PHNOM PENH - Cambodian riot police fired assault rifles and used electric batons on Tuesday to break up a protest by 1,300 workers demanding redundancy payment from a garment factory that shut down last month.

"We are just shooting into the air to scare them away," military policeman Chan Heng told Reuters at the demonstration outside the South Korean-owned Sam-Han Fabrics Co. factory on the northern outskirts of the capital.

The factory closed in January, but in an unprecedented attempt to ease tension in an industry that employs some 240,000 people, the government stepped in to lend the company $1.2 million to pay workers' final monthly wages, officials said.

But Khieu Savouth, Cambodia's chief labour dispute negotiator, said the money only covered outstanding monthly wages and not the severance payment to which some of the workers would have been entitled.

"They should go through the courts to solve this problem," he said.

With the expiry this year of preferential trade quotas for small countries such as Cambodia under the Multi-Fibre Agreement, its garment factories are coming under pressure from cut-price giants China and India.

Even though the war-scarred country has built a reputation as a relative haven of labour rights and acceptable working conditions, protests are increasingly common.

In Tuesday's clashes, which appeared to have been brewing for two days, workers threw bricks and rocks at police although no officers were wounded, witness said.

One worker injured his toe running away from a police baton charge, and another was arrested, police said.

"They should not treat us like this when we are just protesting to get the factory to pay our final wages," said 30-year-old worker Sor Samnang, rallying protesters with a loudspeaker.

The company was not available for comment.

At least 20 garment factories have closed in and around Phnom Penh in the last four months, putting several thousand women out of work, and possibly pushing them into the sex industry, the United Nations said at a recent seminar.

"This is a concern for us," Commerce Minister Cham Prasidh told Reuters. "They used to send money home to their parents. Now some of them have lost jobs. The question is where they are going?"

Cambodian officials remain optimistic that entry last year into the World Trade Organisation will lead to a long-term increase in exports, and not just in the garment sector.

The industry is the impoverished country's biggest foreign exchange earner, accounting for around 80 percent of its $1.4 billion official annual exports.