Cambodian Prime Minister Hun Sen promised on Monday to give tax breaks to garment factories hit by supply chain disruptions from the coronavirus epidemic and higher tariffs after the European Union (EU) withdrew trade preferences over human rights.
He also pledged to give hotels and guesthouses a tax exemption for four months to help offset losses to the tourism sector caused by the new coronavirus strain that has killed more than 2,500 people, mostly in China, and spread to about 28 other countries and territories.
Travel restrictions and quarantines in China, the manufacturing engine that powers much of the world, hit movement of goods, with the lack of supplies reverberating throughout the global supply chain.
The disruption is hitting as Cambodia’s key garment industry prepares for the loss of about 20% of the trade preferences it enjoys under the “Everything But Arms” (EBA) scheme the EU offers 48 of the world’s poorest countries.
The percentage equates to about 1 billion euros ($1.1billion) of exports.
Hun Sen said in a speech on Monday that any factories that are “strongly affected” because of the coronavirus or EBA tariffs will be exempt from tax for at least six months.
He also said the government would help pay partial wages to workers if production is halted.
“When these factories suspend operations, they will pay 40 percent of the current minimum wage (to their workers), while the government will pay workers an additional 20 percent. So, in total, workers will get 60 percent of their current wage.”
Hun Sen was defiant at the loss of the trade preferences, which the EU said was the result of his government’s “serious and systematic violations” of human rights.
The Commission will replace zero duties with standard tariffs for certain garments and footwear, all travel goods and sugar. The standard tariff for clothing is 12%.
Cambodia’s total exports to the EU in 2018 reached 5.4 billion euros ($5.9 billion), more than double the 2013 level.
Hun Sen dismissed the EU’s human rights criticism and said he would not be coerced into releasing dozens of jailed opposition politicians and activists who oppose his rule, now in its fourth decade.
“Don’t try negotiate to get them released and give back 20%. There will be no release,” he said.