Weekly news round-up / Week 40

Political (Cambodia-Specific)

After a divisive consultation process, Cambodia’s garments unions have agreed to submit their minimum wage proposal at $168 – ten dollars more than the $158 that the majority voted for last week. Fourteen of fifteen unions approved this proposal, up from 9 who voted for $158 last week.
There remains a long negotiation process ahead, with Ken Loo, spokesman for the Garment Manufacturers Association in Cambodia (GMAC), calling the demand ‘not workable’ and pointed to criteria such as productivity to suggest that the minimum wage was already too high.
Despite the distance between unions’ and employers’ perspectives, Labour Ministry spokesman Heng Sour told reporters that the negotiations were developing positively because all parties were “mature and respected each other”. There is a general view that the process is going smoother than in previous years where negotiations ultimately broke down and there were mass street protests. A final number should be settled before the Pchum Ben holidays begin on October 11.

Europe, European Businesses, EuroCham Members

Acleda Bank, a EuroCham member and Cambodia’s largest bank, has signed a Memorandum of Understanding (MoU) with KEB Hana Bank,
the largest in South Korea, to establish a framework for cooperation across a range of banking services. The MoU is designed to make it
easier for companies that import Korean goods to settle their invoices and for migrant Cambodian workers to send money home to their
In Channy, president and group managing director of Acleda Bank, commented that “As a result of this cooperation, it will be easier for both
workers and companies in both countries … there are many Korean companies operating in Cambodia, and the MoU helps push
transactions quicker. It helps improve both countries’ economies because banking is a backbone of the national economy.”

Infrastructure, Development and Core Industries 

As part of ongoing efforts to increase the ease of doing business within the Cambodian agricultural sector, the ministry of Agriculture plans to establish five regional food safety inspection offices near the country’s borders to facilitate the flow of cross-border agricultural trade. New regional offices, proposed to be located in Battambang, SvayRieng, Kampong Cham, Mondulkiri and Preah Sihanouk provinces, would include laboratories, fumigation equipment and quarantine facilities so as to be able to inspect export shipments and issue phyto-sanitary certificates on-site. Currently the process takes longer as exporters of food and agricultural products are required to send samples of their consignments to designated laboratories in Phnom Penh for inspection and certification.

An aviation audit originally scheduled to be conducted by the International Civil Aviation Organization (ICAO) in November 2015 has been postponed until June 2016 to give Cambodias’s State Secretariat of Civil Aviation (SSCA) more time to prepare.
Having scored poorly in the last audit in 2007, it is important that Cambodia records a better score this time round to avoid being blacklisted by the aviation body and suffer a decrease in confidence amongst potential tourists.
Tourism figures have grown from 2m in 2007 to 4.5m  in 2014. Last year, the authority issued airline operation certificates (AOCs) to three Chinese-backed airlines – Bassaka Air, Cambodia Bayon Airlines and Apsara Air – prompting concerns that airlines were seeking to base operations in Cambodia because of its lax regulatory standards.
An SSCA spokesperson stated that “The SSCA has strengthened standards and regulations more than before, as well as human resources,” he said. “We are confident that we will not be blacklisted, and that our score will be better than in 2007.”

A study released by the Arbitration Council Foundation, an independent labour mediator, has identified a number of factors contributing to rising numbers of strikes. Incidents of striking in the disputes the council mediated rose from 17 in 2012 to 94 in 2014. Compensation issues were the biggest single factor, causing 37% of strikes, though issues relating to employee discipline and occupational health and safety also feature prominently.
According to the report, the lack of a separate labour court to handle cases involving a wide range of demands limits the utility of Collective Bargain Agreements (CBAs). Employers would point to the proliferation of multiple unions as another reason that CBAs can’t be used, though the report points out that this proliferation is in part due to employers’ attempts to co-opt the union movement through ‘yellow’ pro-employer associations.
Strikes are used as a negotiating tactic rather than a last resort, whilst employers’ tendency to reimburse striking workers’ salaries is often used as a ‘consolation prize’ to see employees return to work without realizing more substantive reforms.

The National Bank of Cambodia (NBC)  has announced that government policies and action plans over the coming years will incorporate the long-term goal of increasing the use of Cambodian riel so as to give the NBC more control over fiscal policy within Cambodia’s currently highly dollarized economy.
According to figures released on Tuesday 29th September by the NBC, dollarisation has increased substantially from 36 per cent in 1993 to more than 80 per cent in 2013. This leaves the central bank with no room to initiate currency devaluations, a tactic often used by economies to make their exports more attractive.
However, a leading economist from the Asian Development Bank has warned against implementing such measures too quickly. Investors prefer to invest in dollars as they are internationally recognized and easily convertible. “Therefore, imposing the use of riel before it is convertible and confidence in it is higher will negatively affect investor sentiment,”
Recent global economic conditions have caused the Malaysian ringgit, Thai baht and Vietnamese dong to depreciate substantially, whereas the Cambodian riel – which is strongly pegged to the dollar – has remained relatively stable. However, an appreciating US dollar has hurt Cambodian exports.
In the near future the move is likely to be encouraged across the domestic economy – import-export companies would not be immediately required to switch currency.

Phnom Penh post piece profiling the efforts of the Kampot Pepper Promotion Association (KPPA) to ensure that the Kampot geographical indicator (GI) is recognized as a premium brand through quality control. During the 2015 season around 60 tonnes were produced, 58 of which made it to market.
Kampot pepper’s GI status, gained in 2010, is certification through French certification body Ecocert which verifies that the final product originates from the defined geographical area in southern Cambodia and is produced without chemical fertiliser using traditional pesticide-free growing methods. Studies show the certification resonates with health-conscious Western consumers, and fetches higher prices in international markets – one seller reported its average price to have risen from $5 per kilo in 2010 to $18 per kilo in 2014.

A joint statement from the Labor and Justice ministries released on 14th September and obtained on Wednesday 30th September has vowed to increase five-fold the daily fines levied against companies who violate the Labor Law. The increase in the daily fine from 8,000 riel ($2) to 40,000 ($10) is designed to put more pressure on employers to implement the law.
Human Rights Watch have criticized the current level of oversight within Cambodian industry, particularly garments, citing government figures suggesting that only ten factories were penalized between 2009 and 2013. A Labor ministry spokesperson revealed that his Ministry has conducted 7000 inspections so far this year and fined 30 companied for a total of 100 violations.


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