Tomorrow (June 27), Cambodia will celebrate its first national day of micro, small and medium enterprises (MSME Day 2024), a sector that stands at a critical juncture of opportunities and challenges. 

Prime Minister Hun Manet's June 25 message for the occasion, to be held under the theme “Better MSME Ecosystem for Better Growth”, highlighted both the potential and the hurdles that MSMEs must navigate to drive sustainable development and economic growth.

These enterprises are touted as the backbone of Cambodia’s economy, with the prime minister emphasising their crucial role in achieving its sustainable development goals by 2030. 

"This sector covers all types of economic activities and provides benefits to all people and businesses by creating jobs, increasing incomes, reducing migration and helping vulnerable people stabilise their livelihoods, as well as promoting economic development, social stability and contributing to the growth of the private sector," Manet stated.

He noted that MSMEs make up 90% of the business production base globally, employing 60% to 70% of the workforce and contributing 50% of global GDP. In ASEAN, these enterprises constitute 97.2% to 99.9% of businesses and contribute 44.8% of the bloc’s total GDP.

“In Cambodia, the 2022 census by the National Institute of Statistics (NIS) reports 753,670 MSMEs, employing nearly 3 million people, including over 1.8 million women,” he said.  

Manet noted the sector contributes 63% of Cambodia's GDP and employs over 70% of the non-agricultural workforce. 

Despite these impressive numbers, MSMEs face hurdles that threaten their growth and sustainability. However, they have proven resilient, even in the highly competitive environment of regional and global markets.

“They are crucial in manufacturing, supply and services, adapting to market demands, environmental requirements and technological advancements,” said the prime minister in his message.  

Te Tang Po, chairman of the Federation of Associations for SMEs of Cambodia (FASMEC), could not be reached for comment on the morning of June 26. When finally contacted, he mentioned he was too busy to speak, as he had many tasks at hand.

According to Manet, a national strategy for informal economic development aims to bolster the informal economy's capacity, productivity and resilience. 

The strategy is intended to foster greater participation in the MSME ecosystem, ensuring business resilience and predictability.

He added that efforts are being made to enhance investment, infrastructure and institutional mechanisms supporting these enterprises. 

He said, however, the effectiveness of these initiatives remains to be seen; ministries and local authorities have been tasked with increasing their capacities and improving public services to boost Cambodia's competitiveness. 

“The private sector is urged to invest in capacity development, product and service quality, productivity, staff training, social security, technology adoption and modernisation of production chains,” he stressed. 

In the message, he noted the government has introduced several key measures, including tax incentives, to support and encourage compliance. 

“The goal is to enable all enterprises to access a sustainable market and receive financial support and services for their potential expansion. Skills development programmes are also a key priority,” the premier said.

However, the journey is far from smooth, as these enterprises grapple with considerable challenges.

A tourism operator in Phnom Penh, who preferred to remain anonymous, pointed out that tax-related concessions were predominantly given to businesses in Siem Reap, with limited support for those in Phnom Penh aside from staff allowances during the Covid-19 pandemic.

According to Rashesh Shrestha, an economist at the Economic Research Institute for ASEAN and East Asia (ERIA), a survey of the bloc’s small and medium-sized enterprises (SMEs) in 2020 showed that eight in 10 have made technology their top investment priority, unsurprising given the rapid growth in e-commerce even before the pandemic.

He said the number of digital consumers nearly tripled between 2015 and 2018, with double-digit growth expected in many ASEAN countries.

El Chean, who has been in the soy sauce business for nearly a decade, shared his experience with technology adoption. 

His enterprise uses a traditional processing machine imported from Malaysia, which, although not up-to-date, enables him to meet local demand. 

"Even though it is not very modern, this machine helps me supply soy sauce to local customers on demand. I can produce tens of thousands of bottles a month," he said.

Chean’s story reflects a broader issue: many MSMEs struggle to modernise due to financial constraints and limited access to advanced technology.

By Outhanvatey, managing director and co-owner of RTR Tours Co Ltd, discussed the tourism sector's challenges and opportunities. 

Her company employs between 50 and 60 people, handling tour packages for both local and international guests. 

"Young customers are starting to switch from direct booking to using online platforms," she told The Post. "So, most of our sales still use the traditional method for elderly and working customers, especially those with limited technology knowledge."

She mentioned that due to the evolution of technology, she is trying to integrate it into service operations, including digital marketing. 

However, Outhanvatey observed that, after a brief recovery following the Covid-19 crisis, the number of domestic tourists travelling abroad has decreased compared to previous years, possibly due to the rainy season and current economic conditions.

With the preparation of the new Techo International Airport (KTI) and the Siem Reap-Angkor International Airport (SAI), as well as direct flight connections, she expects more foreign tourists to come to Cambodia. 

"The launch of direct flights between Cambodia and India will bring more Indian tourists to Cambodia, as seen in neighbouring countries," said Outhanvatey. "Although the number of Chinese tourists is not as high as before, I see that European visitors are gradually returning."

SMEs in the securities market

Huot Pheng, undersecretary of state at the Ministry of Industry, Science, Technology and Innovation, provided a snapshot of the manufacturing sector. 

According to Pheng, as of 2024, 44,625 registered SMEs in manufacturing employ 466,594 individuals.

At the “Growth Opportunities for Cambodian SMEs in the Securities Market” seminar on June 6, at the Non-Bank Financial Services Authority (NBFSA) Fintech Centre, he noted that the Cambodia Data Exchange (CamDX) has registered 391 SMEs in technology nurseries, creating 1,321 additional jobs

Pheng highlighted that 20 enterprises are actively participating in the securities market under the guidance of the Securities and Exchange Commission of Cambodia (SECC). 

"The participation of business owners in the Cambodian securities market is a unique activity that contributes to attracting more investment and fostering national economic growth," he said. 

Sou Socheat, director-general of the Securities and Exchange Regulator of Cambodia (SERC), said that SMEs are the backbone of the economy, especially in creating local job opportunities. The bigger the SME, the more they can employ, he added.

At the seminar, Socheat explained that businesses entering the stock market can reduce their reliance on bank loans, as they generate their own capital to repay debts. 

He pointed out that listing on the exchange allows enterprises to secure lower interest rates on borrowed funds.