Technological adaptation in businesses in Cambodia is mainly based on the operation period of an enterprise and land conditions, while shortage of finance, excessive loan interest rates, and complex credit requirements remain barriers for small- and medium-sized businesses (SMEs) to invest in technology, a report has revealed.
The ‘Industrializing Cambodia: Enterprise’s Embracing Technological Advancement’ report, published by the Ministry of Industry, Science, Technology and Innovation in July, compiles the views of 100 businesses from three key industries - agriculture, manufacturing, and trade and services - to understand the technological advancement in each sector.
In spite of the many aspects in factor identification, the study in the context of Cambodia explores the maturity levels of businesses in adopting technology, concentrating on two factors: the age of the business and state of the land they operate on.
Nith Kosal, co-founder at Sethakech, said to invest in technology in SMEs, the first thing that business owners should do is to acknowledge what type of technology is needed to increase productivity. Then, they should invest in technology based on the resources they have.
“I think the government can help facilitate one thing [tax exemption]. For example, in Thailand’s industrial sector, SMEs that are involved in potential sectors they want to grow, they help by offering a tax exemption whenever importing technological products. So, citizens can save some budget from tax exemptions on technology products,” he said.
He added that regarding the limited financial challenges for tech innovation and advancement in business, SMEs should cooperate and discuss the issue with related stakeholders such as government bodies to assist in financial expenses.
The report found that businesses that have been in operation for more than five years generate greater annual revenue. A total of 22 percent of businesses had annual revenues between $25,000 and $1 million, and 45.7 percent of businesses had annual revenues of $1 million or more. Businesses that have been operating for three to five years typically earn annual revenues of $25,000 to $1 million.
Agriculture, forestry, and fishing
For agricultural businesses that have been in operation for three to five years, efforts are being made to promote adoption and the transfer of some key technologies. These include cloud computing, robotics, blockchain, and weather tracking. For businesses that have been in operation for less than two years, steps must be taken to assist them in overcoming the uncertainties associated with adopting new technologies.
Trade and services
It is advised that trade and service businesses swiftly adopt emerging technologies and evaluate their return-on-investment (ROI) estimates to reap the benefits of adoption and transfer. Even if the initial ROI for some technologies may seem poor, it is crucial to take into account the possible long-term benefits, such as enhanced productivity, improved customer service, and eventually larger profitability.
Regardless of their maturity level, manufacturing businesses should give machine-to-machine (M2M) communication, real-time location systems, and augmented reality (AR) and virtual reality (VR) special consideration for adoption and transfer since these technologies result in benefits like cost efficiency, decreased human error, and increased traceability.
Technologies adopted based on enterprise maturity level
Most developing technologies are being used by businesses with a three- to five-year lifespan. The use of cloud technology, however, is currently a problem for SMEs.
The survey shows that businesses with fewer than two years of existence are embracing technologies including aerial imaging, mobile devices, labeling technology, internet of things, and remote sensing. Cloud computing, robotics, and weather tracking installation, however, still pose significant risks and difficulties for these types of enterprises.
Leased, concession, or private land
Land is a crucial consideration for businesses when implementing technology since it serves as both a physical location for operations and a convertible asset for mortgages, which are used to access financing and credit.
Land ownership has a number of benefits, including total control over how the land is used and the opportunity to base long-term investment choices on that assurance. “The distribution of land use in the agriculture sector, with 46.7 percent operating on lease land, 36.7 percent on private land, and only 10 percent based on concession land,” the report found.
In the trade and service sector, land use distribution shows that a majority of businesses rely on leased land, accounting for approximately 66.7 percent. A smaller portion of businesses have their own private land.
In the manufacturing sector, approximately 52.9 percent operate on their own private land and 47.1 percent use leased land for their operations.
The report added that acquiring land can be challenging, particularly for new enterprise owners, due to the significant upfront capital required. These elements might make it difficult for businesses to confidently plan and invest in the adoption of technology. They can also add uncertainty and risk.
One of the biggest challenges that businesses encounter is financial limitations as new technology frequently demands substantial financial investment. SMEs might not have the money to invest in cutting-edge technology. Moreover, businesses may be unable to make critical investments in new technology due to a shortage of finance, excessive loan interest rates, and complex credit requirements.
According to survey findings across Cambodia's agriculture, manufacturing, commerce, and service sectors, the following major concerns are the biggest obstacles to technology transfer: lack of awareness of intellectual property, low level of investment in research and development, financial limitations, and administrative processes, laws, and regulations.
“The government should simplify and integrate laws and regulations to encourage foreign direct investment and promote innovation in Cambodia,” the report said.