Country Report Business Advisory Training , NIESBUD, India-04-10-2010.

1. Business Advisors’ Training
Program, NIESBUD
India
Country Paper
on
Business Sector in Cambodia
Focuses on SMEs
©-SereiRatha Chan-MR.

2. Content
- The Report Overview
- The Report Objective
- Cambodian Economic Overview
- Small and Medium Enterprises (SMEs)
- Opportunity and Constraints
- Business Development Services (BDS)
- Opportunity and Constraints
- How Can it helps SMEs more competitive?
- InVCapital Consulting
- Relationship between SMEs and BDS
- Relationship between SMEs and Economic Growth
- Conclusion & Recommendation

3. The Report Overview
- The study is coming from my business plan on InVCapital
Consulting which was finished on April, 2009.
- But in the study we will look at much deeper into how
SMEs structures, constraints and its general environment
and SMEs in the other countries. And also at the same time
the study will discuss in detail on BDS general
Environment in Cambodia and also compared with BDS in
the Mekong region such as BDS in Vietnam.
- The link between BDS, SMEs and Economic Growth
- And making some recommendation for both sectors

4. The Report Objective
The objectives of the project study are:
- (a)- To extend of my Business Plan to a deeper
understanding of consulting services or BDS can help
SMEs more competitive and finding market access
- (b)- To study constraints and opportunities for BDS
provider and SMEs
- (c)- To link between BDS, SMEs and Economic growth

5. Overview of Cambodian Economy

6. Cambodian GDP Growth Rate
Source MEF

7. Overview of Cambodian Economy (Con’t)
The performance driven by several main
sectors:
1- Agriculture: Employs 57.4% of the
population; provides 28.1% of GDP
(CDRI, 2006)
2- Garment:80% of the country’s exports (71% to US and
22% to EU) (ILO 2006), share of GDP: about 15%,
around 350, 000 employees (CIDS, 2008).

8. 3- Tourism Sector: Tourist arrivals have increased from
170,000 in 1993 to more than 2 millions
in 2008. Share of GDP: about 16% in
2007-up from 6.3% in 2000(IFC, 2008).8.3% of
total employment (566 000 indirect and direct jobs in 2004).
4- Construction: In 2006, construction
increased by 15.7%.Because of residential dwellings,
hotels, condominium, office space, sky-scraper and
factories. But in the year of 2008 the construction
sector has dropped down 12.5% compared to last
year. The sector pulled in $3.2 billions dollars in 2007
but only 2.8 billion in 2008.
(www.AsiaEcon.org/ twoproblemfacingcambodiain2009-05 Jan-2009)

9. Small Medium Enterprises (SMEs)
The growth which made in the last several year and also in the future growth
of the Cambodian economy, it is inevitable from the major driver- private
sector that account for the most employment sector in the economy. And this
sector is dominated by Micro-Small and Medium Enterprises (MSMEs).
MSMEs dominate Cambodia’s economy in terms of the number of firms
(99%) and employment ( around 45-50%).
SMEs- According to MIME, SMEs are defined based on number of
employees and value of fixed asset, so that any firms that employ between
11-50 employees and have fixed asset from 50,000USD up to 250,000USD
would be categorized as “Small Firm”. Medium Firms would have employees
range from 51-200 and fixed asset from 250,000USD up to 500,000USD.

10. The Needs of SMEs
 Access to Markets
 Access to Technologies
 Access to Business Services
 Access to Finance
On Laws and Regulations for a better knowledge of their
business environment
 Clear and Transparency of the law
 Effective Law enforcement
 Predictable and clear policy from government
 Dialogue between government and private sector to see the
real problems
 Reducing corruption and eliminating a bureaucratic or red
tape
 Good governance

11. Opportunities
and Constraints of SMEs
Constraints
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Limited infrastructure
Weak public services delivery
Under-developed banking system (Limited access to finance)
Difficulty to access information
Lack of business development services
Limited size of domestic market
Lack of oriented technology development
Lack of human resources
High operational cost (high transportation costs, high energy costs….)
Low productivity
Pressuring a competition from neighboring SMEs (Vietnam and
Thailand)
Regulatory policy uncertainty
Lack of transparency in laws and regulations
Weak enforcement of laws and existing regulations
Lack of an effective dispute settlement system,

12. Opportunities
 The effort to reform from the government including G-PSF,
SMEs Framework , NiDA
 A sound in financial management (Public Financial Reform)
introduced by MEF and support by Asian Development Bank
and Other DPs.
 Trade Reform, from Integrate Framework (IF) project lead to
achieve Trade Integration Strategy known as DTIS (2002)
and updated in 2007 which identified the 19 products for
potential to export. And later in order to push the trade
regime much better, several programs are introducing such
as Cambodia Trade Facilitation and Competitiveness project
and Trade Sector Wide Approach (Trade SWAp). The main
objective is to facilitate and to improve business environment
for the private sector and to attract FDI to country. The
ultimate goal is poverty reduction.

