Small US banknotes ‘still valid’
‘Small US banknotes remain in wide use’
NATIONAL Bank of Cambodia (NBC) directorgeneral Chea Serey on Thursday stressed that small-denomination US banknotes will remain valid and legal tender in the Cambodian market.
This comes after Japanese-owned shopping mall developer Aeon Mall (Cambodia) Co Ltd announced its decision to stop dispensing $1, $5 and $10 notes from August 1 at its establishments.
Aeon Mall Cambodia said: “We would like to inform valued customers that from August 1 onward, our shopping centres will no longer hand out notes in $1, $5 and $10 denominations and that change will be converted into Cambodian riel.
“We stress that our shopping centres will continue to accept [small-denomination] US-dollar [banknotes] from customers that purchase merchandise in our stores until further notice.”
Serey played down the move, saying it was apparently intended to promote the local currency.
“We cannot force them to hand out small-change banknotes – they should be able to pay with whatever notes they stock. But it is crucial that we continue to promote the wide use of the riel.
“The Japanese have by and large backed the Cambodian currency – undertaking studies on the use of the riel in the Kingdom through Jica [ Japan International Cooperation Agency], only accepting riel for visa payments to the Japanese embassy through Aeon Specialised Bank [Cambodia] Plc, and even being the first to include parallel riel prices at its supermarkets in Cambodia,” she said.
However, Serey said financial institutions will be held accountable if they stop accepting valid notes.
Citing Article 64 of the Law on the Organisation and Function of the NBC promulgated in 1996, she said: “Any person who does not accept payment in a currency that is legal tender in the Kingdom shall be liable for a fine of 100 times the amount of the payment.”
Local entrepreneur and publicprivate partnership advocate Van David chided the NBC for making an unclear announcement that confused and misled the public.
THE government i s working on a draft law on government securities to replace the old one, the Ministry of Economy and Finance said on Tuesday.
This will pave the way to issue state securities, mobilise domestic financing, diversify the state capital portfolio and curb external borrowing, it said.
Demand for resources and financing continues to climb and could meet the real needs of socioeconomic development if underpinned by proactive measures to broaden the scope of funding sources, with emphasis on high-potential local ones, it added.
The current Law on Government Securities was issued by Royal Code No NS/ RKM/0107/001 on January 12, 2007 and remains in force today.
The ministry said: “This new draft law is a legal basis to allow the government to issue securities by limiting the scope, deciding on the issuance, determining the size and form of the issuance of state securities, determining the participants and procedures for trading state securities, as well as penalties.”
“The new draft law is comprehensive and highly responsive to the current context and changing trends of Cambodia’s development through the setting of a common framework for the management of the issuance, trading and management of state securities, and the setting of specific objectives.
“This includes responding to financing needs, especially for infrastructure development, strengthening the management of cash requirements, developing the securities and finance sector, and supporting other priority and necessary projects.”
Ministry spokesman Meas Soksensan told The Post that the draft law is a comprehensive solution that enables the government to issue state securities to mobilise local resources and develop the Kingdom.
But he could not provide a concrete date by which the law would be formally approved by the Cabinet and Parliament.
“Considering that the current law is not exhaustive, we must review and design the new law in a more comprehensive manner which allows for its swift implementation,” Soksensan said.
Ministry secretary of state Vongsey Vissoth previously said securities are a primary mechanism for domestic resource mobilisation and shifting away from reliance on foreign aid.
“We cannot merely rely on external debt as a source of funds as it exposes us to additional risk,” he said.
From 1993 to 2017, Cambodia borrowed a total of $9.685 billion through concessional loans with development partners, the ministry reported.
This is equivalent to 43.7 per cent of the Kingdom’s $22,158,209,503 gross domestic product (GDP) in 2017, as shown by World Bank figures.
The ministry said the Kingdom borrowed $6.377 billion from other governments, of which a whopping $4.05 billion came from China.
The Cambodia Securities Exchange (CSX) launched in 2012 and welcomed its first domestically listed company, the state-owned utility Phnom Penh Water Supply Authority (PWSA), on April 18 that year.
The bourse currently has 12 listed firms – six bond-listed companies and six stock-listed companies. Pestech (Cambodia) Plc, a subsidiary of Malaysia-based Pestech International Bhd, plans to list next month.
The listed firms have raised around $240 million in trading. Market capitalisation increased 4.5-fold from last year to some $2.57 billion. The CSX index also rose 12 per cent over the same period.
As of last year, there were five central counterparties in the derivatives market, 27 derivatives brokers, five fund management companies and five trustees licensed by the Securities and Exchange Commission of Cambodia.
“A few months back, the [NBC’s] abrupt communications style set the public into a panic over small USD notes – $1, $2, $5 . . . Now as we draw closer to the date set, the unease and uncertainty are rekindled.
“Ultimately, such gradual de-dollarisation of the economy is needed to enhance the usage of the local currency.
“The NBC should encourage the public to make use of existing mobile banking apps to enhance digital banking and save money and time for banks and merchants,” he said.
NBC set a three-month deadline for banks and microfinance institutions starting June 1 until August 31 to take all $1, $2 and $5 to the NBC for transport abroad without a service fee.
Financial institutions will be charged after the deadline. The central bank said the move was to avoid flooding its stockpile as demand for the notes is low. But it sparked a reaction from the public who feared the notes will not be accepted further as legal tender.
Prime Minister Hun Sen then clarified two days later that the smaller notes remain acceptable as normal.
“I want to confirm to the Cambodian people that small US banknotes are still widely used and accepted across the country,” he said.
Say Sony, senior vice-president of Prasac Microfinance Institution Ltd (Prasac) – the Kingdom’s largest microfinance deposit-taking institution (MDI) in term of total assets – said his organisation accepts smaller banknotes as usual. However, he noted that the use of the notes by customers is declining.
“We keep accepting these small banknotes and we don’t see any problem related to the collection because we can replace them with our KHR banknotes for small exchanges. This is a great move towards de-dollarisation,” he said.