Prime Minister Hun Sen said Monday the government will help factories pay 60 percent of workers’ minimum wage for up to six months and offer exporters tax breaks in an effort to mitigate effects of the COVID-19 outbreak and revocation of EU trade privileges.
In a five-hour long speech, Hun Sen outlined measures to “save the national economy,” saying the government will ensure workers receive 60 percent of their minimum wage for up to six months, if factories were to request work suspensions. This would reduce the impact of raw material shortages due to COVID-19, he said, and the potential effects of the “Everything But Arms” (EBA) trade privileges partial withdrawal.
Additionally, factories do not have to pay their contributions to the National Social Security Fund and some factories would receive up to 12 months of tax breaks, though he did not mention which factories.
The government and garment manufacturers have maintained that work suspensions were only linked to raw material shortages as China deals with the COVID-19 outbreak, though Monday’s announcements clearly reveal the EBA to be another concern for authorities.
Hun Sen said Cambodia would not give up its sovereignty in exchange for the EBA preferential trade scheme. Cambodia would not negotiate with the EU to ease or take back the partial suspension of the EBA privileges, he said.
“We only have to pay tax, about $100 million,” he said, referring to tariffs that will be applicable on the $1.1 billion of exports. “Therefore, there’s no reason to exchange sovereignty with that $100 million. Remember this point.”
EU Commission decided to suspend the “Everything But Arms” (EBA) trade privileges earlier this month on all travel goods and sugar exports, but imposed only a partial suspension on garment and footwear products.
The suspension would affect 20 percent of exports to the EU, an estimation of $1.1 billion of exports annually. Cambodia exported 45 percent of its products to the EU in 2018, accounting for around $5.8 billion.
For the payments to garment workers, the government would pay for 20 percent of the basic minimum wage, while factory owners will pay 40 percent of the wage. Additionally, factories will get tax breaks for six to 12 months.
On account of a sharp decrease in Chinese tourist arrivals, Hun Sen announced that hotels and guesthouses in Siem Reap will also get tax breaks to mitigate a fall in tourists on account of COVID-19.
Pon Heng, a 28-year-old local union leader working for a factory producing for H&M and Levis, said that the 60 percent of basic salary, around $120, won’t be enough for them to survive and support their families.
He said that his factory has already seen the impact of the EBA investigation process as it has already decreased its production.
“At the factory I work, I think that the main issue is not about the lack of raw materials supply, but the buyers reduce their order,” he said.
He said the union had received notice from the factory's administration that if there is a suspension in operations, the factory plans to cut the 18-day annual leaves to pay them during lay-off.
Pon Heng said if the work suspensions turned into layoffs then a lot of workers would be unable to find other work.
“They are around 40 or 50 years old. If they do not have a job at the factory, I am afraid other places won’t take them,” he said.
VOA Khmer could not reach Ken Loo and Kaing Monika, spokespersons for the Garment Manufacturers Association in Cambodia, also known as GMAC.
Prime Minister Hun Sen also stressed that in order for workers to be paid, they must attend training courses in vocational skills and soft-skill under the arrangement of the Ministry of Labor.
Sam Heang has been working in the garment industry for over 20 years. The 51-year-old mother of four children said apart from her two children also worked as a vendor and security guard, respectively, at the same factory.
A factory closure, she said, would deal her family a big economic blow, which she doubts can be reduced by vocational training.
“I am concerned that I don’t know what to do next,” she said. “I am already getting old. I don’t know what other skills I should learn.”