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Cambodia's dollarization; Help or handicap ?

Posted: Tue Mar 14, 2017 12:34 pm
by CEOCambodiaNews
There is a love/hate relationship between Cambodia and the US dollar. On the one hand, as a foreign currency, widespread use of the $US restricts national control over monetary policy, on the other hand dollarization has given much-needed confidence to investors. But,at the end of the day, the Cambodian riel is the national currency, and it is to be expected that there will be increasing efforts to promote use of the riel over the dollar.

Cambodia is ‘handicapped’ by dollarization

The dominance of the US dollar in the banking system prevents the central bank from lowering interest rates to spur investment and create jobs.
Cambodia is handicapped by the dollarization of its economy in three ways, according to Kith Sovannarith, Deputy Director General of Banking Supervision at the National Bank of Cambodia.

First, the NBC has minimal influence on lending rates charged by banks and microfinance institutions because more than 80 percent of their savings and loans are in US dollars. “We cannot directly use rates to increase jobs and investment,” Mr. Sovannarith says.

Most central banks, like the US Federal Reserve, are able to lower the interest rate they charge for loans to banks – the so-called “policy rate” – when there is a need to encourage investment and job creation, but the NBC can only lower the policy rate on the riel, he explains.

Second, the cost of the loss of seigniorage – the profit the government makes from issuing its currency (the difference between its production costs and face value) – is equivalent to about 10 percent of annual GDP, Mr. Sovannarith explains, citing a study by the International Monetary Fund. This lost money could be used to fund infrastructure and social development projects, he notes.

Third, dollarization prevents the NBC from regaining full control of its monetary policy.

He describes dollarization as a more than 25-year habit, pointing to the arrival of the United Nations Transitional Authority in Cambodia (UNTAC) as the starting point. Research shows that during 1991-92, UNTAC spent $1.7 billion, equivalent to about 75 percent of Cambodia’s GDP at the time. It also led to more foreign currency deposits at Cambodian banks.

As the NBC continues its efforts to promote the national currency this is gradually changing. Banks and MFIs will be required to ensure that at least 10 percent of their lending is in riel by the end of 2019...
More: http://www.khmertimeskh.com/news/36365/ ... arization/

Re: Cambodia's dollarization; Help or handicap ?

Posted: Sat Jun 10, 2017 12:16 pm
by CEOCambodiaNews
Dollar use hurting national economy
8 June 2017
Dollarisation in Cambodia’s economy remains very high, leading to increased local costs and reducing the appeal of the Kingdom’s exports, Chea Serey, director general of the National Bank of Cambodia (NBC), said at a business conference in Phnom Penh yesterday.

The majority of transactions in Cambodia, between 82 to 84 percent of them, are still done in dollars, according to Serey. She explained the use of dollars made transacting in the local currency more expensive, effectively penalising those who used riel.

“It makes transaction costs more costly for the users, but it also makes transaction costs for merchants higher because you have to maintain two different accounting sets – one for local currency and one for foreign currency,” she said.

The high level of dollarisation continues to have a negative impact on the country’s major economic sectors, particularly exports and tourism, she said. As the dollar grows in value, exporting goods from Cambodia becomes more expensive relative to the exports of other export-driven economies...
http://www.phnompenhpost.com/business/d ... al-economy

Re: Cambodia's dollarization; Help or handicap ?

Posted: Sat Jun 10, 2017 5:09 pm
by StroppyChops
How does dollarization make transactions more expensive? Is it the rounding benefit?

Re: Cambodia's dollarization; Help or handicap ?

Posted: Sat Jun 10, 2017 9:55 pm
by Bitte_Kein_Lexus
Yeah I don't buy it. Sounds like a government spokeswoman trying to control people. Having a US economy would help with imports at the moment, which Cambodia is heavily dependent on anyways.

Re: Cambodia's dollarization; Help or handicap ?

Posted: Mon Jun 12, 2017 12:47 pm
by CEOCambodiaNews
CNRP Win Would Mean Switch From Dollar to Riel, Official Says
June 12, 2017
An opposition spokesman said on Sunday that if the CNRP won next year’s national elections, all transactions in the country would be in Khmer riel within one year—a huge reversal of the current situation, in which 84 percent of transactions use the U.S. dollar, according to National Bank of Cambodia (NBC) statistics.

