The government has created an e-commerce platform for MSMEs to bring their trade overseas

It's early days but Cambodiatrade.com, an e-commerce platform spawned out of a public-private initiative, has brought onboard a myriad of pandemic-hit micro-, and small-and-medium enterprises (MSMEs) with over 1,000 local products on display.

Having been launched on March 31, but with a few yet-to-be-resolved kinks, it is being hailed as a promising e-commerce tool for small businesses.

Part of the eight-component Go4eCam pilot project to augment the e-commerce segment, the platform is enabling artisans, retailers, social enterprises and manufacturers to make the transition from conventional business operators to global entrepreneurs.

Owner Kouch Seng Thai of family-run Reakossa Arts Workshop Co Ltd, a Siem Reap-based handicraft shop, whose sales dropped by 80 per cent in 2020 and 2021, said he wanted to explore overseas markets through the government platform, which was free to join.

Within two weeks of signing up, he has already received a small gift order from Switzerland, which he views as a precursor to upscaling his business to cross-border exports at some point.

“I am [participating] in a coaching programme organised by the Centre for the Promotion of Imports to export to the EU. Because I am not qualified yet, I am making preparations now. It will take some time,” said the 37-year-old.

His shop, which employs 12 people, began in 2012 with an environmental idea of recycling sawdust and wood chips to make statues, soap and incense stick holders, vases and key rings. It later diversified into making soaps and fragrant candles.

He has displayed nearly 200 products, which makes him the largest vendor by total number of products, but it also shows his pride in the value of the craftsmanship and heritage.

“We want to preserve the traditional craftsmanship, ensure a sustainable income source for our craftsmen and educate people to appreciate handmade products,” Kouch said.

Tex Simheang, founder and managing director of a Phnom Penh-based social enterprise, KM Textiles Co Ltd, has put up 125 items consisting of handloom clothes, fabric, scarf and bags on the platform.

Southeast Asia Internet Economy Market Size (US$)

While she has yet to make any sale, having only started two weeks ago, she feels the platform would be a good source of revenue that can sustain the livelihood of over 600 women weavers in eight provinces.

The social enterprise, which was set up in 2015, deals in products woven from silk, cotton, kapok, lotus and kroneav (a type of polyester material) and is prominent on social media pages, like Facebook Marketplace and Instagram.

However, given that the government would help promote the site, the 41-year-old feels that it would reduce the cost of advertising and marketing, thus benefitting the workers.

“I joined the platform so that I can sell [overseas] and that I won’t need to spend much on marketing. So, I can help more rural women, who can afford to send their children to school,” said Simheang, whose business suffered a blow during the pandemic.

Both Kouch and Simheang’s visions sit comfortably with the government’s aim to raise the quality and presence of Cambodian products and Khmer businesses to be on par with international standards.

Privatisation, maybe?

To be sure, Cambodia is no novice when it comes to e-commerce. Thanks to a relatively young population and high internet connectivity in the region, Cambodia has become a hotbed for scores of digital applications, ranging from financial technology to food and courier services.

These co-exist with major international apps, particularly e-commerce ones such as Taobao and Amazon, and those with online marketplaces including Facebook, Instagram and TikTok, which are popular among Cambodian shoppers.

Even so, homegrown apps, like Smile Shop and Nham24, where a few of the vendors have signed on, are striving to gain market share as they push for super app status.

In May last year, tech and digital businesses recorded $470 million in revenue for 2019, with e-commerce accounting for 27.6 per cent, the Asian Development Bank said.

In Southeast Asia, e-Conomy SEA (a multi-year research project by Google and Singapore’s investment arm Temasek) predicted that the gross merchandise value (GMV) of the e-commerce segment will expand to $102 billion by 2025 from $5 billion in 2015.

A ‘kroneav’ fabric weaver on Koh Dach, or Silk Island, in Koh Dach commune of the capital’s Chroy Changvar district. KM TEXTILES CO LTD

This reflects a 10-year compound annual growth rate (CAGR) of 34 per cent between 2015 and 2025.

In Cambodia, the platform represents the first business-to-business and business-to-client marketplace, which has fully integrated logistic service providers and payment gateways, said Penn Sovicheat, spokesman for the Ministry of Commerce (MoC).

It was developed with funds from Geneva-based Enhanced Integrated Framework (EIF) under the Go4eCAM project, UN Development Programme (UNDP) in Cambodia, the government and the private sector.

