Cambodia facing drastic rise in poverty amid pandemic
The poverty rate in Cambodia is expected to surge as economic problems arising from a combination of factors are hitting the country hard.
Rapidly rising unemployment caused by Covid-19-related factory closures, rising personal debt of clients of the many microfinance organisations, a decline in exports not only because of the pandemic, but also the recent end of preferred tax regulations for exports to the European Union, as well as a slump in tourism caused by far-reaching travel restrictions turn out to be a toxic mix for the nation of 16.5 million people.
While Cambodia’s good economic development over the past two decades has brought a steady decline in the poverty rate, this process is now, at least temporary, reverting.
Both the Asian Development Bank (ADB) and the World Bank have warned that poverty may “significantly” increase in Cambodia as a result of the pandemic.
In 2007, almost 48 per cent of the country’s population lived under the national poverty line, which was then about $0.62 per person and day.
By 2019, that share of the population regarded as poor decreased to 12.9% measured against today’s national poverty line of $0.93 per person a day. But the coronavirus crisis is now expected to push the figure back up to about 20 per cent.
According to the ADB, the Covid-19 crisis could push an additional 1.3 million Cambodians into poverty, on top of the 2.1 million who lived below the poverty line as of 2019.
Millions facing harsh times ahead
Given that there is a large number of people who live just above the poverty line, let’s say have about a dollar or two a day at their disposal but are not considered as poor, more millions are facing a tough time ahead.
Workers in the tourism industry – which has come to an almost complete standstill – and in the garment and textile sector are particularly hit by the crisis. In the garment industry, many Western clothing brands have canceled orders or are ordering far less garment products than before and also have to spend more because the preferred tax treatment with the EU has been ceased.
Meanwhile, the Cambodian government has unveiled a $1-billion package as a response to the economic crisis. Some $300 million from that package will be used for cash transfers to the poor. According to Prime Minister Hun Sen, $28 million were already handed out to 610,000 Cambodian households in July.
However, observers say that while the government cash would cushion the immediate effects of the crisis and provide for basic goods, food and shelter, it was too little to bring live back to the economy at this point of time.
Overall, an end to the tough times is not in sight. The United Nations warned that Covid-19 threatens to destroy the livelihoods of as much as 218 million informal workers all over Southeast Asia and would push them back into poverty, reversing decades of poverty reduction in the entire region.
Slum at the outskirts of Phnom Penh © Arno Maierbrugger The poverty rate in Cambodia is expected to surge as economic problems arising from a combination of factors are hitting the country hard. Rapidly rising unemployment caused by Covid-19-related factory closures, rising personal debt of clients of the many microfinance organisations, a decline in exports not only because of the pandemic, but also the recent end of preferred tax regulations for exports to the European Union, as well as a slump in tourism caused by far-reaching travel restrictions turn out to be a toxic mix for the nation of 16.5...
The poverty rate in Cambodia is expected to surge as economic problems arising from a combination of factors are hitting the country hard.
Rapidly rising unemployment caused by Covid-19-related factory closures, rising personal debt of clients of the many microfinance organisations, a decline in exports not only because of the pandemic, but also the recent end of preferred tax regulations for exports to the European Union, as well as a slump in tourism caused by far-reaching travel restrictions turn out to be a toxic mix for the nation of 16.5 million people.
While Cambodia’s good economic development over the past two decades has brought a steady decline in the poverty rate, this process is now, at least temporary, reverting.
Both the Asian Development Bank (ADB) and the World Bank have warned that poverty may “significantly” increase in Cambodia as a result of the pandemic.
In 2007, almost 48 per cent of the country’s population lived under the national poverty line, which was then about $0.62 per person and day.
By 2019, that share of the population regarded as poor decreased to 12.9% measured against today’s national poverty line of $0.93 per person a day. But the coronavirus crisis is now expected to push the figure back up to about 20 per cent.
According to the ADB, the Covid-19 crisis could push an additional 1.3 million Cambodians into poverty, on top of the 2.1 million who lived below the poverty line as of 2019.
Millions facing harsh times ahead
Given that there is a large number of people who live just above the poverty line, let’s say have about a dollar or two a day at their disposal but are not considered as poor, more millions are facing a tough time ahead.
Workers in the tourism industry – which has come to an almost complete standstill – and in the garment and textile sector are particularly hit by the crisis. In the garment industry, many Western clothing brands have canceled orders or are ordering far less garment products than before and also have to spend more because the preferred tax treatment with the EU has been ceased.
Meanwhile, the Cambodian government has unveiled a $1-billion package as a response to the economic crisis. Some $300 million from that package will be used for cash transfers to the poor. According to Prime Minister Hun Sen, $28 million were already handed out to 610,000 Cambodian households in July.
However, observers say that while the government cash would cushion the immediate effects of the crisis and provide for basic goods, food and shelter, it was too little to bring live back to the economy at this point of time.
Overall, an end to the tough times is not in sight. The United Nations warned that Covid-19 threatens to destroy the livelihoods of as much as 218 million informal workers all over Southeast Asia and would push them back into poverty, reversing decades of poverty reduction in the entire region.
