Digital Transformation in Cambodia Policies, Strategies, Supporting Factors and Infrastructure.

AuthorSavuth, Cheng
  1. Introduction

    Digital technology has changed many aspects of society. The adoption and usage of digital technology can be observed in households, firms, and governments. The telecommunications regulator of Cambodia reported that, in 2020, the country had 16.3 million Internet users (up from 5.0 million in 2004) and 20.8 million mobile phone subscribers (up from 2.5 million in 2004) and there are approximately 12 million social media users. Interest in digital technology, digital transformation (DT) and the digital economy gained momentum during the COVID-19 pandemic crisis. Despite this, Cambodia still possesses limited ability to exploit the full benefits of digital technology and digital transformation.

    At present, the usage of digital technology in Cambodia is basic and public understanding of the concept of digital transformation is still nascent. Despite the rapid adoption of digital technology, the country still lacks the infrastructure and strategies to integrate digital transformation to promote inclusive growth. For instance, only a small share of small- and medium-sized enterprises (SMEs) made use of digital platforms for their businesses during the pandemic crisis and around two-thirds of firms had no digital sales (World Bank 2020). Moreover, the benefits from the adoption of digital transformation have been unevenly distributed. Such benefits vary across economic sectors due to factors such as the conditions of supporting infrastructure, the level of human capital and skills, and the availability of supporting regulation and law (Velde and Chandarany 2020).

    The government recently adopted the Cambodia Digital Economy and Society Policy Framework 2021-35 (DESPF 2021-35), which contains strategies to implement digital transformation successfully. The framework identified five targeted areas of DT, including: (1) establishing the foundation of digital infrastructure; (2) implementing digital security and regulation; (3) promoting digital transformation in public sectors; (4) promoting digital citizens; and (5) promoting digital transformation in the private and business sector. More in-depth research is required to assess the comprehensiveness of the framework and to identify possible constraints that may hinder efforts to achieve the goals and objectives during its implementation (RGC 2021).

    Figure 1 summarizes the mechanism of Cambodia's digital transformation based on DESPF 2021-35. To achieve the digital economy and society desired, the DESPF highlights a number of supporting foundation factors. These include: (1) connectivity and ICT infrastructure; (2) human capital and skills; (3) regulations and support policies; and (4) supporting macroeconomic and business environment.

    The objective of this study is to analyse Cambodia's digital transformation strategies (DTSs), especially the Cambodia DESPF 2021-35 in terms of: (1) completeness (components of standard DTS, inclusiveness, details, reasons); (2) feasibility of DTS implementation (readiness degree of supporting factors); (3) order of prioritized goals, policies, activities in DTS; (4) monitoring and assessment tool of DTS; (5) seamlessness of integration among DTS components and implementers; and (6) minimizing and harnessing the negative impact of DT.

    This research addresses a number of research questions. First, what is the role of digital transformation in economic growth? Second, what is the readiness level of supporting factors for digital transformation in Cambodia? Third, what are the main digital transformation strategies and policies in the country? Fourth, how is the quality of the DTS and its supporting factors? Finally, what would be the challenges hindering the implementation of the DTS?

  2. Previous Studies on Digital Transformation

    The definition of the digital economy (DE) depends on the scope of coverage. A narrow definition of DE covers economic sectors that produce the foundation of information and communication technology (ICT) goods and services as well as a few other sectors that use ICT intensively. A broad definition of DE includes the use of ICTs and digital technology in all economic sectors which is called a "digitalized economy".

    Another concept related to the digital economy (DE) is digital transformation (DT), which refers to the process that converts all economic spheres into a digitalized economy. In other words, digital transformation refers to the adoption (production or consumption) of digital technology in public, private and all other sectors of the economy (Mahraz, Benabbou and Berrado 2019; Hanna 2020). Similarly, Vial (2019) defined DT as "a process that aims to improve an entity by triggering significant changes to its properties through combinations of information, computing, communication and connectivity technologies". The definition can be broadened to encompass a wider scope which includes not only the transformation of organizations but also industries and societies.

