Cambodia’s economy: what to watch for in 2022

ASIA TIMES

by Sim Vireak  

February 4, 2022

 

As of November 28, the country was ranked second in Asia and seventh in the world for the total share of fully and partly vaccinated people in its total population. On December 20, the results of the so-called “February 20 community event” were declared an end after the government had struggled to contain the outbreak nationwide for 10 months.

The world is quite contradictory because the advanced economies have a surplus of vaccines and yet they are struggling with vaccine hesitancy, while developing countries have been battling for access to vaccines.

Cambodia is among the lucky few developing countries that can secure vaccines for its people, who welcome inoculation as the only means and strategy for national reopening up. The World Health Organization attested to Cambodia’s vaccine success in that regard, but also warned of “vaccine optimism.”

As of November, 87.7% of the population of about 16 million had been fully vaccinated, and Covid-19 has been under control with fewer than 3,000 deaths.

(…)

According to the Ministry of Economy and Finance (MEF), $829 million was spent for interventions in 2020, and $1.454 billion in 2021. For the national budget in 2022, under the “3Rs” pillars (“Recovery, Reforms, Resilience”), the government has earmarked $1.014 billion for intervention, making the total expense since 2020 amount to approximately $3.4 billion.

The MEF predicted growth for 2021 at 3.0% and 5.6% for 2022, expecting the economy gradually to reach its potential in the medium term, supported by global demand and a gradual recovery in investment confidence.

For 2022, three trends should be key for observation on development of Cambodia’s economy.

The first thing to watch is how well Cambodia can tap the benefits from the success of the inoculation drive.

(…)

Second, attention should be paid to the quiet but steady progress of public investment and reforms.

(…)

The third key trend is about the ongoing quest for industrial diversification, which goes hand in hand with market diversification.

(…)

It is worth noticing that in recent years the non-garment sector has been on a growth trajectory. The garment sector used to play a leading role in the economy of Cambodia, accounting for 74% of total merchandise exports in 2018. Despite the accelerated growth rate of 6.8%, garment exports no longer account for the majority of goods exports but rather 45.9% of the total, amounting to $5.82 billion during the first nine months of 2021.

Exports of travel goods surpassed those of footwear products and became the second-largest item, accounting for $1.04 billion. Export of footwear products is third, reaching $1.0 billion. The fourth-largest manufacturing export product is bicycles, which amount to $470 million.

The fifth- and sixth-largest exported products are agricultural commodities, and milled rice and rubber, amounting to $285 million and $266 million respectively. The newly emerging manufactured products, which include electrical, electronic, vehicle parts, and cables combined, reached $412 million.

(…)

 Read full article in ASIA TIMES: https://asiatimes.com/2022/02/cambodias-economy-what-to-watch-for-in-2022/

Cambodia Makes Amendments to the Labor Law

ASEAN Briefing

Nov. 11, 2021

By Ayman Falak Medina

Read full article: https://www.aseanbriefing.com/news/cambodia-makes-amendments-to-the-labor-law/

On October 5, 2021, Cambodia’s government issued Royal Kram No. NS/RKM/1021/011 which amends several articles of the Labor Law. The Labor Law was first promulgated in 1997 and has since undergone two amendments: firstly in 2007 concerning wages for overtime and secondly in 2018, regarding provisions on seniority indemnity.

The latest changes include allowing enterprises to divide scheduled work hours into three shifts, and the provision that individual labor disputes can now be brought to court if the disputing parties cannot settle with the labor inspector. The government hopes the latest changes can strengthen the competitiveness of Cambodia’s labor market, especially as the country is aiming to reach middle-income status by 2030 and high-income status by 2050.

The labor law amendments will likely require employers to change the terms and conditions on employment contracts and internal regulations related to work shifts and public holidays.

What new articles have been introduced in the Labor Law?

