This section outlines the social protection and employment situation and policies in Cambodia, summarising the findings of the social and employment analyses produced in the EU/ILO project “Improving Social Protection and Promoting Employment”.
Poverty reduction has had a positive track-record in Cambodia in recent years, thanks to the country’s vigorous economic growth and the peace and stability that have enabled socioeconomic development to take place after years of armed conflict. In 1994, after the transition to peace, 48% of the population lived below the international extreme poverty line of US$1.25, whereas by 2007 this share had dropped to 28%. Yet, income inequality has risen, and more than half of the population can be characterised as belonging to the category of the working poor. In addition, the global financial crisis has added to these social challenges: The country’s export-oriented economy has slowed down, jobs have vanished and incomes declined. Therefore, the need for effective social protection policies is acute.
The development of social provisioning in Cambodia is in its early stages. The 1993 Constitution forms the foundations of the social protection system. It guarantees the right to social security and identifies groups that require special social assistance, such as poor women and children and the disabled.
In recent years, the Royal Government has signalled a strong commitment to expanding social protection both horizontally and vertically, as portrayed in the following diagram that resumes the Government’s strategy towards comprehensive social protection. The Rectangular Strategy, which outlines the general economic policy of the country, has as one of its objectives the strengthening of social safety nets and the generation of better and more employment. The National Strategic Development Plan reiterates the important role it sees that social protection plays in tackling poverty. Also, the first National Social Protection Strategy for the Poor and Vulnerable (2011-2015) was adopted on 18 March 2011. This strategy is to guide the horizontal and vertical extension of social protection and harmonise initiatives in the coming years.
The Royal Government of Cambodia's strategy towards comprehensive social protection
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Along with the importance given to social protection in policy documents, public spending allocated to social causes has risen, reaching 3% of the GDP (in current prices riel) in 2007. The fiscal space to implement social interventions is undoubtedly, as reflected in this figure, constrained, as Cambodia is a low-income nation. Yet, development partners and NGOs have provided valuable inputs to support the Government in this respect.
Social security rights are detailed in the 2002 of the Law on Social Security Schemes, which applies to the formal sector workers subjects also of the Labour Law. The Social Security law entitles all formal workers to social provisions, such as old-age pensions and work injury benefits, provided through two different schemes – The National Social Security Fund for workers in private enterprise and the National Social Security Fund for Civil Servants.
The National Social Security Fund (NSSF) was set up in March 2008 to administer private sector workers’ social security, starting implementation with companies with eight or more workers. These benefits are currently limited to employment injury, but there are plans to introduce health insurance and old-age pensions, following legal obligations. The introduction of the pension component is planned for 2015 and that of health insurance for 2012. NSSF funding comes from employers’ contributions and the state budget. In 2010, 490 000 workers were insured by NSSF. The scheme therefore covers around 70% of all workers in enterprise with more than eight workers, or a little less than 10% of the labour force. Women in the garment industry form a large share of those insured.
Civil servants are covered by the National Social Security Fund for Civil Servants (NSSF-C) that was also established in 2008 and fully operational by May 2009. The scheme automatically covers all active civil servants, who currently number around 180 000. This is equivalent to 2% of the labour force. The personnel of the Police and Armed Forces are not covered by NSSF-C, but by the National Fund for Veterans. Civil servants receive old-age pensions (some in the form of lump-sum payments), work injury, funeral grants and paid maternity and sick leave financed from the government budget. There are plans to modify the financing structure to incorporate also workers’ contributions.
In addition to these social security schemes, the 1997 Labour Law stipulates that employers must provide and finance additional benefits to formal sector workers, for instance paid maternity leave and health care at the work place.
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A wide range of public social assistance projects and programmes, such as food distribution, school feeding, food-for-work and public cash-for-work initiatives, are implemented in Cambodia. Donors, diverse development agencies and NGOs are closely involved in the provision of such assistance. Yet, the government is taking a more marked leadership role in coordinating, operating and funding social assistance programmes so as to fill in existing gaps and address the needs of the poor more effectively.
