Paving the way for Cambodian MSMEs and WOBs to venture into international trade

Trade, an important aspect of globalization, has a significant impact on economic growth, employment, business opportunities and overall socio-economic development of a country as it influences income distribution between men and women and can have significant consequences for social and gender equality. The implementation of the World Trade Organization’s Trade Facilitation Agreement (TFA) provides a unique opportunity to harness trade for growth and the full implementation of the TFA could reduce trade costs by more than 14% in low-income countries and more than 13% in upper-middle-income nations. This could lead to an increase in developing countries’ exports by up to USD 730 billion per year.

Cambodia’s trade environment

Cambodia ratified the TFA on 12th of February 2016 and assessed its trade facilitation framework in the light of TFA requirements, as well as a road map to implement the agreement. The Royal Government of Cambodia has also embarked upon its 4th Cambodia Trade Integration Strategy (CTIS) 2019-2023. CTIS 2019-2023 identifies integration of Cambodian MSMEs into regional and global value chains as one of the four key determinants of Cambodia’s trade competitiveness. Nevertheless, MSME policies for export promotion still lags because capacity-building initiatives are fragmented and not specifically aimed at helping local MSMEs.

Challenges to Micro, Small and Medium Enterprises (MSMEs) and Women Owned Business (WOBs) in Cambodia

Globally MSMEs account for the majority of firms. As a result, MSMEs play an essential role in driving inclusive and sustainable economic growth in their communities. Studies show that when MSMEs trade, they increase productivity and grow their businesses. However, MSMEs are underrepresented in trade and face several challenges to trading that are aggravated by their size and limited resources. Many of these challenges can be mitigated by implementation of the WTO’s Trade Facilitation Agreement.Similarly, MSMEs are the backbone of Cambodia's economic growth. They account for 99% of the private sector contribution and contribute over 70% to employment and 58% to GDP. However, the MSMEs only account for a mere 10% of exports.

Women own an estimated 61% of businesses in Cambodia, but when it comes to larger businesses – those with 10 or more employees – that number drops to just 26%. And less than 2% of women's businesses are formally registered with the government. Furthermore, 65% of MSMEs in Cambodia are women led. With regard to ownership, 47% of Cambodian firms were owned in majority by women, compared to 29% in the Southeast Asia and Pacific region. Despite these, there is a significant gender gap in the small-medium enterprise (MSME) sector and the entrepreneurial landscape in Cambodia, even though women are heavily represented at the micro-enterprise level.

It is well noted that trade reform is rarely gender neutral, meaning it has differential effects on men and women. Often women are disproportionately disadvantaged by trade reforms due to their unequal access to productive resources and the burden of being primarily responsible for household and other unpaid work. Therefore, in order to ensure equitable growth, gender mainstreaming in trade becomes crucial.

Opportunity for Cambodia to enable trade facilitation for MSMEs and WOBs

Trade facilitation projects provide strong opportunities for women-led and small businesses who are underrepresented in trade to tap into the benefits of trade. The Improving Small Package e-Trade for SMEs (SeT4SME) project of the Global Alliance for Trade Facilitation, implemented by Swisscontact in Cambodia aims to improve the small package imports and exports by promoting the use of ICT for digitalization of trade services such as the EAD interfaceand the e-Trade portal. These automation systems allow MSMEs and WOBs to take full advantage of the enhanced postal logistic capacity and expedited customs clearance procedures of postal items, supported by the EAD interface, and also contribute to enhancing Cambodian MSMEs' presence online and their engagement in cross-border e-trade.

This up-coming e-Trade portal solutions aim to help MSMEs and WOBs through streamlining of the logistics for their cross-border e-commerce. This will feature an e-commerce service component, whereby the platform will host an online store allowing Cambodian MSMEs to sell their products in international markets. The streamlined e-logistics solution services will act as a one-stop site for all tracking and delivery updates along with real time shipping rates display, access to various labels such as the CN22 and/or CN23 forms which can then be generated and printed out for postal shipments, online payment options for service fees etc. The project also plans to work with the Cambodia Post in order to enhance and improve their postal agent system by digitizing the process for booking postal agents for international deliveries of small packages for MSMEs and WOBs.

Intended outcomes

SeT4SME will primarily strengthen Cambodia’s e-Trade environment for MSMEs and WOBs and contribute to time and cost reductions for their small package exports and imports. This support also contributes to the recent efforts of the Royal Government of Cambodia to strengthen the engagement of MSMEs in cross-border trade, as highlighted in the CTIS 2019-2023. Chapter 2 of CTIS calls on the private sector to ‘identify export skills needs of Cambodian MSMEs in such areas as market research, export marketing strategy, sales development, use of electronic markets, use of social media, etc.’ and then implement training programs on these skills. The e-Portal component also contributes to, among other priorities and development policies, SDG 5 Gender Equality specifically 5.b Enhance the use of enabling technology, particularly information and communications technology, to promote women’s empowerment.

Apart from contribution to development policies and other strategies, through the project, the Cambodia Post will benefit through the time and cost reduction through the digitized approach. MSMEs and WOB will benefit from uninterrupted trade because of EAD compliance, and time reduction in customs clearance process in Cambodia for outbound small packages will lead to time and costs savings for the private sector. These developments would encourage and therefore pave the way for MSMEs and WOBs in Cambodia to venture into international trade.