This year, Cambodia is to celebrate the World Micro, Small and Medium-sized Enterprises Day 2023 by organizing a national workshop on 27th – 28th June 2023 under the theme “Resilience and Rebuilding: MSMEs for Sustainable Development”. The workshop is hosted by the Ministry of Industry, Science, Technology, and Innovation (MISTI) in collaboration with the Young Entrepreneurs Association of Cambodia (YEAC) and the Cambodia Women Entrepreneur Association (CWEA), and other key stakeholders, to provide a platform for a joint discussion and the exchange of experiences and lessons on challenges surrounding post- Covid pandemic recovery and the opportunities for enhancing MSME resilience and their contributions to accelerating the achievement of the 2030 Agenda for Sustainable Development and national development priorities in Cambodia.
This workshop showcases the MSME sector continues to be among the Cambodian government’s top priorities. MSMEs, many of whom are women-led, have always been the backbone of the country’s economy, accounting for 99% of the total business entities and contributing over 70% to employment and 60% to the gross domestic product. They play critical roles in creating livelihood opportunities, innovation, expediting sustainable development of the country, and realizing the vision of Cambodia’s Industry Development Plan (IDP, 2015-2025) and the country’s vision to become an upper-middle-income country by 2030 and a high-income country by 2050.
Recognizing the significance of MSMEs, the government has launched MSME support policies and initiatives one after another. Cases in point include the tax incentives scheme established in 2018, the customs-related support scheme in 2019, the Entrepreneurship Fund in 2019 to cultivate entrepreneurial culture and promote the capacity of potential SMEs and innovative start-ups, and the SME Bank in 2020 to increase access to financing for Cambodian small businesses with preferential conditions. Also affiliated with the government, Khmer Enterprise and Techno Start-up Centre, and other support institutions have been established to catalyze the support for entrepreneurs and MSMEs to grow in both scope and scale. Various digital solutions for further improving business environments for MSMEs are also rolled out. KhmerSME, for example, provides a wide range of information useful for MSME businesses including related laws and regulations, business networking, access to finance, service providers, training opportunities, regional and international markets trends and opportunities, etc. CamDX provides a one-stop service platform for accessing public services including online business registrations, where MSMEs can benefit in terms of cheaper fees, less redundant data entry and more simplified procedures, greater transparency, and better accessibility.
That said, Cambodia’s MSMEs continue to contend with multiple challenges, including credit constraints and the lack of capacity, particularly regarding business development and insufficient marketing and strategic management skills, and access to market opportunities of high value. They are further augmented when considering business regulatory issues including complicated and time-consuming licensing and certification, informal practices, tax administration, and customs rules and procedures. These challenges have undermined the resilience of MSMEs to external shocks and uncertainties, such as those brought forth by the Covid pandemic.
Generally, the negative impacts of Covid were more serious for those MSMEs led by women, youth, and groups in vulnerable conditions, with many of them experiencing cashflow pressures, reduced customer foot traffic, and interrupted supply chains. While the stimulus and liquidity injection support to MSMEs as the emergency response to Covid was rolled out, the informality challenge disconnects the majority of MSMEs from these various government supports.
That said, the government continues to display high commitments and strong political support for further improving the environments conducive for MSMEs, building their capacity to recover and grow in the post-pandemic. At his meeting with approximately 5000 MSME owners in April 2003, Prime Minister Hun Sen encouraged his ministers and relevant stakeholders to work jointly and harder to help address challenges faced by MSMEs, strengthen their efficiency, and build stronger resilience of these businesses.
The good news is that the interest of various key stakeholders is high. Multiple discussion platforms were organized for government, private sector actors, and development partners to jointly discuss and collect inputs for policy response in support of MSMEs in the context of Cambodia’s post-covid recovery. They included the ‘Towards a Post Covid-19 Recovery and Resilience’ conference by the National Bank of Cambodia (NBC) and the policy workshop on ‘Strengthening National Capacities for Enhancing MSME Resilience and Building Forward Better to Implement the 2030 Agenda for Sustainable Development in Cambodia’ by the MISTI, were already organized.
One common understanding from these discussions was that MSMEs must make more use of technology, transform the business into a digital format wherever applicable, and seize growing opportunities arising from digitalization, e-commerce, and broader market access. The rise of the new generation of family businesses where sons and daughters are more tech-savvy and familiar with the digital world presents big future potentials in this regard, but the lack of knowledge among the current generation of MSMEs remains the issue. This situation has brought forth new areas for demand-driven capacity development and can be one of the priorities under Mekong-Ganga Cooperation (MGC) activities between Cambodia and India.
The bilateral cooperation between the two countries has been strong. The Quick Impact Projects already showcased one welcome effort, which benefits Cambodia in terms of women’s empowerment and skills development related to digital education, among others. It is worth noting that Cambodia has always been impressed and inspired by India when it comes to India’s world-class ICT industry. The India-Cambodia Umbrella Memorandum of Understanding (MoU) in 2019 and the subsequent MoU between MISTI and the Embassy of India on ‘Enrichment in Science, Technology and Innovation’ in 2022 laid down the foundation for moving forward the cooperation in the area of ICT and digitalization.
India and Cambodia may consider undertaking the Japanese JICA expert model by bringing in long-term Indian experts to advise various related government ministries and agencies on various technology-related matters. ICT policy and infrastructure development present future opportunities for both countries to level up their cooperation for further progressing technological and digital advancement and adaptation in Cambodia. This can be made possible by improving the affordability and uptake of internet connectivity, online payment gateways, and smartphone-based value-added services for Cambodian people and businesses. Capacity-building programs in support of MSMEs, including expert training and targeted mentorship program in digital literacy and digital transformation as well as support for building stronger tech start-up activities can also be considered. In so doing, ensuring good collaboration and harmonization with the existing and emerging technical assistance programs in this sector by other Cambodia’s partners like the EU, UN, ADB, is encouraged. This way, India can amplify the impacts of their support, avoid duplications, create synergies, and thus sustainability.
The published versin of this article appeared in the ASEAN India Centre (AIC)’s Policy Briefs 2023.