The global financial crisis adds to the existing structural and long-term social challenges that the Royal Government is faced with. The national authorities seek to respond to this double challenge by institutional development and policies aimed at making the social protection system more sustainable, affordable and effective. The Council for Agriculture and Rural Development (CARD) coordinated the participatory process of elaborating of the National Social Protection Strategy for the Poor and Vulnerable 2011-2015, which envisions an integrated social protection system able to support the poorest, prevent impoverishment and help families to move out of poverty by building human capital and expanding opportunities. The Strategy also aims at an enhanced coordination between policies and projects and at building common targeting, monitoring, evaluation and reporting mechanisms. More and more responsibility for the administration and funding of social protection efforts will be transferred to the Royal Government and its Ministries, as well as sub-national level administration following the Government’s decentralisation policy.
Health is crucial for long-term poverty reduction and economic and social development in Cambodia, as recognised by the Royal Governments’ Health Strategic Plan 2008-2015. Health is also an area of social policy where Cambodia has experienced notable improvements in recent years. These improvements were long due, as the civil war left the nation with insufficient health-related physical infrastructure and human and financial resources and, as a result, poor health indicators.
These challenges are now being addressed and important advances have been made, especially in the area of infant and child health, one of the priority areas of the Health Strategic Plan. The traditionally extremely high infant and child mortality rates have been considerably reduced, allowing Cambodia to near the target level of Millennium Development Goal 4.
Cambodia's progress in the key health-related Millennium Development Goals
Source: The Royal Government of Cambodia and the World Bank, 2010: "Cambodia Health Public Expenditure Review 2010".
As the table above illustrates, Cambodia continues to face a range of health challenges: for instance, maternal mortality is estimated at a staggering rate of 461 deaths per 100 000 births. This and other indicators reflect gaps in health access.
According to ILO estimates, the 2010 Cambodian public health spending was around 235 million dollars. This corresponds to 2.1% of GDP. Of this total, approximately 11% was covered by the government. According to these estimates, donors cover almost 40% of public health financing needs. The following table details the origin of health financing, excluding private spending.
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Total Cambodian health expenditure, 2007-2010 (US$ million)
Note: The estimates are consistent with those e.g. by the World Bank; differences mainly due to different methodologies. For example: tangible investments into the health system, depreciations and maintenance are not included in the table above.
The absence of a nation-wide health insurance system is reflected in the high share of private and out-of-pocket health spending. The World Health Organization estimates that in 2009 private spending accounted for 78% of total health spending in the country. Most of this (93%) was paid directly out of patients’ pockets. This share is very high in comparison with other countries in the region and globally.
As health costs – transport, user fees, medicine, etc - can become prohibitively high so as to block families’ access to care or have impoverishing consequences to households, the Royal Government has launched several initiatives to lower the financial barriers to care. These schemes, the most notable of which are the Health Equity Funds and Community-Based Health Insurance, have eased the access by over 3 million people to health care.
Those identified as poor by the ID Poor system or through a poverty assessment conducted in the health facility are exempted from the user fees usually charged at health facilities. Also, the Health Equity Funds reimburse public clinics and hospitals for the income they forego by treating poor patients unable to pay fees. The Funds also reimburse transport and other costs that poor patients incur in the process of seeking medical care. The Funds are administered by NGOs under the oversight of the Ministry of Health and funded by foreign donors and the Royal Government. The Funds covered a total of around 3 million people in 2010, and 685 000 poor patients effectively accessed subsidised medical services and/or obtained reimbursement for health-related costs through them.
Another interesting Cambodian solution to the need for health insurance is voluntary and not-for-profit Community-Based Health Insurance. These insurance schemes are administered by NGOs and designed to cater to the near-poor, who can afford to pay a minimal insurance premium in exchange for a pre-defined health care benefit package. In 2009, such schemes numbered 13, covering 123 000 people.
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Between 1998 and 2007, Cambodian GDP grew at an average rate of over 9%, making it one of the fastest growing economies in the world. This growth has been based on the liberalisation of the economy and an essentially labour-based and export-led growth strategy largely driven by the garment industry.
While this strategy has produced economic growth, it has not been sufficiently effective in reducing poverty, and its long-term viability has come to be questioned amidst the global economic crisis that has revealed the vulnerability of the export-led economies. As the global economic crisis persists, Cambodian GDP growth is expected to slow down to about 6% over the next few years. This will create new employment challenges.
