Small and medium enterprises (SMEs) in Cambodia play a vital role in the nation’s economy, contributing 58% to the GDP and providing over 70% of employment. These enterprises are the backbone of Cambodia’s economic and social development. However, in today’s fast-paced business environment, digital transformation is becoming crucial for these SMEs to not only survive but also to thrive and grow sustainably.

Despite their significant contribution, Cambodian SMEs face numerous challenges. These include limited access to both local and international markets, financial resources, and advanced operational models. They also grapple with technical skills shortages, complex regulatory frameworks, high input costs, and difficulties in accessing business development services like capacity building, business networking, and financing from the Royal Government of Cambodia (RGC) and development partners.

Recognizing the importance of SMEs, the RGC has implemented various policies and established institutions to support their digital adoption. These initiatives aim to foster sustainable business practices, enhance economic efficiency, and boost productivity through digital innovation. Embracing digital technologies is therefore a strategic necessity for Cambodia to empower its SMEs towards sustainable growth.

The Cambodian Government’s Initiatives

The RGC has made significant strides in promoting digital adoption among SMEs. In May 2021, the Cambodia Digital Economy and Society Policy Framework 2021-2035 was adopted. This framework outlines key measures such as Digital Reliability and Confidence, Digital Citizen, Digital Government, Digital Business, and Digital Infrastructure. Digital Business, a primary focus of the policy, is integrated into the National Pentagonal Strategy-Phase 1 within the Pentagon 5 (Development of Economy and Society).

In 2022, the Digital Government Policy 2022-2035 was launched, aiming to develop a vibrant digital economy and society. Its goals include establishing a digital government to improve the quality of life and foster trust through better public service provision. This policy is guided by principles like delivering services directly to citizens (G4C), businesses (G2B), and facilitating interactions between government entities (G2G). Institutions like Khmer Enterprise (KE) and the Techo Startup Center (TSC) were established to support sustainable business practices.

The Importance of Digital Transformation

Operational Efficiency

Digital tools and solutions significantly enhance operational efficiency. By adopting digital technologies, SMEs can streamline processes, reduce costs, and improve resource allocation. Cloud-based accounting systems, for instance, simplify financial management, allowing businesses to focus on core activities. A survey by the Cambodian Development Resource Institute (CDRI) found that 19% of MSMEs saw a reduction in operating costs and 29% experienced an increase in profit through digital adoption. Furthermore, 29% witnessed a rise in labor productivity, and 40% reported that digitalization simplified their operations, especially financial management.

Market Expansion, Competitiveness, and Inclusion in Global Value Chains

Digitalization opens new markets for SMEs, enabling them to reach customers beyond geographical boundaries, participate in e-commerce, and explore export opportunities. A strong online presence, through websites and social media, boosts visibility and customer engagement. Digital transformation also equips SMEs with the tools needed to compete effectively in the global economy. Technology-driven strategies such as automated inventory management, data analytics, and optimized supply chains enhance competitiveness.

The SME-eBiZNest initiative of the Go4eCAM project, a joint effort by Khmer Enterprise (KE), the United Nations Development Fund (UNDP), the Ministry of Commerce, the Enhanced Integrated Framework (EIF), and the Australian Government, has helped SMEs boost their online presence and international opportunities. Since 2020, the program has trained and provided grants to over 175 SMEs to embrace digital and e-commerce platforms. KE CEO H.E. Dr. Chhieng Vanmunin noted that the program structure offers efficient mechanisms to provide funds and training, helping SMEs to go digital, especially in the challenging context of the COVID-19 pandemic.

Challenges and Ways Forward

Simplified Policies and Collaboration

To foster digital adoption, policies must be simple and easily understandable. Dr. Taing Nguonly, executive director of the TSC, emphasizes the need for clear guidelines and accessible support mechanisms. Collaboration among stakeholders, government agencies, financial institutions, industry associations, and SMEs is crucial. Joint efforts can create an ecosystem conducive to digital transformation, including training programs, mentorship, and access to capital.

Long-Term Vision

Digital transformation is a long-term process requiring continuous adaptation, skill development, and investment. The CDRI report suggests several policy priorities to enhance MSMEs’ digital adoption:

1. Promoting ICT and Digital Infrastructure: Expand broadband access and invest in telecommunications.
2. Increasing Knowledge and Skills in Digitalization: Enhance workforce competency through targeted training.
3. Promoting Digital Literacy: Raise awareness and assist MSMEs in developing digital strategies.
4. Supporting Access to Financial Services: Expand business loan opportunities and promote digital payments.
5. Enhancing Trust in Digital Solutions: Establish robust data protection and cybersecurity frameworks.
6. Incentivizing Digital Adoption: Offer financial incentives and professional guidance on digital solutions.

These priorities form a strategic framework aimed at fostering MSMEs’ growth and resilience in the digital era.

Conclusion

Digital transformation is not optional for Cambodia’s SMEs; it is essential for sustainable growth. By embracing digital technologies, SMEs can achieve business success, create decent employment, drive resilient economic growth, and contribute to Cambodia Vision 2050 of becoming a high-income nation. As Cambodia continues to advance in its digital transformation journey, its SMEs will be better positioned to thrive in a dynamic and competitive global market.