International Valuation Conference Yangon, MyanmarJapan Valuers (Cambodia) Co., Ltd Cambodian...

“Role and Importance of Valuation in Myanmar -

Today, Tomorrow & the Future”

the Case of Cambodia

By Sim Hoy Chhoung (Mr. Sim)

Certified Valuer (Cambodia)

Certified Public Accountant

Managing Director,

Japan Valuers (Cambodia) Co., Ltd

June 18th , 2019Rose Garden Hotel, Yangon, Myanmar

The views and opinions expressed in this article are those of the author and do not

necessarily reflect the official position of Japan Valuers (Cambodia) Co., Ltd.

International Valuation Conference – Yangon, Myanmar


I. Introduction – Cambodia

II. Valuation in Practices

III. Importance of Professional Valuation

IV. Challenges

V. Conclusion

2

Table of Topics


Population

Membership of ASEAN

3

I. Introduction - Cambodia


Location: Southeast Asia

Membership of ASEAN in 1999

Area: 181,035 sq.m

Population (2018 est.): 16.5 mln

Age Structure (2018 est.):

‒ 0-14 years: 30.76%

‒ 15-24 years: 17.84%

‒ 25-54 years: 41.09%

‒ 55-64 years: 5.94%

‒ 65 years and over: 4.37%

GDP Composition (2017 est.):

‒ Agriculture: 25.3%

‒ Industry: 32.8%

‒ Services: 41.9%

GDP per Capital (PPP): US$4,000 –

2017 est.

4


Japan Valuers (Cambodia) Co., Ltd 5


2012 2013 2019F

14.1 15.3 25.88

7.3 7.4 6.8

973 1,042 1,563

2.9 2.9 3.3

3.6 4.2 N/A

Compiled by JVCambodia, Source: National Bank of Cambodia, Ministry of Economy and Finance, Asian Development Bank, World Bank & IMF

Complied by JVCambodia, Source: National Bank of Cambodia

15Financial Leasing Companies 12 13

74

Rep Office - Foreign banks 7 7 5

MFIs 64 69

2018E

GDP (Bn USD) 16.7 18.2 20.2 22.06 23.68

Economic Indicators 2014 2015 2016 2017

7.1

GDP Per Capita (USD) 1,135 1,171 1,265 1,372 1,451

GDP Growth (%) 7.1 7.0 6.9 7.0

3.2

No. of Foreign Tourist Arrivals

(Million)4.5 4.8 5.0 5.6 6.2

Inflation (%) 3.9 1.7 3.5 3.1

43

Banking and Financial Sector 2016 2017 2018

Commercial Banks 37 39

7

Specialized Banks 15 15 14

Microfinance Deposit Taking 7 7

Payment Service Providers 8 10 16


Non-profit organization

Founded and registered as Association in 2008

Formerly named “National Valuers Association of Cambodia (NVAC)”,

changed to CVEA in April 2011

Become the 8th full member of ASEAN Valuers Association (AVA) in April 2009

Type of membership – Corporate, associate , no individual member

6


Cambodia Valuers and Estate Agents Association - CVEA

Number of Licensed Real Estate Company

End of 2016, total 139, 87 are

members of CVEA

There are about 260 valuers

certified by the MoEF, end of 2018

No. Services Number

1 Brokerage & Valuation 58

2 Only Valuation 3

3 Only Brokerage 78

Total 139



CVEA Partners


License issuing & Certify valuers

Propose related laws, circulars or directives regarding fee scales, ..

Licensing Requirements for a company to legally operate:

‒ One valuation license holder – University degree – related field

‒ Two certified valuers

o become certified – need at least 6 months experience in valuation and

university degree

‒ Professional Indemnity insurance – minimum loss coverage of

US$200,000

‒ Currently, there is no minimum CPD training requirements for valuers

‒ Starting mid-2018, all real estate agents and valuers need to complete

relevant training courses at the University of Economics and Finance ( an

affiliate to MoEF) before getting certified.

‒ Monthly reporting to the MoEF department in charge

8


Regulator – Ministry of Economy and Finance (MoEF)


Cambodian Valuation Standards – not fully developed and updated

Two legal frameworks by the MoEF regarding valuation practices:

‒ Laws on the management of valuation services and real estate agency

(Draft) in preparation

‒ Circulars or Directives issued by MoEF such as fee scales and code of

Professional Ethics, and so on.