Article 138: New provisions related to work shifts

Enterprises can now divide the work schedule into three shifts (morning, afternoon, and night) with each shift not exceeding eight hours (the maximum daily work hours). Previously the law only allowed the division of two shifts (morning and afternoon).

The government hopes this will attract more modern industries, such as electronics production and processed foods manufacturing, into Cambodia.

Importantly, the amendments do not erase the pay rate for employees working regular nightshifts. The rate for regular nightshifts (from 10 pm to 5 am) is 200 percent of normal wages.

Employers must also continue to provide other additional benefits and health allowances to employees who regularly work night shifts.

Article 300: Labor dispute resolution

Under this article, the jurisdiction of the Labor Arbitration Council has been expanded to also resolve individual labor disputes. Previously, the Arbitration Council only had jurisdiction over collective labor disputes.

In an individual labor dispute, the disputing parties can file a complaint to the labor inspector to seek conciliation.

If the disputing parties are unable to settle through conciliation by the labor inspector, the concerned party can file a complaint to the Labor Court or with the Arbitration Council.

Through this mechanism, the government aims to settle individual labor disputes more efficiently in addition to promoting more harmonious industrial relations.

Under the old article, any individual dispute could only be referred to the labor inspector of their province.

The formalities related to the new procedure for filing individual labor disputes will be issued in a later Prakas (decree).

Article 343: New powers for the labor inspector

This new provision empowers the labor inspector as a judicial officer to monitor any employment offenses as stated in the Labor Law. The legal procedures will be determined in an inter-ministerial Prakas, which is yet to be issued.

Article 162: Cancellation of compensated days off in lieu

Previously, to compensate for any public holiday that falls on a Sunday, workers were given a day off in lieu of the following business day. Under Article 162, workers are no longer entitled to this provision. This may essentially reduce the number of annual public holidays each year, depending on how many falls on a Sunday.

Further, any work performed on a public holiday must be under the supervision of the labor inspector. If the company intends to have employees work on a public holiday, they must apply for permission to the Ministry of Labor and Vocational training (MLVT). 

The changes are part of the government’s continuing efforts to improve productivity in Cambodia. In fact, the MLVT has been steadily reducing the number of public holidays since 2018. There were 28 public holidays in that year, 22 in 2020, and 21 days in 2021.

 

Workers of Two Factories Receive Compensation after more than one year ago

 Camboja, Feb. 13, 2021

In the early morning cool, 51-year-old Sao Na stood outside the Kandal Provincial Hall ground on Friday wearing a helmet, armed with rice, sweetcakes and one last slither of hope she would finally receive a long-promised payout.

After more than ten years of service, the Dignity Knitter factory stopped paying her in December 2019, then suspended operations, and then shut down without notice – leaving her and about 1,000 co-workers there and at the nearby ECO Base factory jobless and owed thousands of dollars each.

After a year of broken promises, the provincial court this month sold more than $1.1 million worth of equipment seized from the shuttered factories, which will be split between more than 1,000 workers, who have stood vigil at the factories around the clock for months and staved off multiple attempts by management to take back their goods. 

“It’s not much but we have no choice,” Na said, of the $1,300 she was set to receive. “I feel nothing. I’ve waited too long.” 

About 50 workers were waiting outside the court by 7am, each of them with a story of hardship brought on by losing their jobs in the middle of a pandemic – and many of them unable to move on without having resolved the dispute.

Na had done a few shifts guarding the factory but then went to work on a construction site alongside her husband. But after a few months earning $7.50 a day labouring, she was laid off, unable to keep up, and became the on-site cook.

“I had no choice but to go to a construction site. Factories won’t hire me because I am too old,” she said.

“Garment work is easier than construction work because factory work is regular,” she added, explaining how her job ironing at the factory came with a guaranteed $200 every month, compared to $7.50 per day labouring on a worksite.

In full: https://cambojanews.com/workers-of-two-factories-receive-compensation-after-more-than-one-year-ago/

.

