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Cambodian producers struggle to compete with foreign goods

More creative thinking is needed to restore trust in Cambodian products, but intense competition from foreign investment has the potential to stifle local innovation, industry experts say.

A survey of more than 600 Cambodian consumers undertaken by Thai Market Research Company Envirosell found that Cambodian consumers prefer Western products to those made in neighbouring Laos and Myanmar.

Laurent Notin, general manager of Indochina Research, said the survey was not a revelation. “I am not surprised that they say Cambodians prefer Western products, as Western products come with high perceptions of quality,” he said.

“[Cambodians] do not trust local products.”

Meng Saktheara, head of the Ministry of Industry, Mines and Energy’s subcommittee on small and medium enterprises (SMEs), said that it was an overgeneralization to say that Cambodians do not trust locally made goods, but acknowledged that there are challenges for Cambodian businesses competing with foreign corporations.

“If you talk to the high-class people, they probably prefer Western luxury products. But for the daily household consumption, in general, I believe that Cambodian people prefer the local or regional products,” Saktheara said.

Saktheara believes that local business models have historically lacked innovation, a factor that hinders competition. “It’s difficult because most of the businesses here are more like copy and paste, there are no distinctive features that make our businesses or products really unique,” he said.

“That makes competition really tough. If you have the same product as the imported product, it means that you have to compete on price or quality.

“On top of this, most of the businesses here are small-scale. They don’t have sufficient economies of scale to compete with imported products.”

The Asian Development Bank’s deputy country director, Peter Brimble, said that foreign investment has the potential to strengthen Cambodia’s capacity for innovation in areas such as logistics, supply-chain development, human capital building and manufacturing.

“In this regard, innovative government policies in the respective areas could play a critical role in maximizing the spill-over effects of foreign direct investment on the Cambodian innovation domain,” Brimble said.

Saktheara said the government has set up programs that will favour foreign direct investment (FDI) that links to local SMEs in an effort to enhance technological capacity and encourage innovation.

“In the past, a lot of FDI in the country has been operating independently. Now, we are trying to get them to help locally in enhancing domestic capacity,” Saktheara said.

“There will be closer scrutinising of the quality of FDI that we draw to the country to make sure that we attract the good FDI that enhance local capacity and transfer technology. If you have an FDI and they don’t do anything locally, they don’t create any value locally. They come and they make a profit here, but they give nothing.”

Sam Sakada, co-founder of entrepreneurial support organisation Smallworld and Khmer Enterprises, says that there is a vibrant community of students, social entrepreneurs and local businesspeople who need greater support.

“If investment goes directly to grassroots institutions or local start-ups, the impact might be more effective,” Sakada said

Saktheara said young entrepreneurs are breaking traditional business models, and the government is looking to offer investment incentives and tax breaks to encourage this sort of innovation.  

“It is really different from the old business fashion, where older people used to do business by copying from their parents,” Saktheara said.

“In the past, there was a lot of resources given to trying to reform the public sector, but right now we tend to focus on the private sector. [This] would mean that public resources will go to a program like SME skill enhancement and technology development.

To contact the reporter on this story: Daniel de Carteret at daniel.decarteret@phnompenhpost.com

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