sme internationalization in cambodia: study on …

SMEINTERNATIONALIZATIONINCAMBODIA:

STUDYONBARRIERSANDMAPPINGOFSUPPORTINGSERVICEPROVIDERS

Co-sponsoredby

SMEPromotioninASEANandARISEPlusCambodiaProjects

RatanaPHURIK-CALLEBAUT,CFA

PhnomPenh,June2020

SMEInternationalizationinCambodia:StudyonBarriersandMappingofSupportingServiceProviders 1

PublishedbytheDeutscheGesellschaftfürInternationaleZusammenarbeit(GIZ)GmbHRegisteredofficesBonnandEschhorn,GermanyASEANRegionalIntegrationSupport–CambodiaTradeRelatedAssistance(ARISEPlusCambodia)MinistryofCommerce,BanteaySreyRoomLot19-61,RussianFederationBlvd,PhumTeukTla,SangkatTeukTla,KhanSenSokP.O.Box81,PhnomPenh,[email protected]

www.cambodia-ariseplus.asean.org

StrengtheningRegionalStructuresforSmallandMediumEnterprisesPromotioninASEAN“ASEANSME”DelanoDevelopmentCo.Ltd.#144,Street169,SangkatVealVong,Khan7Makara,PhnomPenh,Cambodia.www.giz.de

AuthorRatanaPhurik-Callebaut,PhnomPenh

Editor

GIZARISEPlusCambodiaandASEANSMEProjects

DisclaimerThispublicationwasproducedwithfinancialsupportoftheEuropeanUnionandtheGermanFederalMinistryforEconomicCooperationandDevelopment(BMZ).ItscontentsarethesoleresponsibilityofGIZARISEPlusCambodiaandtheASEANSMEprojectsanddonotnecessarilyreflecttheviewsoftheEuropeanUnionorBMZ.GIZdoesnottakeresponsibilityforanyuseorinterpretationbyanythirdpartythatmaybemadeofthecontentsofthispublication.Responsibilityforthecontentofanyexternalwebsiteslinkedinthispublicationalwayslieswiththeirrespectivepublishers.GIZexpresslydissociatesitselffromsuchcontent.©-2020,ARISEPlusCambodiaandtheASEANSMEProjects.Allrightsreserved.


TABLEOFCONTENTS

EXECUTIVESUMMARY 6

INTRODUCTION 11

PARTI-SMEINTERNATIONALIZATION:OVERVIEWINASIAANDCAMBODIA 13 I. SMEINTERNATIONALIZATIONINTHEASEANREGION:LESSONSLEARNTFROMOTHERPROJECTSANDBESTPRACTICES 13

SME internationalization forms 13 Barriers to internationalization 14 The ASEAN SME Policy Index 2018 Framework 14 Lessons learnt and Best Practices from the ASEAN Region 16

II.THESMEECO-SYSTEMINCAMBODIA 18 1. Overview 18 2. The legal framework – the existing policies supporting SMEs in Cambodia 21 3. Understanding Regulatory Compliances in Starting Up SMEs 23

III.SMEsANDBARRIERSTOINTERNATIONALIZATIONINCAMBODIA 25 1. A typology of exporting SMEs 25 2. Challenges and Barriers to SME internationalization in Cambodia 27

PARTII–FIELDSTUDY:SUPPORTINGSERVICESANDSTAKEHOLDERMAPPINGINCAMBODIA 33 Background 33 I. RELEVANTSTAKEHOLDERSINCAMBODIABYCATEGORY 34

1. Government bodies and projects 34 2. Development partners / technical agencies 41 3. Business associations 43 4. Private Sector 47

II. TYPESOFSERVICESPROVIDED 48 1. Access to information 48 2. Building skills: capacity development programs 50 3. Accounting, taxation and legal support services (such as business registration) 54 4. Access to finance 56 5. Integration in regional global value chains and SME clusters 60 6. Franchising 61 7. Standards 62 8. Packaging 65 9. Trade, Logistics and Customs 67

III. SPECIFICSECTORSANDCATEGORIES 69 1. Women-Focused Projects/Support 69 2. Agrobusiness projects and services 70 3. Tech startups 72 4. Retail and E-commerce 74

CONCLUSION 76

ANNEXES 78 ANNEX 1: LISTS OF MEETINGS 78 ANNEX 2 : OECD SME POLICY INDEX 2018 79 ANNEX 3: TYPOLOGY OF SMES BASED ON ANDE METHODOLOGY 80 ANNEX 4: REFERENCES 81


ListofTablesTable1:CriteriatodefineanSME............................................................................................................................................18Table2:SWOTAnalysisoftheCambodiaEntrepreneurialEcosystem.....................................................................19Table3:ListofmainGovernmentbodiesandprojectsinvolvedwithSMEs.........................................................34Table4:ListofDevelopmentpartnersandprojectswithanSMEcomponent.....................................................41Table5:ListofBusinessAssociationsinvolvedwithSMEs...........................................................................................44Table6:ListofCapacityDevelopmentProgramsforSMEs...........................................................................................50Table7:Accounting,Taxationandlegalsupportserviceproviders..........................................................................55Table8:ListofselectedinitiativesforaccesstofinanceforSMEs.............................................................................56Table9:ListofPrivateEquityfirmsoperatinginCambodia........................................................................................58Table10:OtherinitiativesrelatedtoAccesstofinance..................................................................................................59Table11:ConformityAssessmentMainplayers................................................................................................................63Table12:ListofcertificationbodiesinCambodia...........................................................................................................65Table13:Listofselectedpackagingcompanies.................................................................................................................66Table14:ListofserviceprovidersandprojectssupportingwomenSMEs............................................................69Table15:ListofselectedstakeholdersprovidingservicesforSMEsinAgrobusiness.....................................71Table16:SelectedservicesandserviceprovidersforTechStartups.......................................................................75

ListofFiguresFigure1:AccesstoMarketandInternationalization:performanceofselectedASEANCountries..............15Figure2:Countryrankingsaccordingtotheirweightedscores.................................................................................15Figure3:Sub-segmentsasproportionoftotalSMEs......................................................................................................25Figure4:ProportionofCambodianSMEsthatexport,bysub-segment..................................................................26Figure5:CambodiaSMEsub-segmentsbygenderofownership,2016..................................................................26Figure6:CambodiaPerformanceforAccesstoMarketandinternationalization...............................................27Figure7:MainstakeholdersinvolvedintheTechStartupEcosystem.....................................................................72Figure8:Listofcoworkingandinnovationspacesfortechstartups......................................................................73Figure9:Techstartuplandscapebycategory.....................................................................................................................73

ListofBoxes

Box1:KiriromFoodProduction ..................................................................................................................... 27 Box2:ExportingHandicrafts .......................................................................................................................... 30 Box4:BNICambodiaChapter ........................................................................................................................ 47 Box4:Docapacitydevelopmentprogramswork? ........................................................................................ 54 Box5:StandardsandCertifications,theexampleofKiriromFoodProduction ........................................ 62 Box7:TheShineAcademyinitiativeofBREDBank ..................................................................................... 70 Box6:AGRIBUDDY ......................................................................................................................................... 72


ListofAcronyms

ADB AsianDevelopmentBankAEC ASEANEconomicCommunityAPO AsiaPacificOrganizationASEAN AssociationofSoutheastAsianNationsB2B BusinesstobusinessB2C BusinesstoconsumerCAVAC CambodiaAgriculturalValueChainProgramCDC CouncilfortheDevelopmentofCambodiaCLA CambodiaLogisticsAssociationCORAA CambodiaOrganicAgriculturalAssociationCRDB CambodianRehabilitationandDevelopmentBoardCTIS CambodiaTradeIntegrationStrategyEBA EverythingbutarmsEIF EnhancedIntegratedFrameworkEU EuropeanUnionFDI ForeigndirectinvestmentFTA FreetradeagreementGDCE GeneralDepartmentofCustomsandExciseGDT GeneralDepartmentofTaxationGHP GoodhygienepracticeGI GeographicalindicationGMAC GarmentManufacturersAssociationinCambodiaGVC GlobalvaluechainHACCP HazardanalysiscriticalcontrolpointICT InformationandcommunicationtechnologiesIDP IndustrialDevelopmentPlanIFC InternationalFinanceCorporationILCC IndustrialLaboratoryCentreofCambodiaIP IntellectualpropertyIPR IntellectualpropertyrightISC InstituteofStandardsofCambodiaIT InformationtechnologyITC InternationalTradeCentreJV JointventureKE KhmerEnterpriseLC LetterofcreditMBI MekongBusinessInitiativeMIH MinistryofIndustriesandHandicraftMISTI MinistryofIndustry,Science,TechnologyandInnovation


MOLVT MinistryofLaborandVocationalTrainingMOC MinistryofCommerceMEF MinistryofEconomyandFinanceMNC MultinationalcorporationMPTC MinistryofPostsandTelecommunicationsMOU MemorandumofunderstandingNBC NationalBankofCambodiaNGO Non-governmentalorganizationOECD OrganizationforEconomicCo-operationandDevelopmentPPCC PhnomPenhChamberofCommerceR&D ResearchanddevelopmentSEZ SpecialeconomiczonesSME Smallandmedium-sizedenterprisesSPS SanitaryandphytosanitarySRP SustainableRicePlatformTBT TechnicalbarriertotradeTPO TradepromotionorganizationTVET TechnicalandvocationaleducationandtrainingUN UnitedNationsUNDP UnitedNationsDevelopmentProgrammeUNIDO UnitedNationsIndustrialDevelopmentOrganizationUSA UnitedStatesofAmericaUSD UnitedStatesDollarWB WorldBankYEAC YoungEntrepreneursAssociationofCambodia


EXECUTIVESUMMARYSmallandmedium-sizedenterprise(SME)developmentisakeypriorityinthestrategyoftheAssociationof Southeast Asian Nations (ASEAN) countries, including Cambodia. SMEs play an essential role inCambodia’seconomy, representing70%ofemploymentand99.8%ofcompaniesandcontributing to58%ofGDP.1 In thecontextofan increasedglobalizationandtheASEANEconomicCommunity,SMEinternationalizationconstitutesaninterestingandeffectivetoolfordevelopment.The goal of thisstudy istoresearchthebarriersforSMEinternationalizationanddocumenttheexistingbusiness support services provided in Cambodia. The report’smain objectives are tomap themainstakeholders involved,assess theexistingcapacityof theseserviceprovidersandanalyze thegaps inservicesprovided.ThestudyisconductedwithintheframeworkoftwoGIZ-implementedprojects:(1)the ASEAN SME project, a regional project with a dual focus on improving market access andinternationalizing SMEs; and (2) the ARISE Plus Cambodia project, which aims to support greaterconnectivityandeconomicintegrationbetweenCambodiaandtherestofASEAN.ThefirstpartofthereportcoversthebestpracticesinrelationwithSMEinternationalizationinASEAN.AshortanalysisoftheSMEecosysteminCambodiaprovidesanunderstandingoftheexistingbarriersforCambodianSMEs.ThesecondpartofthereportpresentstheresultsofafieldstudyregardingSMEserviceprovidersinCambodia.Expertinterviewshavebeenconductedwithmorethan50stakeholdersto give an overviewof the available SME support services available in Cambodia. The goal is also toprovideapracticaltoolandbetteraccesstoinformationregardingtheexistingservices;thisinformationwillbealsoincludedonthefutureSMEwebsite“KhmerSME”thatwillbemanagedbytheMinistryofIndustry,Science,TechnologyandInnovationandsupportedbyGIZ.ThesecondpartofthereportpresentsacomprehensiveoverviewofthekeystakeholdersinvolvedinSME internationalization. Government bodies, international organization, business associations andprivatesectormainplayersarereviewedtoprovidecountrycontext.Serviceprovidersarealsolistedbytypeofservice,withafocusoninternationalization.Accesstoinformation,capacitydevelopment,legalandtaxsupportservices,accesstofinance,SMEclusterpark,franchising,standards,packagingandfinallytrade, logistics and customs are the areas covered in this part. In addition, an overview of servicesavailable to some important categories (women-focused projects) or sectors (IT, e-commerce andagribusiness)hasbeenincluded.UnderstandingthecontextforinternationalizationofSMEsinCambodiaInASEAN,internationalizationofSMEsmostlyhappensthroughexports,franchisingorlicensing.Inthecase of Cambodia, these forms of internationalization are very limited as very few local SMEs areexportingcurrently.Indeed,Cambodia’sexportsareconcentratedinrelativelyfewsectorsandproductsandarecarriedoutbylargecompanies.Regardinginternationalization,themajorchallengesfacedbySMEsarelinkedtothedeficitofinternationalmanagerialskills,thelimitedaccesstocapital,thelackof

1 AccordingtotheCambodianMinistryofIndustry,Science,TechnologyandInnovation(MISTI)


informationonforeignmarkets,difficultiesmeetingstandardqualityrequirementsandthedisjointedsupportingpolicies.Thebenefitsof internationalizationarewell-known:marketexpansion,economiesof scale, increasedproductivity and overall improved competitiveness. However, SMEs typically face major constraintswhentheywanttointernationalize,themostrelevantoftenbeinginternalbarrierslinkedtothefirm’sowncapacityandresources.TheASEANSMEPolicyIndex2018,andparticularlyoneof itsmaincomponentsrelatedto“accesstomarketandinternationalization”,offerssomegoodelementstocomparetheperformanceofCambodiawithothercountriesintheregion.Overall,thisperformanceisweak:thecountryislaggingwellbehindintheareasofexportpromotion,qualitystandards,andtheuseofe-commerceorintegrationintoGlobalValueChains,butsomeprogresshasbeenmadeintradefacilitation.Cambodiacanlearnfromtheexperienceandbestpracticesofitsneighbors,particularlyThailandandVietnam. However, while regional cooperation initiatives are welcome, internationalization strategyneeds to be adapted to each country’s national context. Cambodia for example needs first to look atstrengtheningthecapacityofitsSMEsandtheircompetitiveness.Thekeyfocusshouldbetoenterforeignmarketsdirectlyor as suppliers in global value chains. Increased coordinationamongministries andenhancedcollaborationbetweentheGovernmentandthePrivateSectoralsoremainimportantpointsthatneedfurtherimprovement.Despite a reasonably investment-friendly environment and sustained economic growth, Cambodia’sentrepreneurialecosystemneedsfurtherpolicyactionsthatwillsupporttheemergenceofstartupsandfirmswithhighgrowthpotentialaswellasprovidesupporttoexistingSMEsastheygrowandinnovate.Deficiencies include a weak support structure for entrepreneurship, lack of adequate financing andbusiness services for startups, scarce technical andmanagerial human capital and limited backwardlinkagesbetweendomesticandforeignfirms.At the same time, the SME environment has undergone a lot of changes recently and the RoyalGovernmentofCambodiahas taken importantstepsnot to relyentirelyon foreigndirect investment(FDI)butalsotodiversifytheeconomyandstrengthenSMEsasamainpillarofeconomicgrowth.Severalinitiativeswere launched in 2019 to strengthen the SME ecosystem in Cambodia: new SME tax andcustomsincentiveswereimplemented,andseveralinstitutionsorprojectswerecreatedundertheleadoftheMinistryofEconomyandFinance(SMEBank,TechoStartupCenter,SkillsDevelopmentFundandKhmerEnterprise).Also,thelong-awaitedSMEDevelopmentPolicydraftisexpectedtobereleasedin2020bytheMinistryofIndustry,Science,TechnologyandInnovation.Lookingmorecloselyatthebarrierstointernationalization,informalityisprobablytheonewiththemostpervasiveconsequences.Cambodia’s informalbusinessescannotaccess“formal” finance,servicesanddevelopmentprograms,whiletheyalsorepresentunfaircompetitionandalossofrevenuefortheRoyalGovernment. Informal businesses are not able to export because theywould need business and taxregistration to trade internationally. However, they do not register because they simply do not seeenoughadvantagestodoso,incomparisonwiththepotentialproblemsthatwouldcomewithcompliance(complicated business regulations and non-transparent public service practices). Thus informalcompaniesusuallyprefertostay“undertheradar”ratherthanregisterandgrow.


AmongmanyCambodianSMEs,limitedhumancapitalalongwithan“old-fashioned”mindsetthatdoesnotnecessarilyvaluegovernance,compliance,financialliteracyandtechnologyremainmajorbarriers.However, a new generation of entrepreneurs is increasingly aware of and willing to capitalize onopportunitiestoimprovestandardsandtakeadvantageofthedigitalworld.TradefacilitationhasimprovedinCambodia,buthighlogisticscostsremainanissueforSMEs,especiallydue tohidden informalcosts.Finally,access to financeremainsakey issue forallSMEs.Cambodia isfacingthe“missingmiddlefinancing”problem:MSMEshaveaccesstoinformalcredits,largecompanieshave physical collateral to attract financing, butmedium and small registered companies struggle toaccessworkingcapitalduetotheirinabilitytoprovidesufficient(ifany)fixedassetscollaterals.Forthesamereason,accesstotradefinanceisalmostnon-existentamongCambodianSMEs.Whileproductssuchaslettersofcreditareofficiallyavailableinmostbanks,theirdisseminationisveryselectiveinreality.Withmostcompanieshavingweakbookkeepingmethods,SMEsarecash-strappedinCambodiawithanestimated90%ofimportsbeingpaidcash-in-advance.Asthewholefinancesystemiscollateral-based,thereissimplynoroomfortypicallow-risktradefinancingtooccurandgrow.KeyprovidersofsupportiveservicesforCambodianSMEsandemergingtrendsHistorically, theMinistryofIndustry,Science,TechnologyandInnovation(MISTI)2and,toalesserextent,the Ministry of Commerce (MOC) have been the main ministries in charge of supporting SMEs inCambodia.Inthepastthreetofiveyears,theMinistryofPostsandTelecommunicationshasbecomeveryactive in supporting startups and the IT sector.More recently, theMinistry of EconomyFinance hasbecomeakeyministryintheestablishmentofnewSMEinitiatives.SomecoordinatedinitiativesalsotookplacesuchastheSME-StartupForumandtheDigitalCambodiaannualevents,involvingalltheabove-mentionedministries. Finally, the enactment in late 2019 of themuch-anticipated E-commerce Law,implementedby theMOCbutdraftedwith inputs fromseveral relevantgovernment institutions,willbringinterestingdevelopments.Among the recent government initiatives, the new “entrepreneurship promotion center” KhmerEnterpriseisparticularlypromising.TheTechoStartupCenteralsohassomeinterestingandinnovativeprojects in the pipeline, including technical mentoring and support to agriculture digitalization. Inaddition,thenewSMEBankwillsupportthefuturedevelopmentofamuch-neededGovernmentCreditGuaranteeProgram.TheSkillsDevelopmentFundaimstotackletheveryacuteproblemofskillsgapinCambodiabyestablishingatrustedfinancingplatformforsustainableanddemand-drivenhumancapitaldevelopment.Alltheseinitiativesarepartofanoverallpositivetrend,yetthereisstillanabsenceofacommonSMEdevelopmentframeworkinCambodia,withtheattendantriskofpolicymisalignment.Forexample,anewproject that created a single and unified business registration portal between theMOC, the GeneralDepartmentofTaxationandtheMinistryofLaborandVocationalTrainingdidnotincludetheMISTI,with

2 Formerly known as the Ministry of Industry and Handicraft


theconsequentriskofnotseeingsignificantimprovementinthebusinessregistrationissuesfacedbymostSMEs.Regarding internationalization, no concrete support is provided to SMEs by government to directlypromotecrossbordertrading(suchasthroughtheorganizationoftrademissions).AsisoftenthecaseinCambodia,increasedcoordinationbetweenministriesisneededtofullytakeadvantageofthesenewpromisinginitiativeslaunchedbytheRoyalGovernment.Onthedevelopmentpartnerside,ADB,AusAID,GIZ,andUNDPareparticularlyactiveregardingSMEsandprivatesectordevelopment inCambodia.While this technical support fromdonors isverymuchwelcomeandappreciated,keybeneficiariesoutlinetheimportanceofthesustainabilityoftheseprojects.Whileinthepast,ITandstartupsattracted(andstillattract)alotofinterest,e-commerceandagriculturearenowbecomingsectorsofchoice.Fortheservicesprovidedbytheprivatesector,businessassociationscontinuetobeacrucialsourceofinformation and support for SMEs. They usually play an active role in providing feedback duringconsultationswiththegovernment.However,localbusinessassociationsarestructurallyandfinanciallyvulnerable,astheyusuallyareself-financedandlackinternalresources.StrengtheningthecapabilitiesoftheseassociationscouldbeagoodsolutiontoprovideadditionalsupportforSMEinternationalization,as theyusuallyunderstandwell thechallengesof theirSMEmembers.Sectoralassociationsareoftenunder-utilized.AninterestingtrendtonoteistheemergenceofassociationslikeBNIorJCICambodiawhichare internationalorganizationswithhighstandardsandrequirementsbutadaptedto the localenvironment.Thismixofinternationalstandardsandlocal“flavor”provestobeparticularlyimpactfulinemergingeconomieslikeCambodia.Thebusiness service offering from corporate providers in Cambodiahas increased and is nowmorediversified than before. Local companies are seeing now more opportunities in servicing SMEs in“traditional”sectors,especiallyforhighgrowthmediumandsmallcompanies.However,thequalityofservice providers varies a lot, and many SMEs are still reluctant to pay for “professional” services.Nonetheless,therearesignsofchangeandsomenichemarketscanbeexploited.TechStartupsreceivedalotofsupportandattentiontheselastyears,butthissupportwasrarelyextendedtoSMEsfromother“traditional”sectors.LookingmorecloselyatthelistofservicesprovidedtoSMEs,afewobservationscanbemade.

o First,accesstoinformationisusuallynotsoeasyforSMEs.Onlyafewwebsitesprovidesimple,straightforwardandadaptedcontentstotheCambodiancontext.Specificinformationonaccesstomarketsandpractical import-exportprocedures isevenmoredifficult to find.Topartiallyovercomethischallenge,thefuture‘KhmerSME’websitewillfillsomeimportantgaps.

o CapacitydevelopmentprogramsarenotmissinginCambodia.Theyareoftenprovidedwiththesupportofinternationaldonorsorsponsorshipofbigcompanies(foracceleratorprograms),buttheirformatcanbebetteradaptedtoSMEs’needs.

o Onlyafewserviceprovidersaredeliveringcoursesintheprovinces.o ManaginggrowthrequiresmorefinancecapabilitiesforSMEs,especiallyregardingtheirability

tomanagethefundstheyreceive,andmedium-termcoachingismissing.ThereisalsoalackofbrokerageservicestoservetheneedsofSMEsforfinancing.


o Complianceserviceslinkedtobusinessregistration,taxandaccountingarenotonlyprovidedbymoretrustedlocalfirmsbutalsobyinnovativetechstartupslikeBanhjiorKiu.Thesefirmsarealso facilitating access to finance for SMEs by building some data driven credit assessmentsolutions.

o Asmentionedabove,thereisindeedastrongneedformoreadaptedandinnovativefinancingsolutions.On the other hand, investors are also pointing at the lack of investable companiesbecauseaccesstofinanceisonlyapartoftheproblem.

o Other emerging developments are the SME Cluster parks. SME clusters objectives are wellalignedwiththerectangularstrategyoftheGovernmentandwiththeIndustrialDevelopmentPolicy.

o Franchisingis limitedinCambodia,yet itcouldbeaneffectivewaytoleveragetheincreasingpopularityofinternationalbrandsinCambodiawhileimprovingqualityandstandards.Thisisespeciallytrueinthefoodsector.

o Adherencetoqualitystandardsiscriticalforinternationalexportedgoods.Cambodiaislaggingbehind regarding standards, conformity assessment and certification: public bodies ensuringcertificationarenotinternationallyaccreditedandthereforetheircertificatesarenotrecognized.

o Packaging isalsoanareawhereSMEsdonotreceiveanysupport:becauseofsmallvolumes,SMEsusuallyneedtoprovideadownpaymentof50%orevenpayinadvance.

o TradelogisticscanalsobeveryexpensiveforanSME.However,whileexportingfromCambodiaiscostly, itdoesnotmeanthat theservicesofferedareespeciallygood.Manykey informantsacknowledge the fact that it is better for SMEs to go throughprofessionals (custombrokers,logisticfirms)forallthelogisticprocesses(customclearance,etc.)insteadoftryingtodoitbythemselves.Experienceandknowledgeareessentialinthesefields.

Overall,theserviceofferingforSMEsinCambodiashouldimprovethroughtheeffectiveimplementationof themost recent government initiatives. IncreasingSMEcomplianceandoverall competitiveness isclearly a toppriority for the government; SME internationalization is a secondaryobjective. Further,increasingtheoverallqualityandstandardsofCambodianproductscanonlyleadtopositivechangestosupportSMEinternationalization.


INTRODUCTIONSmall andmedium-sized enterprises (SMEs) are playing a key role in ASEANwhere they representaround 97 to 99% of the enterprise population. The SME sector tends to be dominated by microenterprises,whichtypicallyaccountfor85-99%ofenterprises.InmostASEANcountries,theyalsoarepredominantlyfoundinlaborintensiveandlowvalue-addedsectorsoftheeconomy,accountingforalargeshareofemploymentbutnotrepresentingsomuchintermsofvalueadded.DatafortheregionsuggeststhatSME’scontributiontototalexportsareestimatedonlyat10-30%ofthetotal(OECD,2018).SMEdevelopmentisakeypriorityareaforASEANcountries.TheASEANStrategicActionPlanforSMEdevelopment(SAPSMED)2016-2025wasdevelopedinthecontextoftheAECandisbuiltaroundfivestrategicgoals.Enhancingmarketaccessand internationalization isoneof thesegoalsand isheavilysupportedattheregionallevel.Thebenefitsofinternationalizationarewellknownandwelldocumented,yetSMEsusuallyfacemorechallengestointernationalizethanlargecorporationsdo.Theseinclude:accesstoinformation,accesstofinance,regulatorycompliance,loweconomiesofscaleandlackofentrepreneurialcultureandmindset.Againstthisbackdrop,the objective of thisstudy istoresearchthebarriersforSMEinternationalizationand document the capacity of existing supporting structures, facilities and service providers for SMEinternationalizationinCambodia.ThestudyisconductedwithintheframeworkoftwoGIZ-implementedprojects: (1) theASEANSMEproject,aregionalprojectundertheSAPSMED2025withadual focusonimprovingmarket access and internationalizing SMEs; and (2) theARISEPlusCambodiaproject, a co-financedprojectbyEUandBMZwhichaims to support greater connectivity andeconomic integrationbetweenCambodiaandtherestofASEAN,onecomponentoftheprojectbeingsupporttoSMEsforexportdevelopmentandtradediversification.InCambodia,anationalprojectplanningworkshop,organizedbytheGIZinclosecollaborationwiththeMISTI to launch the ASEAN SME Project in Cambodia, was conducted on 14 June 2019. It gatheredparticipants frombothprivateandpublicsectors.Lackofaccessto informationand limitedaccesstoserviceswereidentifiedamongstthetopprioritiesforSMEdevelopmentTohelpfillthisinformationgap,thisstudyidentifiestheexistingbusinesssupportservicesprovidedinCambodia (and particularly the services supporting SME internationalization), mapping the mainstakeholders, assessing the existing capacity of these service providers and identifying the gaps inservicesprovided.Thisstudyreportisorganizedasfollows:

o ThefirstpartofthereportwillcoverthebestpracticesinrelationwithSMEinternationalizationinASEANandlessonsthatcanbelearntfromtheotherGIZprojectsintheregion.AnoverviewoftheSMEecosysteminCambodiaandthelegalenvironmentwillallowabetterunderstandingofthecontextofSMEinternationalizationinCambodia.Finally,themainbarrierswillbepresentedanddiscussed,basedonbothpreviousanalysisandfeedbackfromstakeholderconsultations.


o ThesecondpartofthereportwillpresenttheresultsofanextensivefieldstudyregardingSMEserviceproviders inCambodia. Individual interviewshavebeenconductedwithmorethan50stakeholderstoprovideaquitecomprehensivepictureofwhatisavailableinCambodiaforSMEservicessupport.ThegoalisalsotoprovideapracticaltoolforSMEstohaveabetteraccesstoinformationregardingtheexistingservicesandtofacilitatetheinclusionoftheseinformationonthefutureSMEportalthatwillbemanagedbytheMinistryofIndustry,Science,TechnologyandInnovation(previouslyknownasMinistryofIndustryandHandicrafts)andsupportedbyGIZ.

