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Opportunities and ChallengesOpportunities and Challengesfor Cambodia’s SME Post AEC 2015for Cambodia’s SME Post AEC 2015

by H.E. by H.E. HengHeng SokkungSokkungSecretary of State, Ministry of Industry and HandicraftSecretary of State, Ministry of Industry and Handicraft

National Conference on Mechanism for Private Sector Development

Synergy, Growth and ASEAN Economic Community03 March 2015

Cambodiana Hotel, Phnom Penh1

Secretary of State, Ministry of Industry and HandicraftSecretary of State, Ministry of Industry and Handicraft

Content Content

I- Understanding of SMEs situation in Cambodia

II- What is the AEC?

III- Where are we now?

IV- Understanding of SMEs situation in ASEAN

V- Opportunities and Challenges for CambodiaV- Opportunities and Challenges for Cambodia

VI- Conclusion

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I- Understanding of SMEs situation in Cambodia

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In 2013, its share to GDP started to rise

again to an estimated level of 24%. In

f h d i h lterm of growth, during the last 15years (1998-2013) the industrial sector

grew at average 12.4% per annum

and in 2014 SMEs growth was 9,7%compared to 2 6% for agriculture and

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compared to 2.6% for agriculture and7.5% for service sector, thus making itthe fastest growing sector.

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II-What is AEC 2015?

ASEAN ECONOMIC COMMUNITYASEAN ECONOMIC COMMUNITYSTRATEGIC SCHEDULE OF THE AEC BLUEPRINT (2008-2015)STRATEGIC SCHEDULE OF THE AEC BLUEPRINT (2008-2015)

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Pillar 1Single Market

& Production Base

• Free flow of goods• Free flow of services

• Free flow of investment

• Freer flow of

Pillar 2 Competitive

Economic Region

• Competition policy

• Consumer protection

• Intellectual

Pillar 3Equitable Economic

Development

• SME development

• Initiative for ASEAN Integration

Pillar 4 Integration into

the Global Economy

• Coherent approach towards externaleconomic relations

capital• Free flow of skilled labor

• Priority Integration Sectors

• Food, agriculture and forestry

property rights• Infrastructure

development• Taxation• E-Commerce

• Enhanced participation in global supply networks

HUMAN RESOURCE DEVELOPMENT RESEARCH AND DEVELOPMENTHUMAN RESOURCE DEVELOPMENT RESEARCH AND DEVELOPMENT 3

IIIIII--Where are we now?Where are we now?

AEC Blueprint: Signed in 2007

Defined: The AEC will “establish

ASEAN as a single market and

Four Pillars of AEC

Single Market and Production Base

Competitive Economic Regiong

production base with the goal of

making ASEAN more dynamic

and competitive.”

Competitive Economic Region

Equitable Economic Development

Integration into the Global Economy

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IV- Understanding of SME Situation in ASEANASEAN Action PLAN 2011-2015

BY ACTIVITIES

13Source : SME Post 2015 Action Plan Study5

2-1. SME Strategic Action Plan(SME SAP)The structure and breakdowns

ASEAN SME Strategic Action Plan (2016-2025)

The SME SAP has a pyramid structure from “Vision” to “Monitoring”. Each layer has connection with its both side of

SME SAP 2016-2025

Strategic Goals

Vision What ASEAN wants

to be

What ASEAN must achieve to get there

Planning& Collaboration

ones.

Desired Outcomes

Mission Statement

PwC14

Implementation

Monitoring

Actions for Strategic Goals How ASEAN will

achieve goals

How ASEAN will implement strategy

What ASEAN performs like

Collaboration& Monitoring

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SMEs in ASEAN

SMEs represent up to 99% of all enterprises in ASEAN member states (AMS);

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( );

SMEs generate 56% to 97% of domestic employment including youth and women;

SMEs contribute 30% - 60% to GDP; and

SMEs contribute 19% - 31% to exports

More than 52 million SMEs in ASEAN Member States can be considered as

one of the most powerful sources to boost the economy in the region

efficiently and effectively Moreover promoting equitable development byefficiently and effectively. Moreover, promoting equitable development by

promoting SMEs is one of the main pillars for reaching our goal of ASEAN

Economic Community (AEC), (Ref. ASEAN data)

16SMEs development zone (Google)

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PRIVATE SECTOR ‐ PRIORITIES

INFORMATION CAMPAIGN

Aggressive campaign for SMEs

FINANCE

TRADE FACILITATION

SMEs

Improvements through financial sector reform, requirement for banks to provide financing

Rules of Origin, Green Lane, Product Standards

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WOMEN/YOUTH ENTREPRENEURS

Focus on Women and Youth Entrepreneurs

ABAC 2014 Report to Leaders

POST‐2015 ASEAN LANDSCAPE

INTEGRATED AND COHESIVE

COMPETITIVE INNOVATIVE DYNAMIC

RESILIENT INCLUSIVE 

PEOPLE‐CENTERED

SECTORAL INTEGRATION

GLOBAL ASEAN

INTEGRATION

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Post 2015 – Focus on 5 Strategic Goals