EIF, which is supported by 24 donor countries, assists least developed countries to use trade as an engine for growth, sustainable development and poverty reduction.

“The marketplace offers opportunities for SMEs to display products and communicate with domestic and cross-border buyers and business partners free of charge,” explained Sovicheat.

The visibility of the products would help increase sales, draw in buyers and grow brand, as well as explore new e-business management, seize market segmentation and attract investors domestically and internationally to improve their business scalability.

But why would a government want to be involved in a business-oriented venture? It is because the e-commerce marketplace in Cambodia is not “very developed” yet, he confided. As a result, there is limited trust between merchants and buyers.

“The role of the government in this case is not to operate the market for profit but to provide a platform that can be trusted by both parties to perform formal e-commerce transactions,” he said.

However, at a later stage, for the sustainability of the market, a form of public-private partnership or “privatisation” is being considered.

“The spillover effect from such an initiative would be the realisation that e-commerce in Cambodia can be taken over by the private sector which might improve it further,” Sovicheat said.

‘Fantastic concept’

The method for the platform rested on a two-prong strategy – incubation and innovation challenge. In the first stage, prospective vendors were trained in “cross-border access to e-markets, business operations and finance” within an incubation programme.

An EIF Trade Development News article, which revealed the strategy, noted that the second stage involved an innovation challenge. Here, “partners including UNDP Cambodia and Khmer Enterprise, gave small grants of between $4,000 to $5,000 to carefully select small businesses to improve their e-commerce prospects”.

These phases, according to Chea Laichea, director of MoC’s Department of International Cooperation, who was quoted in the article, said would help businesses, which are present on social media platforms, to “develop into proper e-commerce players”.

At the end of the process, over 90 micro-and-SMEs out of 350 candidates were chosen to onboard the platform, half of them owned by women and 44 per cent located in rural areas. The target annual sales of those onboard the platform is around $2 million, the EIF article stated.

Clint O’Connell, partner and deputy managing director of DFDL Cambodia, a legal, tax and investment advisory, opined that the initiative was a “fantastic concept”.

He also cited the analogy between “the SME incubator and a learner pool”, which was expounded in the EIF article, as being apt.

“In other words, rather than just dumping a SME in the e-commerce marketplace ocean with all its associated perils and uncertainties, this scheme provides training and support in a learning environment so that SMEs are well equipped when operating in the real world.

“The idea of starting out with reasonably small numbers and creating ‘champions’ makes sense and we all hope that those SMEs that make a success of their business through the platform will show the way for other SMEs to follow,” he said.

O’Connell added that the upskilling and job opportunities within the program would have tangible benefits to the economy as a whole.

“The infrastructure, while not currently perfect, is being quickly put in place and this can be seen via the collaboration between the platform and local banks and fintech firms to provide payment solutions, in particular cross-border payments.

“[As for] logistics improvements, [there are] collaborations with Cambodia Post and DHL Cambodia to upgrade the postal IT infrastructure, and standardisation of key legal documents such as privacy and consumer protections,” O’Connell said.

Indeed, the issue about logistics, which is crucial for the flow of e-commerce goods, was amicably resolved, assured Laichea, in EIF’s Trade Development News.

He said the postal and delivery system had been integrated into the Automated System for Customs Data (ASYCUDA) World tax-management portal and interfaced with UPU (Universal Postal Union) Customs Declaration System.

What this means is that it would ease the sale and shipping of smaller packages, he said.

‘Window to the world’

Back home, Handcrafted Cashew Nuts Stung Treng, a family run start-up established early last year to help local growers, is eager to record sales from overseas via the platform where 20 of its flavoured cashew products are marketed.

In the meantime, Sothnita Soeun, its business development assistant, said they are pleased that the onboarding has enabled them to participate in workshops.

“Since we live in an internet age, doing business using old or traditional ways is very hard to attract people. Nowadays, no one reads the physical newspaper anymore – everyone reads news online,” said the 20-year-old whose parents founded the business.

The semi-mechanised cashew nut processing enterprise in Siem Bok district in Stung Treng province is visible on social media and local delivery apps, aside from its website but the platform would take it further, she believed.

“We want to boost the living standard in the community by offering jobs to women and men, as well as providing a fixed price for our contract farmers,” Sothnita said, whose firm has 12 employees, a majority of them women.

Therefore, an increased presence online is pertinent in order to help gain international exposure, which would lead to exports to East Asia, Europe and North America, she hoped.