ThestudywillnotfocustoomuchontheenablingenvironmentofCambodia,whichconsidersthepolicy,infrastructureorthehumancapital.Accesstofinancewillbepartlydiscussedbutcouldnotbecoveredindetail.ItisalsoimportanttonotethatalltheinterviewstookplacebeforetheCoronaviruspandemic.Theimpactofthisglobalcrisisanditsmagnitudearestillunknown.Unfortunately,wealreadyknowthatCambodiawillbenegativelyimpactedandSMEs,despitetheircapacityofresilience,willnotbeabletocopewithalong-termcrisiswithoutsupportivegovernmentpolicies.


PARTI-SMEINTERNATIONALIZATION:OVERVIEWINASIAANDCAMBODIA

I. SMEINTERNATIONALIZATIONINTHEASEANREGION:LESSONSLEARNTFROMOTHER

PROJECTSANDBESTPRACTICESASEANCountriessharesomecommonfeaturesregardingtheimportanceofSMEsintheireconomies,althoughthesecountriesdifferlargelyintheirsize,sophistication,stageoftheirdevelopmentandtheirenablingenvironment.Literaturereviewsuggests that there isnosingledefinitionofSMEsamongthedifferentcountriesofASEAN.Forexample,MyanmarandThailanddonotrecognizemicroenterprises,andMalaysiawillfocusmore about the turnover and not the size of the assets. Therefore, it is difficult to get compiled andcomparabledataaboutSMEs’contributiontoregionaleconomicintegration.However,SMEsplayakeyrole in every ASEAN country, including at the regional level. They account for 88 to 99% of allestablishments,contributeto51to97%oftotalemployment,andproduce10to30%ofexportsfortheASEANregion.SMEinternationalizationformsSMEinternationalizationcanbeachievedthroughavarietyofactivities.Theyareusuallygroupedunderthe6 followingcategories:1)Direct exporting;2)Direct importing;3)ForeignDirect Investment;4)Servingassubcontractorstoforeignenterprises;5)Havingforeignsubcontractors,and6)Cooperationwithforeignenterprisesintheformoflicensing,franchising,collaboration(non-equityalliance)orjoint-ventures.InASEAN,internationalizationofSMEsmostlyhappensthroughexports,franchisingorlicensing,butalsothrough contractual agreements as subcontractors. SME internationalization through foreign directinvestment can be seen inmore advancedASEAN economies. In the case of Cambodia, the forms ofinternationalizationare evenmore limited, as very few local SMEshavebroken into exportmarkets.TakingacloserlookattheKingdom’smainexportproductsanddestinations,datashowthatexportsarestillfocusedonafewsectorsandproducts–garmentindustry,agroproducts(rice,cassavaandsugar)and some light manufacturing products (bicycles). These products are exported primarily by largecompanies.Specificallyforinternationalization,majorchallengesfacedbySMEsarelinkedtothedeficitof international managerial skills, the access to capital, the lack of information on foreign markets,inabilitytomeetstandardqualityrequirementsandthedisjointedsupportingpolicies.ThestudywillexaminequicklywhatarethebestpracticesintheASEANregionandwhatarethelessonsthatcanbelearnedfromtheotherrelatedGIZprojectsintheregion.


BarrierstointernationalizationThe benefits of internationalization have been well-documented. These benefits include marketexpansion,possibilitytoachieveeconomiesofscale,knowledgeandtechnologytransfer,betterqualityinputsandpossibleimprovementintermsofproductivityandinnovationand,byextension,anoverallimprovementincompetitiveness.SMEsareusuallyfacingmoreconstraintsthanlargecompanieswhentheywant to internationalize: these constraints can be classified into internal and external barriers(AbonyiG,2015),followingLeonidou(2004).Internal barriers are linked to the firm capacity and resources: business culture, skills regardinginternationalization,financialconstraints,productstandardsandcertification,accesstoinformationandknowledgerelatedtotheexportmarkets,capacitytoinnovate,lackoffamiliaritywiththecompetition,andmarketingdistributionofthetargetmarket.Externalbarriersarelinkedtothebusinessenvironment,localandinternational:rulesandregulations,requirements,non-tariffsbarriers, customsandother inefficiencies linked to thedifferencesbetweenlocalandinternationaljurisdictions.Internal barriers are often themost important, especially for SMEs. In Asia, a number of factors areparticularly relevant to look at: (1) managerial mindset and organizational culture, (2) access toinformation, (3) access to financing, (4) the role of clusters andnetworks, (5) differences in level ofdevelopmentamongtheregion’seconomies,and(6)stagesofinternationalization.Thailand,Vietnam,CambodiaandMyanmar,thefourcountriescoveredintheregionalGIZASEANSMEproject, are not at the same level of development and they are also experiencing different stages ofinternationalization, requiring different solutions and interventions to further promote SMEdevelopment.TheASEANSMEPolicyIndex2018Framework TheASEANSMEPolicyIndex2018frameworkmapsandbenchmarksSMEpoliciesacross8policyareas(‘’dimensions’’):(1)Productivity,technologyandinnovation,(2)EnvironmentalpoliciesandSMEs,(3)Access to finance, (4) Access to market and internationalization, (5) Institutional framework, (6)Legislation,regulationandtax,(7)Entrepreneurialeducationandskills,and(8)SocialenterprisesandinclusiveSMEs.The Index provides a recent and quite comprehensive framework to assess the sophistication andintensityoflocalpoliciestoenhancemarketaccessforSMEs.Thepresentstudywilllookmorecloselyatperformance of the 4 above-mentioned countries on the 4th dimension: access to market andinternationalization.Theframeworkcovers5sub-dimensionsforthis4thdimension:

(1)ExportPromotion(governmentprograms,tradefairs,FTAcompliance)(2) Integration toGlobalValueChains (businessmatchingwithMNC,backward linkageswithSMEs,technologytransfers)


(3) Use of e-commerce (legal framework, platform availability, access to other e-commerceplatform)(4)Quality standards (financial support, compliancewith international standardsand servicequalitycertificationcoverage)(5) Trade Facilitation (OECD Trade Facilitation indicators, customs procedures compliance,programs,transparencyandpredictabilityandsimplificationofprocedures)

Scoresrangebetween1and6,withahigherscoreindicatingamoreadvancedlevelofpolicydevelopmentand implementation. Weights are applied at sub-dimension and thematic block level. Scores arecalculatedbasedontheweightedmedians.Figure1:AccesstoMarketandInternationalization:performanceofselectedASEANCountries

Source:OECD,ERIA(2018)–MoreinformationaboutthemethodologycanbefoundonAnnex2

Policy intervention inASEAN countries usuallycovers the followingelementsandtools:exportpromotion facilities,training programs andportals for internationalmarketing, businessmatchmaking activities,support to get productquality certification,support to attendinternational trade fairsand creation of e-commerceplatforms.

Source:OECD(2018)

0 1 2 3 4 5 6

Export Promotion (50%)

Integration into global value chains (15%)

Use of E-commerce (10%)

Quality Standards (10%)

Trade Facilitation (15%)

Total performance

Access to Market and Internationalization

Median ASEAN Vietnam Thailand Myanmar Cambodia

Figure 2: Country rankings according to their weighted scores


Theanalysisofthese5sub-dimensionsprovidesthefollowingresults:

- Export promotion: Thailand and Vietnam have developed comprehensive export promotionprograms for SMEs: not only these programs are operational, but they are alsowell funded.CambodiaandMyanmartendtohaveonlysomelimitedinitiativessuchasparticipationintradefairs or training courses organized in partnershipwith development partners. They are alsolackingtargetedexportpromotionpolicies.CambodiaalsolacksinitiativestosupportSMEsinunderstandingitsFreeTradeAgreements.

- Global value chain integration: Thailand has an excellent program to promote SMEsparticipationinGVCs,andVietnamhasmadealotofprogressinthisarea.Cambodiahasputthisobjective as a priority in its IndustrialDevelopment Policy 2015-2025, as there are very fewbackwardlinkagesfornowbetweenlocalSMEsandMNCs.Unfortunately,littleprogresshasbeenachievedindevelopingthesebackwardlinkagesinCambodia.

- Use of e-commerce: Targeted e-commerce programs for SMEs are important. Thailand is

performingwell in thisareawith initiatives likeThaitrade, thenationale-commerceplatformallowingSMEstohaveaccessforfreetoB2B,B2B2CandalsoB2Copportunities.TheIndexwaspublished before the 2019 enactment of Cambodia’s e-commerce law, contributing to poorperformancebyCambodiaonthisindicator.WhilenewinitiativesinthisfieldattheMinistryofCommercelookpromising,itwilltakesometimetoevaluatetheeffectivenessofthevariouse-commerceinitiativesinCambodia.

- Qualitystandards:Qualityisanimportantconditiontobeabletoexport.Unfortunately,SMEsin general are less likely toobtain internationally recognizedquality certification.Thailand isperformingverywellinthisindicatorwhiletheothercountries,andparticularlyCambodia,arelaggingbehind.Cambodiahasalsothelowestscoreforlargecompaniesthatobtaininternationalqualitycertification.

- Trade facilitation: Thailand and Vietnam achieve high scores. Cambodia and especiallyMyanmarhavemadegoodprogressintradefacilitation,notablyincustomsreformandregardingthesimplificationofprocedures.ProceduresinthesetwocountriesarequitewellexplainedbutareusuallynotSME-specific.Therefore,trade-relatedprocedurescanbedifficulttounderstandforSMEs.

LessonslearntandBestPracticesfromtheASEANRegionDiscussionswithteamleadersofGIZinternationalizationprojectsprovidedinterestingtakeawaysandconfirmedtheinitialobservationsandstudiesdoneonSMEinternationalizationintheregion.• Internationalizationstrategyneedstobedifferentiated:Inallcountries,SMEsareindeedfacing

a lot of challenges but depending on the country’s level of development and stage ofinternationalization,thechallengesarenotthesame.


Forexample,ThailandisthemostadvancedcountryintermsofstrategyandimplementationofitsSMEpolicy: theyhaveadedicatedSMEpromotionoffice,well-funded,andanexistingwebportal.Althoughsomegeneralgoodpracticescanbeapplied,themethodologyandtherecommendationsneedtobeadaptedforeachcountrytohavethemostimpact.Vietnamcanalsooffergoodexamplesofpolicypractices.Forexample,thecountryhaspassedaLawin2017to improvetheeaseofdoingbusiness forSMEs.The implementationwillbegivento theAgencyforEnterpriseDevelopment.Theyalsoenhancethesupport forentrepreneurshipsupportorganizationsincludingincubators,acceleratorsandmentorship.ThisincludestheestablishmentofincubatorsatVietnameseUniversities.Vietnamhasalsointroducedspecific investmentincentivesfor investment funds targeting startups. They also embarked in several training initiatives tostrengthentheirITworkforceandoffersvisasforstartupfounders.

• Updating information on websites is challenging. Access to information and, particularly, toupdatedinformationislimitedforSMEsinmostASEANcountries.Themanagementofwebportals,iftheyexist, isusuallynotveryefficient.Theseportalsarenotregularlyupdated,andmanySMEshavelimitedlanguageskills.ThemainchallengewillnotonlybetheimplementationofanSMEwebportalbutalsoachievingastrongcommitmentandownershipfromtheministryincharge,inordertoreceivetherightcontributions,topromoteitextensively,andthenupdatethewebsiteonaregularbasis.

• EnhancedCollaborationbetweenGovernmentandPrivateSector canmakea realdifference.

Public-PrivatePartnershipsareincreasinglyrecognizedasagreattooltoenhancesuccessfulpolicyimplementationbutalsotoimprovetoolsandpolicies.InVietnam,theprivatesectorisnowmoreinvolvedintheconsultations.Toincreasetheleverageandtheimpact,astrongrecommendationisto have the inclusion of relevant actors (SMEs and sector-specific representatives) during theconsultations.SMEsaresometimesforgottenduringimportantmeetings.Thiscanleadtoirrelevantdecisionsanddifficultpolicyimplementations.

• Language skills can be a tricky issue for internationalization. Capacity building ismuchmore

effectiveiflocallanguageisusedduringthetraining(regardlessthequalityofthetrainers).Usingtrainerswhohaveagoodunderstandingofthelocalmindsetandlocalenvironmentisalsodefinitelyaplus.However,Englishskillsarealsoastrongrequirementforthecompanytoreachthenextstepandimprovetheirabilitytoexportininternationalmarkets.

• Thereisacorrelationbetweenthelevelofdevelopmentandthestageofinternationalization:

less developed economies are usually facing greater challenges. For countries like Cambodia andMyanmar, thekeychallenge is tostrengthen first thecapacityofSMEsandtheircompetitiveness.Regardinginternationalizationstrategy,thetwokeyfocusareaswillbetogetreadytoenterforeignmarketsdirectlyorassuppliersinglobalvaluechains.Also,theuseofmoderntoolsandITneedstobecarefullyassessed following theexistingcapabilitiesofeachcountry: forexample,Facebook iswidely used in Cambodia, but websites are less consulted. While face-to-face activities such asworkshops with printedmaterials will continue to be useful, service providers should also takeadvantageofanincreasinguseoftechnology,nottomissthedigitalrevolution.


• Wheneveritispossible,regionalcooperationinitiativesareverymuchwelcome:bestpracticesand experience sharing are appreciated by participants to enhance internationalization. Veryconcreteexamplesandinitiativescouldbesharedatregionallevelregardingtopicssuchas:

-regionalcooperationrelatedtotradeandsupplychainfinance- regional workshops and training focusing on internationalization or productivityenhancement.-SMEbusinesscentersandotherbestinternationalizationpractices.

II.THESMEECO-SYSTEMINCAMBODIA

1. Overview SMEs play an essential role in Cambodia’s economy. According to theMinistry of Industry, Science,Technology and Innovation (MISTI)3, SMEs represent 70% of employment, 99,8% of companies andcontributeto58%ofGDP.Basedonthe2014CambodiaIntercensalEconomicSurvey,whichincludesunregisteredfirms,thetotalnumberofSMEsinCambodiawas513,759firms–withmicroSMEs(MSMEs)representing97%of the total enterprises (60% femaleowned/95%non-registered) and small andmediumcompaniesrepresentingonly2%ofthetotal(26%femaleowned/25%non-registered).Definition

Table1:CriteriatodefineanSMEThe MISTI (ex-MIH) provides adefinitionofSMEsbasedonbythesizeof capital investment (assets butexcluding land) and by the number ofemployees. This definition is used forbusiness registration. However, theGeneralDepartmentofTaxation(GDT)usestheannualturnoverinsteadoftheassets; andmany financial institutionsdefine SMEs by loan size. Astandardized definition is expected inthefutureDraftSMEDevelopmentPolicythatshouldbereleasedin2020bytheMISTI(ex-MIH).Thepresent studywill refer to thedifferentcategoriesofSMEsbasedon theirnumberofemployeesratherthantheirturnoverortheirassets.Nonetheless,toidentifyandunderstandthebestsupportandservicesprovidedtoSMEsinCambodia,itisalsousefultokeepinmindadditionalindicatorssuchastheSMEs’growth,theirstageofdevelopment(matureoryoung)andalsotheircharacteristicssuchasfamilybusinessorbelongingtothenewgenerationofentrepreneurs,womenentrepreneursortechstartups.Indeed,alotofdisparitiescanbeseenbetweenthesedifferentsubcategories.Recently,Cambodiahas

3 Formerly known as the Ministry of Industry and Handicraft (MIH)

SizeClassification

Ministry of Industry andHandicrafts(MIH)

General Department of Tax(GDT)

Indicator Number Indicator Number

Micro Assets (excl.land)

USD50000 AnnualTurnover

USD62500

Employment ≤10 Employment ≤10

Small Assets (excl.land)

USD 50 000 –250000

AnnualTurnover

USD62500–175000

Employment 11-50 Employment 11-50

Medium Assets (excl.land)

USD250000–500000

AnnualTurnover

USD 175 000–1000000

Employment 51-100 Employment 51-100


seentheemergenceofhigh-growthmediumsizebusinesses,operatingoftenintheretailsector,aswellas the rise of tech startups, which have attracted a lot of attention. Overall, Cambodian SMEs havebenefited (until the Covid19 pandemic) from good momentum, thanks to a strong entrepreneurialmindsetandthedynamicenvironmentprovidedbytheASEANmarket.SMEEcosystemAssessmentCambodia’sSMEenvironmenthasundergonealotofchangesoverthelastfewyears.Cambodiaisasmallcountrywithanopeneconomicpolicywhichhasexperiencedforalmost2decadesofstrongeconomicgrowthofaround7%.Thisperformancemadethecountryoneofthebestworldperformersovertheperiod. This growthwas the result of amarket-based and export-led economic policy based on FDIattraction, an open and very business friendly environment and supported by 4 pillars of growth:tourism,construction,agricultureandgarmentindustry.CambodiabenefitedalsofrommanyFreeTradeAgreements(FTAs)toboostitsexportsandfromsubstantialChineseinvestments.Chinahasbecometheprincipalpartnerfortrade,investmentandtourists.The entrepreneurial ecosystem in Cambodia needs further policy actions to be able to support theemergenceofhighpotentialgrowingfirmsandstartupsandassistexistingSMEstogrow,innovateandtake advantage of global value chains. Deficiencies include a weak support structure forentrepreneurship, lackof adequate financingandbusiness services for startups, scarce technical andmanagerialhumancapitalandfewlinksbetweendomesticfirmsandexternalmarkets.ThesechallengescanbeaddressedbydevelopinglocalenterprisesandnotablySMEs,andopeningnewareasofeconomicactivities(WorldBank,2018).Table2:SWOTAnalysisoftheCambodiaEntrepreneurialEcosystem

STRENGTHS WEAKNESSESEmergingpocketsofentrepreneurialcultureDynamicandAdaptiveSMEsVibranttechstartupsceneIncreased interest from local private and venturecapitalLocation in thedynamicandvibrantASEANregion,especiallybetweenThailandandVietnamOpen economic policy to attract investment, whichcan lead to skill and knowledge transfer in themediumtolongterm

DominatedmainlybyinformalenterprisesInsufficientGovernmentsupportAccess to finance still requires land or real estatecollateralandhighcostoffinanceLackofefficientbusinesssupportservicesNeed to strengthen entrepreneur capabilities (financialskills,businessplanning)Accesstoexternalmarkets(internationalization)Lackofqualifiedstaff/managersWeakcorporategovernanceInabilitytocreatebackwardlinkagesHighcostoflogisticsandelectricity,particularlyaffectingthemanufacturingsector

OPPORTUNITIES THREATSBusiness-friendlyenvironmentforInvestmentIncreased Government initiatives and DonorProgramsforSMEsUntapped sector and geographic (provinces)opportunitiesImproving road connectivity and increasing portcapacitytolowerlogisticcostsCustoms reform program to promote tradefacilitationBetter supply of electricity and slightly lowerelectricitycosts

Lackof coordinationamongst stakeholders (even insidetheGovernment)WeakbusinessenablingenvironmentforSMEs(accesstoinformation,highcostofelectricity,transportation)Fragility of the economy if major external shocks(consequencesofEBAwithdrawal,Covid19-relatedglobaleconomicslowdown)High cost of starting up business and regulatorycomplianceencouragesSMEstoremaininformalWeak implementation of reform efforts to increase thecompetitivenessofSMEsalongthesupplychain


Potential usage of emerging technology by youngworkforcetoincreasetheefficiencyandproductivity

Increasingtrendofyounglaborforcemobilitytoworkinforeign countries leading to limited supply of dynamicworkforce

Source:AuthorandWorldBank,2018TheEBAwithdrawalandashifttoastrongerentrepreneurshippolicyInFebruary2020,theEuropeanCommissiondecidedtowithdrawpartofthetariffpreferencesgrantedtoCambodiaundertheEuropeanUnion'sEverythingButArms(EBA)tradescheme,becauseoftheEU’sseriousconcernsoverviolationsofhumanrightsandfundamentalfreedoms.Duringthelongevaluationprocess in 2018-2019 that led to this decision, theGovernment of Cambodia took several importantmeasurestotacklethepotentialeconomicimpactoftheEBAwithdrawal.Withabusiness-friendlyandopeneconomy,Cambodiahasbeenquitesuccessfulinattractingforeigndirectinvestments.TheseFDIswerevitalfortheKingdomtoexperienceoveryearssustainedgrowth.However,morediversificationisneeded,andadditionalenginesofgrowthshouldbefound.ThesizeofCambodia’smarket,itsrelianceononly4sectorstofuelitseconomy(tourism,construction,agricultureandgarmentindustry)andonChinaasamainpartnermadequiteclearhowfragiletheeconomyofCambodiacanbeiffacingexternalshocks.Ina recent report, theWorldBank recommendedanumberofpolicyactionsaround the following4objectives(WorldBank,2018)

- Promote a culture of entrepreneurship and build the government capacity to implement acomprehensiveentrepreneurshippolicy

- StrengthenSMElinkagestonationalandinternationalmarkets- Improveaccesstofinanceandbusinessservicesthroughsupportprogramsanddevelopmentof

PPP- Attractandnurturetechnicalandmanagerialtalentsforstartups

Alothappenedduring2019:newinitiativesfromthegovernmentstartedorareabouttobelaunchedduring2020andcreatedalreadynewtrendsfromandfortheprivatesector.ThenewreleaseoftheE-commercelawwillprovidealsointerestingopportunitiestoSMEs.Alltheseprogressanddevelopmentswillbediscussedbelow.TheCoronavirusPandemic:amajorshockfortheeconomyandanuncertainfutureCurrently, the world is facing an unprecedented health and economic crisis with the spread of thecoronavirus.ThusfarCambodiahasbeenabletomitigatethespreadoftheviruswithinthecountry,buttheeconomicrecessionthatisnowfacingmostofworld’smajoreconomieswillhitCambodiahardaswell.AsadirectresultoftheCOVID-19pandemic,therewillbeasignificantglobalslowdowntomajoreconomiessuchasChina,theUSandtheEuropeanUnion,resultinginthereductionofCambodia’saccesstovitalexportmarkets.TheWorldBankandtheAsianDevelopmentBank(ADB)havepredictedinApril2020 that the Kingdom’s real economic growth will slow to around 2.5 percent and 2.3 percentrespectivelythisyearassumingthatthepandemicendsrelativelyquickly.Thedeclineintourismhashitveryhardthehospitalityindustry,andtheconsequenceswillprobablylastsubstantiallylongerthanthelockdown.


TheGovernmenthastakenalreadysomeimmediateandproactivemeasurestomitigatethemosturgenteconomiceffectsofthecoronavirus:emergencyfunds(800millionUSD),subsidyof20%oftheminimumwagescontributedtoworkersingarmentandhospitality,puttingsomepressureonpropertyownerstoavoidevictionsorcontractterminations,lowintereststateloans,taxreliefs.ForSMEowners,managingcashflowandavoidingbankruptcywillbecomethemainchallengesinthecomingmonths.

2. Thelegalframework–theexistingpoliciessupportingSMEsinCambodiaThebodyresponsibleforformulatingSMEpolicyinCambodiaistheSMESub-Committee(SCSME),whichwas established in2004.The SCSME is chairedby theMinistry of Industry, Science, Technology andInnovation (MISTI), previously called Ministry of Industry and Handicraft (MIH) and includesrepresentativesfrommorethan10ministries.ThemainbodyresponsibleforimplementingSMEpoliciesandprogramsistheMISTI.IthasadedicatedunitforSMEpolicy,theGeneralDepartmentofSMEsandHandicrafts.Itsresourcesareratherlimited,butitdoeshaveastronglocalpresence,withofficesinall25provincesofCambodia.MainPoliciesTwoimportantpoliciesareguidingtheactionoftheGovernment:theRectangularStrategy(thecurrentphase IV focused on people) which is based on the 4 pillars: (i) Human resource development (ii)Economicdiversification(iii)Promotionof thePrivateSectorDevelopmentandEmploymentand(iv)InclusiveandsustainabledevelopmentandtheIndustrialDevelopmentPolicy(IDP)2015-2025.TheIDP’svision is to“modernizeCambodia ‘s industrial structure froma labor-intensive industry toaskill-drivenindustryby2025,throughconnectingtoregionalandglobalvaluechains(withclusters),integratingintoregionalproductionnetworksanddevelopinginterconnectedproductionclustersalongwitheffortstostrengthencompetitivenessandenhanceproductivityofdomesticindustriesandmovingtowarddevelopinga technology driven and knowledge-based industry”. The IDP identifies 4 pillars: i) Attract FDIs (ii)UpgradeandDevelopSMEs(iii)Improveregulatoryenvironmentand(iv)Coordinatesupportingpoliciesrelatedtoskillsdevelopment,industrialrelationsandterritorialmanagement.Untilrecently,thegovernmentdidnothaveacomprehensiveSMEdevelopmentstrategyinplace,withobjectives,concrete targetsand instrumentsover themediumterm. Instead,occasional interventionswereguidedbythegoalsofthecountry’sindustrialdevelopmentstrategy.However,thegovernment,viatheMISTI,hadstartedtodevelopamedium-termstrategycalledtheSMEDevelopmentPolicy.ThedraftofthisSMEDevelopmentPolicywaspreparedaspartofthe2017IDPimplementationandevolves around 5 priorities (1) Enhance policy and regulatory environment, (2) Promoteentrepreneurshipandhumancapitaldevelopment,(3)Promoteproductivity,technologyandinnovation,(4)Enhanceforeignmarketaccessandinternationalization,and(5)Increaseaccesstofinance.ThedraftoutlinessomeinterestinginitiativessuchasaCreditGuaranteeSchemeforSMEs,thenecessitytohaveimprovedfinancialreportingtemplatesformicro-businessestoimproveSMEs’accesstofinance,andthecreationofafocalpointforSMEinformationsuchasanSMEinformationcenter(portal).Somerevisionshavedelayeditsimplementation,butthepolicyshouldbereleasedin2020.InMarch2019,duringthe18thGovernment-PrivateSectorForum,PrimeMinisterSamdechHunSenannounced important recommendations to facilitate trade and increase competitiveness. These


recommendations were followed by rapid actions. The new policies to support SMEs include thefollowing:

- Important SME tax incentives scheme (from Oct 2018)– Sub-decree 124 provides taxexemptiononthetaxonincomefrom3to5yearsandincentivesfordeductibleexpendituresfor6prioritysectorsincludingagro-industry,foodmanufacturingandprocessing,manufacturingfortourismsector,manufacturingforsupplyingotherlocalmanufacturers,R&DassociatedwithITandSMEslocatedinSMEclusterszone.

