Contribution by Peter J. Brongers, CEO of BMW Cambodia
Peter Brongers is a Dutch national who has been living in Asia for more than 20 years. He is a Senior Executive Vice President of the Royal Group, Cambodia’s leading strategic investor. He is CEO of BMW Cambodia and President of the Cambodian Automotive Industry Federation. He holds an MBA, MSc and degrees in Organisational Change and Law.
Cambodia is a promising prospect for businesses and investors—an underdeveloped economy with many positive aspects, in the heart of the world’s fastest-grow- ing region, close to a market of half a billion people. The country’s early stage of economic development gives it a “greenfield” advantage: an opportunity to build a “fit for purpose” economy to suit the modern world. Things have moved fast in the past few years: domestic de- mand benefited greatly from credit growth, sending con- struction activities and exports skyrocketing, resulting in a growth figure hovering around 7% per annum.
However, challenges remain. The construction boom is slowing down, there is increased credit risk due to slowing demand for new housing and a less competitive export-oriented garment industry, meaning this growth figure might prove difficult to maintain. To develop, Cambodia now needs to diversify its economy and increase its labour productivity to a level on par with neighbouaring countries – a difficult but not impossible feat.
Managed well, Cambodia could conceivably increase the size of its economy, creating nonagricultural jobs in the process. Cambodia can no longer rely on export garments and tourism alone. Only a diversified economy can double its labour productivity. The garment industry will become less important due to increased competition from other low-wage countries and tourism can not continue to provide the jobs necessary to offer employment opportunities as hundreds of thousands of new entrants hit the labour market.
All the fundamentals must be in place: rule of law, political and economic stability and the necessary skills and infrastructure. Though Cambodia is one of the most liberal investment destinations in the region, all these areas need attention.
Important areas of innovative opportunities are:
1. Telecommunications and digitalisation
Cambodia’s industrial development is just beginning. Internet technology and mobile technologies are increasingly affordable. Harnessing these tools to the fullest will help Cambodia jump to a more advanced stage of development and accelerate economic growth. New technologies, particularly related to data over the Internet, have the capacity to completely bypass swathes of older technology and business activities. Cambodia can take immediate advantage of the newest technologies. A good example is Wing mobile money transfer, large in scale and with even more growing potential. Such an easy-to-use system leads to fast growth of additional activities in commerce, savings and loans.
2. Reaching consumers in innovative ways
Increased use of smartphones, more tech-savvy consumers and a widening array of products and services allow for digital sales models set-up specifically for demand outside Phnom Penh. Cambodian retailers can reach a large customer base with only limited levels of capital investment. This highlights the potential for relatively simple infrastructural projects with a tremendous payoff. With a “hypermarket” available through their smartphone, any consumer in the provinces requires only reliable electricity, Internet connectivity and adequate road to transport supplies.
3. Transformation of agriculture by innovation
Cambodian agriculture is transforming by expansion of farmland and increased mechanisation. With a large amount of available farmland, it is ideally positioned to become one of the region’s main food suppliers. It is one of the main sectors where Cambodia can achieve poverty reduction and shared prosperity, especially by developing a value-added food processing industry.
To implement an innovative agenda, the Cambodian government needs to solve current planning issues and drive the implementation of change. Cambodian businesses should consider their opportunities in different markets, quickly reach international quality standards and explore more diverse foreign partnerships for the long-term.