Adorned with hanging plants and hammocks, the communal areas at entrepreneurial support provider SmallWorld are more reminiscent of a backpacker hostel’s lounge than a traditional office building.
Yet concepts such as SmallWorld, which nurtures ideas from initiation to funding, supporting those looking to bring something new to the economy, are critical to the next stage of Cambodia’s development.
SmallWorld co-founder Sakada Sam is all too aware of the challenges that face Cambodia as it attempts to diversify its economy through innovation.
A recent program by SmallWorld to seek out entrepreneurs began with 50 students. That dwindled to 25 on day two, and by the end of the program, just three remained. Only one of them is still with SmallWorld.
“Right now, they don’t have stories to inspire them, and we don’t really have a structure [to facilitate innovative ideas],” Sakada, a 29-year-old master’s graduate in business management, said.
One start-up that has flourished at SmallWorld is ArrowDot, whose products use smartphone technology to power robots and household electrical appliances.
Although still in its infancy, ArrowDot’s concept has come a long way as SmallWorld encourages it to explore prototypes that may be commercially viable and attractive to investors.
“We think that if [ArrowDot’s products] work, it will help many Cambodian people to explore and implement their [own] ideas,” Hor Sophanna, a 22-year-old electrical engineering graduate and co-founder of ArrowDot, said.
Innovation occurs when a range of economic actors – big and small business, government, and private and public enterprises – react to one another, as well as driving creativity from within themselves.
Governments across the region are promoting the potential opportunities arising from the integration of the ASEAN Economic Community (AEC) in 2015, but experts are wary that a failure to innovate could leave Cambodia at the mercy of its neighbours’ more mature industries, putting jobs at risk and threatening national identity.
For Gernot Hutschenreiter, head of country reviews of innovation policy at the Organisation for Economic Co-operation and Development (OECD), innovation is not merely a factory’s increased productivity from the adoption of better technology, or the introduction of a product via a company’s research and development department, but instead exists across a broad spectrum.
“It actually involves all types of significant changes in processes and products,” Hutschenreiter said.
“It also involves changes in organisational management practices, so there’s a whole range of non-technology innovation that is absolutely necessary even for technological innovation to happen.”
Hutschenreiter is positive that the dynamics of the region will offer great opportunities, but he is wary of the impact that trade liberalisation can have on low-income countries, and says vision is required to avoid becoming stuck in low-value-added economic activities.
“We will also see a reshuffling of value chains, which may be difficult for some countries in the Southeast Asia region in the intermediate stage. They may come under pressure from China controlling more of the value chain,” he said.
“But, on the other hand, it may offer new opportunities for latecomers like Cambodia.”
The government is also aware of the need to innovate, rolling out programs that connect foreign direct investment with small and medium-sized enterprises (SMEs), offering start-up capacity-building and financial support as well as technology-adoption initiatives for local business.
For Meng Saktheara, director-general of Industry and Secretariat of the SME sub-committee, innovation is a priority for Cambodia as it faces AEC integration.
Saktheara is concerned that if the country fails to move up the value chain, Cambodian jobs will be at risk.
The economy is vulnerable to global economic shocks, and national identity is threatened by competition from its neighbours, he said.
“You can observe that innovation doesn’t take place in Cambodia [right now].
“Most of the start-up businesses are just copied and pasted from an existing business, so you rarely see new value created for Cambodian society from a start-up business.
“What scares me most is that a lot of SMEs are sleepy right now; they’ll soon be woken up by the onset of integration.
“They seem to be looking at new opportunities, but forget about challenges they face.”
For Sakada and the next generation of innovators at SmallWorld, the outlook is promising. They see opportunities to learn from their neighbours, recognise Cambodian role models and break out of traditional business models.
“I’m encouraging people to start something that is different from cut and paste,” Sakada says.