Author: Pheakdey Heng, Enrich Institute
In March 2018, the Cambodian government announced its plan to be ready to transform into a digital economy by 2023. A digital economy is one in which economic processes and activities are based on digital technologies (electronic systems and devices that generate, store or process data). The digitisation of the economy drives innovation and fuels job opportunities and economic growth.
Cambodia’s economy grew at an estimated rate of 7.1 per cent in 2018, driven primarily by robust expansion in domestic consumption and exports. Despite this positive outlook, there are internal and external risks that may affect Cambodia’s future growth. These include the potential withdrawal of the European Union’s Everything But Arms trade preferences, unpredictable spillover effects of the ongoing trade frictions between the United States and China, and vulnerabilities in Cambodia’s financial sector related to the construction and real estate sectors.
Cambodia’s competitiveness also continues to decline. With its global competitiveness ranking dropping to 110th from 109th in 2017, Cambodia remains one of the least competitive countries in ASEAN. A lack of infrastructure, human capital, innovation and good governance are persistent challenges.
Recognising global trends and understanding the potential of technology to promote competitiveness and sustainable growth, Cambodia aims to be ready to transform into a digital economy in the next five years. To achieve this goal, Cambodia requires an enabling regulatory environment, sound supporting digital infrastructure and strong human capital.
Cambodia currently lags its ASEAN neighbours on several digital fronts. By the end of 2017, half of Cambodia’s population had access to the internet and the country’s year-on-year internet penetration growth rate was relatively low at 12 per cent — compared to 28 per cent, 29 per cent and 33 per cent in Vietnam, Myanmar and Laos, respectively. Cambodia does, however, have a high mobile phone connection rate. It is estimated that of the country’s 29.2 million mobile phone connections, 52 per cent have 3G or 4G broadband coverage.
The adoption of new technologies is slow in Cambodia due to a lack of investment and trust in online transactions or financial institutions. According to World Bank estimates, only 22 per cent of the total population have a bank account, 3 per cent have a bank card, 13 per cent receive or make mobile payments, and 0.6 per cent make online purchases or pay bills online.
Cambodia’s digital ecosystem is still small, but the emergence of local tech start-ups is gradually changing the way people live and do business. There are around 130 start-ups of various types in Cambodia, including in financial technology, logistics and online booking industries.
Digital literacy remains low among the general population and skill shortages plague many job sectors. A National Employment Agency report revealed that 78 per cent of employers in the hospitality sector and more than 50 per cent of employers in shipping and logistics, health, education and training, food and beverage processing, and insurance and finance sectors face recruitment difficulties.
Notably, many businesses in the information technology (IT) sector are unable to find competent staff. This skill gap is slowing the industry’s development, increasing costs for businesses and affecting the competitiveness of Cambodian firms.
Cambodia has made progress towards creating an enabling legal environment that supports information and communications technology (ICT) and digital infrastructure development, but a comprehensive digital economy strategy is yet to be developed. The ICT Master Plan 2020 and Telecommunication/ICT Development Policy 2020 provide vision, policy and coordination frameworks, and institutional arrangements for ICT development. They address structural challenges and aim to enhance the business and investment environment of Cambodia’s ICT sectors.
Cambodia’s most anticipated e-commerce law is expected to be passed in 2019. The latest draft has 12 chapters that are divided into 90 articles and cover a wide range of topics such as e-commerce, e-signature, e-government and intermediary or service providers. The draft also addresses protection of online consumers and their personal information, as well as penalties for breaching these provisions.
Before Cambodia can benefit from the age of digitalisation, the remaining barriers need to be removed. A comprehensive digital economy strategy and a five-year road map should be developed to incentivise investment in digital infrastructure, improve digital literacy, promote entrepreneurship and innovation, and build trust in the use of online services.
All stakeholders have a role to play in Cambodia’s transformation into a digital economy. The government should create an enabling environment and demonstrate digital leadership to encourage the adoption of digital technologies. Firms should invest in digital infrastructure and upskill their employees. And non-governmental organisations and schools should provide education and training to bridge the digital divide.
Pheakdey Heng is the founder and chairman of Enrich Institute.
This article is part of an EAF special feature series on 2018 in review and the year ahead.