Government balancing COVID-19 restrictions with lagging economic activity: Observers

Cambojanews, Dec. 3, 2020:Government balancing COVID-19 restrictions with lagging economic activity: Observers

Cambodian observers say the government’s hesitancy to shut down parts of the economy even as Cambodia deals with its first community transmission cluster bares concerns over the health of an already-struggling economy.

Government and health officials are scrambling to contact-trace, test and isolate people who are part of a new cluster of 19 reported cases, as of Thursday morning. The cases are the first community transmission incident where health officials are not sure of its origins.

Last week, the government was quick to shut down schools, entertainment facilities, and ask anyone in direct or indirect contact to stay home for 14 days. But, as with previous outbreaks, the government has shown no inclination to temporarily shutter bustling markets, construction sites, restaurants and bars, crowded factories and other offices.

Hong Vannak, a business researcher at the Royal Academy of Cambodia, said allowing these businesses to continue was indicative of the government’s concerns over a potential impact on the economy.

 In full: https://cambojanews.com/government-balancing-covid-19-restrictions-with-lagging-economic-activity-observers/

.

 

Workers hope for an end to year-long Kandal factories closure dispute

 Cambojanews, Dec. 4, 2020

More than 1,000 workers from Dignity Knitter and ECO Base Factory garment manufacturers have yet to get compensation packages nearly a year the factories’ owner first withheld their pay and subsequently shut down the factories.

.

The owner of the two factories reduced work and did not pay wages for workers last December and after three months of work suspensions starting March the facilities were shuttered permanently in June. A number of factories have suspended operations or closed down because of the COVID-19 pandemic, which has affected global supply chains.

Phin Sophea, a unionist at the Coalition of Cambodian Apparel Workers Democratic Union, who was employed at Dignity Knitter for 14 years, said Deputy Director of Kandal Provincial Court Pech Maren and Kandal Provincial Governor Kong Sophorn met with workers and factory representatives for a meeting on November 25.

Sophea said a European company was now evaluating and appraising the factories’ property, which would then be distributed between creditors and the workers.

“So, they need time to evaluate the details because if we want it faster, then we will not get enough information. So, when they sell it, we will get a cheap price,” Sophea said.

He said that proceeds from the sale would be first given to workers before being distributed to other parties. Sophea added that the case was moving slower than usual because a number of creditors had made court claims.

In full:https://cambojanews.com/workers-hope-for-an-end-to-year-long-kandal-factories-closure-dispute/

.

USTR to Assess GSP Eligibility of Beneficiary Countries

 U.S Embassy in Cambodia: USTR to Assess GSP Eligibility of Beneficiary Countries 

The Generalized System of Preferences (GSP) is a U.S. trade program designed to promote economic growth in the developing world by providing preferential duty-free entry for up to 5,000 products to designated states and territories. GSP is not a trade agreement, but rather a benefit offered to less economically developed countries, allowing these countries to increase and diversify their trade with the United States. 

The U.S. Trade Representative (USTR) has announced a new effort to ensure beneficiary countries are meeting the eligibility criteria of GSP. The process will involve an assessment by USTR and other relevant agencies of each GSP beneficiary country’s compliance with the statutory eligibility criteria. If the assessment raises concerns regarding compliance, the Administration may initiate a full country review of that country’s continued eligibility for GSP. During the assessment, there will be ample opportunities for engagement between the government of the beneficiary country and the U.S. Government. Cambodia became a GSP beneficiary in 1997 and in 2016 exported nearly $179 million duty free to the United States under the program.

To qualify for GSP benefits, a beneficiary country must meet the eligibility criteria established by Congress, including, but not limited to: enforcing arbitral awards; a beneficiary may not have nationalized, expropriated or otherwise seized property of U.S. citizens or corporations without providing, or taking steps to provide effective compensation; taking steps to afford internationally recognized worker rights; implementing commitments to eliminate the worst forms of child labor; and the extent to which a country provides adequate and effective protection of intellectual property rights (...) 

