I have been experiencing an interesting shift in the way that I advise clients on risk as part of my move from Europe to Asia.
Almost a week after the Indian Supreme Court revoked 122 mobile licences on the grounds that their award was “totally arbitrary and unconstitutional”, which led to share price drops for some foreign investors, my eye was caught today by this story in the Phnomh Penh Post, that the government would create a telecoms regulator independent of government and that the regulator would provide increased transparency and rules for the telecoms sector.
Were I blogging about changes to Ofcom rules, I would be able to analyse the detailed impact of the changes on the way companies operate in the market and try to make some informed guess about their likely impact. However, when looking at Cambodia, any assessment about the impact of the rules also has to take into account whether the rules will be followed and /or enforced. In other words, the assessment of the regulatory regime needs to take account of country specific general investment risks correlated with the strength of the rule of law and the levels of corruption within that jurisdiction.
Whilst that assessment is by no means a purely legal assessment it is a relevant question to ask whether the Cambodian government has made any international commitments, which might assist. As I explain here, telecoms has been the subject to WTO treaty negotiations, and the separation of the regulator from government forms part 5 of the telecoms reference paper agreed by US and Europe in 1996, and which is widely used as the basis for WTO offers by countries.
In the case of Cambodia, they have signed up to the telecoms reference paper, so in theory should already have an independent regulator as well as the other elements of the regulatory framework contained in the reference paper. Of course, in reality they don’t, which is why I will be following the implementation process with interest. As the WTO commitments do have teeth, it will be particularly interesting to see if any of the market participants directly or indirectly reference Cambodia’s international commitments as a benchmark during the upcoming reforms.
So, in best blogger fashion, I end by answering my own question: will reforms to Cambodia’s telecoms regulatory regime reduce investment risk? The short answer is that whilst there is every prospect that it will, the way that the process is carried out, and more significantly the extent to which it can actually be enforced will be the real test.