13.  Integration of Cambodia into the regional and
global economy (ASEAN, WTO…)
 Land management reform by giving a land title- it
is good sign for access to finance through
collateral.
 Investment Law and procedures, lead by CDC to
facilitate investment in any project in Cambodia
such as (BOT, BOO….)
 Other factors which give a opportunity to growth of
SMEs (Cheap labor, Fertile Soil….)

14. Business Development Services (BDS)
Business Development Services (BDS) refer to any nonfinancial services to business, offered in the form of either
formal or informal basis. The kind of services including:
 Training and skills development
 Product Development &Packaging design
 Networking and brokering
 Business advice & counseling
 Courier and delivery
 IT services and advices
 Market information and research
 Marketing & advertising advices
 International Trade Facilitation
 Event management or Trade fairs
 General/Strategic management advices

15. What are the constraints and opportunity for
the field?
1- Common Challenges of BDS fields in Cambodia are:
 Limited market size (not developed market)
 Access to critical and reliable information
 The matches between supply and demand (Low) and high
fees
 Tough competition in the market from international firms
 Updated and Competitive technology and high skill human
resources
 Lack of incentive from government in the field
 Business regulation barriers
 Other factors

16. 2-Common opportunities for the BDS fields are:
 A recent growth and reform of Cambodian economy
and integration of Cambodia to regional and
international economy (ASEAN, WTO)
 Limited capacity of SMEs in market information, new
technology, strategic management, accounting and
finance and law and regulation
 Supporting from international institution in improving
BDS in Cambodia has increasing recently through
such program like EMAF
 A tough competition in the market, so that SMEs
need a capacity to compete in the current climate of
competition in order to survive
 Lack of linkages between large businesses and
SMEs and networking among business to business
 Other factors

17. How can BDS help SMEs more
competitive?
- BDS can help SMEs through their creative and
innovative services from experts, advisers and
specialists of the BDS who have an in-depth
knowledge and strategic concept in their own fields.
- BDS build capacities of SMEs through training or
consulting services in order to identify the
weakness or to fulfill their needs to improve the
operation more effectively and efficiency.
Ex. Most of SMEs are lack of understanding about Country’s
law and regulations. The problem can solved by law firm or
individual legal consultant.

18. InVCapital Consulting
InVCapital Consulting is a start up firm which will focus
on providing a wide range of services to SMEs in
Phnom Penh area in the early stage of its operation,
and we will expand soon to some main provinces and
cities around Cambodia which have a strong potential
growth of SMEs over there.
It has three main partners and two consultants who
join together to form the company.

19. InVCapital Consulting will provide a wide range of services to
SME’s owners, depending on their particular needs.
 Our start-up services including:
 Investment consultancy (esp. SMEs)
 Taxes and finance services
 Market Study (Feasibility and pilot study)
 Strategic Marketing Plan
 Recruitment and Human Resource Consultancy
 Corporate training
 Outsourcing
 International Trade Facilitation Services
 Legal advices (registration, contracts, labor law ...)
 E-commerce and ICT consultancy
InVCapital Consultingn is very flexible in term of schedule or
length of the project or services which it provides.

20. Relationship between SMEs and BDS
Business Development Services (BDS) refer to any non
financial services to business, offered in the form of either
formal or informal basis. The kind of services including:
 Training and skills development
 Product Development &Packaging design
 Networking and brokering
 Business advice & counseling
 Courier and delivery
 IT services and advices
 Market information and research
 Marketing & advertising advices
 International Trade Facilitation
 Event management or Trade fairs
 General/Strategic management advices

21. Relationship between SMEs and
Economic Growth
- SMEs tend to employ more labor-intensive production
processes than large enterprises. Accordingly, they
contribute significantly to the provision of productive
employment opportunities, the generation of income
and ultimately, the reduction of poverty.
- SMEs are the key to the transition of agriculture-led to
industrial economies as they provide simple opportunities for
processing activities which can generate sustainable livelihoods.
- SMEs can help to balance in development between rural and
urban and also the incomes distribution in a smaller gap.

22. - SMEs support the building up of systemic productive
capacities. They help to absorb productive resources at all
levels of the economy and contribute to the creation of resilient
economic systems in which small and large firms are interlinked.
- Strong SMEs can attract FDI, because of Multinational
corporations need a local suppliers for theirs supply chain.
- SMEs can support an innovative and entrepreneurship which
can supply any nice market with high margin and also flexible
with a special design or origin (geographical)

23. Conclusion and Recommendation
1- In conclusion, SMEs are crucial to generate
an employment for both skill and unskilled
workers and also the entrepreneurs which
will contribute to smaller gap in income
distribution among poor and rich and rural
and urban. This will lead to sustainable
economic growth and finally poverty
reduction for the country.

24. 2-Recommendation:
- BDS providers should seek an assistant from
Government, Bank and International Organizations to
help in developing the field through capacity building
and market access and information.
- SMEs should link up between local and global SMEs,
innovative and creative needed, link up between SMEs
with Large enterprises are crucial to develop the field,
asking for help in term of access to finance, law and
regulation from the government and other stakeholders
(IOs, Bank, and NGOs…).

25. THANK YOU
FOR
YOUR ATTENTION !