In full: https://kh.usembassy.gov/ustr-assess-gsp-eligibility-beneficiary-countries/

 

CDC:Generalized System of Preferences (GSP)

Cambodia is one of the beneficiaries of the Generalized System of Preferences (GSP) schemes operated by developed countries. Under these schemes, import tariffs on many products from the beneficiaries are exempted or reduced if requirements such as rules of origin are fulfilled. Below Table shows the relations between the beneficiaries in Asia and three major markets: Japan, the US and the EU.

Since Cambodia is categorized as a least developed country (LDC), it is entitled to additional preferences, under which more of its products are subject to duty-free or tariff reductions. For example, Japan gives Cambodia tariff preferences on imports of 3,490 articles plus an additional 2,200 articles including apparel and footwear as shown in below Table. (...)

In full: http://www.cambodiainvestment.gov.kh/why-invest-in-cambodia/investment-enviroment/generalized-system-of-preferences-gsp.html

 

European Commission: Cambodia loses duty-free access to the EU market over human rights concerns

As of today, 12 August, some of Cambodia’s typical export products such as garments, footwear and travel goods are subject to the European Union’s customs duties. The EU’s decision to partially withdraw Cambodia’s duty-free quota-free access to the EU market is now effective. The preferential treatment enjoyed by Cambodia under “Everything But Arms” (EBA) – the EU’s trade arrangement for Least Developed Countries – is now temporarily lifted due to serious and systematic concerns related to human rights ascertained in the country. The EU enforces this measure while staying open to engage with Cambodia on the necessary reforms.

 

(...)

Background

The “Everything But Arms” (EBA) arrangement is part of the EU's Generalised Scheme of Preferences (GSP). The GSP allows vulnerable developing countries to benefit from lower duties of duty-free exports to the EU, and hence stimulate their economic growth. It is a one-way arrangement: it does not require reciprocity vis-a-vis EU exports. Through the EBA arrangement, the EU grants duty-free and quota-free access to its market for all products – except arms and ammunition – from Least Developed Countries (as defined by the United Nations). Under the GSP Regulation, tariff preferences may be suspended in the case of "serious and systematic violation of principles" laid down in the international human rights and labour rights conventions listed in an annex to the GSP Regulation.

Based on serious concerns about the deterioration of political, human, land and labour rights in Cambodia, in February 2019, the Commission opened a procedure for a withdrawal of the EBA preferences granted to Cambodia. On 12 November 2019, the Commission submitted to Cambodia a report demonstrating serious and systematic violations of key principles of the International Covenant on Civil and Political Rights (ICCPR) linked to political participation, freedom of expression and freedom of association in Cambodia. At the same time, despite remaining serious concerns, the report underlined tangible progress in solving land disputes in the sugar sector and with respect to labour rights. Following a period for comments, on 12 February 2020, the Commission adopted a Delegated Regulation on a temporary and partial withdrawal of tariff preferences granted to Cambodia under the EBA. The Regulation entered into force on 25 April 2020 and takes effect as of 12 August 2020.

 

In full: https://trade.ec.europa.eu/doclib/press/index.cfm?id=2177

 

 

The GSP Program 

Congress created the U.S. GSP program in 1974, with broad bipartisan support, to expand the choices of American industry and consumers while creating economic opportunities in developing countries. The GSP program provides preferential duty-free treatment for 3,400 products from 134 designated beneficiary developing countries (BDCs) and territories. Year-to-date (YTD) Jan-Nov 2006 imports under GSP totaled $30.0 billion, which is an increase of 22.6 percent over the same period a year ago. 

 

In 1996, an additional 1,400 articles from just least developed beneficiary developing countries (LDBDCs), including Cambodia, were made eligible for duty-free treatment. There are 43 LDBDCs currently eligible.

