Cambodia officially opened its first stock exchange. The problem? There aren't any stocks to trade.

After years of delay, Cambodia opened its first stock exchange Monday. Officially at least. 

But the Cambodian Finance Ministry says shares will not begin trading until around the end of the year, because no national company is ready to go public.

Government officials hope the stock exchange will boost both domestic and international investment in an economy battered by three decades of war and political isolation. 

Cambodia has seen steady economic growth since its civil war ended in 1998, but gains have been limited by high levels of government and private sector corruption. Inconsistent regulation and corruption deter many. Last year's Transparency International index, which ranks corruption perceptions, ranked Cambodia the 24th most corrupt country in the world (out of 178 countries).

But promoters of investing in Cambodia say there is a lot of money to be made.

“I think the risks are overstated. There is the potential for more return relative to the risks than elsewhere,” says Scott Lewis, the chief investment officer for Leopard Capital, a Phnom Penh-based private equity firm.

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Mr. Lewis predicts the stock exchange will encourage companies to reform their business practices to meet standards necessary to list on the exchange. Currently, he says, many businesses do not do proper bookkeeping, and can show no receipts for the payment of taxes.

“They don’t pay them,” he says. “They just wait for a guy [from the government] to come around every year, and they negotiate a price.”

Once such businesses see others raising capital on the exchange, the hope is that they will get their books in order and follow suit.

But companies hoping to list on the exchange, which was initially expected to open in 2009, are still struggling to prepare applications. In a public letter announcing the July 11 inauguration, the Finance Ministry said companies accredited by the Securities and Exchange Commission of Cambodia were “strongly encouraged” to keep working on their applications.

Cambodia’s black market emerged as a response to decades of instability. The Maoist Khmer Rouge eliminated money after taking power in 1975, attempting to create an agrarian utopia. That regime was overthrown in 1979 and Cambodia was ruled throughout the 1980s by an isolated Vietnamese-backed communist government.

In pursuit of economic liberalization

Like its still-communist neighbors, Cambodia has more recently pursued economic liberalization; opening a stock exchange is the latest step. Vietnam launched its stock market in 2000. In January, Laos launched what is perhaps the world’s smallest exchange, listing only two companies.

“The establishment of a stock market will help Cambodia develop additional sources of finance currently buried in various places, and it will boost economic growth,” says Christopher Hnanguie, an economist with the Asian Development Bank who has worked in all three countries.

But the stock exchange's success will depend to a great degree on the government’s ability to clamp down on corruption and promote transparency, he says.

“Perhaps in five to 10 years, the stock exchange will play a key role in strengthening Cambodia’s financial sector, but authorities must proceed carefully to build trust from the Cambodian people and investors,” says Mr. Hnanguie.