Job losses, pay cuts, force Cambodians into bad debts
The unrelenting negative economic effect of Covid-19 on businesses and banks’ stringent procedures have put Cambodians in a bind over term loans
IN THE mid-1970s, when t he cit y crashed and burned in a warped socia list uprising led by Communist Party of Kampuchea leader Pol Pot, untold fear gripped the people.
Today, a lthough less menacing, t he fear is surrea l as Covid-19 does a number on the economy.
It has resulted in thousands of documented job displacements in the garment sector, and wage cuts among white collar workers in Cambodia, a lthough this has yet to be quantified.
The situation is graver because garment workers, as past studies show, stimulate the economy in the informal sector which is made up of street food vendors, hairdressers and transport prov iders.
A rough estimate shows that each wage earner in the garment sector supports five to si x persons in the informal sector v ia loca l economic stimulation.
The government estimates t hat the temporar y loss of some 150,000 jobs in the garment sector would indirect ly affect some one million people in t he informal sector.
David Van, senior associate of Platform Impact, a public-private partnership, said: “The government’s so-ca lled Covid-19 stimulus plan is [a lso] not leading any where as small- and medium-sized enterprises are finding difficult y securing loa ns.
“If they close shop permanently, then there would be fewer jobs in t he f uture. The picture is ver y
grim.”
As i f was t hat not bad enough, nearly 90,000 Cambodian migrant workers in Thailand who flooded back home amid the crisis will likely ra ise t he unemployment rate in t he Kingdom.
All t hese could veritably point to an expected grow th in indebtednes indebtedness among Cambodians. Up to 2018, the Credit Bureau of Cambodia recorded $20.9 bil- lion in ove overa ll outstanding loan balances, r representing 3 3.3 million activ active borrowers from 157 fina financial inst it itutions.
B e s i d e s , an updated Ma May report by NGOs Lica cadho and S a h m a - k kum Teang Tnaut ( S T T ) on t he d debt crisis face faced by t he lower st rata of t he so societ y revea led that t more than 2. 2.6 million Cambod Cambodian borrowers held h more than t han $10 billion in microfina microfinance debt by the end of 2019.
The report “Driven O Out – One v illage’s experience wit h microfinance institutions institut ions (MFIs) ( M and cross-border migration” said t he amount constituted an average loa n size of $ 3,804.
This is supposedly t he highest figure in the world, and an increase on an “a lready troubling” average of $ 3,370 as of December 31, 2018.
“This debt, the majorit y of which is collatera lised by la nd t it les, continues to pose a significant t hreat to land tenure securit y for indebted families and has led to ot her serious and systematic human rights abuses across t he countr y, including debt-driven migration,” Licadho and STT said.
Based on t he report, t he situation had already seemed compounding before Covid-19. But the pandemic has sent the Cambodian economy into a ta i lspin.
The early stage impact was first apparent in the formal workforce starting in Februar y, as minimum wagers lost t heir jobs af ter hundreds of factories progressively pulled down t he shutters on fa lling orders and imports of raw materia l from China.
To date, some 150,000 garment workers have been temporarily suspended and were forced to sett le on a t hird of t heir monthly income amounting to $70.
Unofficial data states t hat only 15,000 workers have received state a llocation of $40 per person starting this month. The remaining $30 per worker is to be covered by the employers to make up the agreed flat $70 monthly wage for as long as they are temporarily unemployed.
“Of course, suspended workers have been receiv ing $ 30 from the companies based on t he implementation of t he policy [to pay sus