Small and Medium Enterprises (SMEs) are key factors in the Kingdom’s industrial sector growth, but around 95 per cent of Cambodia’s SMEs have not been properly registered, the Ministry of Industry and Handicraft said on Friday.

The ministry’s secretary of state, Heng Sokkong, added that SMEs were vital to achieving the government’s ambition to attain upper-middle-income status by 2030 and high-income by 2050.

Speaking at the closing of event Enhancing Development of Small and Medium Enterprise[s], and Handicraft and Industrial Sectors, Sokkong said the industrial sector’s GDP share hit 32 per cent last year, higher than the government’s 2025 goal of 30 per cent.

Meanwhile, the National Bank of Cambodia’s biannual report showed that the sector’s share of GDP had increased to 36.4 per cent within this year’s first semester, while services contributed 39 per cent.

Sokkong added that of 510,000 registered firms in Cambodia, more than 90 per cent of them were SMEs.

He said other firms included at least 1,600 large manufacturers, while the rest were retailers, wholesalers and services.

“Given that SMEs absorb more labour, we need to keep studying ways to improve the sector,” he said, noting that Cambodia needs to modernise its SMEs to keep pace with Industry 4.0.

According to the ministry, more than 1.2 million people are currently employed in the sector.

Ministry of Industry and Handicraft’s Department of SMEs director Chhea Layhy said the government had been introducing policies and mechanisms to boost SMEs, such as tax incentives, procedure simplification and power transfer to sub-national levels.

However, he estimated that only 5 per cent of the Kingdom’s SMEs have been properly registered.

“This is a big issue. When we only have a small number of SMEs that are officially registered, it’s difficult for us to learn about the challenges in the sector.

“Substandard products [that the SMEs promote] and consumers’ low confidence in them makes matters worse,” he said.

Lim Heng, Vice president of the Cambodian Chamber of Commerce, said the Kingdom’s SMEs still experienced shortcomings in the areas of human resources and production costs.

He added the sector still needed more support from the government, particularly with respect to financing.

“If subsidy is not yet viable, facilitating low-interest loans to the SMEs should be on the table,” Heng said.

Ly Visal, operations manager at the Federation of Associations for Small and Medium Enterprises of Cambodia (FASMEC), urged SMEs to register so that the government could address their concerns.

According to Sokkong, the SME Bank will start providing financing for SMEs at the end of this year.

The Ministry of Economy and Finance announced in January that the government had allocated a $100 million budget to launch the bank.

SME Bank will prioritise the development of Cambodian agro-businesses and SMEs that are linked to foreign direct investments, the tourism sector and tech start-ups, it said.

An initiative for setting up SME Bank was introduced by Prime Minister Hun Sen in December 2017 in the hopes that it would boost local processing plants and strengthen export capacity.

The move comes after SMEs complained of a lack of financing and repeatedly called on the government to facilitate low-interest loans.