Social protection refers to the set of policies and programmes designed to alleviate poverty and vulnerability in society, strengthen risk resilience and promote an efficient labour market. While their use is often marked with economic debate, their importance for the protection of those most vulnerable in society is well established.
In the Cambodian context, the National Social Protection Framework 2016-2025 outlines the Kingdom’s current social protection mechanisms already in place and under progress, social assistance and social security. Social assistance concerns mechanisms that deal with emergency response, human capital development, vocational training and social welfare of vulnerable people. Social security is centred on pension, health insurance, employment injury scheme, unemployment and disabilities. Belonging to the latter, the largest social protection programme in Cambodia is the Health Equity Fund, according to the social protection review of Cambodia.
Recently, the rapid emergence of the COVID-19 pandemic has affected the social and economic fabrics of countries around the world. This has catalyzed a global response of social protection mechanisms in order to protect at-risk citizens and included policies such as the provision of financial aid in the US, unemployment handouts in Thailand, cash transfers in Hong Kong, emergency payment in South Korea and the provision of rice ATMs in Vietnam.
In line with the global pattern, Cambodia has also suffered from the impact of the pandemic. Tourism, garment manufacturing, real estate and education, among others, have all faced significant hardship. On a micro level, local businesses and enterprises are struggling. For instance, 113 private schools are facing the state of bankruptcy. According to the Asian Development Bank (ADB), the overall effects will cost $283 million to $711 million depending on the maturity of the outbreak. Based on an International Monetary Fund (IMF) projection, the national economy in 2020 is estimated to contract by minus 1.7 percent for the first time since the war ended, while the global economy will contract by minus 3 percent. Of course, the vicious circle in the economy is also obviously emerging.
One of the most challenging issues is unemployment. The outbreak has seen a considerable dent in the global supply chain and resulted in many factories in Cambodia suspending their activities. This has, consequently, placed thousands of Cambodian factory workers out of work. As in a speech of the Ministry of Labour’s spokesperson, “at least 200 factories will face raw material shortages and the worst scenario will see 160,000 factory workers affected because of the COVID-19 outbreak”.
In addition, the employment of workers in the entertainment industry is also facing uncertainty on account of the closure of businesses such as beer gardens, KTVs, pubs, clubs, and cinemas to contain the spread of Coronavirus in the Kingdom. This has been compounded by a disruption to the tourism sector with the majority of international air, land and sea travel on hold. Furthering the pressures on national income is the return to Cambodia of nearly 7,000 migrant workers, primarily from Thailand, who have now lost their work and income. Compounding the loss of income is the increase in consumer prices for staple foods, beverages, protective masks and alcohol sanitisers that has arisen through a combination of supply chain disruption and unscrupulous retailers seeking to take advantage of the situation by raising the price of protective equipment.
According to a study by the Robert Wood Johnson Foundation, which is a philanthropic healthcare organisation, low-income groups are more susceptible to chronic disease as a result of their limited healthcare knowledge and repeated behaviours that shape poor health outcomes. In the case of COVID-19, the disease is up to 10 times as deadly for those in a lower-income bracket.
In response to the economic impacts of the pandemic, the Cambodian government has begun to implement some social protection mechanisms of its own. Suspended factory workers are pledged to be subsidised 20 percent of their minimum wage, while factories are obliged to pay 60 percent of that. However, the policy was changed to the provision of a $70 allowance, where $30 is from the factory employer and $40 is from the government. The Ministry of Tourism decided that employees whose jobs are suspended in hotels, guest houses, restaurants and the tourism agents sector, will be provided $40 per month for two months. And businesses relating to hotels and guesthouses were given a tax exemption for four months, from February to May. For the pandemic-affected enterprises for instance in manufacturing, agriculture, property and tourism industries, the government has issued the regulation to support through tax breaks and a tax holiday since February. On April 23, the Ministry of Labour and Vocational Training agreed to suspend social security payments from all educational institutions nationwide for six months from April to September 2020.
While these policies mark steps in the right direction, it is clear that the hardship faced during this crisis will extend far beyond the confines of contagion. Given the experience from other global social protection mechanisms and the theorised impact of COVID-19 moving forward, Cambodia should prioritise the design, review, and implementation of a robust social protection system. Primarily, the Kingdom should prioritise the following mechanisms.
First is conditional unemployment cash transfers to protect unemployed workers. Through financial assistance, this mechanism could effectively reduce the magnified effects of the vicious cycles in their livelihoods and, in the same token, it counterbalances the demand for goods and services.
However, the scheme is not a free lunch: Beneficiaries have to be conditionalised contingently to skill training or community projects designed by the government by, for example, their contribution toward social works for their community such as road restoration, public infrastructure and irrigation system construction, community cleaning, or self-quarantine if required. According to an ADB report, cash transfer is not sufficient in the long term. However, with conditionality, beneficiaries will commit to empower themselves out of poverty. At least 84 countries are already implementing the cash transfer. For instance, in Malaysia the government has handed out $135 per month for six months, conditionally eligible for those without pay leave from March 1. However, how a developing country such as Cambodia could mobilise financial resources to cover the cost of the mechanism is a question. In this regard, some international institutions prepared budgets to support developing countries dealing with the issue. As evidence, the ADB has announced a package of $6.5 billion to support developing countries in Asia. The World Bank announced support up to $12 million for the country’s response to COVID- 19. The IMF is also providing huge disbursements with zero interest rates under its Rapid Credit Facility (RCF) to low-income countries with limited conditionality to address the pandemic. The second priority is to support the sustainability of enterprises by reducing operational costs during the pandemic. One part of this mechanism is the provisions of tax breaks and social security payment exemptions for all affected enterprises in exchange for employment.
Owing to the fact that pandemic-infected enterprises are losing income, facing bankruptcy and intending to reduce employees, this mechanism is the incentive for those enterprises – ie garment factories, hotels and guest houses, restaurants and more – to retain their employees during the crisis.
VORN Searivoth is a junior research fellow at the independent, Cambodia-based think tank, Future Forum.
- Tags: COVID-19