Ministry Urges SMEs To Join CSX


The government has called on local small and medium-sized enterprises (SMEs) to list on the stock exchange as a way of enhancing access to funding and enabling expansion.

A monitor shows trading activity at the Cambodia Securities Exchange (CSX). KT/Chor Sokunthea

Heng Sokong, secretary of state at the Ministry of Industry and Handicrafts, said limited access to finance remains one of the top challenges for Cambodian SMEs and urged them to join the Cambodia Securities Exchange (CSX).

“By doing so they will be able to stay competitive as they will gain access to new sources of finance to allow them to expand.

“However, to become a publicly listed company, they first must formalise. They must register with the government and ensure they follow standard accounting practices,” Mr Kong said during a forum on the agri-processing business held Friday.

As outlined in the country’s Industrial Development Policy 2015-2025, the government’s goal is to have at least 80 percent of SMEs officially registered by 2025. At least 50 percent of those firms must follow proper accounting and bookkeeping standards.

“This target is simplistic but important as proper bookkeeping offers a window into a business’ situation and provides accountability to shareholders. Firms that keep their accounting books up-to-date will also receive support and incentives from the government, including training and technical assistance,” the country’s Industrial Development Policy says.

“The securities market can serve to mobilise financing for long-term investment,” it notes.

Micro-enterprises are businesses that employ 10 employees or fewer, while SMEs have more than 11.

Mr Sokong said it is important to educate SMEs owners about the benefits of registering with the government. He said Cambodia has about 520,000 SMEs but that just about 150,000 of them are registered manufacturers.

“The SME sector is the backbone of economic growth. If the sector thrives, the country thrives,” he added.

Sok Dara, deputy-director general of the Securities and Exchange Commission of Cambodia (SECC), the capital market regulator, highlighted one of the main challenges in getting businesses to list publicly.

“Some medium-sized companies are confused when it comes to taxation. They are afraid that if they register [and list on CSX] they will have to pay taxes retroactively, from 10 years ago. Most are trying to avoid taxes to beat the competition,” he said

“Likewise, most SMEs are family-owned and don’t want outsiders to intervene. Others simply have no ambition to expand,” he told Khmer Times.

However, Mr Dara said an increasing number of family-owned businesses are realising the benefits of corporate governance. He said fiercer competition is forcing these businesses to rethink their strategies to remain competitive.

In early January, Prime Minister Hun Sen released a sub-decree that gave huge tax incentives to companies listed on the local bourse. These include a 50 percent reduction of the income tax and the cancellation of tax debt for firms that list in the next three years.

Hong Sok Hour, CSX CEO, told Khmer Times last week that some SMEs still believe the stock market is essentially gambling.

“To raise awareness about listing on the market, we conducted monthly forums to educate business owners on the benefits on joining CSX,” he said.

Mr Sok Hour said that at these forums, called ‘Executive Take’, companies can learn about the documentation needed to prepare an initial public offering. Being aware of this information can save enterprises that wish to list publicly a lot of time, he added.

Leang Leng, managing director at Leang Leng Enterprises, a local producer of fish, soy, and oyster sauces, told Khmer Times yesterday that it is looking for new sources of finance to expand production.

“I will consider listing at the securities market if my companies meet the requirements. We are looking for more funds to expand the business,” Mr Leang said.

This article was originally published in the Khmer Times.