Welcome.

Discover how my writing can benefit your business or organization, by providing engaging, in-depth analysis and research.

Cambodia’s start-up culture blooms, despite hurdles

Cambodia’s start-up culture blooms, despite hurdles

The completion of Cambodia’s first undersea communications cable on March 15th constituted a major milestone for Cambodian businesses, as the country finally gains access to high bandwidth internet capabilities, thus superseding the more limited, existing terrestrial lines to Thailand and Vietnam. Cambodia’s acquisition of undersea communication capabilities comes at a fruitful time, as the country sees the creation of an emerging e-commerce and technology ecosystem.

Cambodian entrepreneurs are seeking to create ‘Made in Cambodia’ solutions which capitalize on the country’s growing technology and internet adoption rates. In 2000, only 6,000 Cambodians used the internet, whereas now some five million do so, mainly via the use of smartphones. Traditional telecommunication infrastructure has been leap-frogged with only 88,000 Cambodians having access to a landline, but 94% of the population reporting access to a mobile phone, 40% of which are smartphones. Cambodia not only became the first country in the world to have more mobile than landline phone users, it also boast one of the fastest growing internet penetration rates. In 2010, only 0.5% of Cambodians were online, by 2013 it was 31.8% – more recent estimates now see close to half of all Cambodians with internet access.

This is especially impressive given that 60% of the population does not have access to electricity. Instead, a cottage industry of cell phone kiosks, charging vendors and internet cafe have emerged to provide charging, prepaid time purchase and repair services. Indeed, mobile subscription rate data from November 2015 noted that there were 3.5 million more mobile phone subscriptions than people in Cambodia.

Government efforts at simplifying licensing procedures for mobile operators has seen the emergence of a three way race between the country’s largest phone companies to become the first to offer nation-wide, high speed 4G mobile internet broadband. Of these, Cellcard appears closest to this goal, announcing rollout plans for April. Having partnered with Huawei and Nokia, Cellcard is aggressively pushing to increase market share, to the point that it has run into accusations of undercutting competitors, with critics noting its popular Osja Exchange which offers $100 worth of calls for only $1.

Competitors Smart and Metfone are also spending millions to expand their 3G and 4G services. Furthermore, Smart Axiata partnered with Huawei for the exclusive launch of the Mate 9 in Cambodia, and has partnered with Apple to be the only service provider selling iPhone and iPads. Phnom Penh-based electronics distributor T-Shop already has eight stores and is looking to expand, as one of Vietnam’s largest mobile distribution chains – Mobile World Investment Corp. – is opening its first of many stores in Cambodia under the BigPhone.com brand.

Meet the new kids on the block

Cambodia’s rapid cell phone and internet adoption rates have spurred flowering of e-commerce and tech startups. One such enterprise is the Coder Studio. Based in Battambang City the nine-month old Coder Studio already employs eight in its efforts to design computer and mobile applications for small businesses. Seeking to capitalize on high technology adoption rates among Cambodian youth, Code Studio is already expanding to Phnom Penh and Siem Reap, and has eyes on the global market.

Another firm is Sydney-based Yojze, which is using a crowdsourced platform to resolve issues relating to last mile delivery capacity and other logistical issues. Yojze is partnering with local delivery firms, including Post Media, to implement blockchain tracking technologies to introduce same day and next day delivery services. By using AI to assign drivers, routes and workflow, Yojze is taking aim at logistical inefficiencies hampering not only technology start-ups but also more established brick and mortar businesses. Uber met with Cambodia’s minister of commerce in mid-January to discuss expansion, yet it will likely face an uphill battle as it contends with popular local apps like Exnet Taxi Cambodia, Choice Taxi, iTsumo and PassApp Tax. Uber might have lost in Cambodia before it has even begun, especially given its pull-out from China after fierce competition from Didi.

There is also Kiu, a new e-commerce platform for SMEs in the lower Mekong region supported by the Asian Development Bank and the Mekong Business Initiative. Launched on February 21st, Kiu allows local producers and SMEs to access developed markets by providing a multi-lingual, multi-currency marketplace platform to simplify connecting local companies to international markets. Similarly, Pathmazing – a Cambodian start-up looking to diversify the country’s app market – has launched Tesjor, the country’s first e-commerce ecosystem app, which allows users to order and pay for food and drinks at physical kiosks via their digital wallet on their phone or via accumulated points.

