What sector is effected by novel Coronavirus in the world and Cambodia?

The new epidemic known as Coronavirus or Covid19 had found the first case in Wuhan, China at the end of 2019 which is defining the global health crisis worldwide. The pandemic gets attention from people, media, scientists, the international community, and non-governmental organization since there are thousands who are infected and died in a short period of time. The disease’s spreading has caused many countries to lockdown which has led to the downturn of the depth and duration that depend on many factors together with the behavior of the virus itself, public health responses, as well as economic involvements. The activities of the social and economic of many countries have frozen to contain the outbreak, closing a plenty of businesses, and billions of people worldwide are requested to stay at home for months because of the lockdown. Major sectors, including the tourism industry, energy sector, businesses closure, the airline industry, and others are badly effected and some factors are facing bankruptcy due to the pandemic (Sarukhan, 2020).

This term paper aims to study more about the impact of Covid-19 on economy. We are going to figure out broadly from global stage. Then, we narrow our concentration of Cambodia economic. We intentionally look sectors under economy, including tourism, garment factories, construction. Furthermore, paper will mention about the policies and regulations which are adopted by the Royal Government of Cambodia. Each polices will be evaluated. At the end, we provide the recommendation for recovering in the post-crisis.   

 Damaging worldwide economic sector

Covid-19 not only give a bad impact on the health sector or political but also affects extremely to the economic sector as well that can cause economic shock for this twenty-first century. From the begging of the outbreak, the supply chain in both local and international has been cut off that it is a lack of response to the country need food. The demand for medical treatment and masks as equipment to fight with this invisible enemy increase rapidly which lead to the shortage and abnormal in price.

Not only mentioning in the rising price of medical treatment but also many sectors included economic shock such as the reduction of the employer, the banned of the airline, the income from tourism had slopped down, import and export in goods and services were banned as temporary and so on. Base on the estimation has shown that most major economies will lose at least 2.4 percent of the value of their gross domestic product (GDP) over 2020 (Duffin, 2020).

Tourism Industry

First, from the observation, it causes badly damage to the tourism industry, so many sectors like airlines have been closed as temporary and the prohibited of traveler that potentially bring the virus to the country as well. From this, the revenue that earns from tourism as worldwide had dropped down that the estimated 447.4 billion U.S. dollars in 2020 - A rapidly decrease around 34.7 percentage from the last few years. On the other hand, it shows a significant change to lower than the original 2020 forecast of around 712 billion dollars.

Oil Production

During this pandemic, it is not only giving a bad impact to the tourism industry but the economy as worldwide also depends heavily on the Energy sector. Base on the member of OPEC had spoken that during the Covid-19 generally slow down the demand of oil production or the lower of energy demand as if the first six months of 2020 oil producer met and discuss the cut-off oil supply to 1.5 million barrels per day and cause to the price shock of this production cut (Segal & Gerstel, 2020).

Business Closures

Since the outbreak of Covid-19, most of the small or large business had closed as temporary till the re-announce of the government to reopen again to keep social distancing to prevent from the infected of coronavirus. Best understanding from this point is the restaurant and bars which need customers to resume their foodservice and also need one part of their income to provide to the employee as well that they cannot respond to give a huge amount of their income to employee compare to the less of customer they get during social distances. So the owner must choose between the close as temporary and the laid-off employee. For instance, from the data of year over year change in seated and dining outside in the United States had dropped to -80 percentage till May 2020 (Franck, 2020).  

Airline Industry

Moreover, in this sector, Covid-19 gives an enormous impact on the airline industry as travelers had banned from traveling abroad to obey the social distancing policy. However, some countries had reopened the gate again but still not enough to rebuild income from the slop down in the previous month. For instance, the COVID-19 affected the price of tickets which lead to airfare decrease by 35% on average price through 2021, from estimated the price of each roundtrip will be decreased by up to 65% (Karantzavelou, 2020). 

•  Los Angeles to London - $329 roundtrip
• Los Angeles to Barcelona - $303 roundtrip
• Chicago to Paris - $278 roundtrip
• Chicago to Buenos Aires - $378 roundtrip
• New York to Athens - $289 roundtrip
• New York to Bali - $313 roundtrip

Many countries even the great powers are getting impacted and also trying to ways to solve their economic crisis because of the Covid19. However, in the cause of the least developed countries (LDCs) have their limited when it comes to capacity, so they are likely to face the hardships during the economic fallout of the covid19 crisis. The World Trade Organization has mentioned that there are 87.5% of goods exported from LDCs are sold in 10 major markets which affected by the Covid19. Due to less in demand in the markets, which led to failure to achieve the target in the Sustainable Development Goal (SDG) as well as lose in export revenues of the LDCs. In the least developed countries, the export of services including the travel and tourism sector has become worst. To solve the problems, they have to keep their trade open during the pandemic for medical supplies, food, raw material, and energy supplies. Moreover, there is a fall in Foreign Direct Investment (FDI) of the LDCs, there is a suggested that the international community should work closely with the private to support the investment-related. Also, there are some supporting and helpings LDCs in the significance of Aid for Trade through supporting the competitiveness of their micro, small, and medium-sized enterprises (MSMEs). Due to the virus, even many countries are trying to solve the problems there might be increased global poverty that rising by 2% according to the initials estimates (Adhikari & Tembo, 2020).