Kampot province is famous for its pepper industry, which employs thousands of people. KAMYA AGRITRADE CO LTD

For Phnom Penh-based Kamya AgriTrade Co Ltd director Andreas Groetschel the invitation to join Cambodiatrade.com “could not come at a better time”.

The 10-year-old company, which trades in Kampot Pepper and cashew nuts, was starting to expand to a “broad range of customers locally and abroad” from bulk exports to “one or two regular customers”.

“It is the first step to also bring our new retail products to the market. We really like the idea to present Cambodian products online to a potentially wider audience,” Groetschel shared.

Having started as a one-man company, Kamya specialises in certified-organic products. It sources and processes exclusively Cambodian raw materials and products, catering to very “quality-conscious customers who value Cambodian agriculture products”.

Around 35 people are employed at different sites and provinces in the farming side of the business.

“We collaborate with smallholders, assisting them with certified production and the marketing of raw materials,” he said, adding that the platform is inspiring them to expand their product portfolio which could help their smallholder partners to grow with them.

While it was too early to assess any additional business from the platform, Kamya has received several enquiries from SMEs abroad, which are being followed up on.

“We believe the platform provides a window to the world, making Cambodian products known worldwide. We can present the products to potential customers and offer more opportunities to raw material producers, processors and exporters.

“Even though there is no new business yet, we believe in the medium and long-term benefit of the platform,” he said.

‘Please grow fat’

With the entry of free trade agreements (FTAs), the platform stands to capture attention as cross border trade increases.

On this pretext, Sven Callebaut, international trade adviser with MoC, said the benefit of having a government-hosted platform is that Go4eCAM can be one the first beneficiaries and users of new laws and preferential market access stemming from the FTAs.

For instance, some of the decisions, recommendations and commitments found in the ASEAN e-commerce agreement on electronic payments, on consumer protection or electronic documents can be featured in the platform.

“To ensure the platform is fit for purpose, the MoC is spearheading the development of a unique regulatory sandbox for e-commerce – to draft and test out in a closed loop some of the most innovative regulations for e-commerce used internationally, before they can be scarped or expanded to include other domestic players.

“Bear in mind, the CambodiaTrade.com platform is meant to be sustainable in the long run, hence the plans to formulate a win-win exit strategy with the private sector, potential investors and current vendors,” he said.

Meanwhile, a check on the platform showed that a third of 117 vendors have yet to display their products, possibly due to the fact that they might not have signed with the respective logistics and payment services providers as yet.

The newness of the process might be daunting, as agreements with third parties require SMEs to prepare legal documents so that third parties can create “merchant accounts and merchant keys” to activate on the platform, Sovicheat said.

“This process looks complicated and SMEs might hesitate to open an active account on Cambodiatrade.com,” he added, while mentioning that language could also be a barrier for the vendors.

On the other hand, vendors feel that the platform should simplify the upload feature, which is currently complicated.

“In general, the platform is already good but if it is to be improved, maybe they should consider its design. Sometimes it is hard to upload the data or a bit complicated. The platform should be easy to upload the data,” Sothnita said.

They also hope that the government would promote the platform in the international market, to make it visible like Amazon and Alibaba.

Moving forward, questions whether the amenable policies created by the government for SMEs could affect the growth of other e-commerce players remains uncertain.

“I think Cambodiatrade.com is a great platform to support local products. In my opinion, if the ministry collaborates with existing local platforms – it will be very good,” said Smile Shop Co Ltd co-founder and chief executive officer Jack Lee.

His app, which was set up in October 2018, has similar stylings as some of the leading e-commerce apps in the region.

He said seeing that the ministry’s vision of starting Cambodiatrade.com is to support Cambodian products, existing local platforms can be partners, not competitors.

“Thus, if there are opportunities to collaborate, Smile Shop would be keen to partner with Cambodiatrade.com to support local products,” Lee offered.

Noting that Smile Shop spent “a lot to get more vendors onboard initially”, he believed that more vendors would join Cambodiatrade.com.

Looking ahead, he acknowledged that Cambodia is a small country but there is a “great future” for the e-commerce market.

“I agree the Cambodian market is small … so, for e-commerce, [though it] might not grow tall, please grow fat [instead],” he quipped, suggesting that the government keep an open mind to expand or merge Cambodiatrade.com with other apps to become “one super e-commerce platform or a super app”.