‘Winter’ for factories, not optimistic situation of Cambodian employee

Recently, the Cambodian Ministry of Labor said that due to a shortage of materials, some garment factories in Cambodia may be forced to temporarily close or dismiss workers next month. The cause of the shortage of materials is caused by the Novel Coronavirus pneumonia.

As the Novel Coronavirus pneumonia continues to spread, many local textile factories in China have suspended, leading to the disruption of Cambodia's material supply. Previously, most garment factories in Cambodia imported fabrics from China.

As it is unclear when Chinese factories will restart operations, by the second week of March, 5% of Cambodia's factories may face a shortage of fabrics. By the end of the month, the data will be expanded to 10%, so some factories may have to close or dismiss employees.

Cambodia has been loved by investors for its cheap and sufficient labor force, coupled with loose policies and preferential tariff treatment, which attracted a large number of foreign capital to set up factories in Cambodia, which not only boosted the local economic development, but also solved a large number of employment needs for Cambodia. Therefore, Cambodia is very friendly to foreign investment and encourages everyone to come and invest in the industry.

In recent years, with the changes in the global situation, Cambodia's advantages in investing and setting up factories have weakened, and the working environment for workers has suffered several times.

In the term of domestic reasons, the increase in factory operating costs, the decrease in investment, and the closure of the factory have led to a large number of workers losing their jobs.

Cambodian workers are not very efficient, only about 60% of the Chinese labor force. In recent years, Cambodian workers have continuously demanded higher wages, and salaries they get  have been far higher than other Southeast Asian countries, increasing business operating costs. Secondly, Cambodia's industry is lagging behind. It is difficult to supply materials normally, and it only rely on imports. Freight and tariffs are also a large expense. In addition, the local infrastructural facilities are poor, the power supply is insufficient, the electricity costs are extremely high, and power outages often occur, which increases the production costs of enterprises.

In addition, Cambodia's social environment also has a certain impact on investment and construction of factories. Although Cambodia is relatively friendly to the Chinese, the local justice is not sound enough, it is difficult to resolve the accident, corruption is severe, and the hidden cost of building a factory has increased.The disappearance of the advantage of cheap labor and the increase in business operating costs have greatly reduced the attractiveness of factories in Cambodia. Many small and medium-sized enterprises have also closed down, resulting in a large number of workers losing their jobs.

Changes to the Labor Law will affect workers' benefits

Earlier this year, the Cambodian Ministry of Labor has planned to amend some provisions of the Labor Law, stipulating that workers who work night shifts are paid the same as during the day, and will not be compensated when public holidays overlap with Sundays.

Although the Ministry of Labor is responding to the needs of economic development and improving the competitiveness of factories, this move has still caused dissatisfaction among workers and unions, and workers' welfare has been affected to some extent.

From external reasons, EBA tax-free preferential treatment will affect the livelihoods of hundreds of thousands of Cambodian workers

European Parliament start the "Everything but Arms" (EBA) duty-free review proceedings to Cambodia to decide whether to withdraw the preferential treatment. At present, the investigation for nearly one year has ended, and the audit results will be officially announced in the near future.

The EU is the second largest trading partner of Cambodia. If the EU withdraws Cambodia ’s EBA tariff preferential treatment, Cambodia ’s exports to the EU will pay an additional $ 1 billion in tariffs each year, and Cambodia ’s exports to the EU will be reduced by $ 514-653 million. Especially the footwear industry and the garment industry.

As the increasing cost of exports, the decreasing benefits of building factories, and the capital transfer to foreign countries, the direct consequence is that the livelihoods of hundreds of thousands of Cambodians will be affected, and the employment growth of workers will be even more severe.

The Novel Coronavirus pneumonia has caused a disruption in the supply of materials, Cambodia's factory operations have become even worse, and the employment environment of workers has been hit again, which is a great challenge for Cambodia, which has a weak economic foundation.