Better Factories Cambodia released a report citing continued improvements in labour law compliance among hundreds of Cambodian garment factories

Outlook mixed for garment sector
Thursday, 27 August 2009 15:04 James O'toole and Nathan Green

BETTER Factories Cambodia, a division of the International Labour
Organisation (ILO), released a report Wednesday citing continued
improvements in labour law compliance among hundreds of Cambodian
garment factories, but experts fear these gains are overshadowed by
grim overall prospects for the industry.

Though acknowledging that approximately 60,000 jobs have been lost in
the Kingdom's garment sector since November of last year, the ILO
reported that 99 percent of surveyed factories paid full-time workers
at least minimum wage, and that 84 percent of factories had at least
one union. Just one underage worker was discovered among the 175
factories visited during the study, which was conducted from January
2008 to April 2009.

Questions remain, however, about how reflective the ILO figures are of
the industry as a whole. Of 280 factories covered in the study, 258
were still operating as of July, Better Factories Cambodia manager
Tuomo Poutiainen said.

In addition, any survey of the garment industry is complicated by the
fact that many Cambodian factories are not registered with the ILO and
the Garment Manufacturers Association of Cambodia (GMAC), Michael
Smiddy, a senior consultant at the Phnom Penh office of Emerging
Markets Consulting, told the Post earlier this month.

"There's a whole lot of subcontracting factories that are not members
of GMAC, and how many people they employ and how many jobs have been
lost there isn't clear," he said.

Garment factories are only required to register with the ILO and GMAC
if they export their goods, and the ILO study was limited to
registered factories. Tuomo Poutiainen guessed that there are between
70 and 100 subcontracting factories in Cambodia, but exact figures are
unclear.

"That's a problem for the Cambodian economy - that so much of the
economy is informal," Smiddy said.

Poutiainen said that this issue will need to be rectified if the
Kingdom's garment industry hopes to match the efficiency and quality
of competitors such as China and Vietnam, and urged subcontracted
factories to sign up with GMAC and the ILO.

"Sooner or later, if they are serious and if they produce quality
goods for exports, then they will join," he said.

The increased unionisation reported in the ILO study is another
controversial issue for the garment industry. Strikes in Cambodian
factories nearly doubled in the first six months of 2009 compared with
the same period last year, from 12 to 23, with 17 coming from the
garment sector, according to the Phnom Penh Municipal Police.

Roger Phan, secretary general of GMAC, said earlier this month that
industry competitor Bangladesh was outstripping Cambodia in part
because unions are weaker there and are therefore less likely to
disrupt service.

"Whether [workers] understand that or not, we are losing business on
account of that," he said.

Chan Sophal, president of the Cambodian Economic Association (CEA),
also suggested that agitation for higher wages could be
counterproductive for the industry as a whole.

"I think one of the reasons why the industry has not been very
competitive is that [consumers] care more about prices during a low-
income period.
They're not willing to pay a high price for labour-qualified
products," he said. "I think the immediate future for the garment
industry, especially this year, does not look very good."

Seventy-eight factories have closed so far this year, according to the
Free Trade Union of Workers of the Kingdom of Cambodia, and the
Ministry of Commerce has predicted that garment exports will fall by
"at least" 30 percent in 2009. Even with these challenges, however,
factories looking to cut costs would be ill-advised to reduce workers'
wages, Tuomo Poutiainen said.

"The key concern remains how competitive the industry can be in terms
of quality, price and lag times. The working conditions at the level
they are is an added value, a big one," he said.

ADDITIONAL REPORTING BY CHUN SOPHAL
.

Relevant Pages