    Digital technology provides convenience to consumers. For instance, the Internet of Things (IoT) has reduced consumers' search time for products and enabled them to reach a broader range of online sellers via online market platforms, regardless of physical distance. Firms also benefit from the use of digital technology in their businesses. Ismail, Khater and Zaki (2017) point out that firms undergo digital transformation due to external, internal and/or holistic factors. The authors explained that (1) external factors refer to the attempt to use digital technology to enhance customers' or users' experience, (2) internal factors refer to the attempt to use digital technology to support internal business operations and business decision-making, and (3) holistic factors refer to the use of digital technology to create new business models and improve business performance. They also mentioned that, during the process of digital transformation, firms might undergo several changes such as re-engineering, restructuring, renewing, regeneration, refraining, revitalizing, and renewal. Moreover, during the process of digital transformation, firms will go through four phases: (1) adapting--when firms select activities to be automated; (2) evolving--when firms become familiar with the digital technology; (3) envisioning--when firms redesign business and network models; and (4) renewing--when firms reframe their business scope and market.

    Mo et al. (2021) identified a few forms of digital transformation adopted by firms, particularly SMEs. These include: (1) cloud computing and cloud storage technology; (2) sterilization technology; (3) social media adoption; (4) social commerce; (5) e-commerce; (6) block chain; (7) digital platforms for customer relationship management (CRM) and supply chain management (SCM); (8) radio frequency identification (RFID) technology; (9) Industry 4.0 technology; (10) portals (websites); (11) accounting information system; and (12) smart manufacturing (big data processing, advanced robotic and 3D printing). However, the authors also acknowledged the limited ability of SMEs to adopt digital transformation due to limited capital and human resource, and market uncertainty.

    The failure to adopt digital transformation can be attributed to several reasons. Bughin et al. (2018) suggested five reasons why the digital strategies of firms fail. These include: (1) having a vague definition of "digital" and the underestimation of digital by erroneously regarding digital technology as the same as common information and technology (IT); (2) underestimating the impact of digital on traditional economic models for business and competition; (3) overlooking the ecosystem by defining customer and market too narrowly (for example, successful firms in the digital economy such as Alibaba and Facebook have a well-established an ecosystem that connects them to many suppliers, customers, financial institutions and others); (4) underestimating the effect of digital disruption on business competitiveness; (5) adapting slowly to digital change; and (6) having a lack of strategy.

    Digital transformation is not only taking place in firms and households but also in the public sector through the introduction of e-government and many online public service deliveries. Overall, digital transformation provides many benefits, but it also comes with challenges and disruptions that must be tackled. The ability to adopt, exploit and gear digital technology varies by country. For instance, within the country, the distribution of digital technology's benefits is uneven for different sectors, regions (rural/urban), high-skilled and low-skilled workers, and the rich and poor. Therefore, strategies to adopt DT should also incorporate the distributional effect of the benefits to reduce inequality (Velde and Chandarany 2020).

    Acknowledging the benefits and challenges of DT, many countries have set up their digital transformation strategy. However, scholars have an ongoing debate on how to develop a strategy that provides benefits from DT while diminishing its negative impact and disruptions. Ross et al. (2016) suggested three areas for successful adoption and usage of digital technology: (1) a digital strategy that clearly defines the value proposition of technology integration's initiatives; (2) an operational backbone that provides the capabilities for optimal operation; and (3) a digital service backbone that supports the innovation and responsiveness to new opportunities.

    In addition to having a digital transformation strategy, DT needs assessment tools to monitor and provide feedback on the implementation as well as to minimize the negative impact on society (Hanna 2020). To begin with, a clear definition and measurement of DT would be helpful for the design of data collection and other inputs required for the assessment tool of DT (World Bank 2018).

    At the heart of the digital framework and strategy are data, platform and data infrastructure...

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