- CreationofaSkillsDevelopmentFundtoprovideupskillingandreskillingopportunitiesforexistingworkerstoaddressskillsgapsandskillsshortageintheindustrialsectorthroughwork-basedlearningprograms

- CreationoftheTECHOStartupCentertofosterthecreationofnewtechstartupsandSMEs- CreationofanEntrepreneurshipPromotionCenter(KhmerEnterprise)- EstablishmentofanSMEBanktosupportthedevelopmentofCambodianagrobusinessesand

SMEsthatarelinkedtoforeigndirectinvestments,thetourismsectorandtechstart-ups.In July 2019, theMinistry of Commerce also released the update of the Cambodia Trade IntegrationStrategy(CTISU)2019-2023,whichpresentsaninnovativetradestrategybuiltuponthevisionoutlinedinthephaseIVoftheRectangularstrategyoftheGovernment.Finally,on2November2019,theGovernmenthasenactedtheCambodiaE-commerceLawwitheffectonMay2020.Thelawisanimportantstepforthecountryasitsetsaclearbasisfortradepromotionviaelectronicmeans. Itwillprovidemoreopportunities toSMEsand contributeat the same time to thedevelopmentofCambodia’sdigitaleconomy.OtherSpecificpoliciesorinitiatives • Customs(Sub-Decree50):in25March2019,anewcustomsincentivewasreleased.SMEsinthe

followingprioritysectors(domesticseller,SEZ,exportingorsupportingexport,cleanwaterandinITsector)mayobtain a customsduty exemptionon imports of production equipment, constructionequipmentandrawmaterials/otherproductioninputs.

• ThecreationoftheICTStartupCenter• TheProgramforCountryPartnership(PCP)withUNIDOtargetsthreekeyareas:thedevelopment

of sustainable tourism, thedevelopmentof competitiveagro-industryandcreative industryvaluechains, and industrial diversification, in particular through the development of Special EconomicZones.

• Buildingonthe2007LawonConcessions,anewPPPlawisbeingdraftedandaimstoattractmoreprivate sector investment in public sector infrastructure projects. This can also be helpful indevelopingprojectslikeSMEparks.


ImplementationAlltheprojectsannouncedbytheGovernmentduringtheGPSFin2019havebeenlaunchedorareabouttobelaunched.TheMinistryofEconomyandFinancetooktheleadonmostSMErelatedprojects.Theresultisquitecomprehensiveasitcoverstax,employment,financingandsupporttoentrepreneurship.Inparticular,theestablishmentofthenewEntrepreneurshipPromotionCenterKHMERENTERPRISEisextremelypromising.ThisinitiativewillbediscussedlaterinthesecondpartofthereportRegardingthenewtaxandcustomsincentives,theinitialresultsareabitdisappointingfornow.VeryfewSMEsareapplying for them.These incentives,especially the taxones,aredesignedtoencourageSMEs to register so that they canbe regulated.However, somebusiness associations report that theapplication for these incentives is complicated for SMEs, which are often reluctant to deal with theadministration.

3. UnderstandingRegulatoryCompliancesinStartingUpSMEs

StartingupaSMEisnotaneasytaskinCambodia.SmallandMediumEnterprisesarerequiredtopossessseveral licenses and undergone through many inspections. The new start-up SMEs are obligated toreceiveallnecessarylicensesfromawiderangeofgovernmentofagencies.Thenumberoflicensesandinspectionsisdeterminedbybusinessactivity,firmsizeandlocation.TheselicensesincludeCertificateof Incorporation (Business Registration), Tourism License, Food Processing Operating License, TaxRegistration forPatentTax,VATNumberandStampTax,LocationApprovalLicense,Registration forOpeningEnterprise,EstablishmentLedger,PayrollandInternalWorkRule,TaxPermitonSignBoardandPermitonSignBoard,etc.Ontheissuesrelatedwithinspection,SMEsinfoodprocessingsectormustcomplywithmanyinspectionsundertakenby inspectors fromdifferentgovernmentagencies.These inspectionscan includeProductQualityInspectionby(MISTI),OperationalHygieneInspectionbyMinistryofHealth(MoH),FireSafetyandSecurityInspectionbyMinistryofInterior(MoI);LaborComplianceInspectionbyMinistryofLaborandVocationalTraining (MoLVT);Environmental InspectionbyMinistryofEnvironment (MoE); andLocalAuthorityInspectionbyMinistryofInterior(MoI).Itisimportanttostressthatbusinessactivityisakeyfactortodeterminewhataretherequiredlicensesandinspections.Forexample,SMEsoperatinginfoodprocessingsectorarerequiredtohavethree-yearoperatinglicensewiththreeyearsvaliditywhileSMEsintourismareobligatedtohaveoperatinglicensefortourismwithone-yearvalidity.Giventhatitisnotpossibletospecifypreciselywhichlicensesandinspectionsarerequiredforparticulartypesoffirms,takinganindividualexamplegivesanideaofthelicensesandinspectionsthatfirmstypicallyhavetocomplywith.BelowisanexampleofthecomplianceburdenfacedbyanewlyestablishedSMEproducingdrinkingwater,wineand/orsoftdrinks.


Application for Setting Up a Small and Medium Factory Producing Drinking Water,WineandSoftDrinkBusinessinCambodia4WhatlicensesdoesanSMEneedforanewbusinessproducingdrinkingwater/wine/softdrink?

- Allnewfactories/handicraftsproducingdrinkingwater,wineandsoftdrinkwithasizablecapitalarerequiredtohavethefollowingcertificates/licenses:

- CertificateofIncorporation(BusinessRegistration)- PermitonSmallandMediumFactory&HandicraftEstablishment- OperatingLicenseonSmallandMediumFactory&Handicraft- LicensefortheUseofProductCertificationMarkចបផ

- LicensefortheUseofProductCertificationMarkCS009:2005(optionalforsomeproducts)- TaxRegistrationforPatentTax,VATNumberandRegistrationTax- LocationApprovalLicense- Registration for Opening Enterprise, Establishment Ledger, Payroll and Internal Work Rule

(within30days).- TradeMarkRegistration(optional)- TaxPermitonSignBoard- PermitonSignBoard

WhatinspectionsshouldSMEsexpect?DuringapplicationprocessofOperatingLicenseonSmallandMediumFactory&Handicraftfrom(MISTI),SMEsshouldexpect(1)ProductQualityInspectionby(MISTI),and(2)LocationInspectionbyPhnomPenhMunicipality.An SME operating a drinking water/wine/soft drink business should also expect the followinginspections:(1)ProductQualityInspectionbyMISTI;(2)OperationalHygieneInspectionbyMinistryofHealth(MoH);(3)FireSafetyandSecurityInspectionbyMinistryofInterior(MoI);(4)LaborComplianceInspection byMinistry of Labor and Vocational Training (MoLVT); (5) Environmental Inspection byMinistryofEnvironment(MoE);and(6)LocalAuthorityInspectionbyMinistryofInterior(MoI).

4 BasedonADB(MekongBusinessInitiative)researchreport,2018


III.SMEsANDBARRIERSTOINTERNATIONALIZATIONINCAMBODIAFollowinganoverviewoftheSMEsecosysteminCambodiaandthelessonslearntdrawnfromotherSMEpoliciesintheregion,thefirstobservationtoconsideristhatonesizedoesnotfitall.ThemostsuccessfulSMEpoliciestowardsinternationalizationareconsideringadifferentiatedapproachbecauseneedsaredifferentanddependonthedifferenttypesofentrepreneursandtheirstagesofgrowth.

1. AtypologyofexportingSMEs#ClosingtheGapMekong,astudyonEntrepreneurialEcosystemAssessmentinCambodia,conductedbyEmerging Market Consulting (EMC) on behalf of Dutch Good Growth Fund provided an interestingsegmentationbasedontheWorldBankEnterpriseSurvey(WBES)methodology.5TheanalysisprovidedatentativesegmentationoftheSMEsinCambodiaaccordingtotheirgrowthandsizecharacteristicsusingtheASPENNetworkofDevelopmentEntrepreneurs(ANDE) frameworkanddatafromtheWorldBankEnterpriseSurvey2016(WBES2016).Despitesomeissuesinthemethodology,thestudyprovidessomeinterestinginformationregardingthesize of each segment. (The sample is not large, the data includes only registered companies, and itexcludesmicro firms employing less than 5 employees. It also excludes some important sectors likeagriculture or professional services or financial intermediation to focus mainly on manufacturing,construction,retail,IT,transportorcommunications.AfulldescriptionofthetypologyanddifferentSMEsegmentscanbefoundintheAnnex3.)

Figure 3 provides a visualsnapshot of the size of thedifferent SME segments,classifiedbytheirsize(smalltomedium)andtheirgrowthrate(lowtohigh)The proportion of mediumcompanies is indeed verylimited in comparison withsmallandmicrocompanies.MostSMEsaremicroandsmallbusinesses with limitedgrowth.

5 WBES2016interviewed373establishmentsfromasampleframeof23123andusedstratifiedrandomsamplingtoavoidconcentrationinanysector.EMCderivedestimatesforthetotalpopulationbasedonWBESweighting.

Figure 3 : Sub-segments as proportion of total SMEs


Without surprise, the categories of SMEsthathavethebettercapacitytoexportarethemediumones.There ismuchmorepotential forgrowingtheir exports for the categories of SMEsbelonging to the Small and GrowingBusiness (SGB) and particularly to theSmallandHighGrowthBusiness(SHB).SHB are defined in the report as havingmorethan20%growthwithmorethan10employees and with less than 5 years ofexistence. These businesses have alreadyinvested in R&D and improved theirorganizational structures while SGB aredefined as having a moderate turnovergrowth(10to20%),beingusuallylessthan5 years old, using email to communicatewithclientsandstartingtoinvestinR&D.

The last graphprovides a snapshotofwomen ownershipbysub-segments.The proportion offirms owned ormanagedbya femaletopmanager is lowerfor medium businessthan for smallcompanies.Source:EMC(2019) forallthegraphs

Figure 4: Proportion of Cambodian SMEs that export, by sub-segment

Figure 5: Cambodia SME sub-segments by gender of ownership, 2016


2. ChallengesandBarrierstoSMEinternationalizationinCambodia

SMEs in Cambodia face many constraints and challenges. The major ones often cited are unfaircompetition (for the registered companies), access to finance, bureaucracy and recruiting adequatehumanresources.However,thesechallengesarequitevariabledependingonthetypesofSMEsandtheirsize.Figure6:CambodiaPerformanceforAccesstoMarketandinternationalization

BasedonOECD,2018Accordingtothe2018OECDSMEpolicyindex,CambodiaisunderperformingconsistentlyregardingtheAccesstoMarketandInternationalizationIndicator.Withaglobalscoreof2.69(outof6),itiswellundertheASEANmedianscoreof5.02.Onlythesub-componentlinkedtotradefacilitationreceivedascorequitesimilartotheASEANmedianscore.Exportingisnoteasy,butsomecompanieshavebeenabletodoit.Hereisthetestimonyofalocalmediumcompanythattookthenecessarystepstodothe“rightthings”,alongandcomplicatedjourneywheretheyfinallyhavebeenabletogrowsubstantiallyandachievesuccessinexporting.Box1:KiriromFoodProduction

CASE: Kirirom Food Production, a journey to export

The company is exporting dried mangoes products and can be considered as a model of exporting company.

The company registered in 2013 to export and they started the production in 2014. They faced a lot of obstacles at the beginning. China was the first market they targeted, and they found there a partner who helped them on the technical side. At that time, they did not know much about China as a market, or about the technical aspects of the machines and processes (they were dependent of the technical expert sent by their contractor). In addition, their product was not compliant with the required standards. They experienced significant loss. In 2016 and 2017, they decided to analyze all the problems and make the necessary changes: they invested in training and relied on local human resources. It was

2.82

2.49

2.032.04

3.3

5.02

3.86

4.444.46

3.89

Export Promotion (50%)

Integration into global valuechains (15%)

Use of E-commerce (10%)Quality Standards (10%)

Trade Facilitation (15%)

Access to Market and Internationalization performance

Cambodia (Total: 2.69) ASEAN Median (Total: 5.02)


an important part of their success. Then, they were able to receive a grant to follow trainings at the NPCC for 5S (Japanese standards). It was extremely useful. They applied for some basic food standards: GMP (good Manufacturing Practices) and HACCP (Hazard Analysis Critical Point). They went through all certifications processes, even the most stringent ones (ISO 22001) Food Safety Management System FSMS ISO 22000. The company have now 100% of Khmer staff, very knowledgeable and they are exporting around 80% of their production. Here are some interesting pieces of advice for SMEs which would like to export.

1- Top Management is the KEY Trust, patience and persistence are key elements to succeed this transformation journey and build a sustainable strategy.

2- Size the production to a reasonable volume When the production is too small, it cannot bear the fix costs

3- Keep on improving technical skills Building internal human capital is very important, starting with having the right consultants to train and build skills and knowledge internally.

4- Find the right suppliers It can make a big difference to have the right suppliers: not only for the raw materials (fresh mangoes) but also for the equipment or for the building contractor

5- Build good relationships with Ministries and institutions The company have been able to benefit from support from international donor programs because they maintained active relations with the people in charge of them (ISC, NPCC, MOC), not only for productivity issues but also for promotion of their products

6- Improve the productivity with proved methods The Company followed trainings from the NPCC (National Productivity Center in Cambodia) on 5S Kaizen but also on GMP ISO 20200. Apparently, they also were able to have an In-house training for a full diagnostic and implementation on the topic of Advance Food Safety Program.

7- Apply for the relevant Standards (see standards sections for more info) Required standards depend on the markets so there is a need to do a proper check on which standards for which countries. It might be a bit costly at the beginning, but it reduces a lot the after-sales issues because recalling products can be very expensive, and it will limit the customer complaints

8- Find the right logistic providers Logistic providers are ‘’specialized” by countries. Not all of them are used to work with agro products neither. Expertise is needed to know about the requirements, etc. Do not try to do it by yourself, it can be quite counterproductive. To find the right logistic provider, you can usually do it based on referrals and recommendations (word of mouth). The good news is that the providers are quite supportive with each other, so it is not so difficult to get good recommendations.

9- Expand your market

Opportunities exist but it is important to do regular market intelligence and know what is going on as information is not always available. Start with country fairs organized by institutions (MOC, CCC, YEAC, CDC). From then, build consistently your network et know well your products! Sometimes, a mix of personal contacts and network can be enough to develop a market. Since 2018, the company has increased his production and export 85 % of its production in China, Japan, Europe, USA, Australia, Vietnam and Thailand. A remarkable journey.

Source: Interview

InformalityandtheburdenofbeingcompliantInformalityisthefirstkeybarriertointernationalization.AlargemajorityofMSMEsarenotregisteredandinformalityhasconsequencesthatarebeyondthesimplesphereofbusinessregistration.


Informalbusinesses cannothaveaccess to “formal” finance; therefore, their costof financing isoftenhigher.TheydonotpaytaxeseitherandthereforecreateanunevenplayingfieldandunfaircompetitionfortheotherbusinessesandparticularlytheregisteredSMEs.ThelossfortheGovernmentintermsoftaxrevenuesisnotnegligibleeither,asinformalitynarrowsthetaxbaseandconcentratestherevenuecollection on a smaller number of tax-compliant businesses. Informal businesses cannot “officially”exportwithoutbeingregistered,theycannothaveaccesstoglobalsupplychainorengageinanyofficialcollaboration or cross-border possibility. Therefore, they are limited in their internationalizationpossibilities. Finally, they also have more difficulties in accessing support services or developmentprograms.TheLawonCommercialRulesandRegistrationimpliesthatallpersonsorentitiesengagedinbusinessmustregisterwiththeMinistryofCommerce.TheregistrationwiththeMinistryofCommercecreatestheobligation to register with the Ministry of Labor and the General Department of Taxation (GDT).Additionally,manySMEshaveotherformsofregistration,licenseorapprovalofbusinessoperationfromother ministries: usually the MISTI (ex-MIH) or the Ministry of Tourism, but also the Ministry ofEducation,YouthandSports,theMinistryofHealthortheMEF.So,manyunregisteredbusinessescanhavesomeformofgovernmentapproval.ThiscanbeindeedconfusingforSMEsandMSMEswhichhavenotindeedthe“obligation”toregisteratMOCastheycanregisteratMISTIforexample.However,theregistrationatMISTIdoesnotcomewitharegistrationwiththeGDT,whichisaconditionnecessarytoexport.The main reason for SMEs to remain informal is to stay “under the radar” of the Government andparticularlyofGDT.Accordingtokeybusinessassociationsandinformants,formalizationhasacost:onthetopoftheinitialcostsofregisteringabusiness,compliancewithexistingregulationsisburdensomeandsometimesreallycomplicatetonavigate.Businessregulationsandnon-transparentpracticescanbearealchallengeforSMEs:corruptionandinformalpracticesleadtouncertainty.Cambodiaunfortunatelydoesnotscoreverywellinthe“EaseofDoingBusiness”rankingfromtheWorldBank.Overall,lawsandregulationspersearenottheissuebutimplementationandinterpretationofthelawscanbetricky,evenforGovernmentofficialswhodisagreesometimesonhowtoimplementcertainlawsintheabsenceofclearimplementingguidelines.Trade,logisticsandcustoms-relatedissuesAccordingtoastudyreportfromUSAID(2016),themainissuesintradefacilitationinCambodiaarehighunofficial fees, complex, non-transparent and burdensome procedures, risk management, valuationmethods,directtraderinputsanduseofICT,portcongestion,supplychainsecurityandprivatesectortradecapacity.Alltheseinefficiencies,non-transparencypracticesandheavybureaucracycontributetomaketradefacilitationamajorconstrainttointernationalization,particularlyforSMEs.However,since theabovereportsignificantprogresshasbeenmade.Cambodiahas introducedmanymeasurestofacilitateareassuchascustomsautomation,nationalsinglewindow,onestopborderposts,customsriskmeasures,E-permitandcustoms,phytosanitarycertificatesandtraderegistrations.Somemeasuressuchaspre-shipmentinspectionsandtheneedforacertificateoforiginhavebeeneliminated.OtherreformshaveautomatedcertainprocessesandtheintroductionofASYCUDA(AutomatedSystemsforCustomsData)hasimprovedclearancetime.(CTIS,2019)


Another analytical work conducted by the World Bank in 2018 also indicated that Cambodia’sperformance in logistics is uncompetitive when compared to neighboring Thailand and Vietnam.Logisticscostsremainhighduetopoorqualityoflogisticsservicesandinadequatequalityoftransportinfrastructure.ThecostandtimetoexportacontainerfromSihanoukville,Cambodia’smajorseaport,ismuchhigherthantheglobalaverage,asreflectedinthecountry’spoorrankingintheTradingAcrossBordersindicatorsofDoingBusinessin2018(108outof190countries).Cambodia’s main official imports are from big companies importing raw materials or agricultureproducts.SmallimportsfromSMEsarefromneighboringcountries(VietnamandThailand).MostSMEsprefertostayundertheradarandpayalumpsumtofacilitators,buttheirexportsareverylimited.Despitesomeprogress, there is limiteddataavailable tomonitor theperformanceof logisticsserviceproviders. Ingeneral, the logisticssystemisperceivedasarchaic, inefficient, ineffective,andcostlytousers(CTIS,2019)butwhenlookingmoreclosely, itappearsthattruckingcostsareverycompetitivewhencomparedwithneighboringcountries.Itisofteninformalcoststhatarequitehighandhiddeninlumpsumservicecontracts.Box2:ExportingHandicraftsCASE:EXPORTINGHANDICRAFTSFORANSMEBUSINESSOWNERNoreaAngkorHandicrafts’ownerisasuccessfulanddynamicCambodianwomenentrepreneur.Sheadmitsthatherproducts(beautifullamps,curtainsandpillows)haveagreatdesignandCambodianflavor,buttheydonotfitwellforthelocaltaste.Therefore,beingsuccessfulinexportingherproductsisnotanoption,itisanecessity.HerproductsarealreadyverypopularwithinthehospitalityindustryinCambodia,buthermarketislimited.Shewasabletotakepart insome internationaldecoration fairs throughnetworkssuchasCWEAorsometimesthroughtheMISTIandMOC.Thefeedbackonherproductswasgoodbutoverall,theassistancefromtheGovernmenttohelpSMEstoexportisstilllimited.In2019,sheenteredintheCBIBusinessExportCoachingprogramfocusingonHomeDecoration;a5-yearverycomprehensiveprogram(withonly15SMEsenrolledbutmanyareexpat-ownedbusinesses)thatprovidesin-depthtrainingonhowtoexporttoEuropewiththebestinternationalstandards.Allaspectsarecovered.CBIcoversthecost of the program but some costs such as some trips to Europe must be financed personally and the timecommitmentduringthefirst2yearsoftrainingisquiteheavy.Sheisdeterminedtodoitbecausethelearningprocessisvaluable,butitseemsabitambitioustogetmanyCambodianSMEsenrollastheymightnothavethefinancialresourcestocommitduringsuchalongtimeperiod.Inaddition,shetriedtoexportbyherselftoEuropeandothercountrieswhereshehasafewclients.Findingtheinformationregardingtherelevantstandardswascomplicated.ExportinglampstoEuroperequiresaCEmarking,aninternationalcertificationshedidnotknowwheretogetatthebeginning,inadditiontoothersubtletiesforeachcountryofEUregardingthenormsforelectricity.Packagingwasalsoalmostthecostofthelamp.Overall, exporting isalreadyacomplexprocess forneophytes,but it isevenmorecomplicatedwhenyouexporthandicrafts as an SME. Water Lili’s owner confirmed this assessment. Shementioned however that exportingthrough“cooperative”orsomeumbrellaorganizationmightbeasolutiontoovercomecertainissueslinkedtothecostsofshipment.Asolutiontoexplore?Source:interview


Capacitybuilding,mindsetchangeandHumanresourcesHiringandretainingthecompetentresourcesinCambodiaisanacuteproblem.InthecaseofSMEs,thebiggestchallengeforentrepreneursismorelinkedtoachangeinmindsetandregardingtheirabilitytolearn, grow and think differently. This internal barrier is often cited from service providers andstakeholders,whethertheyarepublicorfromtheprivatesector.Resistancetochanges,limitedcapacitytoinnovateanddifficultytohavealong-termvisionarenoteasytomodify.Anotherrequirementforinternationalizationistheabilitytoplan:becauseofthecostsinvolved,thereisnoroomforimprovising.FewSMEsarereadytoprepare,plan, findtherightinformationandbuildastrategy.Most service providers in contactwith SMEs emphasize the need to conceptualize capacitybuildingprogramsthatarebetteradaptedtoSMEsandtheirlearningstyles.Despitethetimeneededandsome resistance, observers confirmedpositives changes: the sustained efforts of the government formorecompliance,theriseofanewgenerationofyoungentrepreneursandtheincreaseduseofdigitaltools inbusiness are factors that SMEBusinessowners cannot ignore andprogresshavebeenmaderecently,especiallyinurbanareas.Thesolutionmightlieinthenextgenerationofthesefamilybusiness,thesesonsanddaughters,moretechsavvyandfamiliarwiththedigitalworld.International managerial skills or enhancing the capacity to export is another issue. Some serviceprovidersareprovidingtrainingonmarketaccessbutsofar,expansionisrarelyseenoutsidetheborders.Moreisneededregardingexportskills.CapacitybuildinginthetechsectorislessanissueinCambodia:emergingco-workingspaces,togetherwithcommunitybuildingeventsandtrainingworkshopshaveexposedyoungprofessionalstodifferentapproachestolearningandworking,newinspirations,andopportunitiesfornetworking.Makerspaces,innovation labs, entrepreneurial supportprograms, and startup competitionsoffered safe venues foryoungpeopletoexplorenewideas,accessaffordableresourcesforexperimentingwiththoseideas,learntobuildateam,andimproveproblem-solvingandpublicspeakingskills(USAID,2018).Accesstofinance&AccesstotradefinanceAccesstofinanceisusuallyoneoftheleadingconstraintsmentionedbySMEsandMSMEs.Thisissuehasbeenanalyzedanddocumentedinmanypublications.Interestingly,Cambodiaisscoringquitewellinmany“accesstofinance”indicatorsincludingtheEaseofDoingBusinessreportoftheWorldBankortheGlobalInnovationIndex,duetoastrongfinancialindustry(solidbankingsystem,developmentofthemicrofinanceinstitutionsandpresenceofacreditbureau).AssummarizedintheUNESCAP2019reportonMSMEsAccesstofinanceinCambodia,Cambodiaisfacingthemissingmiddle financingproblem:microandsmallenterpriseshaveaccess tocredit fromsavinggroups or informal providers like money lenders. Also, MFIs offer non-collateralized loans of smallamounts(usuallylessthan3500USD).Attheotherendofthespectrum,largecompaniesusuallyhavethe physical collateral required to access substantial financing. The challenge is that medium-sizedenterprisesoftencannotaccessfinanceduetotheirlimitedownershipoffixedassetcollateral.


