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Up to 17,000 garment workers in Lao PDR affected by the Covid-19 pandemic are to receive two months’ emergency income support worth LAK900,000 (US$100).

The one-time cash transfers totalling US$1.8m will help mitigate workers’ lost income and support business continuity while reducing employers’ staff turnover costs. 

The German Federal Ministry for Economic Cooperation and Development (BMZ) is funding the initiative, which has been developed with technical support from the International Labour Organization (ILO).

Eligible beneficiaries, of whom 85% are women, will receive the cash transfers by the end of March.

“This support not only benefits workers and garment factories, it also helps strengthen the administrative capacity and payment mechanism of the social security system, as well as enhancing social dialogue and tripartite collaboration in Lao PDR,” said Padeumphone Sonthany, vice minister of Labour and Social Welfare.

The Lao PDR garment sector employs some 26,000 workers. It has been hit hard by the Covid-19 pandemic with many factories scaling back production, releasing staff and in some cases closing their doors.

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By GlobalData

“We are happy that this support has been channelled to the Lao Social Security Organization (LSSO). A strong social protection system that is adaptive during a crisis and responds to chronic and emerging vulnerabilities is crucial,” said Jens Lütkenherm, German Ambassador to Lao PDR.

The Association of Lao Garment Industry (ALGI) and the Lao Federation of Trade Unions (LFT) have been involved in the scheme’s development and will support its operation. 

“The Lao garment industry has been hit hard by Covid-19. Income support will help workers survive this difficult period and businesses maintain their staff so they are in a better position to resume operations when the impact of the pandemic eases,” said Graeme Buckley, director of ILO Country Office for Thailand, Cambodia and Lao PDR.

The emergency programme will ‘piggyback’ on LSSO’s existing delivery systems, helping reduce administration costs and speed up delivery, whilst easing the financial strain on the national unemployment insurance scheme. 

New payment methods will also be piloted by LSSO, with electronic payments made via a local mobile network operator, increasing financial inclusion for garment sector workers, especially those without bank accounts.

The pandemic has greatly increased demand on Lao PDR’s unemployment insurance scheme, with the garment sector alone seeing more than a threefold increase in payments, rising from LAK406.58m in 2019 (US$44,000) to LAK1.33bn (US$143,000) during Covid-19.