Taking things up a notch in Cambodian e-commerce

Issues that stem from a lack of digital literacy, familiarity with certain technologies, infrastructure, and a legal framework stand in the way of growth in Cambodia’s e-commerce sector, Chanvoitey Horn writes.

The expansion of e-commerce has the potential to propel Cambodia’s economic growth in both obvious and subtle ways. One might look to Vietnam, its neighbour – its e-commerce growth rate ranking second in Southeast Asia, with an annual growth of 87 per cent, worth $2.8 billion – for an example of what is achievable in the region.

Yet in Cambodia, e-commerce remains limited even with the recent rise of small-scale entrepreneurs. Though it is important to acknowledge the progress that has been made, it is also crucial that we think more about the hurdles that stand in the way of prosperity.

Firstly, problems associated with poor digital literacy among a significant proportion of Cambodia’s population hinder the development of digital businesses. In 2018, there were 19.5 million people subscribed to six mobile operators, of which 13.6 million had access to the Internet and 7 million used Facebook.

Yet, in Cambodia, technology is not often used for purposes past messaging, social media, and entertainment. More sophisticated usages go unexplored, and opportunities that could bring about great financial gain go undiscovered.

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Smart, a national telecom firm, has provided $1.5 million in funding for schemes designed to improve digital literacy. The SmartEdu Scholarship Program and the SmartEdu University Student Development Program have been established to increase the prevalence of e-commerce in the country. The company has even signed an agreement with the Ministry of Education, Youth and Sport as well as the Ministry of Posts and Telecommunications to develop local talent to help support a growing a digital economy.

Yet the skill shortage in Cambodia’s IT sector has slowed industrial development and has only led to increasing costs for businesses. This has, in turn, negatively impacted the competitiveness of the country’s businesses.

Secondly, there is a lack of familiarity and trust around e-commerce. This is especially reflected in Cambodia’s consumer trends, particularly amongst its older population. Many still prefer physical retail stores, including street traders and informal market sources, which are predominantly built on a cash-based culture.

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Although the local cashless payment system, Pipay, has more than 250,000 active users, more needs to be done to help Cambodia’s e-commerce to reach its full potential. The lack of trust in online security and consumer protection impedes the acceleration of growth in e-payment software.

Third, Cambodia suffers from an infrastructure deficit, which has also contributed to the absence of sophisticated technology usage.

Logistics networks and telecommunications technology have several unresolved issues, which has led to the launch of a national plan that outlines infrastructure development over the next seven years. It hopes to one day become something of a logistics hub in the Greater Mekong Subregion.

Some are more optimistic about the current situation. Kevin Li of Cainiao Smart Logistics Network, for example, stated that Cambodia is at an advantage with markets in Vietnam, Thailand, and Myanmar being easily accessible. Sin Chanthy, president of the Cambodia Freight Forwarders Association, has also conveyed his hopes to attract more global investors to the country’s e-commerce sector.

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An increase in high-quality telecommunications networks and supporting utilities, as well as better transport and city infrastructure, will incentivise a broader uptake of digital assets. Hard infrastructure, like roads and ports, will help facilitate digital spillovers by reducing the costs of connectivity in the supply chain.

The unregulated environment of e-commerce, however, still remains a major challenge for the expansion of the sector. International firms are reluctant to enter the national market for this very reason.

The Ministry of Commerce has recently announced, in response, that a Consumer Protection Law, Competition Law, and E-commerce Law are expected to be approved by the Council of Ministers this year.

Willing or not, Cambodia is undoubtedly moving towards a boom in its e-commerce sector, largely on the back of increased smartphone usage amongst its consumers. With significant challenges lying ahead, policymakers and the business community alike must think of innovative ways to overcome them.