In short, banks are notmeeting fully the financingneeds ofmedium/growth companies forworkingcapital.Forthestartups/earlystagecompanies,Cambodiahasstillalimitedamountofrisk-capital,moreventurecapital isneeded.Someprivateequity firmsarepresent inCambodia,but theyusually facealimitedpipelineofinvestablecompanies.Thechallengescanbeexplainedbytheinformalityofthebusiness,poorfinancialliteracy(mostMSMEsdonotreconcilerevenuesandexpenses),absenceoffinancialstatementsforthebanks(makingthecreditassessmentriskierforthebanks)ortheSME’sperceptionthatgettingaloanisacomplicatedprocess.The lack of reliable creditor information leads to a lending system essentially based on fixed assetcollaterals (real estate or land). Very few banks accept moveable assets and almost none acceptreceivablesorinventory.Access to trade finance is almost non-existent on a practical level in Cambodia. It is however animportantfinancialmechanismtobridgethetimelagbetweentheshipmentofaproductanditsdelivery.InCambodia,thefinanciallandscapehasevolvedalotandthelargepresenceofforeign-ownedbankshascontributedtoimprovethe”availability”oftradefinanceproducts,alsoforSMEs.Despitethisavailability,theseproductsaredistributedveryselectively:mainlytoafewlargecompaniesandconglomerates.Lendingfacilities,issuingLettersofCredit,exportfactoring(companiesreceivefundsagainstinvoicesoraccountsreceivable),forfaiting(purchasingthereceivablesortradedgoodsfromanexporter),exportcredits(toreduceriskstofunderswhenprovidingtradeorsupplychainfinance)andcreditinsurance(duringdeliveryandshipping,alsocoverscurrencyriskandexposure)arethemaintradefinancetoolsusedallovertheworldandformostofthem,theyarenotthatmuchusedinCambodia,especiallyforSMEsevenifadecentrangeofproductsareofferedofficiallyinreputablebanks.Banksusuallysimplyprovide“loans”andworkingcapitalfacilities,atahighinterestrate.Thereisaneedto improve the utilization of letters of credit (available in Cambodia). Banks mentioned the lack ofavailabledocumentationbutalsosomeperceiveduncertaintiesrelatedtothecollateral(whichis,inthecaseofLetterofCredit,themerchandiseitself).Withmostcompanieshavingweakaccounts,SMEsarecash-strappedinCambodiawithanestimated90%ofimportsbeingpaidcash-in-advance.ThereasonliesalsobecausethewholesysteminCambodiaisbasedoncollateralizedlending,whichisnotefficientanddoesnot recognized the low-risk character of trade finance. Someproducts such as factoring orforfeitingcouldbebetterunderstoodandpromoted.(CTIS2019)


PARTII–FIELDSTUDY:SUPPORTINGSERVICESANDSTAKEHOLDERMAPPINGINCAMBODIA

Background Followingthenationalworkshopwhichtookplaceon14June2019,theproject“StrengtheningRegionalStructuresforSmallandMediumEnterprisesPromotioninASEAN(ASEANSME)wasintroducedto10participantsfromtheprivatesectorand14representingtheMISTI(ex-MIH)andotherministries.Theworkshop favoreddiscussion, interactionandexperience sharing.Asa result, it clearly identified theneedsofSMEs,butpracticalsolutionsandactivitieswerenotyetdefined.Thechallengesandthebarriersforinternationalizationwereidentifiedandagreedamongtheparticipants:accesstoinformation,accessto network, access to services (finance, capacity building and technology transfer) and policycoordination.Additionalneedswerealsoidentifiedsuchas:(1)tostrengthenthecommunicationbetweenallrelevantstakeholders, (2) to improvethecoordinationthroughanSMEworkinggroupthatwould includetheprivatesectoraswell,(3)tohelpbuildtheinternalcapacityofMISTI(ex-MIH)staff,and(4)tosupporttheneedformorecomprehensivedataonSMEs.Anotherremarkwastheimportanceofthesustainabilityaspect,aspreviousSMEprojectsstoppedassoonasfundsdriedup.ThisstudywillnotonlysupporttheneedformorecomprehensivedatacollectiononexistingservicesbutalsotogetabetteroverviewoftheSMEsprojectsandtherelevantstakeholdersinCambodia.FollowingthecooperationbetweenMISTIandASEANSME(implementedbyGIZ),someprogresshasbeenmaderegardingthecoordinationbetweenthedifferentstakeholders.AnSMETaskforcehasbeencreatedunder the facilitationof theMISTI andASEANSME todiscuss the content of a national SMEwebsite.AnotherSMEwebsite,Bizinfo,hasalreadybeencreatedwiththesupportoftheMekongBusinessInitiative (MBI)by theYoungEntrepreneursAssociationofCambodia (YEAC).Thiswebsitehasbeensuspendedforawhileaftertheendoftheprojectin2017buthasnowbeenupdatedandrelaunched.TheSMETaskforceagreedtocreateaNationalSMEInformationwebsitenamed“KhmerSME,”plannedtobelaunchedbyDecember2020.In parallel, the project ARISE+ Cambodia (also implemented by GIZ) launched in 2019. The thirdcomponentoftheprojectisfocusingonenhancingprivatesectorengagementintrade,notablyofSMEsforabetterpreparednessfortheASEANEconomicCommunity’ssingleeconomicspace.Thiscomponenthasthreeworkstreams:(1)SMEexportdevelopmentthroughtargetedtechnicalassistancetoselectedfirms,(2)Tradeinformationthroughtheprovisionofdemand-orientedtradeinformation,and(3)TradeadvocacybystrengtheningtheadvocacycapacitiesofbusinessassociationsinCambodia,particularlytheonesrepresentingSMEsandthosewhichareunderrepresentedintrade.The Cambodia landscape for SMEs has changed a lot recently. New projects, institutions and actorsemerged.TheConsultantinterviewedmorethan55keyinformantstogetthemostrelevantoverviewof


what exists in Cambodia in terms of SME-oriented offer, support and services. The complete list ofintervieweescanbefoundinAnnex1.Theusualstakeholderswereinterviewed,butnewcomersornewserviceshavealsobeenreachedoutto,toseeifthepotentialexistsforleapfroggingincertainareas(suchasfintech,e-commerceorindustry4.0) as theworld is becomingmore andmore digital. Innovationwill not be toomuch discussed asinternationalizationinCambodiadidnotreachthispointbutstill,moderntoolsofcommunicationandconsumertrendscanbeconsideredtoleveragesomecommunicationactions.Intermsofmethodology,theinterviewsweresemi-structuredregardingtheservicesthatcanbeofferedtoSMEs.Theparticipantswerealsoaskedtoprovidetheirfeedbackonthemainissuestheywerefacingwhendelivering their services and the challenges facedby SMEs in the related field.Theywere alsoinvitedtosharerecommendationsonhowtosolvetheseissues.The report will first provide an overview of the different stakeholders involved in SMEinternationalization or more generally working with SMEs. Government bodies, internationalorganizationsandrelatedprojectsandbusinessassociationswillbecovered.Fortheprivatesectorpart,itwasnotpossibletoalwaysprovideanexhaustivelistofalltheprivatesectorplayersastheycanbequite numerous and as no qualified opinion can be given on the quality of their services. Themostrecognized players will be nonetheless mentioned for each category as well as some innovativecompaniesthatdifferentiatewiththeircompetitorsintheirfield.Thesecondpartofthisfieldstudywillfocusonclassifyingtheserviceprovidersbytypeofservices,withafocusoninternationalization.I. RELEVANTSTAKEHOLDERSINCAMBODIABYCATEGORY

1. Governmentbodiesandprojects SMEsupportfromtheGovernmentisdispersedacrossseveralMinistries.ThemainonesinvolvedaretheMinistry of Industry, Science, Technology and Innovation (MISTI ex-MIH), theMinistry of Commerce(MOC),theMinistryofPostsandTelecommunication(MPTC)forthestartups,theMinistryofEconomyandFinance(MEF)andtheMinistryofLaborandVocationalTraining(MOLVT).PriortothelaunchoftheIDP,theMISTI(ex-MIH)hadtheprimaryresponsibilityfortheGovernment’sSMEpoliciesbuttheMinistryislackingresourcestoimplementlargescaleprograms.InordertoboosttheagendafortheIDPimplementation,theGovernmenthaslaunchedin2019aseriesofmeasurestosupportSMEsandentrepreneurshipinCambodiathroughtheleadershipoftheMinistryofEconomyandFinance.Anothernewdevelopmentistheapprovaloftheso-awaitedE-commerceLawinNovember2019withacomprehensivee-commercestrategythatshouldbeputinplacein2020bytheMinistryofCommerce.


Table3:ListofmainGovernmentbodiesandprojectsinvolvedwithSMEsMAINGOVERNMENTBODY/PROJECTS SERVICESPROVIDED

MINISTRYOFECONOMYANDFINANCE(MEF)TheroleoftheMEFistoimplementandcontributetothegovernment'seconomicandfinancialpolicy.Toimplementallitstasks,theministryisorganizedintovariousgeneraldepartmentsanddepartments,includingtheGeneralDepartmentofTaxation(GDT)andtheGeneralDepartmentofCustomsandExcise(GDCE).TheMEFplaysakeyroleinCambodiaandrecently,hasstepupasakeyministrytosupportSMEswiththelaunchingofveryimportantinitiatives.KHMERENTERPRISELaunchedinApril2020www.khmerenterprise.com

KhmerEnterprise(KE)isthenewnationalSMEpromotionandDevelopmentCenter.Thefocuswillbeonbusinessowners,scalableSMEs,entrepreneurialcommunities.Theywillprovidefinancialandnon-financialsupportthroughdifferentprogramslinkedtothefollowingprioritysectors:techstartup,tourism,agro-processingandmanufacturing(importsubstitution)andindustrialclusters

1) START-UPProgram(networking,seedfunding,capacityupgradingandentrepreneurialculturepromotion)withaco-workingspace

2) SupportEntrepreneurProgram,especiallythroughbusinessassociations.Forexport,thegoalistoworkonlywithalreadyadvancecompaniesthathaveexperienceinexportandunderstandmarketconditions.KEwillthenbeabletofacilitate.Theideaistoenhancecompliance,buildcapabilitiesandcreateastrongecosystem.

Strongoperatingprincipleswillbeimplemented:interactionandsynergiesamongstakeholders,KPI-basedbudgeting,PPP-basedprogramdeliveryandbalancedapproachtocustomerneeds.Inaddition,apublic-privateboardwillprovideastrategicoversightandKEwillbenefitfromastrongautonomyandalotofflexibility.

SMEBANKLaunchedinApril2020(websitecomingsoon)

TheSMEbankisoperatingwithaninitialbudgetof100MillionUSD.Prioritysectors:IT,Franchising,Tourism,Trading,Manufacturing,cottageindustries.AgriculturesectorwillbetakencarespecificallybytheRuralDevelopmentBankwithabudgetof50MillionUSDFullrangeofproductsareexpected.Forthefirst6monthsin2020,transactionalbankingwillbethepriority,thenadditionalproductswillbeadded.Expansiontotheprovincesisexpectedin2years.Astrongsocialmandateisaddedtotheusualactivities:acollaborationwiththeprivatesectorisexpectedtohelpcompaniesbecomingmorecompliant(forexample,collaborationwithaccountingfirmstohelppreparingfinancialstatementsorwithbusinessorganizations.)

TECHOSTARTUPCENTERLaunchedinJune2019www.techostartup.center

TECHOisastartupcenterundertheinnovationarmofMEFwhichaimstobuildviableearlystageemergingtechstartupsbyignitinginnovationandtechnology.Theywillworkwithyoungtalentstoco-createtheproducts.Activities:

• Research:FintechPolicyRecommendation,KhmerTextSearchinlargedataset

• Projects:CamDX(aunifiedOnlineBusinessRegistrationPortal),theDigitalAgricultureValueChainunderSAAMBATproject(improving


accessibilityofagriculturalproductstothemarketthroughdigitaltechnology.

• Programs:StartupCambodia,TAPaccelerator(seecapacitybuildingchapter),E-commercemodel

SKILLSDEVELOPMENTFUNDLaunchedinJuly2019www.sdfcambodia.org

TheFundisapilotprojectandaimstobethemosttrustedfinancingplatformforsustainableanddemand-drivenskilldevelopment.Theprojectfinancestrainingproposals,tobesupportedbytheFundin5prioritysectors:construction,manufacturing,ICT,Electronics,Hospitality.Twotypesoftrainingopportunities:oneforlargecompaniesandoneforSMEs.ThefocusofthisschemeistoimproveentrepreneurialskillsandmindsetsofSMEowners/startupsand/ortheiremployees.Participantswillbeequippedwithnewtoolsandtechniquestofacilitate(potential)entrepreneurstostartbusinessesaswellastofacilitatethegrowthofexistingSMEs.(moredetailsprovidedinthecapacitybuildingchapter)

NATIONALTRADEREPOSITORY(NTR)Launchedin2015www.cambodiantr.gov.kh

TheNTRisatradeportalthatprovidespublicaccesstoallnecessarytradeinformationforexportingandimportingbusinessesinordertocomplywithallthenon-tariffmeasuressuchasquantitativerestrictions,standards,customsproceduresortechnicalregulations.Informationisprovidedonprocedures,customspermits,anddocumentationneeded.AllthisinformationissupposedalsotobetransmittedtotheASEANTradeRepositorywhichprovidesasinglepointofaccesstoallthetrade-relatedinformationofASEANMemberStates.

GENERALDEPARTMENTOFCUSTOMSANDEXCISE(GDCE)www.customs.gov.kh

TheGeneralDepartmentofCustomsandExcise(GDCE)ofCambodiahasbeenduringthelasttenyearsveryproactiveinfacilitatingtradeandassistingtheimporters,exporters,logisticsoperatorsandcustomsbrokersbypublicationsaboutrulesandregulationsincludingapplicationsonimport,export,customsclearing.TheypublishedtheHandbookonCustomsClearanceinOctober2015,acomprehensiveguideforthebusinesscommunityinCambodia.Thebasicinformationoncustomsclearanceiseasilyaccessibleforeveryone.TheGDCEisalsoinchargeofthedevelopmentoftheNationalSingleWindow,launchedinJuly2019.Theobjectiveistoallowpartiesinvolvedintrade,transportandlogisticstolodgestandardizedinformationanddocumentswithasingle-entrypointtofulfilallimport,export,andtransit-relatedregulatoryrequirements.

MINISTRYOFINDUSTRY,SCIENCE,TECHNOLOGYANDINNOVATION(MISTI)On25January2020,theMinistryofIndustryandHandicraft(MIH)wasrenamedastheMinistryofIndustry,Science,TechnologyandInnovation(MISTI)attherequestofitsMinister,ChamPrasidh.TheGovernmenthasdecidedtoestablishtwonewunits,theGeneralDepartmentofScience,TechnologyandInnovation,andtheNationalInstituteofScience,TechnologyandInnovation.TheadditionofthesetwounitsaimstomeetthepracticalneedsofrelevantinstitutionssothesectorsofscientificandtechnologicalresearchandinnovationwillimprovewithinthecontextoftheFourthIndustrialRevolution.


Asmentionedearlier,MIST(ex-MIH)isthemainbodyresponsibleforimplementingSMEpoliciesandprograms.Thisresponsibilitywasgivenin2014,whentheGovernmentsplittheMinistryofIndustry,MinesandEnergytocreatetheMinistryofIndustryandHandicraftsresponsibleforissuingoperatinglicenseforSMEs,especiallyfoodprocessingsector.www.mih.gov.khSMEDEPARTMENT

TheGeneralDepartmentofSMEandHandicrafthas3departments:thedepartmentsofSMEs,theoneofHandicraftsandtheSMEplanningandDevelopmentPromotion.ItisresponsibleforSMEmanufacturingsectorandplaystheroleofcoordinationagencytoengagewithlineministriesandasthechairoftheSMESub-committee.Currentprojects:SMEportalproject(GIZ),promotionofCambodiaBrandthroughtheMCQP(MarkofCambodianQualityProducts),someexportpromotionactivities(throughcross-promotion),draftonSMEclustersub-decreeinpreparation,e-market,tradefacilitationproject,TASK(TechnologyAdviceandSolutionsKorea)projecttosharebestpracticesontechnologyrelatedtoagroandfoodprocessingandcapacitybuildingforMSMEs,collaborationtotheASEANSMEPolicyIndex,decentralizationtoProvinces(25sub-nationalProvincialOffices).MSMEsandSMEscanregisteratMISTItogetamanufacturingpermit.TheyreceiveaCertificationofOperationvalid3years,buttheyarenotregisteredattheTaxDepartment.MISTIcannormallyprovideallservicesthroughtheirOfficeofConsultationsandInformation,aone-stopshopserviceatMISTI.Informationandconsultationserviceisfreeofcharge.However,notmanySMEsareawareaboutthisofficelocatedwithintheMinistry.

INSTITUTEOFSTANDARDS(ISC)www.isc.gov.kh

TheInstituteofStandardsofCambodia(ISC)isthebodyresponsibleforthepreparationofnationalstandardsandguidelinesforproducts,commodities,materials,servicesandoperation.ISC,asacorrespondentmemberoftheInternationalOrganizationforStandardization(ISO),cansellandadoptISOstandardsnationally.InrelationwithservicesprovidedtoSMEsandparticularlytomediumenterprises,ISCisprovidingtestingservicesthroughitsIndustrialLaboratoryCenterofCambodia(ILCC).TheyarealsotheCambodianCertificationBody.Theyprovidetrainingandconsultingservicesintheareaofthestandards(ISO9001,ISO20200andGMP).Informationabouttheregulationsarefreeofcharge.Standardsdocumentsareprovidedagainstasmallfee(5USD)forthecopyright.

NATIONALMETROLOGYCENTER(NMC)www.nmc-mih.gov.kh

NMCofferscalibrationservices.Theycover3areas:scientific,industrialandlegalmetrology.Forexample,thelegaldepartmentisresponsibleofverifyingmeasuringinstrumentsusedintradetransaction,verifyingtheproductionofpre-packagesanddevelopingthesystemofunitsinCambodia.NMCreceivedalotofsupportfromUNIDOandreceivedofficialaccreditationofitslaboratoriesforcalibrationservicesinmass,volumeandtemperature.WithSMEs,NMCprovidesconsultationstoassistimplementationofmetrological-relatedtoolsforproductivity,theyalsoprovidetrainingcoursestoselectedSMEsrepresentativesfocusingonbasicqualityissuesconcept,data


andservices.Theytrytoraiseawarenessaboutcalibrationthroughdifferentactivities(training,seminar,workshops).

NATIONALPRODUCTIVITYCENTER(NPCC)www.mih.gov.khSince2004

TheCommitteeforProductivityinCambodiaistheleadpolicydevelopmentagencyforproductivityenhancementatthenationallevel(largefirmsandSMEs.)ItischairedbytheMinisterofEconomyandFinanceandhas18othermembers(ministries,privatesectorandacademia).TheNationalProductivityCentreofCambodia(NPCC)underMIHisthemainimplementationagencyforproductivityenhancementprogramsandpolicies.SME-specificproductivityenhancementprojectsarefragmented,andmostareexternallyfinanced.TheNPCCisamemberoftheASEANProductivityOrganization(APO)thatdirectlyfinancessomemulti-countriesprogram.TheNPCCoffersseminarsandtrainingcourseson5S,Kaizen,GMP,ISO9001andISO20200,ToyotaQualitymanagementandtheGreenProductivityprogram3R(reuse,reduceandrecycle)

MINISTRYOFCOMMERCE(MOC)TheMOCisthegovernmentministryresponsibleforregulatingandpromotingcommerceandtradeinCambodia.ApertheLawonCommercialRulesandRegistration,allbusinessesaresupposedtoregisterwiththeMOC.TheMOCisresponsiblefor business registration and supplying trade-related documents. It also plays an important role as facilitator in tradefacilitationagenda.

GeneralDirectorateofTradePromotion(GDTP)www.moc.gov.kh

• ThisdepartmentofMOCisresponsibleforcoordinationandimplementationoftradeandtraderelatedinvestmentpromotionactivitiesinCambodia.Mainactivitiesare:

• -Collectinformationontheawareness/Preferenceofdomesticproductinglobalmarket

• -Matchmakingbetweendomesticcompaniesandforeignpartners

• -Organizingandparticipationofdomesticandinternationalevents(fairs).

• ItisimportanttonotethattheMOCdoesnotspecificallydoanyexportpromotion.


GO4ECAMLaunchedinJanuary2020www.moc.gov.kh

Thisprojectone-commerceisco-financedbyEIF,UNDPandtheMOCThegoalforthisambitiousprojectistoenhancee-commerceinCambodiaandSMEdigitalizationinCambodiathrough3components:(1)thecreationofanSMEmarketplace(managedbytheMOC).ThegoalistohelpSMEstosellonthisplatform.TheprogramaimstobeasinclusiveaspossiblewithprovisionsforwomenandprovincialSMEsandplanstohavearegulatorysandboxwithlawyersdevelopingspecificregulations.(2)Ebiznestproject(managedbyUNDP)thatwilllaunchanEcommerceBootcamptosupport,throughmentoringandcoaching,around50digitalSMEsperyeartogoonline.Theprogramwillalsoprovidesmallgrants(5000USD)(around25peryear)tohelpthebestofthemtodeveloptheirproject.(3)Launchofan“InvestorDeck”(managedwiththeMOC):toprovidesupportfore-commercestartupstolearnhowtodealwithinvestorsthroughpitchingsessionsandbetterunderstandingonfinancialaspects.Thissub-componentinvolvesthecreationofanE-commerceassociation,initiallyundertheleadershipofMOC.AsupportwillalsobeprovidedtoCambodiaPostfortheire-commerceaudit.NOTE:theprojectaimstobeinclusive(womenandprovincialSMEsarekeytargetsaswell).Inaddition,thegoalisalsotocatchupwithrelatedinternationalstandardswhereCambodiaisparticularlylaggingbehind(consumerprotection,intellectualpropertyprotectionorreturnmanagementstrategies).ARISE+component3hasalsoelaboratedaproposaltocooperateonthisspecificprojectwithMOC.

AIMS(AcceleratingInclusiveMarketsforSmallholders)Startedin2017https://aims.moc.gov.kh/

AIMSisajointprojectwithIFAD(InternationalFundforAgriculturalDevelopment)withacombinedfundingof61million.Theobjectiveistoincreasereturnsfromfarmingforsmallholdersthroughsupportforhighervalueagriculturalproductsandthedevelopmentofassociatedlocalclusters.Italsoaimstomaketheagriculturemoreattractivetoyoungergenerations.AIMSwillworkthrough15provincesand5value-chaincommodities(vegetables,chicken,rice,cassavaandrawsilk).Serviceproviderswilldeliverappropriatebusinessdevelopmentservices(technicalassistance,trainingandfinancialservices).Thesecondcomponentoftheprogramintendstoenhanceaccesstofinanceforsmallholdersthrough“investmentsupport”and“financialservicepartnership”.Avaluechaininnovationfund(VCIF)willprovidetargetedinvestmentincentivesto“firstmover”privateinvestorswhoinvestinnewproductiontechnologiesinthevaluechain.


MINISTRYOFPOSTANDTELECOMMUNICATIONS(MPTC)Theministry is highly involved in the field of startups anddigital economy: it has established a CapacityBuilding andResearchDevelopment (CBRD)Fund topromote themobilizationof young talents and topromote tech-startups in thecountry.TelecomoperatorshaveprovidedUSD6.5milliondollars to this fundand thegovernmenthas contributedanadditional USD 0.5 million. Furthermore, the MTPC and Ministry of Education are working together to promoteentrepreneurshipviatheestablishmentofSmartLabsthroughoutthecountry.Sincelastyear,MPTCorganizestheDIGITALCAMBODIAfair.In2014,theGovernmentestablishedtheNationalInstituteofPosts,TelecommunicationsandInformationCommunicationTechnology(NIPTICT)underthesupervisionofMPTCtoaddressICTresearchandtraining.ItwasgrantedanUS$8millionresearchfundfinancedfromtelecomsectorrevenues.ICTINNOVATIONCENTER(NIPTIC/MPTC)PlannedforMay2020

TheICTinnovationcenteraimstopromoteHRdevelopment,researchandinnovationdevelopmentofICTinCambodia.The7500sqmcenterwillincludearesearchlaboratory,astartupandcoworkingplaceandfacilitiesforpublicandprivateagencieswithanICTfocustocollaborateandnetwork.ForstartupsandSMEs,therewillbeaMakersplace(thefirstofitskindinCambodia)wheretechmachinerywillbefoundwithlaser,IoT,roboticequipmentetc.Trainingwillbeprovidedbyapartner,Herodote,astartupcompany.Thefocushereisonhardware.SMEsarewelcomebutthecenterismorefocusedonstartupsandoncreatingtherightecosystemforinnovationandprojectsthatcanbescaledandreplicated.TechUniversitystudentswillalsousethesefacilities.Symboliccontributionforthecosts.Firstyear,probablyfreeofcharge.

NATIONALINSTITUTEOFENTREPRENEURSHIPANDINNOVATION(NIEI)www.niei-tvet.com

Twotrainingprograms-theNewEnterpriseCreationProgram(NECP)morededicatedtostartups(MSME,poor)and-theEnterpriseDevelopmentProgram(EDP)forentrepreneurs.In2020,thetrainingdepartmentwilllaunchanewcourseon"EntrepreneurandInnovation".Courseswillberestructured.NewProject:TheNationalEntrepreneurshipAward(incollaborationwithKhmerEnterprise)3steps:Provincialcompetitions(thebest5foreachprovincewillcompeteatnationallevel),thentheywillgetmentoringandthewinnerswillwin10,000USD/5,000USDand3,000USD.Criteriaforparticipation:tobeinthe5prioritysectorsincludingtourism,agriculture,tech,manufacturingandservices.

MINISTRYOFWOMENAFFAIRS(MOWA)

MOWAdoesnothaveanSMEdepartmentbut is runningdifferentprograms thatprovide supportandhelp forWomenEntrepreneurs.Theyhave14WomenDevelopmentCenterswherebasictrainingsareprovidedfortrainingoftrainersinwomenentrepreneurships,financialmanagement,financialliteracy,digitaltoolsandBusinessplanwriting.Somespecifictrainingsarealsoprovided(weaving, foodprocessingandbeautysalon).Strongercollaborationwith theprivatesectorshouldmaterialize end of 2020, with aWomen Center in Phnom Penh thatwould be a space for learning, exchanges,networkingandtraining,incollaborationprobablywithCWEA.Inaddition,therearesomespecific“Women’sEconomicEmpowerment”(WEE)projects,specificallytargetingwomenledSMES.Forexample,MOWAwasdiscussingwithADBontransformingsomeoftheWomenDevelopmentCentersintomorebusiness-orientedestablishmentsintheformofPublicPrivatePartnerships(PPP).www.mowa.gov.khSource:interviews


2. Developmentpartners/technicalagenciesMostdevelopmentpartnershavesomeprogramsinrelationwithSMEs,butfewweredirectlyrelatedtoentrepreneurshipandinnovation.Theselastyears,twospecificprojectswereveryactiveinthisfield.MekongBusinessInitiative(MBI)wasanADBprojectsupportedbyAustraliaDFATfocusingonbusinessadvocacy,alternativefinance,andinnovationacrosstheMekongRegiontopromoteSMEdevelopmentand regional linkages through entrepreneurship. They worked with angel investors (Mekong AngelInvestmentNetwork“MAIN”),onfintechandhadalsoatechaccelerationprogramintourismandagro(‘’MIST”and“MATCh”).TheMBIprogramisnolongeractiveinCambodiabuttherearediscussionstorelaunchit.Anothersuccessfulprogramthatjustendedendof2019wastheDevelopmentInnovations(DI)programfundedbyUSAIDthatsoughttoaddressdevelopmentchallengesandsocialimpactthroughtechnology(‘ICT4D) but their activities were targeting more young graduates and below rather than moreexperiencedyoungentrepreneurs.GIZisnowoneofthekeycontributorstoSMEdevelopmentinCambodiawithatleast3projects:MSMEproject,ASEANSMEandtheSMEcomponentofARISE+Cambodia.Supporttobusinessassociationsisalsoprovidedwith,forexample,atechnicalconsultantworkingdirectlywithYEAC.Anotheragencyisalsoveryactive:UNDPis involved inseveralpublic-privatepartnerships.AnMOUhasbeensigned in2018withUNIDOandWorldbridgetosupporttheestablishmentofthefirstinnovativeSMEclusterpark.UNIDO is also involved in the GO4ECAM project of the Government and have recently created anInnovationlabandlaunchedanincubatorprogramBlueTribe.Althoughtheyarequitedynamic,thescopeoftheirinvolvementismorelimitedregardingprivatesectordevelopment.