Novel Coronavirus impacts on Cambodia's economy

During the spreading of novel coronavirus from China, Simultaneously, other parts of Asia, including South, East, South East, have bad impact from the spreading. Not only economy, but also public health, development. Moreover, European, North America, and Latin America has been hit hardly by the virus, Cambodia does not exception.

Cambodia growth has been undermined by diseases. Many sectors are expected to lose income this year including tourism, garment factories, supply and demand. Local businesses relating to tourism such as hospitality, tour guides, restaurants have been struggling since the first outbreak. Cambodia national revenue is also supposed to drop in the first half of 2020. According to the Asian Development Bank report, released in the early April reported Cambodia’s economic growth is expected to drop to 2.3% in 2020 (ADB, 2020). The report also supposed that Cambodian economy will dramatically recovered from the crisis in 2021. It is scientifically accounted 5.7% (the forecast graph has been attached below). Both of it are forecasting data from ADB. Some argued that the report is too early to conclude the growth rate in 2020. After the flowing of tourists will witness again, Cambodia economic will be respawn. On the one hand, some rebutted that Cambodian’s economy recovering bases on EU, US and especially China normalization first. Because of those are the big market, before resuming trade, we need to see those countries recover as well. 

From this part, we are going to take a look about impact in each sectors. This term paper is going to evaluate and collects the data from reliable sources in order to support the argument. The first main sector is tourism, and relating businesses, including hotels, restaurants, workers, and guides from local people, etc. Next, this term paper will look how the novel coronavirus effect factory worker. At the end, the paper will be highlight the policies, resolution from the government of Cambodia for addressing the issues. 

Cambodia tourism sector is undermined by COVID19

Since the beginning of outbreak, Chinese government has warned their citizen not to cross the border. The government also announced that the disease is transmitting. Wuhan was completely locked down due to the wide spreading. We have known that Chinese citizen has travelled a lot every year. Even South East Asia, we have witnessed that Chinese citizen has travel from one to one countries across continents. In addition, Southeast Asian region, countries are undermined in tourism because of the decreasing of Chinese tourists since the outbreak (Institute, 2020).   

Simultaneously, Cambodia has depended a lot on tourism either domestic or Chinese tour. Tourism is defined by the government of Cambodia as non-polluting industry. In 2019, according to Ministry of Tourism’s report, Cambodia earned $4.91 billion in revenue. It increased by 12.4 percent from 2018 (Times, 2020). In addition, tourism sector contributed 12.1 percent to the country’s gross domestic product (GDP). 630,000 people has been employed by this advantages (Times, 2020). A report came from Radio Free Asia stated that more than two million Chinese tourists visited Cambodia last year (Asia, 2019). The statistic shows that Cambodia has depended too much on Chinese more than others tourists to support the tourism, hospitality, local daily income, and site seeing.

The outbreak has caused declining of Chinese visiting in Cambodia. We have depended mostly on Chinese tourists. By the time, Bejing closed their border, consequently, few tourists came to visit Siem Reap, ancient civilization temple, and Sihanouk Ville, one of the coastline province. In February, according to South China Morning Post, Covid-19 epidemic caused felling more than 60% in the previous time (2019). The same source also mentioned the number of Chinese tourists dropped by 90% (SCMP,2020). It is more than a half. For Cambodia perspective, it is awful crisis, especially for local people. Cambodians who completely depend on tourism has been suspended their working. Chinese linguistic guides has worried about their daily life during this extreme circumstance. Losing tourists generally is leading to stop working. Some has postponed in order to find new job. Some relocated to other place for working. Hotels and restaurants are temporarily closed. The unemployment rate has been increasing. Because of the unpredicted ending crisis, businesses owners are not patience enough with this uncertain situation. They have been forced shutdown their businesses. Reporting from Khmer Time, 2865 tourism businesses are suspended or closed (Institute, 2020). Nagaworld, one of the most famous hotel and casinos in Phnom Penh, has been closed down. The government has ordered night entertaining place to close temporarily, including clubs, pubs, cinemas and casinos. All those businesses exist of Cambodian staff. Consequently, it has been leading to the protest from worker union. There are nearly 9,000 employees working in NagaWorld’s casino and hotel (Leakhena, 2020).