Mobimedia is working with phone operators to help them monetize apps due to the low rate of credit card use in Cambodia – there are only 30,000 credit card holders in a population of almost 16 million. To this end, Mobimedia is partnering with major phone companies for the launch of its Matchstix social platform, as well as working with music firms to find ways to provide legal payment options for music, as well as other downloadable content. Sabay Digital Group is also looking to aid the creation of Cambodian apps, launching an e-novel app and Cambodian card game app earlier this year.

Cambodian start-ups held back by system failures

Cambodian entrepreneurs are faced with a range of limitations, both local and international. The Mozilla-commissioned Winners and Losers in the Global App Economy found that “sixty nine percent of developers [from low-income countries] were not able to export compared to high-income countries, where only 29 percent were not able to export.” This paints a stark contrast with the US, where only three percent of developers did not succeed in exporting.”

Developers from low-income economies are no less able to create good products than their competitors in wealthier countries, the issue is one of barriers and bottlenecks in local and international e-commerce systems. The dominance of the Google Play Store and Apple Store means aspiring Cambodian entrepreneurs face barriers due to corporate preconceptions. Both of these stores take the ubiquitous nature of credit cards in California or Cologne as a given, and as such do not accept alternate payment methods. The problem for Cambodians is that in most cases the most accessible digital wallet anyone has is on their phone. The lack of credit cards in the wider population severely limits the number of potential customers.

The lack of credit cards has also hindered increases in digital consumption habits among Cambodians, many of whom remain wary of shopping online. Concerns over fake goods, the need for credit card backed purchases and a lack of ecommerce literacy have meant that despite more than half the country being online, only 8% use the internet to shop. This comes as AliExpress is expanding into Cambodia, as is Amazon, ASOS and Marks & Spencers. Foreign firms like Amazon and AliExpress will likely dominate Cambodian e-commerce especially given their customer protection policies. What will need to change in the medium term is for firms to accept hybrid payment methods. This is exactly what many local businesses have done, accepting mobile payment systems alongside credit/debit cards. The emergence of local payment systems like WING and SmartLuy highlights another business opportunity for companies willing to fill in the gaps in Cambodia’s nascent e-commerce scene.

Another problem is that Cambodian companies are unable to access the Play Store because they do not have merchant accounts. The problem is that “the local bank that an app company would want to work with to make their app chargeable is not recognized by Google,” notes Steven Path, president of Cambodia’s ICT Federation.While Apple does recognize some local banks, the problem then becomes one of  inflexible banking practices ill-suited to the new economy. Cambodian banks by and large only accept real estate as loan collateral. This largely leaves out many start-ups and cloud-based solutions, leaving few alternative financing solutions outside family and friends.

Moreover, “there are not many angel investors or other forms of alternative financing in Cambodia, and there is little government support, so access to finance remains the main challenge for [SMEs],” notes Chansamrach Lem, managing director of the Cambodia Investors Club (CIC) and founder of Komchey. The latter, which launched on January 14th, is Cambodia’s first peer-to-peer online lending service; while other P2P options exists, Komchey is the first designed and owned by Cambodians. “We wanted to disrupt the traditional way of providing finance to SMEs and startups,” remarks Lem.

While Komchey has found a business opportunity in circumventing existing barriers, other start-ups still face financing problems. While platforms like Komchey will help, Cambodia also needs to better integrate itself into the global venture capital sector in order to attract greater attention. This appears to be beginning, as Khmrload – modelled on the Buzzfeed model – became the first Cambodian company to receive funding from Silicon Valley – $200,000 to be precise. CEO and founder In Vichet is also driving force behind the popular Little Fashions e-commerce site.

While $200,000 does not sound like much, it makes a big difference for Khmrload, which is now valued at over $1 million and is planning on expanding into Myanmar. Moreover, the impact of $200,000 goes alot further in a country with a per capita GDP is only $1,227. Greater support from Silicon Valley and beyond will be a great boon for Cambodian start-ups; however, local entrepreneurs have already shown their determination to succeed, and creativity in exploiting systemic failings – from logistics to financing – to create new businesses.

What Trump, Trudeau and the Security Council all agree on

What Trump, Trudeau and the Security Council all agree on

What’s behind China’s love affair with Morocco?

What’s behind China’s love affair with Morocco?