Table4:ListofDevelopmentpartnersandprojectswithanSMEcomponentDEVELOPMENTPARTNER/PROJECT

SMEFOCUS/Sector

AREAFOCUS SERVICESPROVIDED

GIZ-MSMEIVProjectGiz.de/en/worldwide/17293.html

MSMEandSME(businessowners)Agro(inSiemReapandBattambang)

ValueChainimprovement

TheprogramaimstoimproveaccesstomarketforbusinessownersinAgriculture.Servicesprovided:(1)BusinessDevelopmentSkillsTraining-trainingoflocaltrainersbyinternationalconsultant.Duration(2daysaweek2times),whichisbetteradaptedtolocalneeds.(2)Improvingqualityofpackaging:supportbyinternationalconsultanttoimprovethedesign,marketingandqualityofpackaging.(3)ImprovecapacityofProvincialBusinessAssociationsthroughPPPPlatform(4)Foodstandardskillsdevelopment(withMISTI)Cost:freeofchargeforparticipatingSMEs.


GIZ–ASEANSMEProjectLaunchedinJuly2019Giz.de/en/worldwide/82045.html

MSMEsandSMEsExport-orientedsectors(retail,agro,services)

Accesstoinfo/Export

Regionalproject:AimstosupportSMEinternationalizationbyimprovingaccesstoinformation,accesstoservicesandaccesstofinance.AkeycomponentwillbetheestablishmentofawebportalandaphysicalSMEinfoportalownedbytheMISTI.

GIZ-EUARISEPlusCambodiaLaunchedinJanuary2019www.cambodia-ariseplus.asean.org/

SMEs SMEexportdevelopment,tradeinformationandtradeadvocacy

Theprojecthas3pillars:1- Improvingcustoms,tradefacilitations

andStandards2- Strengtheninginstitutionalcapacities

andimprovingregulatorypractices3- EnhancingPrivateSectorEngagement,

notablyofSMEsandbetterpreparednessforAECsingleeconomicspace.

IFAD(InternationalFundforAgriculturalDevelopment)-SAAMBATPROJECTLaunchedinFebruary2019www.ifad.org

SMEsAgriculture

Roads,financing,digitalskills

TheobjectiveoftheSustainableAssetsforAgricultureMarkets,BusinessandTrade(SAAMBAT)projectistoimprovelivelihoodsbybetterconnectingruralcommunitiestomarkets,technicaltrainingandemploymentopportunities.Thisisahugeprojectamountingof125million.SAAMBATaimstoproductivelyemployatleast4,500ruralyouth,develop500smallandmediumbusinessesandtrainatleast25,000ruralvaluechainactorstousedigitaltechnologyduringthe6years’projectThecomponent“DigitalAgricultureValueChain”willbeconductedbyTECHOstartupcenterwithafundingof10million.

SWISSCONTACTwww.swisscontact.org

SMEwithhighimpact

TechnicalAssistance

SwisscontactistheSwissFoundationforTechnicalCooperation.Theyhave2programsforSMEs:(1)SENIOREXPERTCONTACT:10seniorexpertsperyearcancomeandprovidetheirsupporttoSMEsinCambodia(costislimitedtofoodandlodging).(2)RISEProject:fundedbyUSAID,theprojectprovidestechnicalassistancethroughapoolofvettedconsultantstohelpSMEstobecomeinvestmentreadyandtoassistinvestorsformatchmaking.Assistanceisneededatdifferentlevels.Theinvestorsarealso"partners".

PACT(WEACTProject)www.pactworld.org

SMEsandMSMEs(YoungWomenEntrepreneurs)All

Several WEACTprojectworksexclusivelythroughpartnershipswithSHEinvestments,AsiaFoundation,CWEA,LadySavingGroup,YEAC,JCICambodia,SeveawithWomenVentures,Facebook,ImpactHub,AgileDevelopmentGroup,Wapatoaetc.Programsarecenteredaroundnetworkingstrengthening(JCI,AsiaFoundation.)andskillsbuilding(throughcoaching,mentoring)inordertosupportinternallytheecosystem.

UNDP(INNOVATIONLAB,SMECLUSTER,E-COMMERCE,BLUETRIBE)www.kh.undp.org

Diverse/SME/Innovation

TechnicalSupport

UNDParesupportingsomeveryinterestinginitiativesthroughPPPprojectsandsomeinnovationprojectssuchasINNOVATIONLAB,


EBIZNEST(GO4ECAM),SMECLUSTERprojectandBLUETRIBEincubationproject

CAMBODIAN-JAPANCOOPERATIONCENTER(CJCC)www.cjcc.edu.kh

LocalSMEsandEntrepreneurs

CapacityDevelopmentProgram

TheCJCChasbeenprovidingcapacitydevelopmentservicesformorethan10years.(1)Fullentrepreneurshipprogram(2)Intensivecourses(1to3days)onentrepreneurshiptopics.(3)Businessstudytours(ofteninJapan,toexplorethemarketandfindpotentialpartnersbutnotonlyforSMEs,opentoeveryone).(4)Contractedservicesforpotentialpartnership(5)CJAP:Cambodia-JapanAcceleratorProgram(CJAP)

CBIBUSINESSEXPORTCOACHINGwww.cbi.eu

SMEHomeDecorationandHomeTextile

TechnicalAssistancetoexporttoEurope

FulltrainingonexportcapacitytoentertheEUmarketforalimitednumberofselectedbusinesses.Trainingson(1)BusinessAuditandActionPlan(2)ExportCapacityBuilding(3)MarketEntry.

CAVAC(DFAT)Cavackh.org

Farmers&SMEsAgriculture

TechnicalAssistance

CAVAC’sgoalistoincreaseproductivityandincomesforsmallholderfarmersinCambodia.Ratherthanworkdirectlywithfarmers,mostoftheiractivitiesaredeliveredinpartnershipwiththeirsuppliersandregulators,thegovernmentandtheprivatesector,usingamarketsystemsapproachtospreadknowledgeaboutnewagriculturaltechniques.

ACRA(AcceleratingE-commerceRegulatorAdoption)–DFAT

SMEsE-commerce

RegulatoryAspects

ThisnewprojectoftheAustralianCooperationaimstoexplainanddisseminatethee-commercelawanditsstrategyinCambodiabyraisingawarenessanddevelopingtheappropriatetools.Theyaimalsotosupporttheregistrationofe-SMEs

3. Businessassociations

BusinessAssociationsareplayingakeyroleintheSMEecosysteminCambodiaandtheyareevolvingalot.Themainchallengethatbusinessassociationsarefacingistheirlimitedfunding.Mostofthemareself-financed,withlimitedrevenuesderivedfrommembershipfeesorservicesprovided.Theyalsohavealimitednumberofprofessionalstaffs.Nonetheless,withthesustainedgrowthoftheeconomy,theseassociationshaveevolvedovertimeandhavebeenabletogrowtheirmembersbaseaswell.Someofthemarealsosupportedfinanciallybyinternationaldonorsordevelopmentpartners.ThemainassociationsdirectlyinvolvedwithSMEsandMSMEsaretheFederationofSmallandMediumEnterprises of Cambodia (FASMEC), Young Entrepreneurs Association of Cambodia (YEAC) andCambodiaWomenEntrepreneursAssociation(CWEA).BilateralormultilateralassociationssuchasforeignChambersofCommerceareusuallymoreinvolvedin tradepromotion inboundandoutboundwith their respectivecountries,but theiractionregardingtrade(businessdelegations,tradepavilions)isoftenlimitedandverytargeted.


Sector-relatedassociationsarenumerous,andsomearelackingvisibility(nowebsite,onlyFacebook)astheycanbequitesmall.TheGarmentManufacturersAssociationofCambodia(GMAC)isthemostwell-known one. There are also associations in the hospitality sector, logistics and agro-industry such asCambodiaTourismFederation(CTF),CambodiaAssociationofTravelAgents(CATA),CambodiaLogisticsAssociation(CLA),etc.Aside from these “classic” types of business association, there are interesting associations such asBusiness Network International (BNI), Junior Chamber (JCI) or the recent Global EntrepreneurshipNetwork(GEN).Theseassociationsbenefitfromstronginternationalprocesses,networksandsupportwhile keeping their own local identity: a blend of international standards and local flavor. Lessintimidating than the international organizations, members usually can build their soft skills moreefficientlyastheyfeelina“safe”environment.Businessassociationsareplayingacrucial role in informationdissemination.Theyareoften the firstsourceofinformationforSMEsandmicro-enterprisesregardingbusinessnews,governmentregulationsandinitiatives,compliance,taxincentives,specifictopicsofinterests(energy,etc.),sometimesspecificprograms dedicated to SMEs. Information is disseminated through e-mail (newsletter), socialmedia,Telegramgroup(verypopularwithlocals)orthroughbusinessmeetings,formal(breakfastorluncheonpresentation,workinggroups,seminars,conferences)orinformal(networking,galadinner,Awards).Business associations also play an important role in advocacy in providing relevant feedback to theGovernment, through Public-Private sector forums or directly with the Government. The followingassociationsarethemostrecognizedonesandhaveadirectlinkwithSMEs.Thelistisnotexhaustiveandmightneedtoberefinedtoincludemoresectorassociationsiftherearespecificprogramstodisseminate.Alsonotethatthepricinginformationmayhavechangedsincedatawascollected.Table5:ListofBusinessAssociationsinvolvedwithSMEsBUSINESSASSOCIATION

SMEFOCUS(Beneficiaries)

AREAFOCUS SERVICESPROVIDED

CCC(CambodiaChamberofCommerce)www.ccc-cambodia.org

MSMEandSME Advocacy,businessdelegationandmatchmaking,participationtofairs

TheCambodiaChamberofCommerceisopentoanybusinessofanysizeinCambodia.Therearenowalso12provincialchambers.TheCCCisthekeypartnerforinternationalbusinessdelegations.Theyorganizematchmakingsessionsandparticipationtointernationalfairs.Theyworkcloselywithalltheassociationstodisseminatetheinformationandcanorganizeinfosessionsaboutexportmarketsaswell.

FASMEC(FederationofAssociationofSmallandMediumEnterprisesofCambodia)Foundedin2010www.fasmec.org

MSMEandSME Advocacy,Businessinfo,promotion

FASMECisfocusingonSMEs,workingcloselywithMISTI.ThefederationwascreatedwiththeaimofpromotingthegrowthofsmallandmediumenterprisesinCambodiathroughtheintegrationofregionalandglobalmarkets.OneoftheirkeyrolesistopromotelocallymadeproductsinCambodia.Mostoftheir300membersareregisteredandtheyadvocateformorecomplianceamongSMEs.TheyprovideloansthroughtheirownMFItotheirmembers.Theyareveryactiveatadvocacylevelbyco-chairingthePrivateSectorWorkingGrouponSME.Theyalsoorganizetrainingfortheirmembersondifferenttopicslinkedtointernationalization.COSTS:Membershipfee


YEAC(YoungEntrepreneursAssociationinCambodia)Yeacambodia.org

SMEregistered,youngentrepreneurs

Network,businessinfo,training

ListofservicesprovidedtoSMEs(1) bizinfo.com.kh-Informationplatform-currently70-

80%updated.Nowaccessibleforallbutinthefuture,probablyasubscriptionwillbeneeded.Alotofinformationcanbefoundsuchastemplates(policy,companyregistrationinfo).Theyalsohaveatelegramgroupandatelegramchannel-bothinEnglishandinKhmer

(2) Systemofreferrals-YEAChave315membersand80%areSMEs

(3) BusinessmatchingdoneonAgrofoodprocessingfair(4) AccesstoadditionalmarketsthroughtheASEANYE

Association(5) TrainingprogramonTNA(TrainingNeed

Assessment)3weeks-trainingonmanagementperformance,tax,financialmanagementfornon-financepeople...5trainingperyear(1-2days-100USDperday)

COSTS:100USD/adayfortrainingCWEA(CambodiaWomenEntrepreneursAssociation)www.cweacambodia.org

MSMEandSME Network,businessinfo,training

CWEAisassociatedwithmanydonor-fundedprograms(CBI,Seniorexpert,PACT).Theyprovideastrongnetworkandgoodinformationfordissemination.Theyorganizealsotradeshows,businessmatching,referrals,etc.Morespecifically,theyhaveaninformal"BUSINESSCLINIC"wheretheycanoffersomesolutionstotemporaryproblems(providedbytheteamandespeciallybythedirectorONIELUNA)-Workshopsareorganizedonentrepreneurialskills(HRissues,DigitalmarketingandLeadership)COSTS:Businessclinic:free/20-30USDperworkshop-BusinessMatching(ifoninvitation,nocost)-MembershipFee:125USD-Now680members

EUROCHAMCambodiawww.eurocham-cambodia.org

SMEregistered Advocacy,businessinfo,network

EuroChamistheleadingwesternbusinessassociationinCambodia.TheirmemberbaseincludesalsoCambodianbusinesses:mostlyprominentonesbutalsodynamicsmallbusinesses.Theyhavesectoralcommitteesveryactiveinsectorslikelogistic,tourism,agroandtheyplantohavesoonanSMEcommittee.TheresultsoftheworkofthecommitteesarepublishedintheWhiteBookthatpresentstherecommendationsoftheprivatesectorfortheGovernment.EuroChamalsoprovidesbusinessservices,trainingandisanactivecontributortothepublicandprivatedialoguewiththeGovernment.Membershipfee:370USDforSMEs

CLA(CambodiaLogisticsAssociation)PreviouslyCAMFFAwww.camffa.org.kh

All Advocacy,trainingandnetwork

Inadditiontotheiractivitiestopromotefreightforwardingingeneral,CLA(ex-CAMFFA)aimsalsotopromoteengagementinenterprisesrelatedtothefreightforwardingindustrybyrail,road,seaandair,includingcustomsclearanceandwarehousing.Forexample,CLAofferscomprehensivetrainingonExportandImportsProcedures.Thetargetaudienceisnotonlyprofessionals,andthetrainingisusuallyveryusefulforSMEstobetterunderstandtheseprocedures.COSTS:Trainingcostsforexportandimportsproceduresseminar:90USDfornon-membersoftheassociation.


CamBFA(CambodianBusiness&FranchiseAssociation)Cambfa.org

SMEoranypotentialcandidate

Businessinfo,fairs,training

TheassociationwasjustcreatedinJune2019andaimstodevelopSMEsinCambodiathroughfranchising.ThemaingoalbeingtomaximizefranchiseactivityinCambodia.Organizationofgrouptriptolearnaboutnewproductsthroughthevisitsoffairs.CoursesareprovidedandtheyhavesignedanMoUwithaconsultingcompanytoprovidetrainingandcoachingonthetopicsrelatedtofranchising.

JCICAMBODIA(JuniorChamberInternational)www.jcicambodia.com

IndividualsandSMEs CommunityandBizDev

JCIispresentin125countries.TheyarepresentinCambodiasince2010with6chapters.TheyaremainlyinvolvedinCommunityDevelopmentandaimtoempoweryoungpeopleforchange.IncollaborationwithYEAC,theyorganizetheverypopular“EntrepreneurAwards"andtheyhavedifferentprogramstoempoweryoungentrepreneurssuchastheYoungLeadersprogramandtheentrepreneursquarethattargetsstartupswithafocusonexperiencesharing).

BNI(BusinessNetworkInternational)CambodiaChapterwww.bnicambodia.com

SMEregistered Networkreferrals

BNIconnectisaninternationalorganizationwith9000chaptersaroundtheworld.InCambodia,thecountrychapterhas18chaptersandaround600members.Theobjectiveistogrowbusinessthroughreferrals.Allchaptersfollowstrictrulesregardingprocesses,organization,commitmentandstandards.Theresultisveryeffective.TheBNIUniversity,aneducationplatform,providesfreetrainingtotheirmembersandtheirmembers’onlydirectory(localandinternational)isveryusefulandeffectiveforfindinganinternationalbusinesspartnerorforprovidinginformationregardingatargetmarket

WOOMENTUMCambodiaApp.woomentum.com

WomenEntrepreneurs DigitalCommunityforWomenentrepreneurs

ThechapterinCambodiawascreatedin2018.InitiallycreatedforCrowdfundingbutitdoesnotworkinCambodia- Digitalplatform,accesstointernationalnetwork.- WomenTechmedia–Interviews,forum,

publicationstoraiseawarenessabouttech.–comingsoon

- TraininginDigitalSkills(generalandcustomizedtrainings)comingsoon

Source:author


Box3:BNICambodiaChapterCASE:BNICambodiaChapter,InternationalStandardsandLocalFlavor:arecipeforsuccessBNICambodiachapterisagreatexampleofhowanassociationcanhelptheirmemberstochangetheirmindsetandbuild their skills differently. The BNI network is international and works everywhere with the same very strictprinciples.Membersneedtoshowastrongcommitment.Iftheyfailtocomplytoooften,theycannotstayasmembers.Mandatoryweeklymeeting,compulsorytraining,obligationtovisitthebusinessofothermembersandhavingaccesstoanonlineBNIUniversityinEnglishareamongsomeoftherequirementsneededtobeamember.Eachchapterhasonlyonerepresentativeforacategoryofbusiness(sothatthereisnocompetitionbetweensameserviceproviders).InCambodia,thereare21chaptersandmorethan600members.Ineachchapter,membershavetheobligationtodoreferralsandduringeachweeklymeeting,theypresentthemselvesveryshortlyandreportonthenumberofreferralsdone.ThisisanimportantKPI,trackedonthemembersappBNIConnect.Everyweek,2companiesaregivenmoretimetopresentpubliclyabouttheirbusiness.ThemostmotivatedmemberscantakeadditionalresponsibilitiesbybecomingBNItrainer,coordinator,chapterpresident,etc.Thismethodmightnotbesuitabletoeveryone,butitisveryeffectiveforlocalSMEsinacountrylikeCambodia.SMEsfindaverysupportiveenvironmentwheretheyareallequallytreated,andtheyhaverulestoabidestrictly.Theybuildself-confidence through training, they develop their presentation skills, they learn about partnership andcollaboration.MeetingsareinKhmerlanguageandthereisaverystrongmotivationalaspectthroughafamilyspirit.Regardinginternationalization,thenetworkgivesplentyofopportunitiesthroughtheMembersApp.InSingapore,theyofferalsoadditionalserviceslikefundraising,financialadvisoryorcorporatefinance.BNIstartedaround5yearsagoinCambodiabuttookoffonlytheselastcoupleofyearswiththegrowthofthemiddleclassandtheemergenceofyoungentrepreneurs,dynamicandmoreeducated.TheAnnualMembershipfeeis528USDandaweekly15USDfeeforthemandatorymeeting.ItisnotcheapforSMEsbut,accordingtothemembers,theyreallycangrowindeedbusinessandtheylearnalotalongtheway.Source:Interview

4. PrivateSector TheGovernmenthasnotbeenasignificantinvestorinservicedeliveryinCambodia,buttheprivatesectorwasnotveryactiveneither,exceptforsupportingthetechstartupsector.Youth,socialimpactorwomenareothertargetedcategorieswherewefindmanyinitiativesledbynot-for-profit/socialenterpriselikeSHEInvestmentorImpactHub.Untilrecently,thissupportdidnotreachtraditionalindustrialsectors.Regardingthetechecosystem,allstakeholdersareplayinganactiverole.Largetelecomcompaniesareheavilysupporting theecosystemthroughpartnerships, sponsoring, incubatorprogramsandventurefunds.Forexample,SMARTAXIATAfinancesthetwowell-knownSmartStartandSmartSparkincubatorprograms(managedbyImpactHub),createdaventurecapitalfund(SADIF),investsintechstartupsandsponsorstheTechnoIncubationLab(ITC),NIPTICTcenter,BarCamp,YoungEntrepreneursAwardandICTawards.ToyotaandGrabarealsovisiblesponsorsofthetechscene.FromtheCambodianside,localconglomerateslikeRoyalGroupcompanythroughCellcardandEzecom,itstechnologysubsidiariesarealsosponsoringevents.Wordbridge(WB)ledbyOkhnaSearRithytookadditionalstepsthroughthecreationofaVentureCapitalFunddedicatedtoSMEs,OOCTANEandthroughtheestablishmentofthefirstinnovativeSMEClusterParkwhichmaybreakgroundin2020.ThisSME


clusterparkisoneofthemostinnovativeprivatesectorinitiativesdevelopedforSMEsoutsidethetechsector(seedetailssection).Thereareotherpositivesignsofchange:localcompaniesareseeingmoreandmoretheopportunitiesthatcanbeofferedbydevelopingservicesforSMEbusinessowners.WiththerealityoftheAEC(ASEANEconomic Community), more business owners are looking to improve their processes and theirproductivityinordertoexpandtoneighboringmarkets.Capacitybuildingistheareawherewecanseesomeprogressaswellasintheareaofservicesrelatedtocompliance(businessregistration,taxation).Opportunities exist, especially if these services focused on the category of high growth mediumcompanies.Services linked to access to finance have seen also some developments thanks to Fintech seen as adynamicsectorinCambodia.Iftraditionalfinancialinstitutionsarelaggingtoinnovateandtoproposetailored(andinnovative)productstoSMEs,somestartupsarealreadyofferinginterestingsolutionstohelpSMEsaccessfinanceandbuildacredithistory.For trade and export-related services, progress seems to be slower. Existing service providers areservicingbigandsmallexporters,buttherearenotailoredprogramsreallyadaptedtoSMEneeds.SMEswill continue to have a competitive price disadvantage dealingwith these service providers: quality,certification,standards,packaging,exportingorimportingandgettingaccesstointernationalmarkets.WhatisreallymissingisafullpackagetosupportSMEsforexportorhavingmore“ExportConsultancy”servicesavailableatanaffordablepriceforSMEs.Privateserviceproviderswillbelistedintheircorrespondingcategoryinthenextsection.II. TYPESOFSERVICESPROVIDED

1. Accesstoinformation

Business Information services can be defined as “A service that presents facts and interpretations toindividualorinstitutionalclientsinresponsetoabusiness-relatedissue.Itcontributestoinformed/rationaldecisionmakingforentrepreneurialgainsofitsusers.”Informationcategories/typologycanbeclassifiedasfollows:

1. Businesscontacts(marketingpartnersalongthevaluechain,technologyproviders,BDSe.g.qualitystandardcertificationproviders,publicsupportprograms,etc.)

2. Generalbusinessinformation(registration,procedures,laws,taxation,tariffs,etc.)3. Sectorstatistics(targetmarkets,quota,prices,etc.)4. Potential and trends (market intelligence, e.g. forecasts related to changes in demand,

supplyandprices)

AccesstoinformationcanbecomplicatedandchallengingforSMEsingeneral.InCambodia,veryfewwebsites are adapted to local SMEs. Local SMEs mentioned the “lack of digestibleinformationandinsightrelatedtomarketintelligence,regulationsandbusinessopportunities”asacriticalconcern.Still, informationisnotperceivedasadistinctservicetomembers,butmostlyprovidedonanad-hocpersonalcontactbasis,orasanembeddedpartofmorecomplexqueriesonmarketopportunities,exportregulations,importquota,etc.Herearesomegeneralsourcesofinformation,usefulforentrepreneurs:


Websites SMEBusinessInformationportals(KhmerandEnglish)• NgeayNgeayisabusinessinformationplatformlaunchedbySHEInvestmentsandcustomizedtothe

needs of women entrepreneurs. The focus is to provide guidance for registration and businesscompliance.ThecontentisinKhmerandEnglish,simpleandstraightforward.ThewebsitehasbeeninitiallydevelopedwiththesupportofDevelopmentInnovationandhasbeenrevampedrecentlytoincludenewtoolsandfeaturessuchasane-learningplatform.

http://ngeayngeay.co/• BizinfoistheBusinessInformationCenterlaunchedbytheYoungEntrepreneursAssociationwith

theinitialsupportfromMekongBizInitiative.Ithasbeenrelaunchedrecentlyandupdated.BizinfoaimstobethepreferredsourceofinformationandopportunitiesforMSMEsinCambodia.Thesiteprovides easy access to reliable and updated information related to laws and regulations aboutregistration, licensing,market opportunities, access to finance and training. Business guides andtemplateshavebeenaddedaswell.

http://bizinfo.com.kh/• TheCambodiaChamberofCommerce(CCC)websiteisnotprovidingdetailedbusinessinformation.

However,thesiteprovidessomebusinessnewsandaccesstotheirextensivemembers’directory.www.ccc.org.kh

• BusinessCambodiaisanonlinemediathatfocusesonsharingbestbusinessnewsandknowledge.Createdsince2013,thisonlineplatformhasevolvedfromabusinessmagazineintoapopularwebsitetoinspireyoungentrepreneursbyprovidingusefulresourcesforstartingandleadingtheirbusiness.AvailableonlyinKhmer.https://www.business-cambodia.com/

The first two websites provide clear and updated information and advices for SME to register andnavigate into the essential Government regulations. They were supported initially by developmentpartners.Generalinformation• B2BCambodiaisanonlineresourceofferingbusinessinvestors,ownersandmanagersinCambodia,

andthoselookingtosetupabusinessinCambodia,witheasilyaccessibleinformation&adviceforsetting up, opening and managing a business. It includes a section on Business Registration. Inadditiontomarketoverviews,featurearticlesandnews,averycomprehensiveCambodianbusinessdirectoryisalsoavailable.https://www.b2b-cambodia.com/ThesiteisinEnglishonly.

• GeeksinCambodiaisaplatformdeliveringdailynewsinCambodiaandAsia,focusedonTechinCambodia, Startups and Social Media. It is a central point for information on the organization,programs and people in the Tech Hub ecosystem. The site is in English and partly in Khmer.http://geeksincambodia.com/

Bothwebsiteswerefoundedbyexpatriates.TheyarefillingsomeneedsbutmaytargetlesslocalMSMEs.InfoCenter• OfficeofConsultationandInformation(MISTI):TheMinistryofIndustry,Science,Technologyand

Innovation (MISTI) is normally providing consultations for SMEs at the MISTI. There is no


appointmentneededandtheycanprovidesupporttoSMEswillingtoregister.However,fewSMEsareawareaboutthispossibility,andtheOfficeisnotservicingmanyofthem.

• SME info Center (MISTI): the ASEAN SME project on SME internationalizationwill support thecreationofanSMEinformationCentertogetherwithotherrelevantlineministriesandmanagedbyMISTI.ApossiblelocationcanbeinAEONMall.

BusinessassociationsTheyareplayingaveryimportantroleindisseminatinginformation,formallyandinformally.Theyoftenareafirstandveryimportantpointofcontactfortheirmembers.

