Cambodia has experienced steady economic growth over the last two decades. Data from the Ministry of Economy and Finance shows the country maintained an average annual GDP growth rate of 7.7% from 2000 to 2019. The economy is driven by the private sector, where most businesses are small and family-run.
The context in which these businesses operate is dramatically changing due to the rapid technological and digital advancement and adaptation in the country over the past decade, with growing affordability and uptake of internet connectivity and smartphone-based value-added services. For instance, a report published by DataReportal suggests the number of internet users stood at 9.7 million in January 2020, a 1.3-million rise from the preceding year. Alongside, the e-commerce activities have trended upward significantly with the growth in tech start-up activities accompanied by increasing numbers of online payment gateways such as Wing Pay, ABA’s PAYWAY, ACLEDA E-Commerce Payment Gateway, among others. A report by Statista highlights the revenue in the e-commerce market in Cambodia, expected to grow at an annual rate of 8.98% from 2021 to 2025.
Moreover, the enactment of the E-Commerce Law in November 2019 and the E-Commerce Strategy in November 2020 adds an even stronger momentum, providing an institutional, legal, and regulatory framework for electronic transactions and for accessing and sharing information and data in e-commerce transactions.
The e-commerce turnout is expanding beyond Cambodia’s national border, with small Cambodian e-traders engaging mostly with the international delivery of small packages. The flourishing of international postal items has illustrated this. For example, the Express Mail Service or EMS packages accounted for 47% of Cambodia Post’s revenue in 2019, with the volume increasing by around 43% and 38% for outbound and inbound, respectively, from 2017.
In a previous AVI publication, the author highlighted that Cambodia had made remarkable improvements in digital trade facilitation, using modern information and communication technologies to simplify and automate cross-border trade procedures. Similar improvements are called for in response to the uptrend of cross-border e-commerce. Specifically, an enhanced cooperation of Cambodia Post and the Customs administration or the General Department of Customs and Excise of Cambodia (GDCE) will facilitate the movement of small packages across Cambodia’s border.
This is particularly critical now than ever before when certain countries enforce new laws and regulations that require the Electronic Advance Data (EAD) for the postal items arriving at their soil. Those countries include the members of the European Union, the US, China, Russia, among others. The enforcement implies that Cambodia’s postal shipments to the markets in those countries risk being returned or destroyed by their customs administrations as per their respective regulation, i.e., the EU-Import Control System and the US Stop Act, which come into effect in early 2022.
As a workaround, Cambodia needs to enable the EAD, allowing advanced data exchange of critical customs and security information of the postal shipment (i.e., sender, contents, and value) electronically between Customs Declaration System (CDS) of the Cambodia Post and ASYCUDAWorld (AW) of GDCE.
AW is the automated customs processing system implemented by GDCE at all ports and checkpoints to capture and process customs declaration data of export and import consignments. While the CDS, a system developed by the UPU Postal Technology Centre for its member postal operators, including Cambodia, can capture declaration data of the postal shipments, the linkage between CDS and AW is currently lacking. So, why is it both important and necessary for Cambodia to have a fully operational EAD? Overall, enabling the EAD will facilitate the cross-border movement of Cambodia’s small package exports and imports. At least three reasons stand out.
First, it ensures the regulatory compliance of the outbound postal shipments to EAD countries. Without it, Cambodia’s exporters risk having their postal items returned or destroyed due to security and safety measures imposed by certain destination countries. Second, the rapid growth in cross-border e-commerce puts increasing pressure on GDCE. It is the leading government agency responsible for revenue collection from the imports of low-value goods subject to duties and taxes. Besides revenue collection, GDCE has an equally high responsibility to prevent the importation of prohibited items from entering Cambodia. That means all merchandise imports, regardless of their value, are subjected to risk assessment and, where appropriate, checked by customs officials as part of the wider risk management process. Efficiency in this process can be improved if the capturing and processing of the customs declaration data of the import shipments can be carried out against risk selection criteria before their arrival. That also means expedited customs clearance procedures of postal items imported into Cambodia. Third, it contributes to progressing Cambodia’s commitments under Article 7.1 on the Pre-Arrival Processing and Article 7.4 on Risk Management of the WTO Trade Facilitation Agreement (TFA).
In conclusion, establishing a fully operational EAD will strengthen the government’s efforts in employing modern information and communication technologies in their reforms around cross-border trade facilitation, while at the same time benefiting Cambodia’s private sector, which increasingly embraces the global e-trade and digital economy.
This article first appeared in the Asian Vision Institute (AVI)’s Commentary Issue: 2021, No. 07. AVI is an independent think tank based in Cambodia.