A to-do list for Cambodia’s technology sector

Content image - Phnom Penh Post
Khuon Soporth, CEO of Morakot Technology, speaks at a Startupbootcamp event in Singapore in March. Photo supplied

By William Heidt, the United States ambassador to Cambodia.

Did you know that, after the United States and China, Southeast Asia is now the world’s hottest tech market? Eight “unicorns” – startups valued at more than $1 billion – have emerged in the region, including Sea (gaming, Singapore), GrabTaxi (transportation, Malaysia), Tokopedia (marketplace, Indonesia), and VNG (gaming, Vietnam). The region has more than 300 million active mobile internet users, most of them under 35. US tech giants and venture capital firms have set up offices in Singapore and other cities in the region. They are building relationships, rolling out new products and funding dozens of regional startups.

Cambodia’s tech sector is growing rapidly too. Already, Cambodia’s rising tech companies like Morakot Technology, Khmerload, Pathmazing and many others are exploring Asean markets to position themselves as regional players. Cambodian tech firms are doing a surprising amount of work for large American e-commerce websites, sports leagues, and libraries.

But more could be done to bring Southeast Asia’s tech boom to Cambodia. Both established IT firms and tech startups would benefit from more foreign direct investment, more foreign venture capital, and closer ties with regional tech hubs.

Drawing the big tech firms to Cambodia would help Cambodian startups solve the complex programming and engineering challenges they face in bringing products to market. To make these things happen, the government, private sector, and Cambodia’s international partners need to work together. Based on my 30 years of experience in economic development, I see four important jobs ahead.

Job #1: Improve Marketing
Cambodia’s tech scene is built on a couple of key strengths. Information technology (IT) programmes in Cambodian universities are improving in quality and are producing better trained graduates every year. More than two dozen co-working spaces, incubators, and innovation labs are providing critical early support to tech entrepreneurs. Good IT infrastructure, a welcoming business climate, cheap mobile data, reasonable wages, and a young, enthusiastic population that adopts new technologies quickly also support Cambodia’s vibrant technology startup scene.

But the truth is, not many foreigners know about the opportunities in Cambodia’s tech sector. The level of foreign direct investment into the sector to date has been low – starving local companies of the expertise and resources they need to take their business to the next level and expand internationally.

Last month, I pitched investing in Cambodia to 25 American venture capitalists in Singapore, and none of them knew much about the tech scene here.

The US Embassy is working hard to build bridges between tech companies in Cambodia and the United States, which has the world’s deepest reservoir of technology talent and venture capital. Eight of Cambodia’s leading technology entrepreneurs and experts are touring tech centres in the US right now to meet American entrepreneurs and learn how American cities and states support their tech industries.

Later this year, the US Embassy will sponsor the first “Tech in Cambodia” report to help market the sector to potential investors. The report will collect basic information on Cambodia’s tech sector such as employment, regulations, industry trends and investment opportunities. And once that report is done, I plan to lead a delegation of Cambodian tech leaders to Singapore to meet with big American technology companies, venture capitalists and the very large US business networks there. But more could be done to better market Cambodia’s tech sector. Why not collaborate on a Cambodia technology conference in 2018?

Job #2: Decide on Cambodia’s Tech Niche
During a visit to Phnom Penh earlier this year, a prominent American venture capitalist told me that, for smaller countries like Cambodia, it is important to identify a competitive niche in the global tech industry and exploit it aggressively. In a fast-moving and competitive industry like technology, that is the best way to stand out and attract talent and capital.

For example, Estonia, a small country of 1.5 million people in Europe, successfully worked with its private sector to become a world leader in e-governance services. Singapore is a centre for venture capital and, increasingly, artificial intelligence. Indonesia is a major player in the e-marketplace and service sector.

There is no reason why Cambodia could not become a leader in its own niche – but identifying that niche and tailoring specific support for it will require close cooperation between Cambodia’s private sector and the government.

Uber’s launch in Phnom Penh last month shows the impact of effective government-industry cooperation. Uber is the world’s most valuable tech startup but has had growing pains in many markets. Thanks to strong cooperation with the Ministry of Public Works and Transport, Cambodia now has the most forward-thinking regulatory framework for ridesharing in Asia. This framework should lead to strong growth in Cambodia’s ridesharing market as Uber’s competitors also look at the market. Maybe ridesharing and other transportation apps could be Cambodia’s niche?

Job #3: Announce a Targeted Tech Initiative
Technology is different than manufacturing, construction and other traditional economic sectors. The capital requirements for startups are much lower, especially at the beginning. Tech entrepreneurs tend to be young, creative, collaborative, and very international.

The lesson of Silicon Valley and other technology centres is that the best way to grow a dynamic tech sector is to send a clear signal that startups and tech entrepreneurs are welcome, focus government efforts on strengthening the indirect building blocks for the sector, and to let the creative process develop on its own.

After Singapore, Cambodia already has the most welcoming business environment in the region. And the startup sector doesn’t need direct financial support from the government at this time. But the government could send a welcoming signal to international investors if it consulted with the tech industry and announced a targeted programme to support startups and the tech sector. This programme could be structured along the lines of Thailand’s “Thailand 4.0” programme or Vietnam’s “Vietnam Silicon Valley” initiative. Such an initiative could:

a) Establish a public-private consultative body to recommend policies to accelerate the growth of the technology sector in Cambodia;

b) Announce streamlined tax, business visa, and company registration requirements for small startups (the Ministry of Commerce’s prakas No299 and 300 are a good start in this direction), and;

c) Send initial signals to innovators and potential investors about Cambodia’s niche in the global tech market.

The latter point could be a subject of a lengthy analysis of its own. But I would recommend keeping in mind Cambodia’s competitive advantages. By embracing new technologies more quickly than its neighbours – which Cambodia has often done – and creating a favourable regulatory environment, Cambodia can quickly become a trailblazer in new technology fields. Cambodia’s relatively small size could become a competitive advantage, as tech firms invest here to develop, test, and market products that they can then scale up in larger developing countries.

Job # 4: Don’t Forget About Corporate Social Responsibility
For the next few years, Cambodia’s tech sector and market for new technologies may be too small to draw in the largest tech companies. Of the five best performing tech companies in the market today (Facebook, Apple, Amazon, Netflix and Google, also known as FAANG), only Netflix is currently active in Cambodia.

But there is another way to get big tech companies interested – market Cambodia as a welcoming and rewarding location for corporate social responsibility and social entrepreneurship activities.

American companies have a strong sense of social responsibility and many have had very positive experiences operating CSR programmes in Cambodia. And Cambodia’s social entrepreneurship sector is already very developed. Microsoft’s Student Partners programme, for example, works with 54 outstanding university students to promote IT careers in Cambodia. And once a relationship is built, it’s not much of a jump from a good CSR programme to that first business investment. The embassy and AmCham’s CSR Committee are both terrific partners in helping American companies develop CSR projects.

These four jobs sound like a lot of work. But if the tech industry, government, and Cambodia’s foreign partners work together, there is no reason it can’t be done. Cambodia’s tech sector is growing quickly, and if we all work together, 10 years from now we may look back at 2018 as the moment when Cambodia’s technology sector achieved lift-off.

Somewhere among the various tech startups, Cambodia’s future Bill Gates or Steve Jobs is already working to create Cambodia’s version of Microsoft or Apple – he or she just needs a little help to get there!