 

The combined GSP-eligible product lists include most dutiable manufactures and semi-manufactures, and selected agricultural, fishery, and primary industrial products. Top U.S. GSP imports in YTD 2006 were petroleum, gold jewelry, aluminum alloy products, refined copper cathodes, methanol, and silver jewelry. Certain articles are prohibited by the GSP statute (19 USC Section 2463) from receiving GSP treatment, including most textiles, watches, footwear, handbags, luggage, flat goods, work gloves, and other leather apparel. Attachment A is a list of textiles and apparel articles which are eligible for GSP duty-free treatment.

 

 

A GSP-eligible import must meet the following requirements: 

• It must be included as a GSP-eligible article (designated as A, A+ or A* in the Harmonized Tariff System of the United States). 

• It must be imported into the United States directly from Cambodia, or pass through another country in a sealed container. 

• Cambodia must be eligible for GSP treatment for that article. 

• The article must be the growth, product, or manufacture of Cambodia. 

• When inputs for a product are imported from elsewhere, the sum of the cost or value of materials produced in Cambodia plus the direct costs of processing must equal at least 35 percent of the product’s appraised value when the product is sold for export into the United States. Imported materials can be counted toward the 35 percent value-added requirement only if they are “substantially transformed” into new and different constituent materials which are then used to produce or manufacture the eligible article to be exported. “Substantially transformed” means that U.S. customs would classify the constituent materials as different items. 

• The exporter/importer must request duty-free treatment under GSP by placing an “A,” “A+,” or “A* before the U.S. tariff line (HTSUS) number that identifies the imported article on form 7501.  

In full: https://ustr.gov/sites/default/files/uploads/gsp/asset_upload_file979_14815.pdf

 

More Incentives, Obligations Announced for Businesses in Cambodia in Garment Industry

 Ministry of Labour and Vocational Training issued Instruction No. 045/20 which provides additional measures to support business and employees in the garment sector. Instruction No. 045/20 puts in place the obligations that business must adhere to in order for them to suspend employment contracts.  The obligations include helping employees in applying for the government monthly allowance.

•  Companies wishing to suspend employment contracts must first submit an application to the MLVT. If approved, the suspended employees can receive monthly allowances from the government. 

 Suspension of workers' employment contract

The factories garment sectors who want to suspend employment contracts must first submit an application to the Labour Ministry. Suspension is allowed for the maximum period for two months but this can be extended further depending on the circumstances.

Employers need to provide the Cambodian ID card and phone number (or a relative’s) of the employees’ subject to contract suspension to the Labour Ministry. Employers should also take the thumbprint next to the employee details. This will allow the Labour Ministry to verify the eligible candidate for the transfer of monthly allowance subsidies.

It is important that the employer tells the employee of the above requirements because failure to obtain the correct information will result in the employer paying the monthly subsidy allowance (max of US$40).

Lastly, the employer must attach three copies of their employees’ latest payroll before the suspension, marked with the company’s stamp on all pages, in addition to the company’s certificate of incorporation, relevant licenses (such as tourism licenses), tax certificates, bank details, and their National Security Fund (NSSF) number.

The NSSF is a government body responsible for providing social security for workers in the private sector.

Once the application is submitted, the MLVT will conduct a review and a labor inspector may visit the business within two days.

How much are suspended employees entitled to?

The period of suspension must follow the dates as approved by the MLVT. The suspended employee will be entitled to the following monthly subsidies, transferred through Wing Specialized Bank:

• US$15 for 7-10 days of employment suspension;

• US$30 for 11-20 days of employment suspension; and

• US$40 for 21 days to one month of employment suspension.

The funds will be transferred 10 days after the date of suspension. The employee will receive a message on the registered phone number notifying them of the transfer which they must show, as well as their ID, to the nearest Wing Bank branch.

This must be done within the 10-day period otherwise the money will be transferred back to the government.

Suspension of NSSF payments

After the MLVT has approved the suspension of employment application, companies can then suspend their monthly NSSF payments. This is done by writing a formal letter to the NSSF; more information can be found on the MLVT website.

