It wasn’t the busiest quarter for Cambodia’s ICT sector, but nevertheless, the last three months involved some interesting developments. Notably, the Kingdom’s central bank issued new regulations governing the licensing of payment services providers in line with the growing financial technology sector while a handful of innovative teams were able to receive some much-needed capital to realise their technology-related business ideas.
Cambodia could add an additional $320 million to the economy over the next 10 years while increasing tax revenue by $24 million if it dropped its tariffs on information and communication technology (ICT), according to new research published.
According to a study by the Washington-based think tank Information Technology and Innovation Foundation (ITIF), Cambodia could grow its GDP by nearly 1 percent over the next decade, adding $320 million to the economy, if it adopted the Information Technology Agreement (ITA).
“If Cambodia joins the Information Technology Agreement, its businesses and consumers will use more technology products because of lower prices, while becoming more deeply integrated in global value chains for ICT production,” Stephan Ezell, ITIF’s vice president and lead author of the report, said. “This will spur significant economic growth for the country while generating new tax revenues that help offset tariff losses.
“Overall, the growth from joining this agreement matters much more to Cambodia’s economic future than any tariff revenue it loses.”
Winners of the SmartStart Young Innovator Program were announced with five teams awarded funding and support to bring their technology-related business ideas to market.
The three-month competition organised by local telecom Smart Axiata began with 30 teams in February. Fifteen finalists pitched their ideas to a panel of judges, with the five best projects set to receive $4,000 in funding and six months of incubation services.
The winning teams addressed needs and business opportunities in a variety of industries, including Gosoccer, a platform for booking futsal fields in Phnom Penh; Spare, a service connecting renters with tenants; and Prestige Gift, a company providing gift consultation and delivery. The other two winning teams were Be-First, an app for learning Khmer, and Sopheakmongkol, a one-stop wedding-planner platform.
The central bank has issued new regulations governing the licensing of payment services providers (PSPs), requiring that all firms providing online services to accept electronic payments have at least $2 million in registered capital, a move expected to increase the stability of the sector and encourage the consolidation of its smaller players.
A prakas signed by National Bank of Cambodia (NBC) Governor Chea Chanto on June 14 and released on June 20 establishes that all PSPs in Cambodia must obtain a licence from the NBC to operate. The licensed firms are required to demonstrate a minimum registered capital of 8 billion riel (about $2 million) and deposit 5 percent of their paid-up capital with the NBC.
PSP licences are valid for six years, with an annual licensing fee of 20 million riel ($5,000), according to the prakas.
The new regulations aim at better governance of third-party processors (TPPs) that act as intermediaries to complete payment transactions, and reflect the rapid growth of financial technology (fintech) solutions.
Global payments giant Visa is the first international financial firm to announce the roll out of a payment solution in Cambodia for quick response codes, or QR codes, those pixelated black and white squares designed to be read by a smartphone camera that have begun popping up at retail outlets throughout the capital.
The company is preparing to launch mVisa in Cambodia and 10 other countries worldwide, according to a spokeswoman, who said the QR code payment platform would be available to merchants and consumers through participating local banks in the coming months.
“We expect the first banks in Cambodia to start offering the service in the third quarter of this year,” she said.
mVisa will join the growing list of QR payment platforms in Cambodia, which include apps developed by Acleda Bank, the country’s largest commercial bank, and Pi Pay, a new digital payment smartphone application.
Malaysian telecom giant Axiata Group will likely divest stakes in its more profitable operations, including its Cambodian subsidiary Smart, as the company is projected to have a 7 percent year-on-year decline in earnings for 2017, according to PublicInvest Research.
The research house for Malaysia’s Public Investment Bank Berhad (PIBB), noted in a report this week that Axiata’s performance has been dragged down by operations at home and by its subsidiaries in Singapore and India.
“We believe Axiata is likely to divest part of its stakes in more profitable overseas units in Sri Lanka, Cambodia and Indonesia in order to raise funding for future capex [capital expenditure] and to pare down borrowing, following the call-off of the planned disposal of M1,” it said, referring to a reverse of course in July that saw the company call off a potential sale of its stake in Singapore’s M1.
In May, Axiata offloaded a 10 percent stake in Smart to the Japanese group Mitsui Co Ltd for $66 million. The strategic sale, which still gives Axiata an 82.5 percent stake in Smart, raised the value of the company to $724 million when considering cash received from dividends, Axiata said at the time.
“Portfolio management is a normal business consideration and exercise, and is good practice of a holding company and operating group such as Axiata,” an Axiata spokesperson told The Post in an email. “[However,] Axiata has no plans to exit any of its portfolio companies. We are a long-term investor and we operate our subsidiaries, some more than 20 years.”