Government help needed to improve SME market access
Small- and medium-sized enterprises (SMEs) are the backbone to Cambodia’s economy and there are more than half a million of them in the country. Te Taing Por, president of the Federation of Small and Medium Enterprises of Cambodia (FASMEC) recently spoke to Khmer Times’ Chea Vannak on the problems of getting SMEs registered and the need for more government support to the sector.
KT: How does FASMEC plan to help promote SMEs?
Mr. Taing Por: In order to liaise with SMEs, FASMEC will open branches in 25 provinces nationwide in May. This will enable investors to be matched with provincial business partners. We will be focusing on SMEs in the agriculture and handicraft sectors.
We don’t want to see SMEs in these sectors to be just concentrated in Phnom Penh. We hope to set up provincial industrial parks where SMEs can also operate in other parts of Cambodia. Hopefully, we can attract foreign investors to invest in these industrial parks and help promote our local markets.
The SME sector is vital. It’s indeed the backbone for the country’s economic growth. It provides Cambodians jobs and incomes, thus reducing the country’s poverty.
KT: In the agricultural sector, what will FASMEC concentrate on?
Mr. Taing Por: Our priority will be on food production. The raw materials we have in the country are milled rice, corn, cashews, fruits etc. If these can be processed into value-added food products and packaged for sale, we would cut down our reliance on imports tremendously. At the moment, our main import is food products. If we can produce our own, we can cut back about $4 billion to $5 billion a year in cash outflows.
KT: The quality of local products has always been an issue. How does FASMEC plan to address this?
Mr. Taing Por: Yes we acknowledge that the quality of products produced by SMEs previously was an issue. FASMEC is working hard to address that. The number of local products has increased by leaps and bounds and through time their quality has also improved.
FASMEC is working to make Cambodian quality standards to be on par with Asean standards.
KT: Late last year, SMEs had been urged to register with the Ministry of Industry and Handicraft. What is the status of this directive now?
Mr. Taing Por: The draft law on SMEs is still with the Minister of Industry and Handicraft Cham Prasidth. He is in talks with the Ministry of Economy and Finance because it also involves that ministry. This is an inter-ministerial issue, so we have to tread carefully.
We are waiting for the policy to be completed before registering. We will push small enterprises to register when there is a policy for SMEs. To encourage foreign investors, FASMEC will help formalize this process.
FASMEC is also negotiating with the Ministry of Economy and Finance to give a three-year tax incentive to SMEs when they get themselves registered with the Ministry of Industry and Handicraft. We want to encourage them to register.
KT: But there’s still a problem with registration in the sense that not all of the 530,000 SMEs have expressed an interest to get themselves registered. What is the reason?
Mr. Taing Por: Of the 530,000 SMEs in Cambodia, many have been exempt from registration so far due to their small size. For the previous years, these small enterprises across the country, which only had investment capital up to $3,000, were not required to register with the Ministry of Industry and Handicraft, so there was no data about them. Of the roughly 150,000 SMEs involved in manufacturing and handicrafts that the ministry oversees, only about 40,000 had been so far been registered with it.
Some businessmen are also reluctant to get their SMEs registered out of ulterior motives. They do not want to pay tax and want to be below the radar of the General Department of Taxation.
KT: Does FASMEC think the government is doing enough to promote local products?
Mr. Taing Por: I have made a call on relevant ministries to focus on organizing more local product exhibitions instead of just focusing on big expos with overseas manufacturers. Opportunities for local producers to exhibit their products happen just once a month. On the other hand, expos are held in the capital and provincial towns almost every week to exhibit products from Thailand and Vietnam.
This is not the way to promote local products because consumers will tend to choose the cheaper imported products.
KT: How does the 2015-2025 Industrial Development Policy (IDP) help SMEs?
Mr. Taing Por: The third pillar of the 2015-2025 IDP is to encourage the formal registration of 80 percent of small enterprises and 95 percent of medium enterprises and to ensure that at least 50 percent of small enterprises and 70 percent medium enterprises have proper accounts and balance sheets. For that to happen, we have to modernize SMEs and expand and strengthen their manufacturing base.
Importantly, the government can help SMEs by improving their market access and also help them enhance their skills.
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