On the one hand, in Siem Reap, beside Angkor Wat, either Western or Chinese interest in museums. In the mid-march, museums has been closed (B2B, 2020). Moreover, Pub street, one of the most attracting night market and pub in Siem Reap, has been completely black out. Many businesses are running collectively by local people has been affected.

Relating to tourism, airline company has been effected by pandemic. Not only international company, but also local company has lost revenue. Banning travelling from Western, Chinese, US government to their citizen, has led those people are not able to travel. Statement released by government official stated that Cambodia International Airport dramatically absence of traveler. The flight arrival and departures are going down by more than 90 percent (Cambodianess, 2020). Even though the aviation is facing crisis, there is no sign of bankruptcy announcement from airline companies. At the same time, many International Airline firms declared their bankruptcy such as Thai Airway.

Garment factories in Cambodia

The same tourism sector, garment factories extremely affect. Closing factories due to running out of raw material to produce the product. Generally, raw material has been imported from the outside. Simultaneously, exporter has closed either border or port. Shipping has been delayed. Therefore, raw material could not import in Cambodia. The factories are running out of input. They forcibly shut down the factory. It leads to effecting workers. According to report from B2B, ministry of labor has stated that 91 garment factories have postponed. 61,500 workers has been effected by the decision of owners (B2B, 2020). Recently, one of the factory, located in Kandal province, was closed down. 700 Workers protested for demanding the measure that promise by company and government (David, 2020).

Construction in Cambodia

Construction plan has been delayed, including the project has not yet started, according to government. The Royal Government stated that they reallocated the budget for containing the virus. Accordingly, reallocating national budget leads to lack of economic development, educational development, etc. In addition, the end of the project will not be complete on time in order to reflect sustainable development. Maintaining road, building canal and schools are not expected to resume because the uncertainty situation. When the road remains incomplete, hence the flow of trade struggles. Reporting from Global Construction Review(GCR) stated that the postponement will put 10,000 workers out of work (GCR, 2020).

The Royal Government of Cambodia's policies during COVID19

Cambodia’s economic, same all the countries around the world cannot escape the effect of spread of the Coronavirus and have been effected. The impacts from the Coronavirus are not just only harmfully effected to the country itself, it also causes major problem to the residents as a whole, especially the industry workers. In this part, we will look at how Cambodian’s government reacts and response the outbreak.

As being said, a report from the Cambodian Ministry of labor shown that about around 91 garment factories have been suspended, which affecting to all the workers around 61,500 workers during the outbreak. For other factories still operate are also heavily effected, since they can’t do any trade the other countries. Because those countries had closed their border or rise their price during the pandemic. After seeing this problem on February 25 , Cambodian’s government had import a measurement the “Tax holidays” between 6 month up to a year for those factories that has been effect by the outbreak, and this tax release will be adjust to how much each factory has been damaged (MEF, 2020). From this measure, many burdens from the factories have also been released, that they can import the material that they needed for the factory operation. This measure would work fine in the short-run. But in the long-run, government will suffer a lot from this matter that they will need to spend more to support this measure in order to keep this “Tax holiday” continue. When the government spends more than revenues, it will lead to deficit for government. Imagining the crisis intentionally prolongs, the debt will increase. The royal government of Cambodia will find hardship during this pandemic.

In the same scenario, let take a look at the workers of the factories. Just as the report had shown above, around 61,500 Cambodian’s factory worker will be suffered, since their factory had been suspended in order to avoid the spread of COVID-19, they will not be able to work and earn any salary. So in the early April, the government has release another measure saying that the government will provide $30 along with $40 from their factory ($70 in total), for those who are impacted and without require for them to take the training course (B2B, Business2Business, 2020). In June 16, Ministry of Labor and Vocational Training release another measure said that they will provide $38 for those who has been suspended from work for one month, and $76 for those who has been suspended for two months. This measure is only for the worker from the eight garment factory, and only after they had finish their training course during the COIVD-19 (Ministry of Labour and Vocational Training , 2020). These two measures are also, at least, the best solution for all those factory workers that their factory has been closed in outbreak situation, providing them some salary enough to survive for a short period of time only. Because one of the reason is that their minimum wage is around $182 in Jan 2019 (Thul, 2018), but during the outbreak their wage has cut down in a huge amount, and the second is that during the price of some basic-need products also increases due to the closing of closer from the other countries. So that those workers would be short in their money and they cannot survive with that amount of wage in the long-run.

