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Coronavirus likely to result in lay-offs as China factories close

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The virus has killed more than 800 people and infected 37,198 across mainland China. Collective Union of Movement of Workers

Coronavirus likely to result in lay-offs as China factories close

The Ministry of Labour and Vocational Training has warned that some garment factories in Cambodia may be forced to shut down temporarily or lay off workers next month due to a shortage of raw materials.

As the 2019 Novel Coronavirus (2019-nCoV) continues to spread across China, many textile factories there have halted operations, disrupting the supply of raw materials to Cambodia, said ministry spokesman Heng Sour. Most Cambodian garment factories import fabric from China, he said.

Sour said some government critics might link future factory closures and lay-offs with the potential cancellation of the EU’s Everything But Arms (EBA) scheme, which is not true.

“In March, some factories might have to close or lay off employees. This is not because of the EBA issue. Garment factories in Cambodia depend on China to supply raw materials. Once they place an order, it takes these factories about 40 days to receive the fabric.

“Before Chinese New Year, a lot of fabric was imported into the country, but then factories in China closed. They remain closed to this day,” Sour said, adding that it is not known when Chinese factories will reopen for business.

To contain the virus’ spread, China has allowed major companies to close their doors since the Lunar New Year. Chinese citizens have been allowed to take indefinite leave or to work remotely from home.

The virus has killed more than 800 people and infected 37,198 others across mainland China as of press time.

Sour said about five per cent of factories in Cambodia could face fabric shortages by the second week of March and 10 per cent by the end of that month.

“Factory owners have tried to place new orders, but factories in China are not taking them due to their closure,” he said.

Critics, he said, could hijack the issue of factory closures and worker lay-offs to hurt the government. “Any closures should not be linked to the EBA issue as its caused by the shortage of raw materials,” he stressed.

The EU is set to make a decision on the EBA issue on Wednesday. The European Commission could cancel the deal entirely or partially, or it could choose not to cancel it at all.

Collective Union of Movement of Workers president Pav Sina said the government should intervene if workers are laid off.

“If factories close due to a lack of raw materials, workers will not have any source of income. Many loans must be repaid, so they could be in serious financial trouble. The government could consider providing some sort of financial aid to these workers if worse comes to worst,” he said.

Garment Manufacturers Association in Cambodia (GMAC) deputy secretary-general Kaing Monika could not be reached for comment on Sunday.

The World Bank recently said from 1998 to 2008 the Cambodian economy enjoyed an average expansion of its gross domestic product (GDP) of eight per cent due to the strong export and tourism sectors.

During that period, the Kingdom was one of the fastest-growing economies in the world. By 2019, economic growth had decelerated to seven per cent.

In 1996, Cambodia had 60 garment and footwear factories and the sector employed 80,000 workers. Today, there are 1,000 factories employing 810,000 people, said Minister of Labour and Vocational Training Ith Sam Heng.

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