Minding Cambodia's bottom line

Written by Brendan Brady

Wednesday, 24 September 2008 courtesy of Phnom Penh Post

Since 1995, Senaka Fernando, a senior manager at the Cambodian branch of financial services giant PricewaterhouseCoopers, has observed the rise of the Cambodian economy VANDY RATTANA Senaka Fernando outside the PricewaterhouseCoopers offices in Phnom Penh. PROFILE Senaka Fernando Born January 9, 1970 Education Graduated from St Joseph’s College in Colombo before passing the Licentiate Examination given by the Institute of Chartered Accountants of Sri Lanka. Fernando is a member of London’s Institute of Marketing. Career Fernando worked with various international agencies in Cambodia and elsewhere in the region, as well as consulted with the Cambodian government ministry programs before being employed at PricewaterhouseCoopers. 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. DONORS LOOK AT US TO SEE THE PROJECTS THEY FUND ARE PROPERLY MANAGED AND THERE’S FINANCIAL TRANSPARENCY. 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