2. Buildingskills:capacitydevelopmentprograms A lot of short trainings areprovidedbydifferentorganizations aspart of theirprogramsandon therequestoftheirmembers(businessorganizationsareofferingforexamplefinancialliteracyprogram).FullCapacitydevelopmentprogramsareprovidedbypublicandprivateserviceprovidersusuallywiththesupportofinternationaldonorsorthesponsorshipofbigcompanies(foracceleratorprograms).Veryfew have a long-time track record, but SHE investments, CJCC, Impact Hub, Small world and SocialInnovationLabarethemostwell-knownones.TheNIEIoffersentrepreneurshipprogramssinceaverylongtime,butittargetsmoremicro-enterprises,poorpeopleanddrop-outs.Localincubators/acceleratorsandhubsaremainlyfocusedontheideationandstartupphases,notreallyontheexpansionandgrowthphases.Alotofthemarealsomoreinterestedinthedigitalsector(becauseofthelowcostofentry).ConnectionsbetweenentrepreneurshipsupportorganizationsandtraditionalSMEsfromothersectorsareweak.Below are some of the most comprehensive capacity building programs delivered by well-knownproviders,butthelistisnotexhaustive.NotealsothatveryfewofthemareopentothegeneralpopulationofSMEs.TheBIOprogramfromtheCIC(quiterecent)andCambodiaMasterClubarelessexclusiveintargeting theparticipants,butyoumustpay foramembership fee(included in theprogram) tohaveaccess to their courses. However, they accept everyone although their respective businessmodel isdifferent.Bothareself-financedprograms,buttheBIOprogramisco-financedbyCICwhiletheCambodiaMasterClubisbasedonalife-longmembership.Onlyafewserviceprovidersaredeliveringcoursesintheprovinces(SHEinvestments,NPCC,YEACinSiemReap,MSMEprogram)withusuallyalimitedscopeandrange(duetoalackofdemand).Togetabetteroverviewandforcomparison,wealsohaveaddedat theendof thetablesomeof theGovernmentprogramsalreadymentionedinthePartII,Chapter1


Table6:ListofCapacityDevelopmentProgramsforSMEsCOMPANIES SMEFOCUS

(Beneficiaries)AREAFOCUS SERVICESPROVIDED

SHEINVESTMENTS2015www.sheinvestments.com

Women-ownedMSMEs

IncubationandAccelerationProgram/Financing/Businessinfoplatform

(1) NgeayNgeay:abusinessinfoplatforminKhmer,customizedforwomen.Justrelaunchedwithnewtools(e-learningplatform,tutorials

(2) FullIncubationProgramfollowedbyanAcceleratorProgram.Deliveryin6provinces.

(3) InvestmentReadinessProgram(pilotprogram)withasmallgroupalreadyaccelerated.Thebestoneswillreceivesomefinancing(fundingorco-financing)

(4) KOTRArielProject:thegoalistodesignabasicappforfinancialrecordinginKhmertoteachinformalbusinesstorecordtheirexpenses.

(5) AnnualSHEConferenceCOSTS:Adepositisrequiredtoensuretheattendance(100USDto500$dependingontheprogram)

IMPACTHUB2014Phnompenh.impacthub.net

YoungEntrepreneursandStartups

Socialentrepreneurship:pre-accelerationprograms,communitybuilding

ImpactHubispartoftheGlobalImpactHubnetwork.(1)SmartStart(2)SmartSpark(3)IncubatorPrograminTourism(4)IncubatorPrograminAgriculture(Dakdam)(5)HECHubEntrepreneursClubwithongoingmentoringandnetworkofallthealumnioftheincubatorprogram.New:ExtensionofImpactHubinBattambangandSiemReapandprogramtoprovideprofessionalmentorshipforstartupswhoalreadyhavesucceeded.COSTSforthemoment,everythingisfreeofchargeforstartups.Sometimes,participationfeeforsomeconferences

CAMBODIAINVESTORSCLUB(CIC)(2013)Cic-association.com

LocalSMEs,members

AcceleratorProgram CICisamember-ownedorganization,closelyrelatedtoYEAC.Theiractivitiesare:(1) ProvideAccesstofinancetotheirSMEMembers

acrossallsectorsthroughcommunity-basedfinancing

(2) BIOProgram(BeyondInvestmentOpportunity):Pre-acceleratorandAcceleratorprogramforlocalSMEs(opentopublic).Firstphase:trainingon9modules.Largebatchof100companies.Afterthe9modulescourses,companieswillgothroughadiagnosticsystemwithamentortoidentifytheirweaknessesandwillenterthepre-acceleratorprogramwithpitching,bootcamp,mentoring.

(3) FundmanagementandadvisoryservicesCOSTS:BIOprogram:participationfee750USD(500+250membershipfee)


WOMENINITIATIVEPROGRAMFROMBREDBANK(2020)www.bredcambodia.com

WomenEntrepreneurs


(1) INFORM:Breakfasttalksondifferenttopicsincludingpublicspeaking

(2) EMPOWERwithShineAcademy:11independentbusinessmodulesof3hourstieredsessioneachonsoftskillsneededtogrowthebusiness(6onleadershipandmanagementand5oncommunication)basedontheinterviewsandfeedbackof100Khmerfemalebusinessowners.3categories:Businessowners/Management/Staff

(3) WomenBusinessAward(comingsoon)(4) Specificfinancialsupportforwomen

entrepreneurs(emergencyloan,limitedcollateralsfornewloan,suspensionofinterestpaymentsfor3monthsduringpregnancy)

COST:60USDforeachsession(50%forBREDcustomers)

CEOMASTERCLUB(morethan10years)www.ceomasterclub.com

LocalEntrepreneurs-FamilyBusiness

CapacityDevelopmentProgram/Financialadvisory

(1) Coachinginstitution-Throughtheirlifetimemembership,familyownersandentrepreneurscangetaccesstothe12modulesof2dayseachtostrengthentheirentrepreneurshipskills-Verycomprehensiveprogramthatincludesallaspectsofentrepreneurship:businessplan,SOP,HR,Taxation,corporategovernancebutalsopublicspeakingskills

(2) CEOMasterClubInvestment:businessadvisory,fundmanagementandassetmanagement(juststarted)

(3) CEOAwardsNight

CostsincludealifelongcoachingandcounselingthroughalifetimemembershipAround1150members

LEADERSHIPANDDEVELOPMENTCENTERLdcasia.com

SME/CorporateStaff/wealthyfamilybusiness


Shorttermcourses(2days)forSMEsonLeadership,salesandMarketing.CourseonEmotionalExcellenceLeadership.Target:MiddlemanagementuptoC-levelEagleClassbyTHECOMPANY101Theobjectiveistobringatsomepointthecompanypublic.Veryintense3daystrainingcourseonleadership,IPOvaluation,BusinessPlanandstrategy.After,possibilitytohelptofindinvestorsandfollow-uponrequest.Wanttoencouragecompaniestobecomefullycompliant.Thisexclusivecoursecanleadtosupportforequityinvestment.

CAMBODIAN-JAPANCOOPERATIONCENTER(CJCC)(morethan10years)

LocalSMEsandEntrepreneurs


(1)FullentrepreneurshipProgram(6months,3days/week)(2)Intensivecourses(1to3days)onentrepreneurshiptopics.(3)Businessstudytours(ofteninJapan,toexplorethemarketandfindpotentialpartnersbutnotonlyforSMEs,opentoeveryone).(5)CJAP:Cambodia-JapanAcceleratorProgram(CJAP)


COSTS:480-500USDforthefullentrepreneurshipcourse(6months)-Intensivecourse(1to3days)50to150USD

NUMSOCIALINNOVATIONLAB(morethan10years)www.num.edu.kh

Diversified:Enterprises,Government,students

AcceleratorandGlobalInnovationManagementprogram

JustlaunchedapremiumMasterprogramonentrepreneurshipandinnovation(new)-Cost:3700USDfora15-monthsprogramNationalBusinessModelCompetition(BMCstartupaccelerator)andMekongBusinessChallenge.Thesetwoaremoreforyounggraduatesanduniversitystudents

ANAKOTASIAACADEMYAnakotasia.com

Startups Mindfulnessleadershipdevelopment

TrainedalltheparticipantsofImpactHubBootcamp.Averyinterestingpointofviewonhowtobecomeamindfulleader.

NPCCNATIONALPRODUCTIVITYCENTER(MISTI)SINCE2004www.mih.gov.kh

MoremediumenterprisesMainsectors:Industry,Agro

CapacityBuildinginProductivity

Seminarsandtrainingcourseson5S,Kaizen,GMP,ISO9001andISO20200,ToyotaQualitymanagementandtheGreenProductivityprogram3R(reuse,reduceandrecycle).Multi-countriesprogramisfullyfundedbyAPO,otherwiselocalseminarsaretakencarebyNPCCstaff.• Standardseminars(3days),participantspayonly

theorganizationcostsandAPOpaystheexpertcosts.

• In-housetraining(5-10days):fulldiagnosticandimplementationprogramtobuildinternalcapabilityofthecompany.Veryefficientbutlessrequestedandnotsomanystaffcanprovideit.

TrainingsareinPhnomPenhwhilebasictrainingisprovidedinBattambang,KampongCham,SiemReapandKampongSom,duetolimitedSMEscapacitiesintheprovinces.COSTS:Costsarelimitedforthe3-daysseminar.Thein-housetrainingcanbecostlierbutisalsomoreefficient

SKILLSDEVELOPMENTFUND

SME Financingfortrainingprograms

Costsharingmodel(financiallyorin-kind)-ContributionfromtheSkillsfundshouldbelessthan2000USDperstudent.PrioritywillbegiventotrainingprojectsthatarejointlydevelopedanddeliveredbyTVETschools/trainingprovidersandcompanies,withsubstantialpracticeatindustry/workplace.Prioritywillalsobegiventotrainingprogramsthathavesubstantialin-kindandfinancialcostsharingbyschoolsandcompanies.

TECHOSTARTUPCENTER(MEF)

TechStartups(earlystagebusiness)

AcceleratorProgram TAP(TechoStartupAcceleratorProgram):TechnicalMentoringandassistance.Benefits:freeaccesstoco-workingspace(Smallworld),freecomputation(IaaS),mentormatching,face-to-facemeetingandoneyearfreewithBanjhi,datacenterprovided(cloudservice),paymentdigitalprovided(withSandbox).COSTS:Freeofcharge

NATIONALINNOVATIONANDENTREPRENEURSHIPINSTITUTE(NIEI)

SMEsandMSMEs TheNIEIprovidesessentially2coursesforSMEs:- ANewEnterpriseCreationProgram(NECP)more

dedicatedtostartups(MSME,poor)- AnEnterpriseDevelopmentProgram(EDP)(6

months).Courseswithmentoring,coaching.


In2020,thetrainingdepartmentwilllaunchacourseon"EntrepreneurandInnovation".Courseswillberestructured.COSTS:Depends.Paidclass(1-weekcourse150USD)orsometimeswhenpaidbyDevelopmentPartners,freecourses.Usuallythefreecourseattractsmorepeople.

Source:AuthorBox4:Docapacitydevelopmentprogramswork?

Box:CapacityDevelopmentPrograms-Dotheywork?

SHEinvestmenthasdoneastudytoassesstheimpactoftheirincubationprogram.Theresultisverypositivewithmostcompaniesincubatedwhichperformedquitewell.Forexample,oneoftheirsolarcompany’srevenueincreasedfromapprox.10,000USDpermonth(2016)to28,000USDpermonth(2019).Theirstaffincreasedfrom5to22duringthesameperiod

Yes,capacitydevelopmentprogramshaveanimpact:theinvestmentinthesecompanieswassignificantbutthereturnsaswell.OnemillionUSDwasputintosupportingentrepreneursthroughvariousprogramsthroughSHE,andtheincreasedcollectiverevenueofabout180graduatessurveyedwas3millionUSD.SHEwillexpandtheirmethodologywithapartnerinMyanmar

Source:Interview

3. Accounting,taxationandlegalsupportservices(suchasbusinessregistration)

ThistypeofbusinesssupportservicesisnotdifficulttofindinCambodia,butitisstillexpensiveforverysmallfirms.However,theyareincreasinglyneeded.ThereisanincreasingpressurefromtheGovernmenttoformalizetheeconomy.InordertobenefitfromtheseveralincentiveslaunchedbytheGovernment,SMEsneed to register andbecome compliant. This section includes recommendations fromSMEsonadvicetheywouldgiveothers.Referralsfromfriends,peersandbusinessassociationsareusuallythequickestwaytochooseaserviceproviderifanSMEdecidestogoformal.Businessassociationsrefermostlytotheirownmembers,buttheyareagoodsourceofinformation.Businessregistrationisnormallyquitestraightforward,andmanycompanies should be able to provide this at a normal and competitive cost. HR, accounting and taxservicesarenotthatstraightforward,especiallyifanSMEwantstoapplyforsometaxincentives.ItisrecommendedtooutsourcethisserviceifSMEsarenotabletohaveafull-timeaccountant.Accordingtosomegrowingbusinesses,itcanmakeabigdifference.Withregardtobusinessregistrationandtaxservices,manySMEschoseinthepasttogothroughinformalserviceproviders (“intermediaries”).Although this solution isoftencheaper, challengescomeusuallylaterwhenthecompanywantstogrow,andtheownerrealizesthattheregistrationwasnotproperlydone.Therefore,therecommendationwouldbeindeedtoseekseveralrecommendations,tocross-checkandtogothroughregisteredprofessionals.Thenewsingleonlineregistrationportalshouldhelpmakethewholeprocessmucheasierforeveryone.Belowaresomeexamplesofserviceproviderswhoaredifferentiatingthemselvesbyofferingdifferenttypesofproducts,packagesor additional services in this field.One isparticularly impressive:BanhjistartedwithafreeaccountingsoftwareforMSMEstoendupwithcomprehensivesolutions(accounting,


bookkeeping,digitalpaymentsandacustomizedfinancingplatform)totacklethechallengeofMSMEsinaccessing to financing. The below list is far from being exclusive and as mentioned, it is stronglyrecommendedtolooktodifferentreferralsfrombusinessassociationsandfriends,knowingthatsomebusiness providers will target more small foreign business owners (Belaws, Cambodia InvestmentManagement)whilesomeothersoffermixedservices(localandinternational).Table7:Accounting,Taxationandlegalsupportserviceproviders

COMPANYNAME TARGET AREAOFFOCUS SERVICESPROVIDEDCAMBODIASTARTUPADVISERS(CSP&ASSOCIATES,DONASCO&CO,ABACUSIP)2019advisers.tech

SMEs,TechStartups

Advisoryfirm CambodiastartupAdvisersisanallianceofleadinglegal,tax,andintellectualpropertyfirms,servicingthe360degreeneedsoftechfirmsinCambodiaCambodiaStartupHandbookisthefirstpublicationspecificallywrittenfortechnologystartupsinCambodia:writteninplainEnglish,thehandbookisfornon-specialistsandaimstobeapracticalreferenceguideforCambodia’sentrepreneurs.

BELAWSCAMBODIAAUGUST2019www.belaws.com

DiversifiedbutusefulforSMEs(cheaper)

LegalTechPlatform BelawsistheleadinglegaltechplatforminSouth-EastAsiawithpresenceinThailand,Cambodia,Vietnam,SingaporeandHongKong.Theyaimtobecometheone-stopservicesolutionsforlegal,corporate,accountingandtax-servicesinCambodiabyallowingcompaniestohavedirectaccesstopre-vettedexpertsatfixedpricesthroughadigitalplatform.Companiescanalsoenjoybenefitsacrosstheregion.

BANHJI2016Banhji.com

MSMEsandSMEs Financialoperatingplatform

BanhjiisaFintechcompanyofferingcomprehensiveaccountingsolutionstoMSMEs.BanhjiAccountingoffersdigitalandlocalizedaccountingsolutionsfor14selectedindustries(morethan4000signupsfortotalassetsof250millionUSD–Beforeitwasfree,nowthecostisalimitedfee/month.BanhjiAccountantsisanotherassociatedserviceandofferslow-costbookingservicestoMSMEswhilecreatingjobsforlocalyouth.

FOURMI&PARTNERSwww.fourmiandpartners.com

SMEsMainsectors:services,REandPropertymanagement

AccountingandTax,BusinessRegistration

Thecompanyisextremelyengagedwiththeirclients.TheyprovideCFOadvisory.Theirmainpurposeistohelpstartupsandfamilybusinessestohaveaproperstructure,establishstronginternalcontrolsandassistthemtocomplywithrelevantlawsandregulations.TheyplanalsotohaveaFOURMIBUSINESSINSTITUTEwheretheywanttoteachwhattheydotoimprovestandards.Interestingbusinessmodel:whentheSMEsarefullyrestructuredandcompliant,forthemostinterestingofthem,thepartnerscanoffertotakesomesharesofthesecompanieswiththeideaonedaytohelpthemgopublic.

Source:Author


4. Accesstofinance Access to finance is a very large topic that would require a separate study to be fully explored. Asmentionedearlier,wewillbrieflysummarizesomeissuesandmentionthenewestinitiativesandprojectsthathavebeenimplemented.Neworinnovativeprojectswillbehighlightedforfinancialinstitutions.Privateequityfirmsandventurecapitalists present in Cambodiawill also be listed and finally, we have listed a few other initiativesincludingtwofintechinitiativeswhichbuildsolutionsforSMEstogetaccesstocreditwithoutcollaterals.FinancialInstitutions Inpractice,banksandMFImaynothaveanyspecificSMEdepartmentbutsomeofthemhavebusinessandproductdevelopmentdepartmentswhichareresponsiblefordevelopingtheproductstailoredtotheSMEsneeds.BanksandMFIsmeasureSMEsbyloansize.SMEshaverecentlybecomeakeytargetforcommercial banks andMFIs, even though financial institutions are not alwayswilling to take on theperceived risks. In fact, lending to SMEs represents an important share of their loan amounts. Forexample,ACLEDAsmallloans(10,000to50,000USD)forbusinessandnon-businesspurposerepresents46%oftotalloans,withwomenaccountingfor60to70%ofthetotal.LendingfromMFIsmainlygotomicroandsmallloans(lessthan10,000USD),butSMEbusinessloansamountedonly5to15%oftotalloansbecausetheborrowersareoftennotthedirectclients.TheCreditBureauofCambodiaisacentraldatabaseofcreditinformationthathelpsfinancialinstitutionstomanagecreditrisk.Sofar,thesystemwasrecordingindividualloansonly,butCBCannouncedthattheyplantoupgradefor2019-20theirprocesstoincludethehistoryoftheenterpriseborrowers.Despitewillingness shownby thebanks to supportSMEs, still very fewof themhavemadeprogressregarding the problemof collaterals (many accept only fixed assets). They also havenot donemuchprogressonthetradefinanceside.BelowarethenewinitiativeslaunchedbytheGovernmentandsomespecialinitiativesfromtheBanksorMFIthataredifferentfromtheusualloans.Thelistmightnotbeexhaustive.Table8:ListofselectedinitiativesforaccesstofinanceforSMEsCompanyname Target Special

ProjectDetails

SMEBANK(APRIL2020)

RegisteredSMEs SMEco-financingproject

SMEco-financingproject:ajointventurebetweenSMEBankand23commercialbanks,twospecializedbanks,sevenmicrofinanceinstitutions(MFIs).Inadditiontotheinitial100million,banksadded50millionoftheirowncontribution.SMEscanborrow200,000USDforworkingcapitaland300,000USDforinvestmentcapitalat7%annualinterestrateand4-yearperiodofpayment.Normally,prioritysectorscriteriashouldbeapplied.

AGRICULTURALANDRURALDEVELOPMENTBANK(ARDB)www.rdb.com.kh

SMEsinagriculturesector

SMEfundforlending

SMEfund:50MillionUSDSMEscanborrow300,000USDwith6%annualinterestrateforworkingcapitaland6.5%rateforloansusedforinvestment


CANADIABANK SMEs SPECIALPACKAGEFORSMEs(2018)

Pilotprogramof150MillionUSD.Maxloansize200,000USDat8,88%inUSDand7.88%inKHR(5year)Collateralisstillrealestate.

PPCB(incollaborationwithIFC)

SMEMembers IFCrisk-sharingFacility(2019)

PPCBankusesIFC’srisk-sharingfacilitytohelpsmallandmediumenterprises(SMEs).ThefacilityisusedtocoverloansextendedtoSMEs,reducingtherisk.Inadditiontosharingtheriskonthecoveredportfolios,IFCprovidesadvisoryservicesdesignedtoexpandPPCBank’scapacitytoconfidentlyextendmoreloanstomoregrowingenterprises.

ABCMICROFINANCE(MFI)

SMEregisteredwithproperinvoicingsystem

InvoiceDiscounting

Maxamountof50,000USDatannualinterestrateof15.6%to18%andloantermupto90days.Butthereisnodemandforthisproduct

ACOMMERCIALBANK

Non-collateralizedlending

ProbablyincollaborationwithBanhji.

LOLCwithSHEINVESTMENTS

WomenEntrepreneurs

Non-collateralizedbusinessloan

Microfinancingprogram:3,000USDloanforthepurchaseofequipment

SHEINVESTMENTS

WomenEntrepreneurs

“Pay-itforwardFinancing”

THRIIVECambodia:loanupto10,000USD.Thriiveprovidespay-it-forwardfinancingforproductionequipmenttoambitioussmallbusinessentrepreneurs,helpingtoexpandtheirbusinessesandcreatedesperatelyneedednewjobs.Therepaymentisonly10%oftotalloanamount,therestisnotrepaidincash,butinstead“paidforward”withdonationsofnecessitiesandjobtrainingtovulnerablecommunitymembers.

FTB(ForeignTradeBank)withADB

Watersupplyenterprisesandruralelectrificationenterprises

GuaranteeScheme

FTBreceivestheconcessionalloanfromADBandprovidesloanstowatersupplyenterprisesandruralelectrificationenterprisesatpreferentialconditions:7%interestrateand10years’maturity.Incaseofloandefaults,FTBreceivesthepartialrisksharing(50%)fromAFD.

LOLCwithUSAID Agrobusiness GuaranteeScheme

DevelopmentCreditauthorityofUSAID(USAID-DCA)haspartneredwithLOLCinprovidingcreditrisksharing(50%)tohighriskborrowersintheagriculturevaluechaininBattambang,SiemReap,KampongThomandPursat.Normalratesapplybutthematurityislonger(5years)

Source:UNESCAP2019PrivateEquity ThelandscapeforPrivateEquityandventurecapital fundsdidnotevolvesomuchinCambodia.MSPevaluatesacurrentsupplyofapproximately70millionUSDofriskcapitalmanagedintheKingdom,alargeproportioncomingfromDevelopmentFinancialInstitutions(DFI)andthereforecarryinga“socialimpact”investmentmandate.Mostofthemhaveamulti-countriescoverageinsteadoffocusingonlyinCambodia.Theyareusuallyforeignowned,althoughlocallymanaged,exceptforOOCTANEfoundedbyWorldbridge,alocalconglomerateandfortheCambodiaInvestorClub(CIC).EMIA is theonly frontiermarketprivateequity fundwithsignificantoperations inCambodia.Privateinvestors are facing twomain issues in Cambodia: the size of themarket and the lack of investiblecompanies. The limited possibility of exit can be also a problem as the limited performance of theCambodiaStockExchangeisnotattractingyetalotofforeigninvestors.


Many gaps exist in the different categories of SMEs and more venture capital funds are needed inCambodia.However,wecanseesomenewtrendsrecentlywithmoreinvolvementofdomesticcapital.Local investorsshowmoreinterestsininvestinginSMEsinCambodia.Manyarealreadytakingsomeparticipationinsomehigh-growthpotentialcompaniesdirectlyorindirectly.Ooctane’soriginalfundingwassupposedtobeonly5MillionUSD,butWorldbridgegotadditional50Millionthroughadditionaldomesticinvestors,probablyconglomeratesorrichbusinessowners.TheSECC(SecuritiesandExchangeCommission of Cambodia) has also launched a new directive inMay 2020 for collective investmentschemes (mutual funds) where licensed private entities supervise investment funds of a group ofinvestors.CICisoperatingunderapilotlicense.Table9:ListofPrivateEquityfirmsoperatinginCambodia

COMPANYNAME TARGET ACTIVITY GEOGRAPHIQUECOVERAGEANDINVESTEDINDUSTRIES

EMERGINGMARKETINVESTMENTADVISORY(2009)www.emergingmarkets.asia

GrowthStagecompanies

PrivateEquity Coverage:Cambodia,Laos,andMyanmarInvestedIndustries:education,banking(microfinance),tourism(restaurant and coffee),agriculture, insurance

LEOPARDCAPITAL(2008)www.leopardcapital.com


PrivateEquity Coverage:Haiti,Cambodia,Laos,Thailand,Myanmar,Bangladesh,andBhutanInvestedIndustries:beverage,realestate(propertydevelopment),microfinance,energy(powertransmissionandhydropower),telecoms, infrastructure,banking(bankandmicrofinance),andprofessionalservice(lawfirm)

DEVENCO(2007)www.devenco.com.kh


Privateequityandbusinessconsulting

Coverage:CambodiaInvestedindustries:medical(Pharmacy),wastemanagement,technology,energyandagriculture

OBORCAPITAL(2016)Oborcapital.com

StartupsandGrowthStagecompanies

VentureCapital Coverage:CambodiaInvestedindustries:agriculture,infrastructure(pipedwatersupply)andtechstartups

ASIAFRONTIERCAPITAL(2013)www.asiafrontiercapital.com

Growthstagecompanies

Privateequity Coverage:Asian frontiereconomiessuch asBangladesh,Cambodia,Iraq, Laos,Mongolia,Myanmar, Pakistan,PapuaNewGuinea, SriLankaandVietnam

INSITORIMPACTASIAFUNDwww.insitorpartners.com

Growthstagesocialenterprise

Impactinvestment

Coverage:Cambodia,IndiaandMyanmarInvestedindustries:banking(microfinance)andinfrastructure(pipedwatersupplywithObor)Debtfinancing:with4projectsonITandothersocial-relatedprojects

ARUN(2010)www.arunllc.jp

Growthstagesocialenterprise

Impactinvestment

Coverage:CambodiaandJapanInvestedindustries:agriculture,services(hairextension),Education,andhospitality(hotel)Debtandequityfinancing

UBERISCAPITAL(2012)www.uberiscapital.com


Impactinvestment

Coverage:SoutheastAsiaInvestedindustries:skincare,handicraft, andagriculture

ICCOORGANIZATIONwww.icco-cooperation.org


Impactinvestment

Coverage:CambodiaICCOInvestmentisanimpact investmentprovidingfundstosocialenterprisesinCambodia.AgribusinessBoosterisanorganizationinvestingwiththeagribusiness startups,operating the businessbetween1and2years


BLUEORCHARD(2010)www.blueorchard.com


Impactinvestment

Coverage:emergingmarketsinAfrica,LatinAmerica,CentralandEasternEuropeandAsiaInvestedindustries:financial,education, and climateDebt and equityfinancing

INCOFINwww.incofin.com


PrivateEquity Coverage:CambodiaandothersInvestedindustries:financialandagribusinessDebtand equityfinancing

MEKONGSTRATEGICPARTNERS(MSP)(2014)www.mekongstrategic.com

Startups VentureCapital Coverage:CambodiaIndustries: Technology-orientedsolutionswiththeSADIF

BELTROADCAPITALwww.beltroadcap.com


PrivateEquity Coverage:GreaterMekongSub-regionInvestedIndustries:Techcompanies,e-commerce,entertainment

OOCTANEwww.ooctane.com

Startups VentureCapital Coverage:CambodiaTargetindustries:STEAM(Science,technology,engineering,artsandmathematics)

SEAVENTURE

Startups VentureCapital Coverage:SouthEastAsiaIndustries: Technology

LAKSMIPRIMEINVESTMENTSCO.LTDwww.primeinvestmentslimited.net


VentureCapital Coverage:CambodiaInvestedindustries:Finance,realestate,andtechnologyDebtand equityfinancing

CAMBODIAINVESTORCLUB(CIC)(2013)Cic-investment.com


VentureCapital Coverage:CambodiaInvestedindustries:Foodandbeverage,retail,financialDebtandequityfinancing

Source:UNESCAP2019andAuthorOtherinitiativesTable10:OtherinitiativesrelatedtoAccesstofinance

CompanyName Target TypeofServices

Description

CWEA,YEAC,FASMEC

SMEMembers

Trainingonfinance,taxationFacilitationaccesstofinance

BusinessAssociationsprovidetrainingonfinance,taxationandbusinessmanagement.Theyalsoorganizeworkshoponaccesstofinance.YEACpartnersalsowithBanhjianddevelopsthefintechmappingreport.Inaddition,YEACfacilitatesaccesstofinancethroughsharingthefinancialinformationtomembers,linkingFIsandinvestorstoMSMEs.FASMEClinksMSMEstoFASMECmicrofinanceofferingspecialtermsandconditionstotheirmembers.

