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Cambodia’s e-commerce sector seeks clear and regionally uniform regulations

Harrison White

Cambodia’s rapidly developing e-commerce sector will be best placed if regulators clearly define laws and regulations while maintaining regional uniformity according to stakeholders who discussed e-commerce tax and licensing requirements at a panel discussion hosted by DFDL.

Cambodia’s e-commerce sector continues to rise on the back of the pandemic, with government officials now rushing to play 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.

Moderated by Nishant Choudhary, Partner at DFDL the panel commented that it was important that regulators addressed concerns of uncertainty by the market when implementing any new laws and regulations.

The law on e-commerce and consumer protection was established in 2019 with subsequent prakas and sub-decrees aiming to define e-commerce classifications as well as registration and tax requirements for both local and foreign companies.

Removing uncertainty for the market

Christopher McCarthy CEO of local marketing agency Mango Tango said that many of the current regulations are unclear and lack easy-to-understand definitions around what are the differences between a traditional business and an e-commerce business.

“The business community hates uncertainty and hence this is a hard position. What would make the business community more comfortable is an understanding of enforcement mechanisms for breaches of regulations imposed,” he said.

To read more about the taxation requirements for e-commerce in Cambodia click here.

Christopher McCarthy CEO of local marketing agency Mango Tango

Nearirath Sreng Legal Consultant and Deputy Head of DFDL Cambodia said the regulations that Cambodia’s government is implementing are similar to previous legislation in neighboring countries such as Indonesia or Singapore which have already adopted many regulations such as personal data protection.

“The Cambodian government is on the right path with the Ministry of Posts and Telecommunications now preparing new laws however any law takes a long time to draft and then implement, hence the language in these laws sometimes needs to be deliberately broad due to such a fast-changing industry,” she said.

Ensure regulations remain regionally consistent

Cambodia has earmarked the Regional Comprehensive Economic Partnership (RCEP) free trade agreements allowance for e-commerce as a golden opportunity for Cambodian businesses to tap into regional markets.

RCEP’s Rules Of Origin protocols should make it easier for companies to produce products within Cambodia to be shipped throughout participating RCEP countries.

To read more about the opportunities for e-commerce in Cambodia under RCEP click here.

Narirath Sreng Legal Consultant and Deputy Head of DFDL Cambodia

Christopher McCarthy said Cambodian regulators should ensure, as best as possible, keep regulations in regional unison to make the most out of the recently ratified free trade agreement and across e-commerce platforms.

“About the newly implemented requirement for foreign firms to register for VAT in Cambodia many of the larger firms such as Google and Meta (Facebook) already have however the smaller firms would most likely lack the resources to do so,” he said.

Nearirath Sreng added that some of these new laws and requirements now implemented are contradicting each other new e-commerce legislation should properly address this.

Cambodian regulators catching up

Vinjay Ahuja, Partner at DFDL commented that overall usage and population are what drive the direction of the e-commerce market.

“Comparing Cambodia to regional markets such as Indonesia regulators could divide digital businesses them into more simple terms of what constitutes e-commerce over a certain level,” he said.

“For example, there could be a different regulatory requirement for companies that are at different levels of operation to encourage more new players into the market. That said there should be some more clarity around this over the next few years too,” he said.

According to the 2021 Profitence report on e-commerce, Cambodia is still at an early stage, and with the government’s efforts and main growth drivers such as mobile penetration, and a large population of youth, the industry is expected to follow the same positive growth trend as Thai’s e-commerce.

The main challenges of the sector still revolve around the lack of IT experts, infrastructure, and a large unbanked population. While COVID-19 has become a catalyst for several e-commerce businesses such as food delivery, it also hinders the growth of others such as ride-hailing.

The current legislation related to e-commerce is yet to be entirely formalized, so businesses must stay alert and have up-to-date knowledge to mitigate the risk of non-compliance. The Profitence e-commerce report for 2022 is expected to be released soon.

To read the full 2021 Profitence e-commerce report click here.

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