Promote Productivity, 

Technology and Innovation

Increase Access to Finance 

Enhance Market Access/

Internationalisation

1 2 3

9 policies 5 policies 7 policies

Enhance Policy and Regulatory Framework

Promote Entrepreneurship 

and HRD

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GOALS AND OUTCOMES

Strategic Goals Desired outcomesA ) P d i i T h l d I i ill b

A)Promote Productivity, Technology and Innovation

A-1) Productivity, Technology and Innovation will be enhanced

A-3) Innovation will be promoted as a Key Competitive Advantage for SMEs

A-2) Cluster-based Strategy will be enhanced

A-4) IPR Protection for Commercialization will be enhanced

PwC

ASEAN SME Strategic Action Plan (2016-2025)20

B) Increase Access to Finance

B-1) Regulatory Framework for Access to Finance will be developed and enhanced

B-2) Financial Inclusion and Literacy will be promoted

B-3) Alternative Financing will be promoted

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(cont’d) 

C)Enhance Market Access and Internationalization

C-1) High Value Information of the Market to SMEs will be enhanced

C-2) Financial Facilities for SMEs to Export will be developed

C-3) Integration into the Global Supply Chain and Market will be enhanced

C 4) Partnership with Large Enterprises will be

D)Enhance Policy and Regulatory Environment

C-4) Partnership with Large Enterprises will be promoted to Increase Market Access Opportunities

D-1) Inter and Intra- Governmental Cooperation and Coordination in Policies and Regulation will be enhanced

D-2) Cheaper and Faster Start-ups will be enhanced

D-3) Institutional Framework will be strengthened

PwCASEAN SME Strategic Action Plan (2016-2025) 21

E)Promote Entrepreneurship & Human Capital Development

E-1) Conducive Environment for Entrepreneurship will be created

E-2) Entrepreneurship Education will be promoted

E-3) Capability Building Activities including Women and Youth will be provided

SME Integration requires specific focus post 2015:

Avoid CROWDING OUT

private sector

improving the Policy Environment

Cross SectoralCollaboration

(Across Sectors and  With Business)

Targeted SME Programmes

1 2 3

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NEW PLAN INITIATIVES SHOULD:

MOVE THE NEEDLE

BENEFIT SMES AS A GROUP

FOLLOW-THROUGH

BIG IMPACT• BIG IMPACT • SHOW RESULTS• MAXIMISE RESOURCES

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V- Opportunities and Challenges for Cambodia

WOULD YOU LIKE TO FIGHT WITH ARNOLD?

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5‐Opportunities and ChallengesA‐Opportunities

Raise profile and prestige of Cambodia in theregion and International arena

Mutual support: International Organization

Integrated with ASEAN Market of more than 600million people

Develop human resource through IAI (Initiative forp g ( fASEAN Integration)

Receive aid and assistance from DialoguePartners, ASEAN’s friends, and other ASEANMember States

B‐Challenges

Human Resource 

Lack of skill labour

Socio‐Economic Development

Connectivity 

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Business needs

1 010

%

need partnership to help improving the business

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14.3

7.5

6.2

4.2

3.6

2.6

1.0

3

4

5

6

7

8

9

10need partnership to help improving the business

more technical assistance with low cost

no demand

technical expertise to develop business plans/financial statements

more qualified support staff

more available sources of finance

more productive workforce to make full production capacity

d d h l i d i i d

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17.9

16.9

0 10 20 30

1

2

3more advanced technology to improve productivity and cut costs

more information on new markets/technologies/laws

more financial resources to expand the business

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Reduce electricity tariff

Reduce electricity connection fee

What should the government do!

Reduce electricity connection fee

Reduce electricity penalty fee

Eliminate unofficial payments

Ensure fair competition among SMEs

Provide more information (i.e. new market, technology, laws, etc) to SMEs

Provide grant and incentive to SMEs

Provide technical expertise (i.e. technology, marketing, finance, job markets, etc)

Design more SMEs support policies

Reduce tax on import and export especially the import of raw material

Reduce migration rate28

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VISION

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Strategy

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VI‐CONCLUSION

Although the Cambodian economy has recorded decenteconomic growth over the last decade, it is urgent foreconomic growth over the last decade, it is urgent forthe government to take necessary policy measures tograduate to a middle income county and compete withregional countries in attracting FDI throughinfrastructure improvement, including affordable andreliable electricity supply, expansion of transportinfrastructure, improvement to logistics system,upgrading of technologies, strengthening ofcoordination mechanism especially the upgrading ofthe capacity of the executing agencies together withthe provision of appropriate incentives.

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The Industry and SME development is the keypolicy and framework for promoting industrialdevelopment through economic diversificationdevelopment through economic diversification,export promotion and establishment of industrialmanagement framework. The industrialdevelopment policy, IDP, SME Promotion andDevelopment Policy will lay out measures thatcover various aspects to be implemented bycover various aspects to be implemented byconcerned ministries/institutions that are a goodmanagement and preparation of Cambodia forASEAN 2015.

សូមអរគណុThank You!

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