Special requirements for the garment industry

Garment companies who are suspending their employees must also provide allowances in the sum of the following:

• US$10 for 7-10 days of employment suspension;

• US$20 for 11-20 days of employment suspension; and

• US$30 for 21 days to one month of employment suspension.

Businesses and their employees returning to work before the end date of the contract suspension must inform the MLVT at least two working days before the start of operations.

 In full: https://www.aseanbriefing.com/news/incentives-obligations-announced-businesses-cambodia-tourism-garment-industries/

 

 

 

How Arbitration Council and Arbitration Council Foundation Response to Covid-19 Pandemic

 Nov. 14, 2020

The Arbitration Council, which was was established since 2003, has a mandate to assist parties in resolving collective labour disputes in Cambodia.  The Council has recently produced a video on "How Arbitration Council and Arbitration Council Foundation Response to Covid-19 Pandemic.

Watch the video through the YouTube link below: https://youtu.be/_jiujnsKlTI

 ""How Arbitration Council and Arbitration Council Foundation Response to Covid-19 Pandemic"

 

លោក ហេង សួរ អំពាវនាវ​ឱ្យ​អ្នកបញ្ជា​ទិញ បន្ត​ទិញ​ផលិតផល​កាត់ដេរ​ពី​កម្ពុជា

 Post Khmer, Nov. 6, 2020

Garment Workers Still Camping Outside Factory 6 Months After Closure

VOD, Oct. 28, 2020

At age 48, Morm Chanthou says garment factories won’t hire her anymore. She worked for 16 years at Dignity Knitter in Kandal province until the factory began failing to pay workers in December. It then laid off 1,000 employees.

In January, workers say they saw the company start to take equipment out of the factory despite owing the workers money. So on the 13th of that month, they started camping outside the factory all day and night on a rotation to prevent the factory owners from selling equipment, and leaving them in the lurch.

It’s been 289 days since then. Chanthou still shows up at least once a week for her shift keeping watch on the factory, which closed earlier this year without paying out its workers.

“Our age is too old and our eyes can’t see clearly enough,” she says. “So nobody wants to hire us. We are old.”

Sour Socheat, 40, faces similar difficulties. “We served in the garment sector for more than 20 years, but we’ve ended up with nothing in hand except the last hurtful memory,” Socheat says.

“I’m like a floating plant just drifting around,” she says. “I can’t go forward or backward.”

In full: https://vodenglish.news/garment-workers-still-camping-outside-factory-6-months-after-closure/ 

CARE Rapid Gender Analysis for COVID-19: Cambodia – July 2020

CARE, Aug. 4, 2020

The number of COVID-19 cases in Cambodia is quite low (141) however the impact on global supply chains and the livelihood of thousands of factory and migrant workers, who are mostly women, is immense. The loss of income could potentially push families back into poverty and the value of unpaid care work which will increase during the pandemic, is not measured in financial terms, nor seen as a valuable contribution. Additionally, the growth of women’s empowerment which is strongly linked to financial contributions to the household, will decline.

Women and girls in Cambodia face inequalities in many areas such as in employment and payment, division of domestic labour, decision making and participation. Those are likely to further increase in the course of the COVID-19 pandemic. An area of specific concern is in the education of girls and boys, from poor families, who do not have the technical infrastructure and capacity to support online home schooling.

The current health system does not have the capacity to deal with an increasing number of COVID-19 cases. Sub- national health facilities are considered low quality and previous health crisis showed that patients will directly consult provincial and national facilities which is going to exceed their capacity.

 In full: https://reliefweb.int/report/cambodia/care-rapid-gender-analysis-covid-19-cambodia-july-2020

Download report in PDF: https://reliefweb.int/sites/reliefweb.int/files/resources/CARE%20Cambodia%20Rapid%20Gender%20Analysis%20for%20COVID-19%20FINAL%20APPROVED%20July%202020.pdf