Gov’t Proposes Workers’ Safety-Net Fund

The Ministry of Labor and Social Affairs is proposing a social security system that would provide retirement benefits and compensation for on-the-job injuries to workers in the private sector.

But experts call the move, modeled after similar programs in developed countries, too ambitious for Cambodia, given its fragile economic foundation and fledgling democracy. Some are skeptical a social-security fund could be managed properly.

Oum Mean, director-general for labor and vocational training, said last week that the proposal is a necessary step to develop an internationally recognized welfare system.

“We, the Cambodian gov­ern­ment, are making rules of international standards in all fields,” said Oum Mean. “We’re pro­posing the social security system in order to protect more labor­ers and give workers more benefits.”

The government already has a pension system in place for public employees, under which civil servants receive retirement benefits of up to 70 percent of their average salary if they have worked for the government at least 20 years.

“But workers in the private sector have had nothing,” said a social security department official who asked not to be named. “They work, work, work without a future. We should set up the safety system for them.”

A draft law calls for the government to set up a social security fund under the management of an autonomous public entity.

The program would be mandatory for businesses, but voluntary for the self-employed such as farmers and street vendors.

Workers and employers would be required to split the cost of a monthly premium totaling about 10 percent of one’s salary. The premium would go into a retirement fund that could be tapped beginning at age 55.

To receive a maximum benefit of 30 percent of one’s average salary—but not less than 60 percent of the legal minimum wage

—the worker would need to pay the premium for 20 years, including at least 60 months in the last 10 years before retirement.

Should the retiree die, the surviving spouse would re­ceive 50 percent of the retirement benefit, according to the proposal.

If workers registered in the fund change their jobs, they are entitled to receive the benefit as long as they meet the 60-month requirement, officials said.

Under the proposal, the fund also would cover a portion of the medical costs for workers injured on the job. The 1997 labor law already requires employers to be liable for labor accidents. Under the new plan, all employers would pay a monthly premium into a fund. The premium would be determined by the danger level of the job.

Labor officials say the new system should help resolve labor accident disputes between workers and employers.

The Labor Ministry has forwarded the draft social-security law to the legislation committee under the Council of Ministers. The draft has been discussed at inter-ministerial meetings, officials said.

Sum Manit, secretary of state for the Council of Ministers, said the government acknowledges the importance of creating such a safety net. “There would be no stability for the private sector if we don’t have the social security system for them,” he said.

Sorn Sokha, vice president for the Phnom Penh Chamber of Commerce and vice president of Sokimex, also sees the plan as positive.

“After the government opened the door to the free market, everybody started having more and more and people now have enough money to eat. It’s time to start planning the future,” he said. “The social security system would benefit for both workers and employers…It would lead to long-term employment that would also benefit investors.”

But others are skeptical it can actually work as well as the government hopes.

Roger Tan, secretary-general for the Garment Manufacturers Association, said that the system might slow down economic activity. “From a business perspective, the government must be careful to keep the cost of operations competitive in the region,” he said. “Otherwise, no investors would be attracted to Cambodia.”

Workers’ rights advocates and experts say Cambodia simply is not ready to implement the plan, citing the country’s fledgling democracy and economy. None of the advocates are aware of a similar plan in a country as undeveloped as Cambodia.

“It’s not too early to think such a plan, but it’s going to be a very tough order,” said Kao Kim Hourn, executive director for the Cambodian Institute for Coopera­tion and Peace. “The greatest challenge would be how to ensure that the benefits would get back to the private sector.”

Chea Vannath, president of the Center for Social Development, also said that it’s too early. “It’s a very ambitious plan because Cambodia is not in the stage to have such a system yet,” she said. “Look at cyclo drivers and street vendors. Do you think they are able to sustain their lives and pay money for the fund?”

Chea Vichea, president for the Free Trade Union of Workers of the Kingdom of Cambodia, maintained that workers should not have to share the premium cost equally with employers. “In Cambodia the salary is still low, and employers make good profits using cheap labor,” he said. “Employers should pay a majority share of the premium. Or, workers would not support the system at this point because they simply cannot afford to pay the monthly premium with the difficult economic situation.”

Janet King of the University of San Francisco’s Cambodia Law and Democracy Project also said she believes the premium contribution is too much for employees and that the retirement benefit too small.

“The government should rethink it,” said King. “It is very difficult to amend a law once it becomes a law.”

 

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