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The Importance of SME Growth for Cambodia

Allen Dodgson Tan / No Comments Share:
People walk by the logo of the World Economic Forum (WEF) in Davos, Switzerland, Jan. 21, 2019. (Xinhua/Xu Jinquan)

I just returned from the World Economic Forum (WEF) 2019 Annual Meeting of the New Champions in Dalian, China also known as the Summer Davos. This event sees public and private sector leaders from around the world converge to discuss topics relevant to global trends as they relate to Asia. Also representing Cambodian interests at this event were Senior Minister Sun Chanthol, Minister of Public Works and Transportation, Her Excellency Chea Serey, Director General, National Bank of Cambodia, Oknha Sear Rithy, Chairman of Worldbridge Group and Dr. In Channy, President of ACLEDA Bank.

The WEF is known for its highly selective roster of multinational companies, and while this continues to be true, what was particularly interesting about this session was the large diversity of startups and innovative SMEs who were given an opportunity to present their work. This was an acknowledgment by global thought leaders of how important these smaller business structures are to driving innovation in the marketplace. Of course, the idea that “tech startups” are a source for innovation is obvious, but we must also extend the same openness and support to SMEs across sectors, not only to software and tech; Cambodia needs innovation across all industries and SMEs can offer that key.

At the opening address of the WEF we heard from H.E. Li Keqiang, China’s Premier, who announced a list of economic reforms in China’s private sector policies, many of which responded to ongoing concerns by the international community about China’s business practices. At the center of this announcement was an acknowledgment of the huge role SMEs play in stimulating economic growth, generating jobs and consumption. This philosophical shift is consistent with policies that have supported SME growth in the United States for decades and has been one factor in our dominance across the innovative industries. The German economy is another great example where SMEs, locally called the “mittelstand”, are the engine of the economy; providing the majority of jobs and representing 98% of all exporting companies.

The good news is that the majority of Cambodian businesses are SMEs, many of them family-run. When we look a bit closer, we see there is still much improvement needed. According to the Federation of Association for Small and Medium Enterprises of Cambodia, SMEs account for less than 10% of Cambodia’s exports. If we look at the range of consumer products available in the domestic market, we also see a glaring absence of locally manufactured products.

We are fortunate that the Royal Government of Cambodia has acknowledged the importance of SME growth in the Cambodia Industrial Development Policy 2015-2025. This commitment was reiterated by Prime Minister Hun Sen at the 18th Government-Private Sector Forum in April where he announced tax incentives for SMEs, and the Ministry of Industry and Handicraft has also worked to streamline the registration process. If fully implemented, the proposed reforms would make significant headway in providing the support needed.

However, support for SMEs must not be limited to the public sector. Engagement by larger corporate entities and business groups, in the form of partnerships, particularly in the supply chain, should be promoted and supported by government policy. We must encourage our domestic private and institutional investors to look at Cambodian SMEs as a source for revenue growth and as a means for building a strong local economy which will ultimately drive growth, and by extension their core businesses.

We have seen a few examples of local private sector action with the Smart Axiata Digital Innovation Fund and Ooctane, the $55M VC fund set up by Oknha Sear Rithy. Initiatives such as the agricultural “SME cluster” by Worldbridge Group and enhanced co-working spaces like The Factory Phnom Penh are also a step forward. We need more of these commitments by local capital and they need to go beyond tech and digital.

As we move into the next phase of Cambodia’s economy, preparing for Industry 4.0, massive global shifts in supply chains and manufacturing technologies, we should view Cambodia’s SMEs as the vehicle through which we will build our seat at the table. Cambodia cannot follow the same economic path as other industrialized nations; the technologies and modalities of production will shift long before we get there and we lack access to essential natural resources for heavy industry. Innovation through our SMEs will be the key and we must all give them the credit and support they deserve.

Allen Dodgson Tan is a Cambodian-American entrepreneur and the Chairman of the American Chamber of Commerce Cambodia.

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