Commentary

Efforts Needed for Cambodia to Fully Embrace Digitalization

Cambodia has taken great strides to embrace the digital revolution, a move that has been pushed by the onset of the Covid-19 pandemic, but challenges need to be addressed for the Kingdom to reach its full potential
A person buys food from a street vendor in Phnom Penh. Kiripost/Siv Channa
A person buys food from a street vendor in Phnom Penh. Kiripost/Siv Channa

Amid the unprecedented Covid-19 outbreak and global trend of the Fourth Industrial Revolution (Industry 4.0), Cambodia has been developing potential strides for digitalization.

Following the implementation of Cambodia Digital Government Policy 2022-2035 and the Cambodia Digital Economy and Social Policy Framework 2021-2035, plenty of digital services have been provided by the government, ranging from digital finance, business, education, and transportation, to retail and online hospitality.

According to the Cambodia Digital Government, in 2022, there were 20.53 million mobile users, amounting to 122.84 percent of the total population in 2021.

Notwithstanding the widespread use of digital technologies, the remaining skepticism is about whether Cambodia faces challenges in two key priorities: seamless digital payments and fostering entrepreneurship.

A person checks his phone in Phnom Penh. Kiripost/stringer
A person checks his phone in Phnom Penh. Kiripost/stringer

In this context, seamless digital payment refers to a labor-saving payment system in which consumers can transfer their money from one account to another utilizing their digital mobile.

Bank transfers, QR codes, mobile money, and payment instruments, including credit, debit, and prepaid cards are the catalysts for this payment system.

As a developing country with a youth bulge, two-thirds of Cambodia’s population is under 30-years-old. Nevertheless, the digital literacy rate in Cambodia is surprisingly low; roughly only three in 10 people have basic digital skills, with limited data available on the topic of Cambodia’s digital preparedness.

Moreover, the informal sector or shadow economy extensively shares most of the country’s income, with 93 percent of Cambodian workers working in the informal sector. If these issues are not properly and timely addressed, it can hamper not merely the country’s economic development but also its digital readiness at the age of the Fourth Industrial Revolution.

The issue of the digital literacy rate in Cambodia is complicated to tackle, as multiple factors are involved. Though a small country, Cambodia has an inequality of consumption and income.

Therefore, separating people into different groups makes it hard for everyone to achieve equal digital literacy skills and training. Technological innovation has been rapid, making it challenging for people to keep up; cutting-edge technology, such as AI training, data science, block chain technologies, cloud computing, and fintech, are limited in the country.

In addition, 21st century skills, including critical thinking, problem-solving, communication, creativity, and collaboration, are not implemented in the general education curriculum. Only higher education students have the opportunity to learn these extra courses.

Launched in 2021, Cambodia Digital Economy and Society Policy 2021-2035 provide a clear commitment of the government to building, promoting, and improving infrastructure for the digital payment system as one of the ten key strategies. Likewise, digital payment platforms have been rapidly increasing. For instance, 69 financial institutions have provided mobile banking services in Cambodia.

These include ABA Mobile Bank, ACLEDA Mobile, AMK Mobile, Bakong, Binance, Canadia Bank, TrueMoney Cambodia, U-Pay Wallet, and Wing Bank.

In 2021, there were 415.5 trillion riels operated through digital payment transactions. Also, the number of e-wallet accounts outreached 13.6 million users, equal to more than 80 percent of Cambodia’s total population.

This gradually allows seamless digital financial services provided by the National Bank of Cambodia, Bakong, to become prevalent. According to the National Bank of Cambodia, the Bakong digital wallet had over 200,000 users in 2021.

Cambodia experienced a boom in entrepreneurial economics in 2019 and then inadvisably busted in the midst of Covid-19. On the bright side, the country is recovering and is expected to rebound to 5.5 percent in 2023 and six percent in 2024.

In recent years, many shared success stories, such as Brown Coffee, Koompi, Nham24, and BookMeBus, furnish rich and inspirational stories for youth.

The young people have been inspired to start their businesses and their own version of entrepreneurship, defining business success as more than just about generating profits but also addressing the social and environmental challenges through business solutions.

In 2019, the government established an Entrepreneurship Development Fund (EDF) mandated under the Ministry of Economy and Finance to support synergy in the entrepreneurial ecosystem to further encourage the growth of this social entrepreneurship in Cambodia.

