Trading places

E-commerce is becoming a major player in the region’s economic playground, but Cambodia has a long way to go before it is ready to compete with the big boys

Jennifer Meszaros
August 28, 2014

E-commerce is becoming a major player in the region’s economic playground, but Cambodia has a long way to go before it is ready to compete with the big boys

By Jennifer Meszaros

Gone are the days when buying a new sofa necessitated getting off of the sofa. E-commerce has revolutionised the retail sector with big-hitters such as Amazon in the US, Alibaba in China and Rakuten in Japan giving consumers access to a vast array of products minus meddlesome millstones such as human interaction.

While e-commerce seems synonymous with online shopping, the term also refers to any type of business or commercial transaction that involves the transfer of information over an electronic medium. The trading of goods and services between corporations, electronic data exchange and online banking also huddle up under the e-commerce umbrella.

The majority of Asean member states have made significant efforts to strengthen their information, communication and technology (ICT) sectors in order to capitalise on market opportunities and stimulate economic growth.

The process began in 1999 with the launching of the e-Asean Initiative,
a regional strategy that sought to harmonise an e-commerce legal framework that would be consistent across jurisdictions.

“The purpose of the e-Asean initiative was to complement national ICT strategies and to promote economic growth and competitiveness for a better integration of Asean countries in the global information economy,” said the United Nations Conference on Trade and Development (UNCTAD) in a 2013 report titled Review of e-commerce Legislation Harmonisation in the Association of Southeast Asian Nations.

 Just one year later, member states entered into the e-Asean Framework Agreement, which would pave the way for Asean to become the first bloc in the developing world to adopt a harmonised legal framework for e-commerce. However, despite the establishment in 2011 of yet another initiative, the Asean ICT Masterplan 2015, “no significant regional work has been undertaken on e-commerce law harmonisation” since 2009, according to UNCTAD.

However, with the support of UNCTAD and AusAID, Asean member states have made moves themselves. By 2009, eight nations had e-commerce laws in place, with Laos following in 2012. In the intervening years, progress was also made in terms of updating existing laws. Cambodia is now the only country that has yet to adopt e-commerce legislation.

“Cambodia needs to develop an enabling environment where e-commerce activities are encouraged and supported,” said Ken Chanthan, chairman of the Cambodia ICT Alliance. “This includes adopting legislation that protects both the consumer and the company. The law needs to address issues such as security, cybercrime, intellectual property rights and privacy and personal data protection. It is crucial that Cambodia develops a well-regulated system that provides legal certainty to consumers and businesses.” 

While a draft e-commerce law has been drifting around since 2003, progress remains slow in Cambodia, which, according to UNCTAD, is still carrying out preliminary activities including raising awareness among key stakeholders and studying international legal models.

“Laws help strengthen trading activities between governments, investors and consumers as a whole,” said Solivann Somith, a business planning manager at Korea Software Innovation Global Network – an e-finance SaaS consulting agency with an office in Phnom Penh. “Laws and regulations also protect consumers’ privacy, and
a lack of security and privacy for credit card payments are one of the things that shake the confidence of consumers over e-commerce activities. In Thailand, the e-commerce business is popular because both retailers and customers have more security and convenience in terms of networking, paying and shipping throughout the country.”

According to UNCTAD, six Asean countries currently have e-commerce laws that encompass consumer protection, while Brunei and Indonesia only have partial laws and Laos is yet to address the issue. In terms of data protection, only Malaysia, the Philippines and Singapore offer full privacy legislation. In Cambodia, the absence of any established system at all is hobbling e-commerce businesses.

“I find that there are many people who want to buy, sell or rent,” said Ty Rady, founder of Khmer24, an e-commerce site based in Cambodia. “However, in order for e-commerce to be successful… consumers need to feel confident about buying products and services online. [This includes] an online payment structure, such as PayPal, that is not only secure, but inspires trust. 

“I know many people who are afraid to use a credit card over the internet. They are afraid of being scammed by an illegitimate website or having their credit card hacked. The majority of payments in Cambodia are cash on delivery and, until Cambodia builds a system of trust through online capabilities, that does seem safer. Of course, this not only limits the consumer and the seller, but also restricts e-commerce activities in general.”

According to Chanthan, support for the sector is underwhelming across the board. While enabling online transaction capabilities and pushing through legislation would certainly be a step forward, Cambodia’s government needs to realise that e-commerce can contribute greatly to the economy.

“There are many young entrepreneurs who are skilled in the ICT sector but they need the government’s support. Funds need to be allocated to develop the sector, and education is greatly needed. The government can play an instrumental role in supporting existing sites while encouraging startups to develop and expand on business activities,” said Chanthan, adding that foreign investors could also be key in helping Cambodia to develop the sector. 

“If you look at countries such as Singapore and Malaysia, those nations work very hard in terms of collaborating with outside investors while providing attractive incentives. Cambodia can do the same,” he said. “In the meantime, entrepreneurs shouldn’t be discouraged just because Cambodia doesn’t have an e-commerce ecosystem with laws in place. They need to forge ahead with their ideas.”  

Indeed, Cambodia’s e-commerce sector does find itself in something of a ‘chicken and egg’ situation when it comes to legislation – a circumstance that is undoubtedly holding the industry back. One key area where e-commerce can forge ahead, however, is on social media, which is crucial
in driving traffic to websites.

“There are 1.6 million social media users in Cambodia. It changes the way that people interact with each other, but it also changes the way that they interact with brands and products,” said Adrienne Ravez, co-founder of Endorphine Concept Digital Solutions, a digital marketing agency based in Phnom Penh. “An e-commerce platform in itself is not enough to drive a successful business – social media can be one of the keys.” 

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