Business Asia

Good Neighbours

On November 2, a delegation from the Korea Federation of Banks (KFB) will attend a conference in Phnom Penh, signalling intentions to enhance cooperation with Cambodia’s financial sector. The conference—a joint venture between the KFB, the Institute of Banking and Finance (IBF) and the Association of Banks in Cambodia (ABC)—will include presentations from a number of players in the market and intends to pave the way for more Korean banks to enter the burgeoning Cambodian market.

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Ahead of the conference, KFB Chairman Yung-Ku Ha spoke with Management Insider about the state of the finance sector and why Korean banks are looking toward Cambodia.

What is the role of the Korea Federation of Banks?

KFB was established in 1928 to promote the development of the financial industry by supporting its member banks, conducting financial research and improving banking operations. We now have 20 full members (national and regional commercial banks and specialised banks) and 42 associate members (foreign bank branches). The KFB acts as a bridge between Korean banks and the financial institutions of the world, and our main aim is to foster a market environment that helps our members to increase profitability, including by seeking out new growth engines, both locally and internationally. We believe that maintaining relationships with foreign banking federations and fostering global talent are key to helping our members grow.

Why is the KFB coming to Cambodia?

We have been promoting global financial exchanges and cooperation with other Asian countries, including social contributions and financial forums designed to share the Korean banking industry’s experience in developing a stable economy. Our first overseas social contribution and financial cooperation exercise was in Myanmar in June, and now we are coming to Cambodia. On November 1, there is a ceremony to celebrate the extension and renovation of a health centre in Angkor Borei, which the KFB supported as its social contribution to Cambodia.

In essence, we are coming to Cambodia to enhance mutual understanding of the financial industries—especially the banking sector—of both countries and seek out cooperative ways to develop it in both Korea and Cambodia. We also see the visit as a good chance for us to get to know each other, which is key to increasing cooperation at a professional level.

What will be discussed at the forum?

The forum has two purposes: one, to support financial demands in Cambodia, which have been increasing as a consequence of the strengthened economic cooperation between the two countries, marked by the inaugural Korea-Cambodia Economic Cooperation Conference in June 2016, and two, to further invigorate financial exchange and cooperation between the two countries.

More than 150 representatives of financial authorities, banks and finance related institutions are expected at the event, including a delegation of 35 from Korea. There will be presentations on financing SMEs, mobile banking, bancassurance and credit information, as well as Korean banks sharing their experience of overcoming the 1997 Asian Financial Crisis and the 2008 Global Financial Crisis. The KFB will also sign a memorandum of understanding with the ABC, committing to further cooperation in the name of mutual development.

What plans are in place for Korean expansion into Cambodia?

Korean banks have been steadily expanding their business overseas and, as of the end of 2015, had 10 banks operating 167 branches in 38 countries around the world. In Cambodia, Korean banks currently operate four local subsidiaries (Kookmin Bank, Shinhan Khmer Bank, Woori Finance, Phnom Penh Commercial Bank) and have two offices (Industrial Bank of Korea and Export-Import Bank of Korea, both in Phnom Penh).

While Cambodia is a relatively small-scale economy with insufficient infrastructure, the abundance in natural and human resources and capital inflow from foreign investors has allowed the country to record 6% growth over the past 10 years. Accordingly, there has been a steady increase in demand in the financial sector and Cambodian banks have been able to show stable profitability. We see great potential for growth in the Cambodian banking industry and expect that Korean banks will continue to expand their business here. The Industrial Bank of Korea is considering making its Phnom Penh of office a fully functioning bank branch, while Nonghyup Bank and KEB Hana Bank are also seriously considering entering the market.

What is your forecast for banking sector in Asia?

The volume of trade within Asia has been growing rapidly, and such trade activities are mutually complementary. Moreover, the exchange of both human and capital resources is expected to increase further. Considering such increase in trade, capital and tourist flows, it is expected that demand for intra-Asian banking services will continue to rise at a fast pace. To meet this growing demand, more and more financial companies will promote international exchanges and expand their activities overseas.

Since the global financial crisis of 2008, banks around the world have generally been scaling back their overseas operations, leaving Chinese, Korean and Japanese banks to expand across Asia. Asian countries have much greater growth potential than other regions and I expect that the Asian banking sector, like Asian economies, will continue their rapid growth.