Annual GDP growth rates (%) in East Asia & the Pacific, low-income countries, the World and Cambodia, 1993-2010
Note: Annual percentage growth rate of Gross Domestic Product (GDP) at market prices based on constant local currency.
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The Royal Government is at a juncture where it may consider moving towards a more broad-based and employment-intensive development strategy so as to bring about labour market and domestic production structures more conducive to poverty reduction and inclusive economic development. The update of the National Strategic Development Plan views poverty reduction as requiring more emphasis on rural development, structural transformation, skills development and employment generation. The will to develop employment policies is reflected in the Royal Government’s request for ILO’s support for the development of a National Employment Strategy.
The rapid GDP growth facilitated an average yearly employment growth of 3.7% during 1998-2008. This reduced the unemployment rate to the point that in 2008 it affected merely 1.6% of the labour force. While the three times higher youth unemployment rate is clear evidence of the vulnerability of the young, vulnerability is a much more widespread phenomenon. Indeed, the majority are in the type of jobs that are most likely to be insecure, and have low earnings and low productivity. Based on the 2008 Census data, 82.5% of workers in Cambodia can be said to be in this type of vulnerable employment, working either as own-account or unpaid family workers. Women are more likely than men to be in such employment situations.
In recent years, employment has been generated in all economic sectors. The most formal jobs have been created in the garment, construction and tourism industries.
The share of industry of GDP increased from 18% to around 30% during 1998-2008, largely thanks to the generous incentives and preferential market access offered to the garment industry. Yet, industry’s share of total employment has not grown at a similar rate. Therefore, industry has not created enough jobs so as to allow workers to move from agriculture to industry, changing the basic sectoral balance of employment. The traditionally high share of agricultural employment has remained fairly constant, and the sector continues to employ around two-thirds of the labour force. The service sector employs a fifth of the workforce.
Sectoral composition of real value added (GDP) and employment in Cambodia, 1998-2008
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As mentioned, the main policy challenge is that most employment is not yet appropriately productive or sufficiently well remunerated. Most agricultural and service-sector jobs have a low productivity level, which causes workers to earn lower wages. The growth of labour productivity in these sectors has lagged behind that in the manufacturing sector, slowing down due to the crisis. Also, in regional comparison, the rate of productivity growth of Cambodian agriculture has been low.
Productivity should grow in order for wages to rise. While the average wage level has somewhat increased in recent years, there remains a sizeable population of the so-called working poor, especially in agriculture and services. Poverty incidence continues to be considerably high among domestic workers (50%), self-employed farm workers (41%) own-account workers (36%) and unpaid family workers (32%). Noticeably, especially those with less than primary education have a high probability of living under the poverty line.
The high growth rate of Cambodia could be geared towards more sustained poverty reduction through an integrated strategy focused on the generation of productive employment and the improvement of social protection. Growth has not entirely trickled down raising the incomes of the working poor and the vulnerable. Therefore, a sizeable population continues to require income support and social policy interventions to survive and guarantee a basic level of well-being. Such support is being currently extended through, for instance, social transfers and special employment schemes (e.g. public works). These schemes are often transitory, and largely donor-financed. Such programmes could be adjusted so as to seek synergies and to create a more long-term and holistic schemes with nation-wide reach. These, in combination with increasing the employment-intensity of growth, could improve the job and income entitlements of the working poor. The project aims to support this development by research and social dialogue aimed at facilitating the creation of an integrated Cambodian social protection and employment strategy.
This section is based on the findings of the following employment and social protection studies produced in the project:
- International Labour Organization, Social Security Department, (forthcoming): “Cambodia Social Protection Expenditure and Performance Review”, Geneva: ILO.
- Muqtada, M., 2011: “Cambodia: Toward a National Employment Strategy for Sustained Poverty Reduction”, Geneva: ILO.
These and other studies and documents produced in the project may be accessed here.
Further information on social protection in Cambodia available here.
Workshops organised in Cambodia in the framework of the EU/ILO project (incl. material):
- Training workshop in Phnom Penh, 2-4 November 2011
- Workshop for Review and Valuation of the Employment and Social Protection Studies in Phnom Penh, 7-8 November 2011