In the same year, a plethora of support from public universities has established, including the Techo Sen Startup at the Royal University of Phnom Penh (RUPP), the University-Industry Cooperation Centre (UICC) funded by the European Union (EU), and iLab at National University of Management (NUM).

Other important intermediary and business organizations include SmallWorld Cambodia, Impact Hub Phnom Penh, Cambodia Women Entrepreneurs Association, Federation of Associations for Small and Medium Enterprises of Cambodia, Pact, SHE Investment, and Young Entrepreneurs Association of Cambodia.

People use phones in Phnom Penh. Kiripost/Siv Channa
People use phones in Phnom Penh. Kiripost/Siv Channa

While the digital payment platform has hugely facilitated Cambodia’s economy of entrepreneurship, particularly during the outbreak of Covid-19 over three years, problems arise, such as the legitimacy of business registration and the widening tax compliance. Especially among micro, small, and medium entrepreneurs (MSMEs).

Challenges

Despite the rapid growth of digitalization, Cambodia has experienced numerous challenges ranging from financial and digital literacy to resources and skills that hinder the readiness for digital development.

The main principle of digitalization is to accomplish transparency and eliminate distance, and other divides between the government and its citizens with the utilization of technology.

However, Chea Vandeth, Minister of Post and Telecommunication, stated that 70 percent of Cambodia’s population is in need of basic digital literacy skills. This number is concerningly high, given that the country had a total of 17 million internet subscribers in November 2022, with internet penetration of 105.60 percent of the total population.

Therefore, ensuring that most Cambodian citizens receive and can use the digital public services provided by the government remain challenging.

In the Rectangular Strategy (Phase IV) published in 2018, Rectangle 2 of Economic Diversifications centers on the readiness for the digital economy and industrial revolution 4.0.

The necessary skill to find jobs has shifted significantly in this digital age. The three dominant skill sets in the future are cognitive, technical, and interpersonal skills.

Mainly, technical skills in human resources have not met the demand for practical skills in the recent market, especially those in developing and building the digital economy and society.

Although Cambodia has a resource pool of 50,000 digital talents, the workforce in the Information Communication Technology (ICT) sector is identified as having moderate digital skills according to the Cambodia Digital Economy and Society Policy Framework 2021-2035.

The enrollment rate in science, technology, engineering, and mathematics (STEM) at the tertiary level was only 27.1 percent, while another 0.03 percent enrolled in technical and vocational education and training programs.

Recommendation

Cambodia’s income predominantly comes from the informal sector, accounting for 40.9 percent, approximately $54 billion, of Cambodia’s GDP (PPP) levels.

Consequently, many start-ups share common experiences of setbacks during their early stages, mainly due to the lack of government transparency and access to accurate, up-to-date information on laws and regulations.

This results in businesses unknowingly violating the laws. The majority of MSMEs are struggling to move forward digitally and legitimize their businesses. Thus, there has been a recommendation that the Cambodian government considers providing ministerial committees or online advisors to support local MSMEs.

Singapore has set up a high-level committee that helps local small businesses go digital. This Ministerial Committee for Digital Transformation guide Singapore’s adoption of digital technology by overseeing the execution of policies and coordinating the work of many agencies and groups involved.

A person checks his phone in Phnom Penh. Kiripost/stringer
A person checks his phone in Phnom Penh. Kiripost/stringer

In turn, Singapore has more than 83 percent of SMEs transformed digitally and ranked 4th in World Digital Competitiveness in 2022. To achieve better seamless digital payment, Cambodia should consider having a secure platform where the end users; information is identified and protected.

For example, Singapore has adopted the digital national ID card program for residents, businesses, and e- government services. Evaluating one of the factors of efficient digital payment, internet access will increase digital payment users from rural areas.

In China, for example, there are 104 million internet users, 17 percent of which use mobile payment—furthermore, promoting digital talents through different campaigns, from training courses to digital campaigns focusing on categorized audiences.

Regardless of increasing digital transformation accelerating the momentum of digital payment, Cambodia has foreseeable challenges to consider, including internet penetration, tax revenue collection, and personal data privacy.

By key takeaways that enable Singapore and China to achieve their digital payment, we believe that Cambodia will subsequently shift itself to a cashless society.

---

Disclaimer: This commentary is written by fellow of the Adenauer Young Scholars for Excellence Fellowship 2023, as part of their assignment in the program. The views presented in this paper does not necessarily reflect those of the editors, the program, and/or the Konrad-Adenauer-Stiftung Cambodia and Institute for International Studies and Public Policy of the Royal University of Phnom Penh.