Back in February 2020, a speech from Prime Minister Hun Sen said that the government had prepared up to $2 billion to response to the economic crisis during the outbreak (Vicheika, 2020). He also added that these $2 billion is the result from the last five years that the government has been collected tax. From his speech, it has shown that Cambodia, for the best, is fully prepare for to support the economic fallout during the outbreak, and Cambodia is already doing a great job in fighting against the spread of coronavirus. But even with this amount of budget, it doesn’t help Cambodia at some level at all. Because just as mention above that the wage of each factory worker has been cut down, and not just the factory workers, the official employees wage is also reduced and there is no bonus salary like before. Also because of the government that promise to spent these billions of dollar in the outbreak, the Cambodian government also planned to cut the 2021 state spending (NVA, 2020). This will also effect to wage for all employee for the next year.

In the early April, Ministry of Economy and Finance of Cambodia has established a management team in order to monitors the price, demanding, and supplying (CDC, 2020). During this uncertainty, people have intentionally consume goods abnormally, especially basic needed product. They tend to buy more to keep for future using. Consequently, it leads to unequal distribution of product. Example, one family consume a lot of product. Leading to shortage for other group of people. In order to avoid the shortage, the ministry has monitored the trading rate of each supermarket, marts, and local markets.

On the other hand, microfinance institutions have been supported by government. Proposal from National Bank of Cambodia (NBC) suggests that all banks and microfinance institutions should decrease interest rate for customer, specifically during the crisis (CDC, 2020). From National Bank of Cambodia’s perspective, during this crisis, customer might earn less than normal. It is hard for them to reallocate their income to pay monthly debt. Furthermore, NBC has asked for exception fine payment in case late payback. People are facing hardship to pay back the loan.

Recommendation

First, resuming tourism site domestically will recover the tourist’s presence in Siem Reap, Sihanouk Ville, or any sites. The case of covid-19 mostly is importing case. The government, especially for Ministry of Tourism should operate the public restaurant, hotel, and local businesses. National tourists now have travelled. At the same time, they are also stay in touch with hygiene procedure from Ministry of Health. Opening tourism for Cambodian leads to recovering of economy. The engagement of demander and supplier in market will be recovered. The government should start from tourism, prioritize Cambodian citizen. Because during the crisis, only our people can help one another. On the one hand, ministry of health and tourism should work collectively to monitor the operation of those hotels, restaurants. Ensuring operating under the supervision of hygiene regulation by providing hand sanitizers, monitoring temperature, cleaning the room regularly.

Second, based on the current situation, Phnom Penh and any other provinces, people has worked regular. Therefore, the ministry of Education should resume educational institution partially. The government should monitor, study and ensure that area is secure enough to resuming before adopt operation. In contrast, prolonging operation until the whole country resuming causes bad consequences for kindergarten, primary school. We should admit that rural area where the internet service, television signal has not expended yet. Less student has afforded to study through E-learning. In addition, operating school has recovered the economy as well. The school canteen also a market where good is consumed from student. The supplier brings good, then student consumes good.

Third, entertaining sector should be reopened as well. Cinemas, pub, should be resumed. Those entertainment place is a platform where buyer purchases services. But, all those places must comply with ministry of health’s regulation. Health should be monitored. So, when people came to purchase foods, goods, and services, the trading is recovered either.

Fourth, the government should prolong “tax free” policy for businesses, firms, factories. This policy is able to assist the company for a while. During the crisis, company, shops, factories, has lost their monthly revenue. Hence, most of them, cannot afford to pay tax. But, the government should suggest them to reallocate the money to support their staff instead of paying tax.

Novel coronavirus not only effects the world economy but also Cambodia. The escalation of public health to economic crisis. In the quarter of 2020, world GDP has been dropping dramatically. The global supply chain has been interrupted. The interrupting has led to the losing of billion dollars in term of trading.

Cambodia has been effected of the spreading too. Tourism is depended hardly by Cambodia. Covid-19 has hit tourism sector, public health, trading, and supplying and demanding. Consequently, Cambodia as developing countries, has dropped by nearly 2 percent in 2020. Therefore, the royal government of Cambodia has supported, monitored, regulated with many aspects in order to containing and maintaining the economy.  

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Contributors

SAR Puthirith, Sophomore student. Pursuing Bachelor Degree in Department of International Studies. Institute of Foreign Languages.

THY Chandaneath, Sophomore student. Pursuing Bachelor Degree in Department of International Studies. Institute of Foreign Languages.

TOUCH Sittikun, Sophomore student. Pursuing Bachelor Degree in Department of International Studies. Institute of Foreign Languages and Department of Media and Communication(RUPP).

CHEAM Mouyvouch, Sophomore student. Pursuing Bachelor Degree in Department of International Studies. Institute of Foreign Languages and Department of Media and Communcation(RUPP).