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Understanding the Digital Economy in Cambodia

ISSUE 2019
No 14
Release 14 December 2019
By Mr. Ngov Mengyu

Over the last two decades, Cambodia has experienced high economic growth at an average of 7% of Real GDP. This success is mostly credited to the traditional ‘export-led’ growth model. However, this model has its weakness in promoting further economic development for Cambodia. It is not equipped with the right characteristics to enlarge sector diversity and leaves the economy vulnerable to price fluctuation and uncertainty of global demand. Integration of digital technology is the additional driver needed to allow Cambodia to realise its long-term ambition to become an upper-middle-income and higher-income country by 2030 and 2050, respectively.

Reliable internet connection and telecommunications network infrastructure are a foundation for development and transforming Cambodia into a digital economy. Internet connection is the basic mechanism for digital economy to operate efficiently. In the present, basic digital infrastructure has been growing in Cambodia; a mobile broadband as a measure of mobile cellular subscription in Cambodia grew from less than 10 per 100 inhabitants in 2005 to 125 in 2016. In contrast, fixed broadband subscriptions are estimated to be 0.6 per 100 inhabitants in 2016, revealing that Cambodia is underperforming compared to the wider regional (ASEAN). The low internet subscription price, lack of physical landline infrastructure in the rural area, and a large amount of smartphone penetration in Cambodia are determinant factors of mobile broadbands dominant the internet market in Cambodia.

Substantial progress in basic digital infrastructure is an opportunity for Cambodia to develop the digital economy; however, barriers to its provision for the next generation of innovators may be limited for the aforementioned reasons. The mobile revolution showed the opportunities for leapfrogging, within which Cambodia has increased mobile connectivity, bypassing the need for building a physical landline. The next transformation will be required more than basic digital technology improvement.

Human capital development will improve the productivity level of the country; highly educated workers will be the group endorsing industry 4.0. The United Nations (UN) global adoption index measures the spread of technological adoption amongst the organisations, businesses and people in comparison to the global scale. The UN ranked Cambodia in the lower group in comparison with the wider Asia Pacific region; the index demonstrated that both public and private institutions are mostly not ready for the digital transition. This readiness is plagued by the low digital literacy gap amongst Cambodians. The low digital literacy rate may disrupt the Cambodian labour market; a shift from labour-intensive production to more automated production techniques will make Cambodia’s labour market vulnerable. As a consequence, it prevents Cambodia from absorbing the full potential of digital transformation.

Cost reduction and reliance on the internet and intranet, have influenced and challenged traditional business models and private sector operations. The digital economy can help businesses capture the additional value-added via the implication of platformisation. This is a form of the digital market platform that allows businesses and SMEs to offer their goods and services effectively to broader consumers. E-commerce startups are growing in Cambodia; BookMeBus is one such business founded locally by Mr. Chea Langda. BookMeBus strikingly captures the niche market in Cambodia, through facilitating consumer purchase of transport tickets with its online platform. This platform acts as an intermediary to ease product allocation more efficiently and broaden the market. Therefore, the digital economy accelerates economic development through assisting consumers at large, bringing new innovation into the market.

In preparation for transforming Cambodia into a digital economy by 2023, RGC realised that digital literacy and institutional regulation are needed to improve the readiness of technological adoption in Cambodia. The Ministry of Education, Youth and Sport of Cambodia actively revises the curriculum framework for general and technical education. The latest revision of the general education framework is tailored towards the inclusion of 21st Century skills, primarily focusing on integrating information communication and technology (ICT) into the curriculum. Such an arrangement appears to empower human resource productivity. Despite the progression in curriculum revision, the education and digital literacy gap still persists amongst Cambodians, even if the higher education system is well equipped compared to lower education system. Limitations of regional standards of ICT knowledge, create mismatches of jobs and quality in Cambodia.

Internet technology within the digital economy requires a completely new governance that coordinates and regulates activities across all economic sectors, while managing cyber threats risks. Hence, with well-designed e-commerce regulations from the government, it may occasionally ease the adoption of digital transformation and innovation, via the impact of better procurement practice on market development.

The above discussion may offer some policy options for Cambodia to benefit from the transition into a digital economy. To mitigate some of the challenges, future policies should address the institutional framework to regulate the practice of e-commerce within a national framework of cyberspace governance, as an initial step to bolster direct investment into the sector and the prevention of cyber threats. Technological skill shortage is a primary concern, with calls for a reform of the education system and professional training to raise awareness of digital technologies.

The views expressed are the author’s own and do not reflect the views of the Asian Vision Institute.