CICandCWBF

SMEMembers

PeertoPeerLending

CIC:Offlinepeer-to-peerlendingplatformthroughCICordirectlyamongCICmembersTheCambodianWomenBusinessFederation(CWBF)isalsodoingpeer-to-peerlendingamongitsmembers,althoughitisunofficial.

CSXGROWTHBOARDCsx.com.kh

SMEs

ListingIncubatorProgram

ListingIncubatorprogram:-FreeconsultationforIPOpreparation(reviewinternalpreparation,documentation).Basicinformationprovidedfortechnicalwork(sharevaluation)-PlatformforSMEstosharetheirbusinessmodel(CEOtalks)andopportunitiestomeetbusinesspartnersandfacilitatematchmaking


Mainsector:textile,agro,healthcare,education

However,mostofcompaniesarenotready(weaknessesininternalcontrol,corporategovernance,accountingandtax)FuturecollaborationwithSECCtodoaRoadshowandtoattractmoreSMEs(SiemReap,Poipet,PP,Sihanoukville)

KIUCAMBODIAwww.kiuglobal.com

SMEs FintechSolutionstobuildcreditscoring

KIUisaVietnam-basedstartup.TheyprovideanonlineERPsolutiontohelpfirmsformalizeresourceplanning,salesandservicedelivery,customerrelationshipmanagement,accountingandfinanceandhumanresourcemanagement.Kiuhelpsdigitizeandeducatebusinessownersonhowtheycanimprovetheirbusinessprocesses,establishcredibilityandgaineasieraccesstoloansusingKiu.Theirbuilt-inAIcreditscoringengineanalyzedatatobuildacredithistorythatKiu’spartnerbanksandMFIscanaccepttograntaloan.

BANHJI MSMEs FintechSolutionsfordatadrivencreditassessmentandinvoicing

Inadditiontotheiraccountingsoftware,BanhjioffersalsofintechsolutionstosupportSMEsinaccessingfinance.BANJHIFINANCING:MSMSusingtheaccountingsoftwarecanapplyfornon-collateralizedloanswithinBanhjibasedondatadrivencreditassessment.Financialinstitutionswillbeabletohavearealtimeloanmonitoringthroughthissoftware.BANHJICONNECT:enablesMSMEstoparticipateintheformalanddigitalfinancialsystemswithfinancialinstitutionslikeWing,PPCBorAmretwithanAPIBasedB2b/C2BpaymentenablingplatformwheretheFinancialInstitutionswillbeabletoissueinvoicepaymentfortheMSMSs

SWISSCONTACT SMEwithhighimpact

TechnicalAssistance

TheRISEProjectprovidespreandposttechnicalassistance(TA)throughapoolofvettedconsultantstohelpSMEtobecomeinvestmentreadyandtoassistinvestorsformatchmaking.Assistanceisneededatdifferentlevels.Theinvestorsarealso"partners".FacilitationisfreeandthecostsfortheTAareadvancedbySwisscontact.Then,thebeneficiarycompanyhas2yearstorepaywithnointerest.Forthebeginningoftheproject,25%discountareappliedonthecosts.N.A:theschemeisinterestingbutthecapacityofabsorptionofSMEsissometimeslimited.

Source:Interviews

5. IntegrationinregionalglobalvaluechainsandSMEclustersCambodiaiswellintegratedinglobalvaluechainssincethearrivalofthegarmentexportindustryinthecountrybutsofar,therehasbeenlittleprogressindiversifyingthetypeofindustryoreveninclimbingthe garment value chains for more value-added outputs. SME Clusters can provide an efficientdevelopmenttooltosolvetheseissues,wellalignedwiththecurrentvisionandstrategyoftheRGCtosupport SMEsdevelopment. SME clusters are not SEZs. Clusters are usually organically formed fromexisting industrieswitha limited roleof theGovernmentat the initial stage.However, indevelopingcountries,itseemsextremelydifficulttocreatenewindustriesfromscratchwithoutthiskindofsupport,withoutgoodinfrastructureandsoundinstitutions.AnanalyticalresearchonFDI-SMELinkagesconductedbytheWorldBankin2018revealsthatnotmuchprogresshasbeenmadetoimprovebackwardlinkagesbyconnectingFDIfirmswithdomesticsuppliers,especially SMEs. Foreign Direct Investment has been a critical source of growth and industrialdevelopmentinCambodia.However,thecurrentqualityintermsofinternationaltransferofresourcesandknowledge to local firms, andquantityof backward linkageswithin the sector is low, except forservicesinputs.Servicesaremorefrequentlysourcedlocallythanmanufacturedinputs.


Surveyed FDI firms importmore than 90%ofmaterial inputs used for production. Theymostly useCambodia as an export platform for low-cost, low-productivity production activities with limitedpotentialfortransferringcapitalandknowledgetoCambodia.MorethanhalfofallFDIfirmssurveyedwerekeentoincreaselocalsourcing,butoftenhadnotfoundcompetitivesupplierstobuyfrom.Themainreasoncontributingtothissituation,accordingtoFDIfirms,isalackofcompetitivelocalentrepreneursactive inFDI-dominant sectors. Supporting industries for lightmanufacturingaremissing, a segmentincreasinglycoveredbysmallerFDIfirmsfromChina,Japan,KoreaandotherASEANpartners.Besides,thecumbersomeprocessestoidentifypotentialsuppliersandtoreceivevalue-addedtax(VAT)refunds for locally sourced purchases were highlighted as critical barriers. Furthermore, domesticsuppliersareoftennotabletocomplywithFDIcriteriarelatedtoquality,cost,anddelivery(QCD)ofinputs.Relativelyfewbusinessesholdinternationally-recognizedqualitycertificationandtherearefewbusinessdevelopmentservices(publicorprivate)availabletoprovidesupportorcreateawareness.Also,a small share of manufacturing firms in Cambodia offer formal workforce training and cooperationbetweentheprivatesectorandtechnicalandvocationaltraininginstitutesisgenerallyweak.Movingforward,CambodianeedstodeveloplocalclusterstoallowSMEstodiversifyandexpand.Inabidto boost SMEs and industrial diversification, the MISTI is drafting a sub-decree to regulate theconstructionofindustrialparksdedicatedtoSMEs.Worldbridge,alocalconglomerate,,aimstocreatethefirstSMEclusterinCambodia.LocatednearPhnomPenh,thefirstclusterwillfocusonagrobusinesswiththegoaltoproducehighervalueproductsthantheones usually on themarket, and to export them. TheWorldbridge clustermodel features amodulardesign,makingtheclustereasytobuildandeasytoadaptforanytypeofindustry.Itwillalsointegrateindustry4.0features(blockchain,learningplatform)withaservicescenter,researchanddevelopmentfacilitiesandlogisticoperators.ItaimstobuildthebridgebetweenforeigninvestorsandlocalSMEsbycreatingbackwardlinkagesandremovingthebarriersfacedbythesmallentrepreneurs.Ifthisambitiouspilot project is successful, the project can be replicated in other provinces andbe amodel for otherindustrialparks.

6. Franchising Franchising isanotherway to internationalizeandopportunitiescomewith thesteadygrowthof theeconomy.Therisinglocalmiddleclassandtheimportanceoftouristscreatedahugedemandfordifferentbusinessesincludingfranchisecompanies,especiallyqualityrestaurantsandfastfood.SomebrandshavealreadybecomeverypopularamongCambodianssuchasBurgerKing,KrispyKreme,Starbucks,etc..Alot of franchises in Cambodia are international, from USA, Singapore, Taiwan, Korea, Thailand andAustralia.SMEsmightnotbeabletoreachouttothemostpopularbrands,butopportunitiesexistatmanylevels.TheCambodianFranchiseAssociationhasbeenfoundedinJune2019by4co-founders(2Cambodianand2Thai).TheassociationaimstodevelopSMEsinCambodiathroughfranchisingbutalsotoimproveproductivity of Cambodian Businesses through Innovation. Theirmain goal is tomaximize franchiseactivity in Cambodia. They organize group trips to learn about new products through the visits ofFranchisefairs(theyhadadelegationtovisitFranchiseExpoinParis).TrainingCoursesareorganizedonaregularbasis(“howtoselecttherightfranchise”,“TrainingonFranchiseDisclosureDocument”)and


anMoUhasbeensignedwiththeFranchiseUniversityofBangkokandwithaconsultingcompanytoprovidementoringandcoachingduringadvancetrainingforpotentialfranchisees. F&Bisusuallythemainsectorofinterestbutothersectorssuchasconstructionorhealthcarearealsotargeted.Thecosttobe part of the Association is now limited (100 USD) and their co-founders are verymotivated. Thepotentiallooksinteresting,buttheactivitiesarejuststarting.

7. Standards Cambodiaisstillattheearlystageofhelpinglocalbusinessestoimprovetheirproductqualityanddealwithinternationalqualitystandards.The Institute of Standards of Cambodia (ISC) is the body responsible for thepreparation of nationalstandards and guidelines for products, commodities, materials, services and operation. ISC, as acorrespondentmemberoftheInternationalOrganizationforStandardization(ISO),cansellandadoptISOstandardsnationally.Practically,businessesstillrelyonlaboratoriesinneighboringcountrieslikeVietnamandThailandforproduct inspection to comply with the Hazard Analysis Critical Control Point (HACCP) safetymanagementsystem.ThiswasdespiteimprovementsbytheIndustrialLaboratoryCentreofCambodia,whichwasseenbylocalbusinessesaslackingproductcoverage.Donorshaveprovidedalotofsupportto scaling up laboratory capacities, especially in Sanitary and Phytosanitary (SPS) measures andTechnicalBarriers toTrade (TBT), yet only two government laboratories had achieved internationalcertification,andforaverynarrowsetofparameters.Theabsenceofinternationalaccreditationmeansthat certificates issued by such labs have little value in export markets. This poses a problem forCambodian businesses seeking to go global. The lack of support for SMEs in complyingwith qualitystandardshasevenmadethemlesscompetitiveagainstimportedgoodsinthedomesticmarketBox5:StandardsandCertifications,theexampleofKiriromFoodProduction

CASE:StandardsandCertification:Aninsiderpointofview-KIRIROMFOODPRODUCTION

Thecompany,intheirjourneytoexporttheirmangoesproduct,appliedforthebeststandardsavailable.

BasicfoodSafetystandardsareGMP(GoodManufacturingPractices)andHACCP(HazardAnalysisCriticalControlPoint),thenISO22000forfoodproductsisthemorerequestedbyinternationalbuyers.

• GMP is a system to ensure that products meet food safety, quality and legal requirements. As a foodmanufacturer,itisnecessarytohaveGMPinplace.Requirementsincludeatrainingtoobtainthecertificate,the costof the certification fee (ISC certificationora jointaccreditation)and theaudit.Theprocess iscomposedof8steps.

• HACCPcanbepartofGMPand isasystematicprogramtoassure foodsafety.Thereare12steps(thatincludesthe8previousones).

• ISO22000(FoodSafetyManagementSystem)isevenhigherasitprovidesalayerofassurancewithintheglobalfoodsupplychainandhelpsproductscrossborders.Itrequiresthefollowingsteps:

o Consultationsfees(training,documentations)o Infrastructure,facilityimprovement(needtounderstandtheconceptfirst)o Thenthecertificationfee.Acertificationfromaninternationalbodywillbehigherthanalocal

one.o Finalstepistheauditfee(costsneedtocoverthetransportation,theaccommodationandthe

food).Usuallythereare2audits.Thesecondonewilltakeplace3monthslater.Pricewillvarydepending if there is a local auditor or not (auditors from Thai or Malaysia are quitedemanded).


Whentheproductisfreshfood,youhavealsootherstandardsandrequirementssuchastheGAP(GoodAgriculturalPractices)andcertificatesoforigin.YouneedalsotoapplyforaPhytosanitary(SPS)certificatefromtheMinistryofAgricultureandtheMinistryofHealth.

Other standardsare requested fromthecountryofdestinationwhenyouexport suchas thepackagingand theproductsstandards:calibration,moisture,sugar,preservation,SO2(forthemangoes).Parameterswillbegivenalsobythebuyersoryouneedtodosomeresearchtoapplyfortherightstandards.Itisimportanttohaveatsomepointthenecessarylabequipmentin-house.

SometestscanbedoneintheveryfewlaboratoriesinCambodia(NMCandILCC)buttheycannotprovideallthetypesoftestsosomecompaniessendthemtolaboratorieslinkedtointernationalcertificationbodies.

Source:Author

ConformityAssessment As is the case for inspection, private (voluntary) certification services are used in trade transactionsbetweensuppliersandbuyers,toascertaincomplianceofproducts,servicesormanagementsystemwithclients’requirementsorstandards.Certificationofsystemsisoftenusedtodemonstratethecapacityofanoperatortoregularlyproducegoodswithagivenlevelofquality(qualitymanagementsystem)oragivenlevelofsafety(foodsafetymanagementsystemssuchasHACCPorISO22000).Table11:ConformityAssessmentMainplayers

TypeofSupport

ServiceProviders Typeofservices

INSPECTION

PublicServices

PublicInspectionServices(local)

AtMISTI,theRegulatoryDepartmentofISCisonthewayofdevelopingtheinspectionproceduresinlinewithrequirementsofthestandardISO/IEC17020

PrivateBodies

ControlUnion,BureauVeritas,Intertek,SGS

Private(voluntary)inspectionservicesareusedintradetransactionsbetweensuppliersandbuyers,toascertainthatshipmentsconformtothequantitiesandbasiccharacteristicsstatedinsalesdocuments

CERTIFICATION

PublicCertificationBody

InstituteofStandards(ISC) ISCprovidescommercialcertificationservicesformanagementsystems(ISO/IEC9000,ISO22000,ISO14000,HACCP-GMP).ThiscertificationactivityisorganizedaccordingtothestandardISO17021;however,theCertificationdepartmentisnotyetaccredited.

MinistryofCommerce ExportandPre-shipmentCertificationMAFF HealthCertificate(animalproductsincl.fisheriesproducts)

andPhytosanitarycertificates(vegetalproducts)Inrespectwithhygieneandsafetyofagriculturalproducts

PrivateCertificationBodies

GuardianIndependentCertification,TUVRheinland,EcoCert,andControlUnion(agri-food)

Particularlyactiveintheareaofagri-foodproductsareGuardianIndependentCertification,TUVRheinland,EcoCert,andControlUnion.Therearestillalimitednumberofcertifiedenterprisesinthefoodsector(ISO22000forwater,fishsauce,cassavastarch)orinthemanufacturingsectorsuchasconstruction(ISO/IEC9000),electrical(ANZproductstandard),cement(OHS18000),rubber,andhumanresourceandtrainingservices(ISO/IEC9000).

TESTING

LABORATO

RIES

PublicLaboratories

IndustrialLaboratoryCentreofCambodia(ILCC)

TestingservicestosupporttheworkofotherMISTIdepartmentsintheareasoffoodandnon-foodproducts,controlofregulatedgoods,andqualitycontrolsystems.TheILCCalsoservesothercustomersintheprivatesectorandthecommunity.ILCChasstartedsince2016providingtesting


servicesforthecontrolofnon-foodproducts.ThelaboratoryisaccreditedformicrobiologytestsbyNATA,andforfoodandwaterchemicaltestsbytheSingaporeAccreditationCouncil.Therangeoftestsincludesheavymetalsandpesticidesresiduesinfoodmatrices(capacityfor31organochlorineandorganophosphatemolecules).

OtherLaboratoriesinvolvedinSPS:

TheNationalAgriculturalLaboratory(NAL),thelaboratoryDep'tofAgroIndustry(PrekLiepUniversity-MAFF),theNationalFood&DrugQualityControl.TheNationalSpecificHouseLaboratoryofMAFFisresponsibletotestrubberandprovidegradeasperinternationaltradingstandards(Thislaboratoryhaslostitsaccreditationwhenitwasrelocatedin2017.)

PrivateLaboratories

IntertekTestingServiceslab,BureauVeritaslab,SGSlab,andTUVRheinlandlabModernTestingServices

ThefourmentionedarebasedinPPandareownedbytheeponymmultinationalconformityassessmentgroups.Underthegroupsupervision,theyprovidearangeoftestingandquality-relatedsolutionsforindustry,wheretestingmostlycomesasapartoftheinspectionandauditingservices.Theanalyticalrangeincludesanalysesfortextileindustry(mechanicalandchemicaltests)andcommoditiessuchaspetroleum,chemicals,minerals,andfoodandagriculturalproducts.Inaddition,smallerlaboratoriesoperateintheareaoftextilesandcosmetics(e.g.ModernTestingServices).Amongthegroupofprivatelaboratories,thefourlaboratoriesmentionedaboveareaccredited.

TheLaboratoryforFoodandEnvironmentalHygiene(LHAE)ofInstitutPasteurduCambodge(IPC)

TheIPC’sFood&EnvironmentalHygienelaboratorycarriesoutroutineservicesforwatertesting(microbiologyandchemicaltests),andmicrobiologyoffoodandenvironmentalsamples(e.g.foodpreparationsurfaces,air,water,etc.)

Source:CTIS(2019)

SanitaryandPhytosanitary(SPS)Certificate SanitaryandPhytosanitaryCertificate(SPS)areoftenrequiredbyimportingcountrieswhenexportingfreshfruits,vegetables,fish,liveanimalandotherproducts.Thiscertificatecertifiesthattheproductisfree from injuriouspestswhichcoulddamagecrops. It is exporter’s responsibility toensure that theSanitaryandPhytosanitaryconditionsaremet.Thewholeprocessiswell-explainedonthecustomswebsite:http://www.customs.gov.kh/procedures-of-other-relevant-ministries/sanitary-and-phytosanitary-certificate-sps/TheenquirypointsystemwascreatedsothatcountriescouldeasilyobtaininformationaboutSPSandrelated issues. The national enquiry point is responsible for answering all reasonable questions andprovidingrelevantdocumentsregardinganysanitaryorphytosanitaryregulationsadoptedorproposedwithin the country; any control and inspection procedures, production and quarantine treatment,pesticidetoleranceandfoodadditiveapprovalproceduresandriskassessmentprocedures,factorstakeninto consideration, aswell as thedeterminationof theappropriate levelof sanitaryorphytosanitaryprotection.InCambodia,itistheCAMCONTROLDepartmentofTechnicalInformationthathasthisrole.Forothercountries,itcanbeeasilyfoundonline.


Table12:ListofcertificationbodiesinCambodiaServicesprovided

Name contacts

LocalCertificationBody

InstituteofStandardsofCambodia(ISC)

Tel:[email protected]

InternationalCertificationBodies

ISOCertificationBody(ISB-K2A)

www.iso-certifications.com/

BureauVeritas Tel:+85517555638Bbvcpsinfo.kh@vn.bureauveritas.comwww.bureauveritas.com/cps

SGSCambodia


TUVSud Tel:+855235002525/12301758https://www.tuvsud.com/en/services/global-market-access/cambodia

Ecocert(basedinSingapore)


GuardianIndependentCertification

Tel:+85512604075http://www.saasaccreditation.org/gic

Intertektesting Tel:+85523885421https://www.intertek.com/contact/asiapacific/cambodia/

SPSEnquiryPoint

CAMCONTROLDepartmentofTechnicalInformation

TBTEnquiryPoint

ISCDepartmentofInformation

Source:Author

8. Packaging AccordingtoanexpertinPackagingwithgoodknowledgeofCambodia,therearemanyopportunitiesforlocal SMEs toproduceand towork in the fieldofpackaging.Fornow, thereareonly fewcompaniesworking in each sub-sector and they have a monopolistic situation. Because of the small volumes,customersmustprovideadownpaymentof50%andtopayinadvance.PackagingcanbecostlyforlocalSMEs.Packagingproductsarelessexpensiveabroadbutifyouaddthecostoftransportation,itisnotworthimportingforsmallquantityandthedemandisnotsohigh.Transport boxes (corrugated boards and carton boxes) can be easily found: 8 very well-developedcompaniesareinthemarket.Alotofthemproducesboxesforthegarmentindustry,andtheyaremainlyinternationalcompanies.Regardingplasticpackaging,thereisthesubsidiaryofaThaicompany.


Moreinformationcanbefoundintherecent“CambodiaManufacturingIndustryBusinessDirectory2019”,publishedbytheMISTI,inpartnershipwithJapancooperationandsupportedbyIFC.Thisuser-friendlydirectoryfeatures44high-potentialSMEswhichareamongthe leadingcompaniessupplyingmanufacturing FDIs in Cambodia. They are categorized in 5 groups: (i) Packaging, (ii) Printing andlabelling,(iii)Rubber&Plastics,(iv)Steelprocessingandmetals,and(v)others.However, thisdirectorywas createdwith the initial goal toprovideopportunity for SMEspresent inCambodiatoaccessinternationalmarketsandtobeconnectedwithforeigninvestors,afirststeptobeintegratedinglobalvaluechainsandbecomeexportersoneday.Itcanbenoticedhoweverthatdespitetheir limitedsize inCambodia,manycompaniespresent in thisDirectoryaresubsidiariesofregionalfirmsandarenotreallySMEs.Nonetheless,thedirectoryprovidesveryusefulinformationandbelowarethemostusefulonesforSMEs.Forthefullreport:http://www.mih.gov.kh/File/UploadedFiles/6_11_2019_4_5_45.pdfTable13:Listofselectedpackagingcompanies

COMPANYNAME PRODUCTS CONTACTPACKAGING

ANGKOR THOMPRINTING

PrintingServices(alsoforpackaging,paperandplasticbags)

[email protected]

ARDUMAS INDUSTRIES(CAMBODIA) LTD

Polymerbags,flexographicandrotogravureprinting.

+855-12-858-778/[email protected]

ESPACKAGINGCO.,LTD Cartonboxes +855-23-6333-485/[email protected]

HARTAPACKAGINGINDUSTRIES(Cambodia)Limited

Corrugatedboards(single-wall,double-wall,triple-wall),cartonsanddie-cutContainers.Plainandprintedpolybagsandfilms,invarioustypes&sizes.


K-PACKINDUSTRIALBAVETCO.,

Corrugatedproducts(corrugatedboards,regularslottedcartons,printingboxes,die-cutboxes)andpolybagproducts

+855-23-72-92-68eang@kpackindustrial.comwww.k-packindustrialbavet.com

LIHWOEICARTONWORKSCO.,LTD

Cartonboxes +855-89-777-559/[email protected]

MAXIM Label &Packaging

Hangtags,pricetickets,carelabels,adhesives,printandwovenlabels,noveltytrimsandpatches,heattransfers,packagingandRFID.

[email protected]

OJITEXHARTAPACKAGING(SIHANOUKVILLE)LIMITED

Corrugatedcartonboxes,corrugatedboards,die-cutcontainers,paperpallets,partitions,innerboxesandgiftboxes.


PHNOMPENHPACKAGING

Packagingproducts,premiumgifts. +855-17-88-36-88/[email protected]@gmail.comwww.phnompenhpack.com

REDIANPRINTINGCO.,LTD

Plasticbagsandprintingservicesforplasticbags +855-61-214-172/[email protected]

SUNNYEPS Polystyreneproducts [email protected]

PRINTINGANDLABELLINGCAM-IDEAPRINTINGANDADVERTISING

Offsetpublishing,inkjetprinting,graphicdesign,silkscreenprintsandpremiumitems.


CMYKPrinting&Cartons

Cartonproducts,offsetprintingproducts,advertisingproductsandinkjetprintingproducts


DIAMONDPRINTING Allkindsofoffsetprintingandinkjetprinting. +855-23-635-0123sous.phors@diamondprinting.comwww.diamondprinting.com

DONGGUANCITYFINESTARPRINTINGCO.,LTD

Stickersandshoeboxes(cartons) +855-10-948-198+855-92-908-199


NYTAPLASTIC&PRINTINGSERVICE

Plasticproductsandprintingservices. [email protected]

SOKHAPRINTINGHOUSE Offset,inkjet,silkscreen,graphicdesign,stickerlabels,securitypapers,securityink,plasticbags,rollingpapers,rollingtickets,ATMrolling.

[email protected]

PLASTICKHMERPLASTICCO.,LTD Hardplasticproducts. +855-16-891-144/+855-12-697-967

[email protected]

Plasticjars. +855-11-722-036/[email protected]

OCEANPLASTICPRODUCTCO.,LTD

Plasticbags. [email protected]

Source:MISTI(2019)

9. Trade,LogisticsandCustoms Publications Twobooksofreferencethatareabitoutdated,butwhichcanprovidevaluableinformationforexporters

• HandbookonExportProcedures:PracticalGuideforSmallandMediumEnterprisesinCambodia.

Published by theMinistry of Commerce with the support of IFC. The book is dated from 2008 andprovidesclearandconciseinformationongovernmentexportproceduresinauser-friendlyformatsuitedtoSMEs,withstep-bystepguideonvariousprocedures.Itwouldbeworthupdatingit,butforfirsttimeexporters, some general procedures are still very valid and are explained in a very simple way.https://www.MOC.gov.kh/Portals/0/Docs/OfficialDocs/Handbook-Export-Prodcedure-Eng.pdf

• HandbookonCustomsClearance(2015)PublishedbytheCustomsDepartment(GDCE)withtheassistanceofADB,thegoalofthisHandbookistodisseminateinformationongoodsclearanceproceduresinCambodia,insimplelanguage.Itisaveryusefulandcomprehensiveguide.http://www.customs.gov.kh/wp-content/uploads/2015/10/Handbook-on-Customs-Clearance-EN-Final.pdf.Tradeinformationwebsites

• TheNationalTradeRepositoryIt is a trade portal that provides public access to all necessary trade information for exporting andimporting businesses. Managed by the Ministry of Economy and Finance, the website providesinformation on procedures, customs permit and documentation needed for trade.https://www.cambodiantr.gov.kh/• GeneralDepartmentofCustomsandExcisePracticalinformationrelatedtotradecanalsobefoundonthewebsiteoftheGDCErelatedtotradefacilitation.http://www.customs.gov.kh/en_gb/


ImportantprogramsworkingontradefacilitationARISEPlusCambodia:ThisEU-GermanprojectimplementedbyGIZinCambodiafocusesontradefacilitationissuesundertheWTOFTAandCambodia’sASEANcommitmentswiththeaimtostrengthenintra-ASEANtradeandinvestment.TheprojectstartedinJanuary2019andwillrununtilJune2023.https://www.cambodia-ariseplus.asean.org/Logistics Logisticsagentsarenumerousanddiverseinthekingdom.Multinationalfirmsandfamily-runbusinessesoperate side by-side in Cambodia,which implies considerable discrepancies in terms of the servicesoffered.Besides, freight forwarders are typically independent from transport companies,making themarket difficult to apprehend. A freight forwarder does not own his own equipment but instead,organizestransportofgoodsincombinationwiththetransportcompany(land,seaorair).Around150companiesareworkinginthesector,ofwhicharound40areofCAMFFA,theCambodianFreight Forwarder Association, recently renamed Cambodia Logistics Association (CLA).Their mainfunctionistohelpthebusinessortheshipperofthegoodstofindareliablecarrierthatshiptheircargosunder the terms negotiated by the forwarder as well. Aside from that, they can also assemble andconsolidatesmallershipmentsfromdifferentshipperstomakeonebulkshipment,andviceversa.Acustomsbrokerontheotherhandoverseessubmittingallimportantdocumentlikeclearancestoallowtheshipmenttoenterlegally.Theyareextremelyvitalifthebusinessdonotwanttoinvesttoomuchtimeandmoney dealingwith bureaucracy and paperwork. Custom brokers have also a lot of knowledgeregardingallthetaxesandfeesforimportation.Theyalsocanhelpinreconciliation,dispatchingforfinaldeliveryandotheradditionalservices.InCambodia,itispossibleforanindividualtodothecustomclearanceprocedures.CustomsprocessesaremoreandmoreautomatedwiththeASYCUDAsystemandtheyarequiteclearnow.Yet,accordingtomanyspecialists,customsbrokersremainessential.MostSMEsprefertogothroughacustombrokerinsteadoftryingtodoexport/importproceduresbythemselves.Customsbrokershavetheknowledge,thenetworkandknowhowtodealwiththedifferentissues.Regardingtheserviceproviders,CLAex-CAMFFAisthebestplacetogotofindtherightreferralsandrecommendationsbecausefreightforwardersandcustomsbrokersareoftenspecializedbydestination(China,Europe,USA, etc.).Theassociation is verydynamicand is alsoactive in advocacy.TheyofferregularcourseonlogisticsforprofessionalsbutalsoonExportandImportprocedures.Coursesareopentoeveryoneandareveryaffordable.Usually,thetrainersarefromcompanieswhicharemembersofCLA.Anassociationofcustomsbrokers(CCBA)hasalsobeencreatedbuttheirmembersseemtobethesameasCLAmembersandtheydonothavetheirownwebsite.Regardingsmallsendingofproductsamples,keyinformantsusuallyrecommendcontactingDHL.