Practically, valuers refer to different standards, directives

‒ RICS Standards, IVS

‒ ASEAN Valuation Standards – but rare

9


Valuation Standards and Professional Standards



Uses and Subject of Valuation Services

2 M

ain

Applic

ations

of

Val

uat

ion

Valuation for Financial Reporting

Valuation for Secured Lending

M&A, Buying, Selling, Renting, Tax assessment,

Insurance

Subjects of Valuation

Real property

Personal property

Business interest

Intangible assets

Plant & equipment

Trade-related property etc.


Mostly used for secured lending – 80%

for financial reporting – 10%

Other uses – M&A, tax assessment, insurance – 10%

11


Uses of Valuation Services

Subject of Valuation

Real property – 80% (mostly residential)

Plant & Machinery – 10%

Others – 10%

Most frequently used valuation Approaches / Methods

Mix of Comparison & Cost Approach

Income Approach – Very rare


There are growing concerns of financial regulators and stakeholders for better

identification and communication of uncertainty in valuations

‒ 2008: The financial Stability Forum (FSF) published an analysis of the

causes and weaknesses that had produced the turmoil in financial markets

asking for more transparency in valuations.

‒ 2009: the G20 Declaration on Strengthening the financial System called

for improved standards for valuation uncertainty in the context of fair value

accounting.

‒ 2009: The Basel Committee for banking supervision issued its paper

Supervisory Guidance for Assessing Banks’ Financial Instrument Fair

Value Practice

‒ 2010: the Financial Services Authority (UK) published recommendations

for the specific assessment of valuation uncertainty.

12

III. Importance of Valuation

Global Importance - Call for Global Valuation Standards


The financial crisis 2007-2008 highlighted the interdependency of the global

financial markets, and the increasingly prominent role that the valuation

profession plays in these markets.

Having a substantive global valuation technical framework that is principles-

based will improve the consistency, better comparability across the financial

markets and increased confidence in the valuations performed.

The importance of fair value and similar measurements in financial reporting

mandates corresponding high-quality valuations.

“Accurate and professional valuations are vital to a healthy property market

and a stable economy, forming the basis of performance analysis, financing

decisions, transactional or development advice, dispute resolution and

taxation,” Royal Institute of Chartered Surveyors (RICS)

13


Global Importance - Call for Global Valuation Standards


Lubricate real estate activities – lending, investment, brokerage etc.

Real estate agents – to see if they can go for listing of the subject

Government - taxes collections

Investors and developer – decision making & development

Lenders : Collateral risk management tool, Secured/mortgage Lending

Dispute resolution, Arbitration /litigation support

Pre-IPO

Financial Reporting – fair value accounting

Transaction support (M&A, Liquidation, ..)

Insurance

Foreclosure & bankruptcy support

14


Useful for different purposes and different stakeholders:



Contribution to the Growth of the Economy

Real estate-related credit growth (%y-o-y) Real GDP Growth Contribution (%)


The lack of published information or difficulty in obtaining information

regarding transactions as well as other data requisite for proper valuations –

no national level central database

Outdated national valuation standards and no guidelines

Lack of adequately trained professional valuers and training centers or

universities

High volatility of property market and a lot of speculations

16

IV. Challenges

Valuation Practices in Cambodia still faces some challenges:


The implementation of sound valuation standards are essential to the

consolidation, sustainability, transparency, efficiency of property and financial

markets and by extension the whole economy.

Policy makers may need an updated local standards, incorporating

internationally recognized ones such as The Red Book (RICS Standards) or

The White Book (IVS)

More significant roles should be given to Valuation Professional Organization

or relevant association to help develop the profession

Other stakeholders such as banks and other financial institutions should

recognize the importance of valuations undertaken by professionally qualified

valuers who comply with IVS and this white Paper

The valuation standards need to address questions about the quality,

consistency, and reliability of its valuations.

17

V. Conclusion

The Need to Have Professional Valuations

International Valuation Conference – Yangon, Myanmar

THANK YOU !


Our Services

19

Valuation Services:

Residential Property

Commercial property

Business Valuation

Plant & Machinery

Valuation Review

For the purpose of:

Secured/mortgage Lending

Pre-IPO

Financial Reporting

Taxation

Arbitration /litigation support

Transaction support (M&A,

Liquidation, ..)

Insurance

Foreclosure & bankruptcy support

Research & Advisory Services:

Commercial Real Estate Transactions

Real Estate Development Plan

Highest and Best Use Analysis of the Land

Market and Feasibility Study

Real Estate Due Diligence

Advisory on Property Research & Selection

International Valuation Conference Yangon, MyanmarJapan Valuers (Cambodia) Co., Ltd Cambodian...

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