Chapter 1 CAMBODIAN SMALL AND MEDIUM SIZED ... - ERIA

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satisfactory infrastructure are crucial for development. As the enterprise enters thesecond stage, standards and technical assistance, production processes and marketdevelopment take on more importance. During the third stage, factors such astechnological, ICT and managerial capabilities become basic requirements. During thefourth and final stage enterprises become globally competitive and factors such asdesign capability, brand name promotion and industry upgrading are basic concerns. 25In terms of SMIDEC’s model Cambodian SMEs are all around the first twostages of enterprise development. This again emphasises the importance of physical andhuman capital accumulation, and underlying this, an enabling business environment forenterprise development.4. AN ENABLING BUSINESS ENVIRONMENTThe uncertain business climate exasperates the problems of low levels of physical andhuman capital available to Cambodia SMEs. Corruption, poor governance, weak courtsand poor infrastructure cause excessive costs and uncertainties for Cambodianenterprises. 26Over the last ten years the Royal Government of Cambodia has introduced anumber of laws designed to promote commerce in general. These include financialsector laws, a land law to strengthen land rights and encourage the use of property forcollateral, and amendments to the Law on Investment to encourage purchases ofproductive capital. The Law on Enterprise Accounting and Audit was introduced as afirst step towards implementing improved accounting standards. The law onCommercial Enterprises and a law on Commercial Arbitration have recently beenpassed in an attempt to reduce risks associated with trading. There are a further eightmajor commercial laws currently being considered by the government. 27These policies address many barriers hampering commerce and therefore SMEdevelopment. But it is only within the last few years that the government has focused onremoving barriers specific to the development of SMEs.11
4.1 SME promotion strategiesUp until 2004 there was no single department controlling SME promotion policies. Asmany as 25 different ministries and organisations have developed their own SMEpromotion strategies, regulations and policies focusing on achieving varying outcomes.This increases not only uncertainty regarding requirements and government assistance,but also the compliance cost to SMEs. An SME garment manufacturer headed by afemale entrepreneur will be subject to regulations and policies from at least the Ministryof Commerce (MOC), the Ministry of Women’s Affairs, and the Ministry ofEnvironment.None of the ministries officially coordinate SME promotion activities or shareinformation. This results in considerable duplication of data collection and oftenredundant strategies. At the worst policies designed to promote SME development cancontradict each other. 28In 2004 the SME Sub-committee was formed to coordinate and promotepolicies to develop SMEs. By coordinating the SME policies of different governmentdepartments and associations it is hoped duplicating and contradicting policies can beavoided.4.1.1 The Rectangular StrategyIn July 2004 the Royal Government of Cambodia produced the Rectangular Strategy,with thirteen approaches to encouraging Cambodian commercial development, (seeTable 3). The Rectangular Strategy was intended to promote economic growth, generateemployment, and encourage efficiency through competition. One of the main focuses ofthe Rectangular strategy was to promote the development of Cambodian SMEs. 29 Noneof these thirteen approaches were implemented at the time, but the Rectangular Strategyhas provided a foundation for the SME Development Framework. 3012
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Page 7: Table 2: SME definitionEmployee num
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Page 14 and 15: Table 3 Rectangular Strategy: 13 st
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Page 18 and 19: Lowering barriers to company regist
Page 20 and 21: The ADB recommend any citations sho
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Page 24 and 25: 1. a lack of collateral2. an in-ade
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Page 28 and 29: positions for approaching financial
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