues raised in an audit before taking further action.
Cambodia fared poorly during its last full audit by the ICAO in 2007, with all criteria ranked substantially below international standards. Areas including navigation ser v ices a nd accident i nvest igat ions were graded at almost 40 perc ent b e low i nt e r n a t iona l safet y levels.
A group of civil aviation experts that inspected Cambodia’s airports in April found minor security lapses, advising the SSCA to hire and train more security personnel and strengthen airport fences to ensure compliance with international security guidelines.
According to Vutha, the SSCA acted on the recommendations of the experts.
“We still have some problem areas, but they are minor issues, and this is normal as not everything can be perfect,” he said.
“Any ways, t his is t he positive result for us, which means we [are operating according to i nter nat iona l ] av i at ion standards.”
He said the positive result would boost the confidence of airlines and encourage them to transport passengers and cargo to and from Cambodian airports.
By contrast, a poor audit result can land a country on ICAO’s blacklist, with potentially damaging consequences to aviation and tourism.