Study on Tourism MSME and ‘New Normal’ Economic Revival: The Role of Digital Technologies
Digital technologies have evolved at breakneck speed and spread, changing not only the digital ecosystem but also the way economy, trade and business are functioning. Massive digital transformation and its associated broad benefits for development have prompted most countries to embrace digital technology and incorporate it into their economic development plan. The Royal Government of Cambodia recognizes the importance of digital technology as a new source of economic growth that can move the country from middle-income to high-income status and launches the Science, Technology, and Innovation (STI) Policy 2020-2030 aiming to build national capacities in STI and improve the STI ecosystem for sustainable and inclusive development. Amidst the COVID-19 outbreak and economic slowdown, the government has taken another step in the digital technology realm by adopting the Cambodia Digital Economy and Society Policy Framework (2021-2035) with the long-term vision to build a vibrant digital economy and society by laying the foundations for promoting digital adoption and transformation in all sectors of society in order to promote new economic growth and improve social welfare in the "new normal".
Micro, small and medium-sized enterprises (MSMEs), the backbone of Cambodia’s economy, accounting for about 99.9 percent of more than 500,000 establishments in 2014, are even more disadvantageous and often constrained by the lack of financial resources, insufficient internet infrastructure and lack of knowledge on supporting policy framework, resulting in significantly low adoption of digital technology as compared to large firms. MSMEs in tourism are experiencing even worse hardship because of the industry collapse due to the pandemic. The Asia Foundation’s rapid assessment of the impact of Covid-19 on MSMEs in the tourism sector reported that 47% of the surveyed SMEs closed their businesses while another 31% reduced operations.
As the COVID-19 outbreak persists, more and more firms are turning to digital technology to mitigate risks, optimize operations and improve efficiency. In Cambodia, we observed rapid growth in e-commerce activities along with increased use of smartphones, social media platforms and other digital platforms. A survey of e-commerce indicates that some e-commerce start-ups have seen an increase of more than 150 per cent in online grocery sales since the outbreak of COVID-19. It is also found rapid growth in E-payment and a shift in consumption habits driven by the need for sourcing essential items online. Given the spread and trending transition to the digital economy and technology-driven business model, it is crucial to understand the status of digital adaptation and adoption among MSMEs in tourism in Cambodia.
This study examines the crucial role of digital technology in promoting economic growth and boosting post-pandemic economic recovery in the ‘new normal’ economic environment. Particularly, the study aims to achieve the following objectives:
- To examine MSMEs and the digital economy in the tourism sector;
- To understand digital opportunities and challenges for tourism MSME businesses within the country;
- To investigate potential digital solutions to encourage capacity building within businesses, support technology uptake, and to foster recovery and resilience within the Cambodian economy against potential socioeconomic challenges in the future; and
- To understand the extent to which do digital technology adoption affect MSMEs’ performance.