A look at AEC 2015: Challenges For SMEs and Startups

Let us start off with the impact that SMEs (Small and Medium Enterprises) have in ASEAN. According to the US-ASEAN Business Alliance, SMEs account for more than 96% of all enterprises and between 50 to 95% of employment in many ASEAN countries. This means that should SMEs and startups face any major challenges, economies could be heavily affected here.

In Cambodia, these micro, small and medium enterprises (MSMEs) account for 99.9% of all businesses. Most are concentrated in Phnom Penh, while provinces such as Kampong Cham, Siem Reap, Battambang and Kandal are also very economically active.

So what exactly is AEC? AEC (ASEAN Economic Community) 2015 is the “end goal of regional economic integration that would both establish ASEAN as a single market and production base and transform ASEAN into a more dynamic and integrated regional organisation”.

While all this sounds fine and dandy, it does mean that SMEs and startups here will face several challenges. Through AEC, Cambodian businesses will face a free trade market, meaning the elimination of import taxes. This creates a huge strain on products here, and hardware startups will most likely feel the pinch. It is likely that big conglomerates will have their eyes on expansion into Cambodia, which would cause small startups to have larger competition.

Vatana Roth, Research Associate, Cambodia Development Resource Institute (CDRI), feels that Cambodian SMEs are still in their initial stage of development, and thus not ready for AEC.

Another challenge lies in the informality of SMEs and startups in Cambodia. This will lead to difficulties in collecting taxes and designing government policies to support such ventures. There is a huge insufficiency in support of SMEs here. Some other challenges include a shaky legal framework, and “limited participation in regional integration”. As of now, Cambodia seems to be performing the weakest in the area of SME policy.

While some of the challenges lie in areas that we cannot personally change, startups should step up and reevaluate their vision to compete well in AEC 2015.

So how can your startup tackle these challenges head on? One solution would be to revise your business plan and strategy, and think of the bigger picture. Chhaly Samsokrith, one of the organisers of Barcamp Phnom Penh advises startups to reanalyse their strengths, weaknesses, opportunities and threats. This is in terms of regional competition, and not just the local market. “Will our strengths allow us to continue developing our business in AEC? Will our weaknesses compromise our company when facing regional competition?” These are some questions you should be asking yourself.

Another way your startup can stay relevant is if you understand the markets in ASEAN. Consider doing research in this area to have a better understanding and prepare yourself for future competition. Lay a good foundation, and your startup will be stronger as it grows.

Sources:

Khmer Enterprises

Khmer Enterprises

CDRI

CDRI