Cambodia

UN Cambodia framework for the immediate socio-economic response to COVID-19

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Executive Summary

Cambodia’s control over the spread of COVID-19 and prevention to date of community transmission has been a remarkable success. Given the ongoing risks, these efforts will need to be sustained over at least the short term. At the same time, despite its achievement, Cambodia is not immune to the ways that the virus has ravaged the global economy. The country’s heavy reliance on a few sectors, including those tied to trade, such as the garments industry, means gross domestic product will contract.

The UN estimates economic growth will contract from 7.1% to -4.1%, poverty will nearly double to 17.6% and unemployment rise to 4.8%1. The effects will spill outwards through lost jobs and lower income, hitting the most marginalized people first and worst, although also reaching even populations not traditionally regarded as vulnerable. Mounting fiscal pressures could erode essential services and protections for poor communities, children and the elderly, and returning migrants, among others at risk of being left out and left behind.

An estimated 130,000 garment workers have already lost their jobs. School closures since March 2020 have disrupted learning for 3.2 million students. From May to July, social protection was extended to more than 133,000 new households through IDPoor, Cambodia’s poverty listing system. But a rapid assessment of IDPoor households indicates that 72.4 per cent had experienced income loss from COVID-19. Many households had already applied negative coping strategies, such as taking loans and selling assets.

Women are among those most affected, as many work in more vulnerable employment, perform a disproportionate share of unpaid care work, and may face increased risks of gender-based violence during lockdowns. Women own 60 per cent of medium, small and microenterprises, yet many are not formally registered and cannot obtain government support.

The risks are dire for a country that before the COVID-19 crisis was making steady progress on a number of core development indicators. They underline the imperative to act now, with a view towards a future where Cambodia not only emerges from the crisis, but does so in a stronger, more resilient position, without leaving anyone behind. Much depends on the choices made now as Cambodia maintains vigilance in controlling the virus, but also embarks on social and economic recovery.

The Royal Government has moved quickly to put into place a set of recovery measures worth 2.3% of GDP, including $300 million invested in social protection. The Royal Government scaled up digital cash transfer payments, financed by the national budget, to all citizens under the IDPoor programme. This was the first time a social protection programme covered all citizens in poverty (as defined by IDPoor) and was achieved in a remarkably short time frame. These early successes demonstrate what can be achieved and can steer the economic recovery to a higher level of ambition.

The Ministry of Economy and Finance is developing an economic recovery strategy, which looks not only at the immediate response but also at the opportunities to address the deeper issues revealed by the pandemic, such as the need to diversify, to invest in sustainability, and to protect the most vulnerable. The choices ahead may be hard amid lost revenues and budgetary constraints, but the UN development system, offers assistance and expertise on many of the most essential issues at stake. Since the start of the crisis, the United Nations has upheld three core priorities: prevent and stop the transmission of the virus, and save lives; mitigate the socioeconomic impacts on the most vulnerable; and set the stage for an inclusive, sustainable and equitable recovery.

This iterative framework details programmes, funds and delivery deadlines for immediate measures by the end of 2020 and intermediate interventions by the end of 2021. It brings clarity and cohesion to UN efforts, headed by the UN Resident Coordinator, and improves coordination with the Government and development partners. Hand-in-hand with the Royal Government’s economic recovery strategy, the intention of this framework document is to mobilize the UN Country Team to offer full support, focusing on areas where UN agencies have a comparative advantage, and mobilizing resources where possible. The framework serves as a living document, that can be revisited periodically to take into account emerging priorities, challenges and trends.

Five pillars structure the framework. Health is the first, complementing the National COVID-19 Health Master Plan. The other pillars reflect additional social dimensions and the priorities of Cambodia’s Economic Recovery Strategy, including to extend social protection and essential services; restart the economy by stimulating jobs, industries and businesses; manage the macroeconomic response to ensure continued stability and sound policy choices; and sustain social cohesion and community resilience.

None of the pillars stand alone; together, they help support Cambodia’s hopes to recover and restart its development. Multiple UN entities will work collaboratively on each and across all five, under the leadership of national counterparts and in line with national policy frameworks. Fully aligned with longer term development objectives, most crucially to secure greater social and economic inclusion, deliver environmental sustainability and maintain momentum on the Sustainable Development Goals, the framework takes into account national objectives in the Rectangular Strategy Phase IV and the National Strategic Development Plan.

At the heart of the framework is an understanding of how different issues interconnect, and an intention to address them accordingly. Interventions aimed at health and education, for instance, will sustain and extend the human capacities required for people and the economy to once again thrive. Developing new forms of e-commerce would better harness the ambitions of a young and tech-savvy population, stimulate retail commerce and provide protection from the virus.

Making links and informed choices will be critical in helping Cambodia rise to an unprecedented policy challenge. Turning a crisis into an opportunity requires making choices based on the most accurate information and analysis, which is why the United Nations will help Cambodia invest in national systems and capacities, analytical skills, decision-making, planning, and monitoring and evaluation. In line with the Government’s vision of transforming Cambodia into a digital economy, the United Nations commits to invest with partners in accelerating the use of data analytics to monitor progress on the plan, and deepen its reach and effectiveness.

The framework operates across essential services for education, health and reproductive health care, nutrition, hygiene and so on, aiming to sustain them, improve their quality and move towards universality. It will explore expansion of social protection to the “missing middle” (the informal sector) who may face sudden impoverishment. It will aim to make social protection integral to a revised socioeconomic model that is more inclusive, resilient and environmentally sustainable.

The framework also acts across the most important sectors of the economy, from agriculture to garments, construction and tourism, and leaning towards micro, small and medium enterprises. It connects what happens on the ground in the daily economy with the decisions made at the national level to guide the macroeconomy. The United Nations will promote longer-term structural transformation towards an economy that is more diverse and equitable, and aligned with climate and environmental prerogatives. It will help restore, as far as possible, high levels of decent employment and basic levels of income. Employment measures will include the informal sector.

The framework backs steps towards an integrated financing framework. While Cambodia entered the pandemic with a strong financial position due to prudent macroeconomic management, it now confronts an expected loss of $4.7 billion in development financing in 2020 due to the pandemic. The UN will assist in devising an emergency financing framework, emphasizing human capital investment.

It will also help Cambodia move towards a more integrated and comprehensive approach to development financing, which is vital for the country to capitalize on its considerable potential for development. This could include new tools such as sovereign bonds.

The framework brings together the different people who will play critical roles in the response and recovery. It involves engaging with commune councils, civil society, community groups, the media and others to develop solutions and strengthen solidarity and social cohesion.

Above all, the framework is geared towards mitigating fallout on the most vulnerable people. Longstanding disparities, such as gaps between rural and urban areas, and wealthy and poor households, are translating into new COVID-19-related ones, such as unequal access to distance learning given its requirement for technology and connectivity. Persistent gaps in water and sanitation have become a pandemic risk factor, on top of spreading existing diseases and putting children’s health at risk. Informal sector workers, an estimated 6.1 million in total, have lost or face the loss of jobs and cannot benefit from the Government’s cash support due to their unregistered status.

Meeting human needs, from decent jobs and livelihoods to essential services and a voice in decisions, particularly among marginalized groups, is the most critical investment Cambodia can make in steering a course to recovery. This framework guides significant steps towards turning a crisis into opportunity, and making a lasting difference to people and the country as a whole.