Slow economic recovery expected from 2010
Wednesday, January 20, 2010 8:50Charya, 21 years old, in a light blue dress and with her face carefully made up, presses the palms of her hands together in the graceful, prayer-like sampeah gesture to greet the customer entering the beer garden where she works, then leads him to a table.
Charya has been a client-greeter for just one month. She used to be a worker in a garment factory, but in January 2009 the factory told her it could not extend her contract because there was no more work for her and her friends.
“When my second term of contract ended, Mekar [the supervisor] told me the factory could not give me any job,”
Charya said. “I was worried about my income. I had a very difficult time finding a job.” Within a month, though, Charya found a job as a waitress at a restaurant in Phnom Penh. But in the restaurant her wage is only $35 a month, half what she was paid as a garment worker.
Another garment worker who was laid off from her job is Sok Sopheap, a widow and the mother of a child. Sopheap found a new job at a different garment factory.
But her new wage is much lower than what her old factory paid her. The new factory pays her a fixed wage of $50 a month and no overtime; her previous wage was between $70 and $100 per month.
“Now, I have difficulty supporting my family,” Sopheap says. “But this work is better than nothing.”
Charya and Sopheap are two among tens of thousands of workers who lost their jobs when Cambodia was hit by the global economic crisis that began in 2008. Now some of those workers have found new jobs in the service, garment or construction sectors, but others have gone back home to the countryside to work in agriculture.
Recently the World Bank in Cambodia released its half-year update on the country’s economy. The report forecasts that Cambodia’s economy is likely contracted by 2.2 percent in 2009. Garment exports declined by 26 percent in the first six months of 2009 from a year earlier, tourism arrivals also declined, and there was a 25 percent drop in construction project approvals.
In contrast with these three sectors, the report spotlights an improvement in paddy rice production during 2009. And it looks forward to signs of recovery in 2010, with 4 percent growth expected. Key sectors such as construction will bottom out because of new capital inflows; hotel bookings are also expected to improve.
There are, however, signs of corporate stress. Access to finance – from domestic banks or foreign investment – remains subdued. New firm registration has plummeted 40 percent from a year earlier in the first six months of 2009, and 18 percent of garment factories open at the beginning of the year have closed, with a number of others facing severe liquidity problems. Household debt has also increased under the pressure of higher prices in 2008 and lower incomes in 2009.
Such corporate and household vulnerability will weaken the pace of recovery, the report says.
In response to the global economic crisis, the Government of Cambodia is undertaking various policy reforms, including fiscal measures. Externally, a number of trade and investment treaties have been signed, including through ASEAN. Cambodia now enjoys preferential access to “everything but arms” with member countries of the European Union. Internally, a National Arbitration Center will soon be established, and trade facilitation reforms and investment promotion efforts are ongoing.
(Source: The World Bank Newsletter, October-November 2009)
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