III. SPECIFICSECTORSANDCATEGORIES ThissectionhasbeenaddedtogiveanoverviewofsomeimportantcategoriesandsectorstargetedbytheGovernmentandthedevelopmentpartners.Nospecificrecommendationswillbeprovidedastheymightneedtobemoresector-specific,butwethoughtthatitcanbeinterestingtohavealltheinitiativesgroupedtogiveabettersnapshotoftheservicesavailableforthesecategories.

1. Women-FocusedProjects/Support MostSMEbusinessesareownedandmanagedbywomen.Accordingtothe2014census,theyarealsoalargemajorityinthecategoryofmicro-enterprises.Informalityisabigissueforwomenentrepreneurs:70%ofwomenbusinesses takeplace fromtheirhomeand theyareoftenself-employed.Onaverage,women-businesses are also smaller. The main challenges faced by women entrepreneurs are thefollowing: lack of time, cultural barriers to access to education and training (technical and financialtraining),whilewomenaretakencareoffinancesandadministration,businessdecisionsneedoftentheapprovalofthehusband,lowlevelofliteracyandeducation,difficultytohireandretainmalestaffandgreaterdifficultytohaveaccesstofinance.Women-focusedinitiativesarenotmissinginCambodiaandtheyusuallyworkwell,ledbyverydynamicandmotivatedleaders.Hereareashortrecapofprojectsandservicesdedicatedtowomen.Formoreinformation, please see the corresponding description in the different categories of services andstakeholdersTable14:ListofserviceprovidersandprojectssupportingwomenSMEsTypeofSupport ServiceProviders TypeofservicesBusinessAssociations CambodiaWomenEntrepreneurs

Association(CWEA)–Morethan400members

Leadassociation.Secretariatwithfulltimestaff

CambodiaWomenBusinessFederation(CWBF)–Around110members

Specificservice:providesinformalpeer-to-peerlendingfromlargemembertoSMEsmembers

WOOMENTUM Digitalplatform,accesstointernationalnetwork.WomenTechmedia–Interviews,forum,PublicationstoraiseawarenessabouttechTraininginDigitalskills

Government MinistryofWomenAffairs(MOWA) 14WomenDevelopmentCentersDevelopmentPartners PACT(WEACTPROJECT) Partnershipwithmorethan10

associationstodevelopnetworkingstrengtheningandskillsbuilding

CapacityDevelopment SHEInvestments Training,IncubatorandAcceleratorProgram

SHINEAcademyfromBRED TrainingonsoftskillsAccesstoFinance SHEInvestments Micro-financingProgramwith

LOLCandTHRIIVECambodia


WomenInitiativeProgramfromBRED

Specificfinancialsupport(emergencyloan,limitedcollateralsfornewloan,suspensionofinterestpaymentsfor3monthsduringpregnancy

WomenMSMEFinTechInnovationProjectledbyBANHJI

E-commerce WEMALL E-commercePlatformGO4ECAM(MOC+UNDP) 1/3oftargetbeneficiarieswillbe

womenSource:AuthorBox6:TheShineBetterBusinessAcademyinitiativeofBREDBank

Case:BuildingSoftskillsforWomenEntrepreneurs–theSHINEBetterBusinessAcademyRecently,BREDresearchedover100 successfulbusinesswomen inBattambang,SiemReapandPhnomPenh tounderstandthechallengesthatwomenbusinessownersarefacinghereinCambodia.TheresearchdelvedintothechallengesthatwomenbusinessownersfacehereinCambodia.ThebiggestchallengeisaroundSTAFFcapabilities.Businessownersfeltthattheycannotrelyontheirstafftoact independently,andtakechargeofsituations,andthereforetheownersneedtobeonsiteatalltimes.Theyalsofeltthatthecurrentformaltrainingoptionsavailabletosmallbusinessdidnotmeettheirneeds,impactbusinessoperationstoomuch,andwoulddrivestafftoaskforhigherwages.Thereisaneedfornon-formaldevelopmentopportunitiesthatconcentrateonsoft-skillsandhelpemployeesbecomemoreindependent,positive,andstrategicinthewaytheydotheirjobs.

Toinitiateachangeofmindset,BREDBankdesignedtheSHINEBetterBusinessAcademy.Hereparticipantsengagewithdifferentsoftskillsinpeerlevelgroupsandthroughexperientiallearningmethods(learnbydoing).AllsessionsarehalfdayasSME’sstatedthattheycannotaffordtohavestaffawayfromtheworkplaceforextendedperiodsoftime.Eachtopicisdesignedfor3differentaudiences(ownersandexecutives,middlemanagers,staff)toensuretherightprogramisdeliveredfortherightaudience.Thesessionsareindependent,andattendeesarenotrequiredtoattendanypreviouscoursesordoanycoursepre-work.

Eachsessionislimitedto15-20peopleensuringthateverybodyhasspacetoparticipateandlearn.ThetopicsreflectrealworkinglifesituationsandarecontextualizedfortheCambodianworkplace.AllcoursesaredeliveredinKhmerandsomecanbedoneinEnglish.

Formoreinformationpleasegotohttps://www.facebook.com/GrowYourBusinessByBREDtolearnmore.

2. Agrobusinessprojectsandservices Most agriculture in Cambodia is produced by small family-run farms. The average size of thesesmallholdingsisabouthalfahectare,unsuitableforindustrialfarmingandforsmall-scaletechnologies.Forsmallfarmers,toearntheaverageofgarmentworkers’wages,theywouldneedtoproduceuptosixhectaresofriceannually.Thewayforward,asofferedbyinternationaldonorsandlocalNGOs,isforsmallfarmerstodiversifyintohighvalue-addedcrops,suchasorganicfarmingandfreshvegetables.Agriculturecanintegratenewtechnologiestoincreasetheproductivityofthefarmers:forexample,theprocessofswitchingcropsfromriceto,say,pepperrequirestechnicalinformationthatisnotcommonknowledge but could be easily made available with the appropriate means of communications. Forexample,theADBhasbeensupportingane-AgriculturePlatformforKampongChamProvince,whichisatthecenterofricegrowinginCambodia.Theprojectinvolveschannelsofcommunicationsusingmobilephones–80percentoffarmersarethoughttohavemobilephones,20percentofthemsmartphones–kiosks,desktop,callcenters,TV,andradio,amongothers.Theproject,implementedbyErnst&Youngonbehalf of the ADB, dismisses the typical intermediaries – from farmer tomarkets, trader, processor,exportertoconsumer–alongthesupplychainwhichnotonlyreducestherevenuesavailabletofarmers,


butcreatesinefficienciesthataddtothecostofthefinalexportableproduct.Alsoactiveinpromotinginnovation in farming in these provinces and ICT4AG is CAVAC in partnership with the Australiangovernmentandmanyprivatecompanies.Inthisregard,the10millionreceivedbyTechoStartupCentertoleadtheprojectonDigitalAgricultureValueChainofSAAMBATisparticularlyinteresting:theywillbuildane-commerceplatformwithtoolssuchascreditscoring,smartcontractsandprovidetrainingtofarmersondigitalskills.Agribusiness and agriculture sectors have received an increased amount of financing recently fromdonors. The following list is not exhaustive and includes mostly development donors’ projects andgovernmentledprojects.Privatesectorinitiativesexistbutinthefieldofdevelopmentaremorelimited.OneisAgribuddy,astartupthatconnectsfarmerstoresourcesandnetworks.Theirdigitalplatformisbothamobileapplicationandawebapplication,whichfarmersusealongsidea“buddy”tostoredataandordersuppliesasneeded.Agribuddyenablesfarmerstohaveaccesstocapitalthroughbankloans,aswellashigherqualityfarminputs.Table15:ListofselectedstakeholdersprovidingservicesforSMEsinAgrobusinessTypeofStakeholders ServiceProviders TypeofservicesBusinessAssociations CambodiaRiceFederation BusinessAssociationsinthe

sectorvaryalotwiththeirsizeandtheirscope.Somearestrongplayers,actingascooperative.Othershavesimplemandatesuchasawareness,marketing,andpromotion.Someoffersmoretechnicalservices:supportforcertificationetc.Itisusefulnonethelesstoreachouttothemwheneveritisusefultodisseminateinformation.

CambodiaOrganicAgricultureAssociation(COrAA)CambodiaFarmerFederationAssociationofAgriculturalProducers(CFAP)CambodiaCassavaDevelopmentAssociationKampotPepperPromotionAssociationKampongSpeuMangoesAssociationCambodiaLivestockRaisersAssociationAllianceofMarineFisheryAssociationofCambodia

Government MinistryofAgriculture,Forestry&Fisheries(MAFF)

AIMS BusinessDevelopmentandFinancing

DevelopmentPartners GIZMSMEProject TrainingIFAD(InternationalFundforAgriculturalDevelopment)

SAAMBATproject

CAVAC–DFAT Productivity,irrigation,ricemilling

CapacityDevelopment TECHOStartupCenter-SAAMBAT TrainingonDigitalskillsGIZRED4Project Training

AccesstoFinance Agriculturalandruraldevelopmentbank SMEFund=50MillionsAIMS(AcceleratingInclusiveMarketsforSmallholders)

Value-ChainInnovationFund

Agribuddy FarmingServicesmanagement(credit,Rental,Inputprovision…)

E-commerce DigitalAgricultureValueChainunderSAAMBAT CreationofaDigitalPlatformSource:Author


Box7:AgribuddyCase:AgricultureandTechnology:thesuccessofAgribuddyThegoalistoconnectallthedifferentstakeholderstoboostefficiencyandhelpfarmers.Thesystemisinnovative:Agribuddyrecruitsandtrainsentrepreneursalloverthecountries“theBuddies”.WiththeirsmartphonesandtheAgribuddyApp,thebuddiesrecruitlocalfarmerswithlimitedliteracyandnosmartphonestobenefitfromthesystem.Theapplicationthenstreamlinesthefarmingprocessbyconnectingthebuddiesandtheirfarmernetworktobanks,suppliers,markets,andtechnicalhelp.Farmersthroughtheappcangetaccesstothenecessaryinputstotheirfarmingneedswhenevertheyneedit.Buddiesarethemainsourcesofdatainputinthesystemandarementorstofarmerswhoarelearningtousethedigitalplatform.ThissolutioncanovercomethemainchallengesthatarefacingfarmersandSMEsinagriculture:limitedaccesstoloansduetolimitedcollaterals,difficultytoreachawidermarket,thelackoftechnicalknowledgeonefficientfarmingandthesmallsizeofthefarms.Theapplicationallowstobuilddataandbuildcreditprofilesforthebanks.Withthesecreditprofiles,Agribuddyactsastheguarantoroftheloansgiventofarmers.In3years,theyhavegrown50,000farmersregisteredasmembersofAgribuddyanddisbursed2.5millionUSDto3,000familiesandhavepartnershipswithbanksinCambodia,cropinsurancescompaniesandlocalauthorities.Source:AuthorandGeeksinCambodiainterview

3. Techstartups Techstartupswerenotextensivelycoveredinthisreportbecausemanyrecentreportshavedescribedindetailthetechecosystemandthestakeholdersinvolved.Alotofinformationcanbefoundinthewell-disseminatedandacknowledged“CambodiaVibrantTechStartupEcosystem”publishedbyMekongStrategic Partners (MSP) and Raintree Cambodia. Another great source of information is the “TechInnovation Sector of Phnom Penh: Landscape Scoping and Narrative of Change 2013-2018”publishedbyDevelopmentInnovations(USAID).AfewGraphshavebeenextractedtoillustratetheecosystemandthekeyactorsinthesector:

Inadditiontothislist,weneedtoaddthe recent initiative from MPTCwhich will launch its ITCINNOVATIONCENTERtentativelyinMay 2020 and the TECHO startupCenterlaunchedin2019bytheMEFforitsAcceleratorProgramSourceforallgraphs:MSP(2018)

Figure 7: Main stakeholders involved in the Tech Startup Ecosystem


Figure 9: Tech startup landscape by category

Figure 8 : List of coworking and innovation spaces for tech startups


4. RetailandE-commerce Inrelationwith theabovecategory“TechStartups”, it isworth lookingmorecloselyatopportunitiesprovided by the development of e-commerce in Cambodia for companies and their related serviceproviders.Currently,Cambodianconsumersmaintainastrongpreferencefortraditionalmarketsandtheirfinancialmarketsrelyoncash.Thedemandfore-commerceisstilllimitedtogoodsandservicesthatcustomerscannotaccessthroughtraditionalchannelsand/orverynichesectors(handicrafts,garments,tourism,and catering-related services). However, socialmedia platforms such as Facebook have provided anattractivechannelforsmallentrepreneurstobuyoverseasproductsandsellthemonline.Thistypeof“e-commerce”isthemostpopularandisveryinformal.Cambodiahaslocale-commerceplatformssuchasMyPhsar,Khmer24,Iknow,andMall855butaccesstotheseportalsarelesswhencomparedtoFacebookduetoitsperceived“lessuserfriendliness”.(CTIS2019)TheGovernmenthasbeenencouragingCambodian’stoutilizedigitalpaymentsolutionstopromotee-commerce. Internet banking/mobile banking and mobile payment services (most notablyWing andPiPay) have been gaining popularity among consumers but online transactions are limited asmanypeoplearestillunbankedorunderbanked.Logisticcosts,coordinationandefficiencyarealsoimportantbarriers: lastmiledelivery involvesheavyrelianceonMSMEsand isverycostly forsmallcompanies.Anotherimportantchallengeisthelowe-commerceskillsinCambodiaduetoalowawarenessandlackofsupport.However,thingsarechanging:AnE-commercelawhasfinallybeenadoptedtobeimplementedinMay2020 and will finally fill some important gaps such as consumer protection aspects. Plenty ofopportunitiesforSMEscancomeforinternationalizationthroughthischannel,notonlyfortradingbutalsoforalltherelatedservicesassociated:digitalskillstraining,fintechsolutions,digitalmarketplace,logisticscompanies.TheGovernment starts seriously to tackle these challenges: theNationalBank of Cambodia is at theforefrontinworkingwithdigitalsolutions,blockchainandpaymentsolutions.MPTCisalsoinvolvedalotinmonitoringall thetechstartup initiatives,andtheMinistryofCommerce ispreparingto launchanambitiouse-commerceprogram(Go4eCam)withthesupportofUNDPandEIF.Inthefuture,withtheincreaseadoptionofthesedigitaltools,therearesomechancestoseefinallycross-bordere-commerceexpand.Cross-bordere-commerceenableslocalenterprisestoextendtheireconomicactivitiesbeyondbordersinordertopursueopportunitieselsewhere.Asthesectorisstilltobedeveloped,wewillonlymentionheresomerecentinitiativesandthenamesofsomeserviceprovidersthatmightbeinterestingtowatch.


Table16:SelectedservicesandserviceprovidersforTechStartupsTypeofSupport TypeofServices ServiceprovidersCommunities Associations ICTFederation,LaFrenchTech

Cambodge,Amcham,ICTCambodia

Network CambodiansinTech.Startup&Angels

Community ImpactHubEntrepreneurClub(HEC),SHEcommunitygroup

SpecificPrograms TechnicalMentoring TechoStartupCenterE-commercemarketplace GO4ECAM

CapacityDevelopment TrainingonDigitalSkills Woomentum,GeeksinCambodia,ITstepAcademyandsomebusinessassociations(YEAC,CWEA)

Incubators,Accelerators Smallworld,SmartSpark,SmartStart,SHEinvestments,BNCStartupAccelerator,CJCCaccelerator,TAP(Techostartupcenter),etc.

CrossborderTrade(inward) Internationalmarketplacesplatforms Alibaba,Aliexpress,Ebay(directdeliveryinCambodia)

Otherplatforms(intermediaries) Fado168(AmazonUSAandJapan),KiumarketandKiuship

ITdevelopmentandsupportServices(digitalmarketing)

Webdevelopment,softwareoutsourcinganddigitalmarketingserviceshaveemerged,andthequalityisrelativelygood.Therearetoomanytobementionedhere.

Source:Author


CONCLUSIONThisreporthighlightedtherecent initiatives implementedbythegovernment,developmentpartners,andprivatesectortosupportSMEsinCambodia.Alltheseeffortsaregoingintherightdirection.AfteryearsofpolicyfocusingonattractingFDIandinvestors,itistimeindeedtorecognizetheimportanceofSMEsasanaturalengineofgrowthandtosupporttheminovercomingtheirparticularchallengesandboostCambodia’sentrepreneurialecosystem.ThefirststeptosupportSMEinternationalizationisindeedtostrengthentheoverallcompetitivenessofSMEsinCambodia.Progresshasbeenmadeinrecentyears.However,muchremainstobedonetofurtherincreasethecompetitivenessofSMEstocompeteinternationally..ThenewgovernmentinitiativeslikeKhmerEnterpriseorTechoStartupCenterareverypromising,becausetheyaretappingintonewmodels.However,theyhavejuststarted.This study identifies areas for improvement linked to a lack of cooperation between ministries, tobureaucraticcomplexityandlimitedimplementationofsupportinginitiatives.TheSMEtaxincentives,the SME customs incentives and the Skills Development Fund are perceived bymost private sectorrepresentativesascomplicatedtoaccessandnotsufficientlyadaptedtotheneedsofSMEs.Thegoalofthegovernment’spolicyistoincreasecompliance,yetSMEsdonotseeenoughadvantagestobeinthesystem.MoreeffortsareneededtocreatesupportprogramsreallytailoredtoSMEneeds.Services provided by development partners can help fill the gap left by the previously very limitedsupportfromthegovernment.However,sustainabilitywillalwaysremainanissue.RobustprogramsuchasDevelopment Innovation (USAID) andMekongBusiness Initiativeshaveended, leaving sometimessomegreatprojectswithoutfurthersupport.Inthisregard,pushingformorepublic-privatepartnershipscanbeagoodwaytopromotesustainability.Creatingsynergiesbetweenco-existingprojectstargetingthesametopicsisonlycommonsenseandbestpractice,butitisrarelydone.Furtherattentionisneededto improve the collaboration among development partners, government agencies and private sectorrepresentativestoacceleratereformagendasforSMEdevelopmentinCambodia.Thereisapositivetrendemergingfromtheprivatesector.ServicingSMEsisamorecommonbusinessmodel than it used to be. In the past, companies’ motivation to help SMEswas often driven by thewillingnesstosupportthedevelopmentofthecountryandtohaveasocialimpact.Itcanstillbeastrongdriver forsomesuccessfulbusinessmenorKhmers fromoverseas,butmotivationshaveshiftedtobemoreprofit-drivenandhencesustainable.Indeed,opportunitiescanbefoundalmosteverywherewiththe sustained growth of the economy, and many new service providers entering the market arethemselvesstartupsorSMEs.Interestingly,wecouldalsoseeacultural“re-appropriation”fromtheselocalserviceprovidersandfromthenewgenerationoflocalentrepreneurs.Internationalstandardswerepreviouslythereferenceforthebest standards. Today, more and more Cambodians believe that the best solutions lie in-between:internationalstandards,yes,butappliedandadaptedtothelocalculture.TrainingsaremoreimpactfulwithSMEswhentheyaredeliveredbysomeonewhohasagoodunderstandingoftheKhmercultureandmindset.Trustneedstobebuilttochangein-depthmindsetandhabits.Itisindeedpossibletooperateinthe“Cambodianway”whileretainingandadaptinginternationalstandards.


DespiterecentimprovementstotheSMEsupportlandscapeinCambodia,severalgapsremaintobefilled.One key aspect is the absence of a comprehensive export promotion strategy and associated toolstargeted to SME needs. Barriers facing would-be SME exporters are real and numerous: costs,bureaucratic inefficiencies, lackof support, and inexperience.Promisingareas forCambodia’s furtherdevelopment of export-ready SMEs include e-commerce ecosystem, franchising, SME clusters, tradefinance,user-friendlyinformationandenhancednetworksforSMEs.


ANNEXESANNEX1:LISTSOFMEETINGSGOVERNEMENTBODIES/PROJECT

BUSINESSSUPPORTSERVICES

KHMERENTERPRISE(MEF) IMPACTHUBSMEBANK(MEF) CAMBODIAINVESTORSCLUB(CIC)TECHOSTARTUPCENTER(MEF) BANHJISMEDEPARTMENT(MIH) FOURMIINSTITUTEOFSTANDARDS(MIH) CAMBODIANIP&STRATUPADVISERSNPCCNATIONALPRODUCTIVITYCENTER(MIH) INTRIINNOVATIONSEXPORTPROMOTION(MOC) COMPANY101GO4ECAM(MOC) WORLDBRIDGESMECLUSTERPARKMPTCFORNIPTIC(STARTUP)-INNOVATIONCENTER CSXGROWTHBOARD

MINISTRYOFWOMENAFFAIRS(MOWA) CAPACITYDEVELOPMENT-TRAININGNIEINATIONALENTREPRENEURSHIPINSTITUTE(MOLTV) CEOMASTERCLUB

DEVELOPMENTPARTNERS/PROJECTS LAURENTNOTIN

GIZRED4, CAMBODIA-JAPANCOOPERATIONCENTRE(CJCC)

SWISSCONTACT SOCIALINNOVATIONLABPACTPROGRAM(WEACT) ANAKOTASIAACADEMYUNDP(INNOVATIONLAB,SMECLUSTER,E-COMMERCE) OTHERMEETINGS

BUSINESSORGANIZATION KIRIROMFOODPRODUCTIONCAMBODIAWOMENENTREPRENEURSASSOCIATION) NOREAHANDICRAFTS

CAMBODIACHAMBEROFCOMMERCE WATERLILY

EUROCHAM SPECIALISTINPACKAGING(WOLFGANGCZIZEGG)

CAMBODIANFRANCHISEASSOCIATION SPECIALISTINSME(RAHULBHATNAGAR)YEAC SPECIALISTINCUSTOMS(SOKKHA)JCICAMBODIA SPECIALISTINLOGISTICS(CHRISTINESOUTIF)BNICAMBODIACHAPTER RHENUSLOGISTIC

WOMENFOCUS GIZMYANMAR:PROJECTMANAGER+CONSULTANT

SHINEPROGRAMFORBRED GIZVIETNAM:PROJECTMANAGERWEMALL/WOMENTUM GIZTHAILAND:REGIONALPROJECTMANAGERSHEINVESTMENTS


ANNEX2:OECDSMEPOLICYINDEX2018ThefollowinggraphgivesthedetailsoftheDimension4:“AccesstoMarketandInternationalization”fortheOECDSMEPolicyIndex.Thesub-dimensionsandtheirrespectivethematicblocksresultsarealsogiven.HighlightedinredaretheresultsforCambodiaand,forcomparison,highlightedinblueVietnam’sresults.


ANNEX3:TYPOLOGYOFSMESBASEDONANDEMETHODOLOGY


ANNEX4:REFERENCESAbonyiGeorge,2015:BestPolicyPracticesforInternationalizationofSME’sTradeandInvestmentforASEANandEastAsia,chapter2in“Innovation,TechnologyTransfers,FinanceandInternationalizationofSMEs’TradeandInvestment”,ERIAresearchprojectReportFY2013APECPolicySupportUnit,BernadineZhangYuhua2015:SMEInternationalizationandMeasurement,inPolicyBrief,No12,March2015BobowskiSebastian,2017:Internationalizationofmicro,smallandmediumentreprises(MSMEs)inASEAN,conferencepaper.EmergingMarketsConsulting(EMC)2017,MekongBusinessInitiative:UnlockingthePotentialoftheCambodianPrivateSectorEmergingMarketConsulting(EMC),2018,DutchGrowthFund:ClosingtheGapMekong,CountryreportCambodia,EntrepreneurialEcosystemassessmentMekongStrategicPartners(MSP),Raintree2019:CambodiaVibrantTechStartupEcosytemin2018MEF,GeneralDepartmentofCustomsandExcise(GDTE)2015:HandbookofCustomsClearanceMinistryofCommerce(CTIS)2019:CambodiaTradeIntegrationStrategy2019-2023MinistryofIndustryandHandicrafts(MIH),2017:DraftSMEDevelopmentPolicyandFive-yearImplementationPlan2017-2021ChheaLayhy,MinistryofIndustryandHandicraftsMIH(2019):CurrentSituationofSMEinCambodia–MSMEFinancing.PPTpresentationMinistryofIndustryandHandicrafts,WorldBank(IFC)2019:CambodiaManufacturingIndustryBusinessDirectory2019OECD,2018,ERIA:SMEpolicyIndex,ASEAN2018,BoostingCompetitivenessandInclusiveGrowthMinistryofCommerce(MOC)2008,IFC:HandbookofExportProcedures,PracticalGuideforSmallandMediumEnterprisesinCambodiaUNESCAP2019,BDTrust:MSMEsAccesstoFinanceinCambodiaUSAID,DevelopmentInnovation2018:TechInnovationSectorofPhnomPenh,LandscapeScopingandNarrativeofChange2013-2018WorldBank(WB)2016:EnterpriseSurveys,Cambodia2016CountryProfileWorldBank(WB)2018:EntrepreneurialCambodia,CambodiaPolicyNoteWorldBank(WB)/InternationalFinanceCorporation(IFC)2018:FDI-SMELinkages:SupplyandDemandSurveyResults

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