The Kingdom must tap into the potential of innovative technologies to upgrade and diversify its economy if it wants to become an upper-middle income country by 2030 and high-income country by 2050, the latest report from UN Development Programme (UNDP) Cambodia said.
The report, entitled Adaptation and Adoption of Industry 4.0 in Cambodia, was prepared by UK-based Policy Links – the not-for-profit knowledge transfer unit of Centre for Science, Technology & Innovation Policy (CSTI), University of Cambridge – for UNDP Cambodia and was officially launched on Tuesday.
It pointed out that Cambodia has made crucial progress, with the economy growing more than seven per cent annually since 2011 and the share of people living in poverty more than halving in the last decade.
“As recognised in the Industrial Development Policy [IDP] 2015–2025, this vision can only be achieved if new technologies are leveraged to increase industrial value added, diversify exports and strengthen small and medium-sized enterprises [SMEs],” it said.
Cambodia’s manufacturing sector has increased its contribution to the economy over the last couple of decades, mainly driven by the garment and food industries.
Manufacturing’s share of gross domestic product (GDP) in the Kingdom has surged from below 10 per cent in the 1990s to more than 16 per cent in 2018 and now provides 1.4 million jobs.
But the manufacturing in the Kingdom is concentrated in two main primary sectors – garments, textiles and footwear (GTF) and food and beverages – that account for 80 per cent of manufacturing value added and 76 per cent of exports.
The report said: “Cambodia has the opportunity to build on a number of conditions to support the adaption and adoption of new technologies, including Industry 4.0.
“Cambodia has a growing economy with increasing FDI [foreign direct investment] flows and a demographic dividend of young people.
“A number of initiatives are being put into place to promote technology and innovation in the country, including a strategic framework for Cambodia’s digital economy.
“Opportunities exist to exploit technological spillovers from FDI, to leverage the participation in global value chains, and to further develop established international economic partnerships.”
During its launch ceremony, UNDP Cambodia resident representative Nick Beresford said the report will give the government a roadmap for the development of the digital technology.
He said: “Far too few enterprises in Cambodia are aware of, let alone access, new Industry 4.0 technology. As a result, the economy is missing out on big productivity gains and workers are missing out on high skilled jobs and better pay.
“This report is an excellent counterpart to the work undertaken by the government on Cambodia’s Digital Strategy and we are keen to synergise the two.”
Policy Links head Carlos Lopez-Gomez said the report explores the opportunities and challenges for Cambodia’s industrial sector arising from Industry 4.0.
It identifies policy options to harness Industry 4.0’s potential in the Kingdom, with a focus on technology transfer, the development of implementation roadmaps with local stakeholders and learning from the best international practices, he said.
The report identified five key areas where improvements are needed to enable Cambodia to adapt and adopt Industry 4.0.
These are basic and digital infrastructure; institutional framework; network linkages; skills development; and innovation capabilities and access to knowledge.
In March last year, Minister of Economy and Finance Aun Pornmoniroth said the digital economy has been gradually taking shape and creating new business activities in digital payments, online entertainment and E-commerce while increasing the number of users adapting themselves to the use of these technologies in the Kingdom.
Speaking at the first National Consultation Workshop on Policy and Direction of Cambodia’s Digital Economy in Phnom Penh, he said: “For a developing country like Cambodia, new technologies provide an opportunity to leapfrog, bypassing traditional phases of development.
“To keep pace with globalisation and global integration, Cambodia without a doubt cannot avoid the impact of Industry 4.0 – the government must concentrate on finding opportunities and managing risks.
“Cambodia’s digital economy remains at the nascent stage . . . [It] may need to spend the first five years bringing all the fundamental elements together for digital readiness, and another five to 10 years growing the digital economy into a technology-driven market.”
“On the subject, it is worth clarifying that Cambodia has no intention of creating a Silicon Valley or a targeted unicorn start-up company. Our strategic vision is to create a robust digital environment that allows the country’s small and large firms to connect to global value chains,” he said.
In October, the National Assembly approved a draft of the e-commerce law. The draft contains 12 chapters and 67 articles, which will promote e-commerce and contribute to the development of the digital economy.
Last year, the government decided to set aside $5 million per year to support tech start-ups in the Kingdom.
UNDP Cambodia’s report noted the resolute will of Cambodia’s tech, start-up and entrepreneurial scene despite the Kingdom lagging behind in building the capacity and environment required to reap the benefits of digital technologies.
It said: “There is a clear willingness among innovation actors to strengthen the country’s production and innovation capabilities.
“Examples of initiatives in this direction include – the Skills Development Fund, the Entrepreneurship Development Fund, the T-ICT Development Policy and the Policy Framework for Cambodia’s Digital Economy [in progress].
“A strong economy with increasing flows of foreign direct investment and several special economic zones [SEZ] are relevant advantages that have the potential to generate technological spillovers in domestic firms.”