A Change of Guard

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Wednesday, 5 December 2012

Cambodia's cheap labour attracts interest

Wednesday, 05 December 2012
Anne Renzenbrink and Erika Mudie
Phnom Penh Post

Workers assemble garments in a factory on the outskirts of Phnom Penh. Photograph: Pha Lina/Phnom Penh Post
TK Garment Co Ltd, a leading Thai original equipment manufacturer for fashion lines in Thailand, is relocating its largest production site to Cambodia to escape high wage costs, the Bangkok Post reported yesterday.

The company’s chairman Thaveekij Jaturajaroenkhun was reported as saying that 10 other garment companies are also in the process of relocating to neighbouring countries, especially Cambodia and Vietnam.

Last month, the Thai government approved a proposal to implement a minimum wage of 300 baht (US$9.77) per day nationwide from January 1, according to the Bangkok Post.

When contacted yesterday for further information, the company declined to confirm or give further details to the Bangkok Post’s report.

Minister of Commerce Cham Prasidh said there are a lot of garment factories moving from China and other countries to Cambodia due to the rise in labour costs.

“You know why they are moving here because their labour costs are increasing,” he said.

“It is also high in Thailand and Vietnam while we are still low so that they are coming to invest here. In addition to that, if you are producing garments and textiles for export to European markets, you need to pay tax in those countries. But we don’t. When you are producing in Cambodia exports to those markets are duty free. At the same time, we also have cheap labour costs.”

According to Ken Loo, secretary general of the Garment Manufacturers Association in Cambodia (GMAC), generally there is interest in all labour intensive industries to relocate to countries that are cheaper.

“And you know, with the recent implementation of the minimum wage in Thailand of course that provides... disincentives for manufacturers to stay in Thailand and naturally they will look to more to neighbouring countries,” he said.

Jill Tucker chief technical advisor for Better Factories Cambodia, a program of the International Labour Organisation (ILO), said it is not only limited to Thailand. “Cambodia is benefiting, you could say it that way, from minimum wages rising in many countries but especially China, actually,” she said.

“So, a lot of the production from China is leaving and going to cheaper countries including Cambodia, Bangladesh, Indonesia and Vietnam.

“So we’ve seen an enormous increase in the amount of production this year. BFC have had 70 new factories register this year alone.”

She also said it is important that when the production comes here, Cambodia can still maintain standards for compliance even with all this new production.

To contact the reporters on this story: Anne Renzenbrink at anne.renzenbrink@phnompenhpost.com ; Erika Mudie at erika.mudie@phnompenhpost.com
With assistance from May KunMakara and Buth Reaksmey Kongkea

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