“Just one thing that makes it easy for the people to understand…is that all transactions must be done in Khmer riel,” Mr. Sovann said on Sunday, adding that Cambodia would follow the examples of neighboring countries that use their own currencies for transactions.

The NBC has also been critical of the economy’s heavy dollarization, though it has taken a more conservative approach to addressing the problem.

An August report from the central bank noted progress in promoting increased riel usage, but estimated that 84 percent of the country’s transactions were still done in U.S. dollars. More recently, the bank’s director-general, Chea Serey, said on Wednesday that the widespread dollar use was limiting the bank’s ability to enact monetary reforms.

The CNRP’s one-year deadline is a significant acceleration of the current NBC strategy, which has focused more on promoting riel usage through methods including raising public awareness, stabilizing exchange rates and collecting taxes in riel...
Cambodia Daily

Re: Cambodia's dollarization; Help or handicap ?

Posted: Tue Jun 13, 2017 9:28 am
by eriksank
CEOCambodiaNews wrote:
Tue Mar 14, 2017 12:34 pm
... widespread use of the $US restricts national control over monetary policy ...
Reducing the ability of the local politicians to manipulate the value of the currency is a good thing (tm).
CEOCambodiaNews wrote:
Tue Mar 14, 2017 12:34 pm
... the Cambodian riel is the national currency ...
National structures and instruments are not compatible with the internet, which is borderless. I personally do not hold savings in any national fiat currency. I only hold cryptocurrencies such as bitcoin. As far as I am concerned, pretty much all national mechanisms will have to be abandoned and/or destroyed. I believe that the internet will shut down national "anything". We do not need these dead-end dinosaurs.
CEOCambodiaNews wrote:
Tue Mar 14, 2017 12:34 pm
...there will be increasing efforts to promote use of the riel over the dollar...
Yeah, let them waste their time dinosauring.

Re: Cambodia's dollarization; Help or handicap ?

Posted: Tue Jun 13, 2017 12:26 pm
by Bitte_Kein_Lexus
I think you'll be long dead before any of your wackjob dreams become reality. Meanwhile, nation-states will still be around long after you and any offspring you probably don't have are around.

Re: Cambodia's dollarization; Help or handicap ?

Posted: Tue Jun 13, 2017 12:42 pm
by eriksank
Bitte_Kein_Lexus wrote:
Tue Jun 13, 2017 12:26 pm
I think you'll be long dead before any of your wackjob dreams become reality.
It is happening right now. Furthermore, coinmarketcap.com says that I am wealthy. Seriously, I am full of money.
Bitte_Kein_Lexus wrote:
Tue Jun 13, 2017 12:26 pm
... any offspring you probably don't have are around ...
And what is that expensive tutor doing in my front yard? She took the kids bycycling this morning. Do you know how much all of that costs? And now the kids are gone to their private schools down the road. I spend truckloads of cash on these imaginary kids of mine! ;-)

Re: Cambodia's dollarization; Help or handicap ?

Posted: Tue Jun 13, 2017 1:11 pm
by juansweetpotato
Bitte_Kein_Lexus wrote:
Tue Jun 13, 2017 12:26 pm
I think you'll be long dead before any of your wackjob dreams become reality. Meanwhile, nation-states will still be around long after you and any offspring you probably don't have are around.
I'm not so sure about that.
As of February 2015, over 100,000 merchants and vendors accepted bitcoin as payment.[21] According to research produced by Cambridge University in 2017, there are 2.9 to 5.8 million unique users using a cryptocurrency wallet, most of them using bitcoin.
Here are just a few, I seem to remember Amazon also accepts cryptocurrency now too.
.
https://themerkle.com/top-5-companies-a ... g-bitcoin/

Re: Cambodia's dollarization; Help or handicap ?

Posted: Tue Jun 13, 2017 7:59 pm
by Bitte_Kein_Lexus
I'm not questioning the advent of cryptocurrencies or their usefulness, rather tinfoil hat guy saying the internet will magically destroy nation-states as we know them and governments will crumble. Everyday more legislation is passed so it's not like governments are going anywhere.