Cambodia Issues Additional Support for Workers and to Revive Economy

• Cambodia’s government issued its fifth stimulus package as the country continues to battle the economic impact caused by the COVID-19 pandemic.
• The latest measures enhance the incentives offered in previous stimulus packages, such as providing laid-off employees’ monthly subsidies.
• Further, businesses in the tourism industry are now exempted from paying taxes until September 2020.

On July 31, 2020, Cambodia’s government issued its fifth stimulus package as it aims to mitigate the economic impact caused by the COVID-19 pandemic.

This latest round of measures is aimed at enhancing the previous stimulus packages and supporting the country’s most important industries – garment and textiles manufacturing and tourism.

Cambodia’s apparel manufacturing sector accounts for some 80 percent of total exports and more than 16 percent of total GDP whereas the tourism industry contributes to some 12 percent of GDP. The onset of the coronavirus pandemic has caused around 200 apparel factories to suspend or shutdown their operations, impacting more than 150,000 workers, with 45,000 workers in the tourist sector unemployed as of May 2020.

Extended support for private-sector employees

Under the fifth stimulus package, the government has extended its financial support for private sector employees, in particular, those in the garment, textiles, and footwear industries.

Introduced under the previous stimulus package, companies who want to suspend employment contracts must first submit an application to the Ministry of Labor and Vocational Training (MLVT). The suspended employees are then eligible to receive monthly subsidies.

This program has now been extended through the latest economic package until September 2020.

Suspended employees are entitled to the following monthly subsidies:

• US$15 for 7-10 days of employment suspension;
• US$30 for 11-20 days of employment suspension; and
• US$40 for 21 days to one month of employment suspension.

The funds will be transferred 10 days after the date of suspension. 

Garment companies who are suspending their employees must also provide allowances in the sum of the following:

• US$10 for 7-10 days of employment suspension;
• US$20 for 11-20 days of employment suspension; and
• US$30 for 21 days to one month of employment suspension.

Suspended employees from the tourism sector will be eligible to receive US$30 until September 2020.

Enhanced support for the tourism industry

In addition to the monthly subsidies received by suspended employees, hotels, guesthouses, restaurants, and travel agents in the cities of Phnom Penh, Siem Reap, Sihanoukville, Kep, Kampot, and Bavet, will be exempted from paying tax until the end of September 2020; this incentive was originally available until July 2020.

Other measures aimed at boosting the economy

The World Bank has predicted that Cambodia’s economy will shrink between one to 2.9 percent in 2020 due to the coronavirus.

To mitigate this impact, the government has sought to ease doing business in the country through regulatory reforms.

The General Department of Customs and Excise (GDCE), for instance, will be more efficient in facilitating the import of raw materials and parts used for garment and textiles production and the government has suspended the four percent stamp duty tax on the transfer of residential properties from February 2020 to January 2021. 

Further, the Ministry of Economic and Finance has provided some US$200 million for the Credit Guarantee Fund in June 2020 to help businesses gain access to financing.

Interest rates for working capital loans have also been lowered from six to five percent and from 6.5 to 5.5 percent on loans for investment capital.

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