As the temporary withdrawal of some of Cambodia’s trade benefits looms, the European Union is mobilising EUR443m (US$500m) in grants and loans to help the Southeast Asian country in its fight against the Covid-19 pandemic.

The response by Team Europe – which consists of the EU, its member states, and Switzerland – will focus on three key priorities.

These include supporting health, with contributions to expand research and testing capacities in Cambodia and strengthening the health system; supporting people, livelihoods and employment; and supporting economic recovery and job creation by strengthening key areas of the economy and involving public investments for economic development, energy efficiency and green recovery. 

The support package combines new allocations, funds already programmed, and redirected funds. It is part of the EU’s wider global response to the pandemic, which was launched in April and has so far pledged financial support of almost EUR36bn.

“The coronavirus pandemic demands cooperation and solidarity. Team Europe stands together with Cambodia in these challenging times. We have to work together to ensure a sustainable and strong economic recovery, and to help mitigate the impact of this pandemic on human lives, jobs and livelihoods. To this purpose, we combine our resources and join efforts with the Government, the people of Cambodia and civil society, in response to this global challenge,” says Carmen Moreno, the EU Ambassador to Cambodia.  

The announcement comes as a report from the World Bank earlier this month suggested the Cambodian economy could contract by nearly 3% this year as a result of Covid-19.

The Cambodian economy depends heavily on the garment industry, which accounts for at least 70% of the country’s total merchandise exports and 20% of its annual economic growth. It is also the main non-agrarian employer, with more than 900,000 garment workers in 1,500 factories.

But the country is currently set to lose its duty-free benefits on some garment and footwear products and all travel goods from 12 August. After this date, the products will incur duties at the WTO’s Most Favoured Nation (MFN) rate. 

Earlier this month, groups presenting Cambodia’s apparel and footwear manufacturers issued a fresh appeal to the European Union (EU) to postpone the planned withdrawal of the Everything But Arms (EBA) trade benefits as the country reels under the impact of the Covid-19 pandemic. 

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