If
Cambodia is anything to go by, physical size and a population of just
15m are immaterial when it comes to building a successful garment
industry. But as a series of strikes were brought to a close on Friday
with a rise in the minimum wage for the sector of 20 per cent, globally
recognised brands such as Levi Strauss, Gap and H&M will have to
decide whether Cambodia is likely to remain their most cost-effective
option.
The minimum wage for workers in garment factories will rise from $61
to $75 and they will get additional medical cover worth $5 from May 1.
But some union officials said the raise was not enough because an
inflation spike in 2008 had eaten into workers’ livelihoods, which had
not recovered. The strikes ended when the government intervened to force
a settlement between unions and employers, represented by the Garment
Manufacturers’ Association of Cambodia, in an industry that employs
about 350,000 people, mostly women.
According to the UN’s International Labour Organization, Cambodia has
become a favoured location for garment manufacturers exporting to the
US and European Union because of its location and reputation for compliance
with minimum labour standards. From a standing start in the early
1990s, garments now account for between 70 and 80 per cent of total
exports. But it hasn’t been all good news. When the global financial
crisis throttled demand in western markets in 2008, garment factories cut about 70,000 jobs – quite a shock for an industry that was growing at 40 per cent a year.
Exports have mostly recovered, but a reputation for compliance must
be maintained, which manufacturers discovered when the strikes broke
out. Meanwhile series of scandals has made a dent in Cambodia’s
reputation. Suppliers to retailers Wal-Mart and H&M were forced to
come to a settlement in early March this year which cost about $145,000 in back wages and severance to workers who lost their jobs when their factory closed in November.
It seems that industry workers’ demands are unlikely to stop at pay.
Better Factories Cambodia, an ILO industry monitor, observed 136
factories for six months from November 2011 and found that 19 per cent
engaged in discrimination against their workforce, only half provided
maternity cover, two thirds had a health and safety policy and 10
employed child labour. Local media reports that in 2012 a specially
state-appointed arbitration council heard 230 collective labour disputes in the industry involving almost 100,000 workers.
Despite recent unrest, manufacturers are still doing well. Exports to the EU grew nearly 70 per cent in 2011. Total garment exports were up 9 per cent in 2012 to $4.61bn, according to local media.
But in a report assessing Cambodian garment manufacturing, the ILO points to worrying weaknesses.
The industry is typically labour intensive and low-skilled and the
report states that “to date there has been little evidence that the
garment sector can provide [a] spur to higher-value forms of
manufacturing” which raises questions about sustainability, particularly
in the face of rising wages.
A withdrawal of foreign investment, most likely to other countries
with cheap labour such as China, would be highly damaging for the
Cambodian economy. Remittance payments from garment factory workers to
families in rural Cambodia sustain about 20 per cent of the population, according to a report by the Japan External Trade Organization.
Higher wages for factory workers have been welcomed by most unions –
particularly as a monthly wage of $80 roughly equates to the price of a
pair of jeans in New York or London. But the Cambodian government must
ensure that if it continues to rely on the garment industry so heavily,
it has a plan to develop it further.
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