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Asia Sourcing Southeast Asia Dec 2016

Cambodia

Gdp projected to grow by 7.0% in 2016
In World Bank’s Cambodia Economic Update released in October, the country’s economy is estimated to grow by 7.0% in 2016, bolstered by robust growth in garment exports and a strong construction sector. According to World Bank’s projection, the country is projected to sustain its high growth trajectory and see its economy expand by 6.9% in both 2017 and 2018.

Despite the favourable outlook, the report points out several risk factors that should be paid attention to, which include potential uncertainty related to the communal election in 2017 and general election in 2018, a sharp decline in the construction and real estate sector, fallout from the US interest rate hike, regional tensions and slower global growth.

Meanwhile, the report warns that the garment industry, which Cambodia’s economy is heavily dependent on, faces increasing competition from Vietnam, which has developed upstream in the sector, and Myanmar, which sees an influx of foreign investment. The Cambodian garment industry is advised to improve its competitiveness by promoting participation of locally-owned small and medium-sized enterprises, address key constraints such as high energy and transportation costs and infrastructure bottlenecks, and boost high value-added production.

A new universal minimum wage law in the pipeline
The Ministry of Labour met with labour unions in mid-December to discuss a new minimum wage law currently being drafted, which extends to cover all other sectors beyond the garment and footwear sector. Unions were requesting that the ministry reexamine provisions in the current draft law related to regional differences in minimum wage levels and hefty fines for organizing protests against the minimum wage once it is determined.

Prior to the meeting, concerns were mounting that Article 25 and 26 of the draft law would violate workers’ rights to free assembly and expression. Under these two articles, ‘creating obstacles or putting illegal pressure on discussions to determine the minimum wage’ could see offenders slapped with a five-million-riel (US$1,250) fine, while anyone who ‘incites activities against the declaration of the minimum wage’ would be subject to a ten-million-riel (US$2,500) fine. The draft law, however, does not define ‘obstacles’ or ‘illegal pressure’.

The Ministry of Labour pledged to review the unions’ suggestions with relevant experts after the meeting.

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Content provided by Fung Business Intelligence
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