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The impact of Coronavirus on Cambodia

Sok Chan / Khmer Times Share:
Dr Ky Sereyvath, an economist and researcher and director of the China Study Centre at the Royal Academy of Cambodia. KT/Chor Sokunthea

The Kingdom’s government has predicted real economic growth to be negative 1.9 percent in 2020 because of the COVID-19 pandemic. While, the Asian Development Bank (ADB) and World Bank forecast the country’s economic growth to be -5.5 percent and -2.9 percent respectively.
Khmer Times’ reporter Sok Chan, spoke to Dr Ky Sereyvath, an economist and researcher and director of the China Study Centre at the Royal Academy of Cambodia, on what the impact of the virus to the economy will be, what Cambodia should do to restore the economy after COVID-19 and what are the areas Cambodia should improve and strengthen to sustain jobs and the economy.


KT: The health crisis caused by the COVID-19 pandemic has been ongoing for several months now. What have you observed about the impact of the virus on the Kingdom’s economy?

Sereyvath: The Kingdom’s economy has been  hit severely during March and April this year yet we thought that during that period we expected  production and consumer spending to rising dramatically as Cambodia was due to celebrate the Khmer New Year, but everything changed because of the virus. The country’s economy is upside down. The Ministry of Economy and Finance has forecast that the country’s economy growth will be -1.9 percent. But to me, it is not minus, but it is just zero.

The situation is similar to 2009 when many economists forecast the country’s economy would be down to -2 percent, but the Kingdom’s economy was +0.1 percent because the impact was less than feared. I think after COVID-19, the world’s economy will recover as the developed countries such as the US and European Union will not let their economy down when compared with China.

When they find a vaccine, both the US and other Western countries will use fiscal and monetary policies to boost the economy. Then, Cambodia’s economy will also resurrect. Thus, based on this scenario I hope that Cambodia’s economy will not decline dramatically. At present, the Chinese economy is not much affected. Now, Chinese manufacturing and industry have started production and export to 67 countries in the Belt and Road Initiative which is a good start.

 

KT: How long do you think the impact will last and when will it recover?

Sereyvath: I think in the fourth quarter of 2020, COVID-19 will hopefully end and the economy will  recover because I believe that in the next three months the vaccine will be ready following some positive signs of announcing a vaccine from many countries. The US and EU will not let this crisis get too serious.

KT: For Cambodia, if we look at the tourism and industry sectors, they are much affected. Therefore, to sustain the economy, the government has encouraged the local people to travel within the country. Have you observed this trend? Will it be offset during the health crisis?

Sereyvath: More than 100 factories have announced their suspension, with more than 100,000 workers laid off. Therefore, it lost about 16 percent of the total number of garment workers (nearly 1 million). But if we take a look at the small and medium enterprise (SME) sector, their production was stuck for only two months, and now SMEs are re-starting their operations. Therefore, local consumption has started to resume.

Local consumption is the only way to push the economy during the crisis although we do not get any inflow of foreign money, but the local income has passed from one hand to another. It is called a consumption-led economy that generates economic growth itself.

 

KT: From your point of view, the Kingdom’s economy has yet to be severely affected by the COVID-19 pandemic?

Sereyvath: I believe there is an impact, but it is small. The government has offered support with monthly cash. According to the Ministry of Labour, it has paid out-of-work monthly allowances seven times so far to workers in the garment and tourism sectors amid the pandemic, providing a total of $3.9 million to 169,161 suspended workers to help support their livelihoods during this time.

What I suggest is that we should go beyond the garment sector. We should move to technical and vocational training skills because car assembly has already begun in Cambodia. If we take this opportunity to train the workers in technical and vocational skills within three months or six months, I believe we can do as we can do the same with the mechanical and electronic techniques by inviting experts to train local workers.

 

KT: Some experts say the workers who lost their jobs in the tourism and garment sector could not be absorbed by the agriculture sector. What are your thoughts about this?

Sereyvath: Of course, agriculture will not absorb those workers because our cultivated land is full, while a lot of farmers are using machinery on their farms and young labour workers are migrating to work in neighboring countries. We acknowledge that some workers whose factory workpaces have been suspended will face a hard situation. They must find another job to support their families.

 

KT: What have you observed about the exit plan for the government during COVID-19?

Sereyvath: As far as I know the government has already prepared some measures and policy, especially, pushing domestic tourists and pushing the SMEs. It is an opportunity for SMEs. If SMEs cannot produce the products to supply the country during this time, those SMEs cannot survive anyway.

The issue of SMEs is that we cannot compete with imported products. Now, our borders with neighboring countries are closed, so why can’t the SMEs take this opportunity and make it work for them? Thus, it is the weakness of SMEs or the weakness of the SME policy to make the SMEs work or they think about their own benefits. It is role of the Ministry of Industry, Science, Technology and Innovation and Ministry of Commerce to push production.

It is an opportunity to boost the SMEs. They have the SME Bank of Cambodia to give them access to finance, but how much money goes to SMEs? There are strict requirements. SMEs are the soul of the economy in this country.

 

KT: How long do you think the Kingdom’s economy will take to recover?

Sereyvath: Cambodia’s economy is not the main economy that makes the world succeed because we depend on other countries. A small country will drive growth based on the big countries. Who are our trading partners? If our trading partners grow, we will also grow. Our trading partners are the EU, the US, China and Asean. Thus, if these countries see growth, our economy will also grow and recover.

We have many trading partners. The US and EU have yet to recover but China has recovered. We will get advantages from China. The neighboring countries are our main trading partners. Therefore, we have to have a good relationship with them. Asean must be united. If the COVID-19 era ends, the Asean member states must think about trading within Asean. Asean members are trading with the region and the world, but they do not trade among Asean members hemselves, so when there is a crisis, they will also fail.

 

KT: The government has also said that agriculture still has potential although Cambodia was hit hard by COVID-19 and other sectors were severely affected, What government intervention will work in the agriculture sector?

Sereyvath: So far I have noticed that the  government has yet to  come up with any mechanism or policy to boost agriculture. Even if the policy for agriculture should offer more subsidies from the government, this sector would not improve immediately. We have to think about the irrigation system.

Market access is still an issue. Now, the presence of COVID-19 has yet to affect the agriculture sector. It is because it is not yet the time for selling agriculture products. We are now in the cultivation season, but the harvest season is at the end of the year. If we are not affected at the end of the year, we have succeeded. By the end of this year, we must sell internally and externally.

 

KT: How are SMEs and agriculture linked with each other?

Sereyvath: SMEs and agriculture are far apart because few SMEs use agriculture products as a source to produce finished products. A lot of raw materials are imported. Therefore, both sectors are not well connected. The processing of some agriculture products – I see some products, but not  aggressively marketed because they have to compete with imported products. The perception of Khmers to purchase Khmer Products is  therefore not a selling pint. The government should raise awareness of the nationalism of its products and encourage people to trust them. The government should be strict on  standards to build trust.

 

KT: What are your recommendations after the end of COVID-19?

Sereyvath: After COVID-19, we should strengthen the SMEs. We have to strengthen intra-Asean trading. Producers should specialise in products in each country in order to trade with each other. They should have a platform to discuss which country should produce what in order not to make it overlap with the same products elsewhere. The government should promote local and regional tourism and Chinese tourism. After COVID-19 the Chinese will come, so the “China-Ready” should improve the situation.

 

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