At least 200 factories in Cambodia—most of which make garments—are likely to suffer supply chain disruptions associated with the spread of the novel coronavirus (COVID-19) in China, leaving the jobs of up to 160,000 workers at risk, a labor official said Thursday.
“According to our forecast we’ve anticipated that, in March, at least 200 factories will face raw material shortages, and the worst scenario will see 160,000 workers affected due to the COVID-19 outbreak,” Ministry of Labor spokesman Heng Sour said at a press conference in the capital Phnom Penh.
“However, we also know that factories in China are resuming their operations and the government is working its best through communication with buyers and other governments to make sure that China will prioritize supplying raw materials to Cambodia so that we will only be affected for a short period of time.”
Heng Sour said that the government is working to ensure that Cambodia “is the first country” to receive raw materials for production, particularly for its garment industry—a crucial sector that employs one million people.
To date, at least 10 factories have requested a partial suspension of operations, he said, leaving 3,000 laborers without work.
“We are cooperating with the factories to pay the workers,” Heng Sour said, adding that “Cambodia has already prepared all types of scenarios and resources to resolve impacts from COVID-19.”
Earlier this week, Cambodia’s Prime Minister Hun Sen pledged to cut taxes for up to a year for garment producers facing supply chain shortages due to travel restrictions and quarantines in China, as well as new tariffs ahead an expected of suspension of trade preferences with the European Union.
He also promised that workers will be provided with 60 percent of the current minimum wage for up to six months and vocational training in the event that production is suspended.
The EU in mid-February announced plans to suspend tariff-free access to its market under the “Everything But Arms” (EBA) scheme for around one-fifth of Cambodia’s exports, citing rollbacks on democracy and human rights—a decision that would reinstate tariffs on garments and footwear beginning Aug. 12, unless it is overturned by the bloc’s governments or its parliament.
The decision, which Hun Sen has shrugged off and called an attack on Cambodia’s sovereignty, will result in a loss of around U.S. $1.1 billion of the country’s annual U.S. $5.8 billion in exports to the bloc, some 75 percent of which are made up of clothing and textiles.
Speaking to RFA’s Khmer Service on Thursday, Cambodian Confederation of Unions President Rong Chhun questioned why Heng Sour chose not to address the impact of the EBA, saying that the loss of trade preferences combined with the effect of COVID-19 is likely to result in even greater job losses for workers.
“Cambodia is facing two issues: COVID-19 and [the partial loss of the] EBA,” he said.
“These issues will have a massive negative impact on workers’ employment.”
Rong Chhun noted that when workers lose their jobs, “others who are benefiting from workers’ employment will also lose benefits.”
Ath Thon, president of the Cambodian Labour Confederation, agreed that the impact of the EU’s decision should also be factored into any expectations for Cambodian production and how workers will be affected.
He also said he was surprised that the ministry decided to release information about potential negative impacts to the industry, when it had been silent in the past.
“This is a serious issue and it will be difficult to resolve,” he said of the partial loss of EBA status.
Observers have expressed concerns that if buyers in the EU are forced to shoulder the burden of the reinstatement of tariffs on Cambodian garment imports, they will look to other nations for cheaper products, causing a steep drop off in orders for factories in the Southeast Asian nation.
Center for Alliance of Labor and Human Rights (CENTRAL) executive director Moeun Tola told RFA reports that garment factories might be forced to shut down had been circulating well before the COVID-19 outbreak in China.
“We learned from workers … that some factories had started to reduce working hours before the outbreak, and some factories haven’t been producing anything, even though they remain open,” Moeun Tola said.
“Even if the Cambodian government had warned of factory closures recently, due to the shortage of raw materials from China, but I believe the closures are the result of government mismanagement,” he added.
“The garment sector has been operating since the 1990s, but the government missed the chance to cultivate cotton instead of relying on importing raw materials, so production takes a hit when there is a disruption in what we can bring in from China.”
Sam Rainsy, the acting president of the opposition Cambodia National Rescue Party (CNRP), placed blame for the fragility of Cambodia’s economy at the feet of Hun Sen.
“What we have noticed is that Cambodia has been facing a serious economic crisis over the past three decades,” said the CNRP chief, who has been living in self-imposed exile in France since 2015 to avoid a string of what he says are politically motivated charges and convictions.
“Cambodia’s economy is weak so the impact will be serious. But Hun Sen is weak and lacks the skills to resolve the economic issue,” he said, adding that the measures he introduced earlier this week will be “ineffective.”
Sam Rainsy suggested Cambodia’s economy was suffering from “cancer,” but what Hun Sen had offered were “headache pills, so we won’t be cured.”
“This economic crisis is the result of mismanagement,” he said. “[The country] is being led by people without vision.”
Reported by RFA’s Khmer Service. Translated by Samean Yun and Pheap Aun. Written in English by Joshua Lipes.