Cambodia e-commerce policies playing catch-up to regulate the growing sector

Brian Badzmierowski

As Cambodia e-commerce continues its meteoric rise on the back of the pandemic, government officials are playing catch-up to regulate the sector and ensure it forges a sustainable path to success that benefits the government, the private sector, and consumers alike.

The national conference on consumer protection was hosted by the Ministry of Commerce, the Consumer Protection, Competition and Fraud Repression (CCF), and the European Chamber of Commerce with support from the Deutsche Gesellschaft fuer Internationale Zusammenarbeit (GIZ). 

The conference was held at Raffles Hotel and hosted both private and public sector actors discussed the changing landscape of e-commerce and identified areas that needed to be addressed to protect consumers while providing vendors with the appropriate frameworks to operate legally.

Choronai Leangreth, an investment analyst at local advisory firm Profitence, told the audience that the main challenges preventing e-commerce in Cambodia from taking off further included a lack of trust, a preference for cash payments among Cambodians, a lack of IT support, limited infrastructure, and inventory issues.

According to a Profitence report released last month, many Cambodian consumers are suspicious that goods will actually be delivered if are paid for in advance and they aren’t convinced they will be able to receive refunds or exchange items.

Deliveries also remain a problem, with roads and homes not properly numbered outside of the capital.

Cambodia e-commerce

Cambodia e-commerce and digital payments rising but cash is still king

In a survey of 155 university students and young professionals in Phnom Penh carried out in August, Profitence found that 40 percent of e-commerce shoppers used Facebook to buy goods online, followed by Instagram with 22 percent. In third place came the massive Chinese marketplace Taobao.

While the survey indicated that over 60 percent of respondents were comfortable with online payments, the wider population still prefers cash payments. According to Profitence, 89 percent of Cambodians prefer cash payments, compared to 45 percent in the region.

Leangreth said the government would need to be instrumental in helping legitimize e-commerce by providing safe payment systems, improving address systems outside of Phnom Penh, providing IT skills training, and attracting foreign investment.

Sam Chetra, the Deputy Director of the Legal Affairs Department at the Ministry of Commerce, said getting the public and private sector on the same page was the main priority to push the sector forward.

One of Cambodia’s leading e-commerce sites Smile Shop has partnered with Chinese venture capital firm Jin Sha Group to develop its platform to allow consumers to directly purchase listed products instantly on credit.

The strategic partnership was signed under a non-disclosure agreement between Jack Lee, CEO of Smile Shop App and Liu Yang, the Chairman of Jin Sha Group. Cambodia Investment Review has been informed the deal was “in the millions” and in return for a portion of Smile Shop shares.

The ethics and morals of advertising online for Cambodia e-commerce

Adrienne Ravez, Chief Operating Officer of advertising firm QED said ensuring ethical and truthful advertising was another issue that needed to be addressed.

She said problems include sellers making false promises, selling counterfeit goods, and using taboo subject matter in advertising such as gambling and explicit content. 

Vendors have landed in hot water recently due to false advertising. 

For example, Nutrilatt Cambodia a producer of milk powder for infants was taken to court last year after their products were found to have deficient levels of iron, causing infants to develop negative side effects.

Counterfeit cosmetic products are commonplace on online marketplaces as well and can have serious side effects for consumers. 

The Australian Competition & Consumer Commission (ACCC) recently delivered an online training session to colleagues at Cambodia’s Directorate-General of the CFF.

The partnership aimed to combat pyramid schemes in the Kingdom after several high-profile scams have impacted consumer confidence.

Ravez said bigger e-commerce companies like Amazon usually have their own codes of conduct vendors must adhere to but these rules don’t exist or aren’t followed by many vendors on social media, where most online sales take place in Cambodia.

“In that sense, the advertising that you would see would very often fall under the irresponsible advertising category,” she said.

She added that Facebook has its own rules of conduct that should be followed by its users and that to ensure advertising remains ethical, vendors must be educated on how to properly and truthfully advertise their products.

Phan Oun, the Director-General of the Consumer Protection, Competition and Fraud Repression Directorate-General (CCF), said although there aren’t many legal precedents for false advertising, anyone caught employing unethical practices would likely be warned and given a chance to correct their advertisements. 

If they still failed to follow the rules, they would be taken to court, he added.

Cambodia e-commerce vendors need clear information to register businesses

Vendors also needed to be educated on how to properly register their e-commerce companies and how to pay the proper amount of taxes on their sold goods. The framework exists, however, most e-commerce companies still operate informally.

While there has yet to be any major e-commerce players like Amazon land in Cambodia, Deep Chowdhury, Profitence’s founder and director, told CIR that the giant has a chance to make it to the Kingdom someday, and he expects books to be a major seller when that day comes.

Mam Dathalineth, the Vice President of Internal Affairs at the Cambodian Women Entrepreneurs Association, said women make up a majority of the e-commerce vendors in the Kingdom and her organization is fighting to make sure women have equal shares of the e-commerce stage. 

She said the organization has brokered deals with banks to offer a 5.5 percent interest rate on loans for women, something that she said will help more women have independent access to finance to help grow their SMEs and take part in the growing e-commerce field.

This year, Cambodia’s Online Business Registration System (OBR) has expanded its scope with five more ministries joining the platform with business owners now able to apply for eight more professional licenses through an official portal.

There are now 11 ministries involved with the portal covering the majority of small and medium-sized business activities.

The e-commerce market in Cambodia however remains relatively very small accounting for approximately $182 million in 2020, compared to $7 billion in Thailand and $6 billion in Vietnam.

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