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Global Brands Welcome Wage Rise

May Kunmakara / Khmer Times Share:
Garment workers at a factory on the outskirts of Phnom Penh. They will see their monthy minimum wage rise to $140 in January. Anne Holmes

Major global brands that source from Cambodia welcome the recent rise in the basic minimum wage for the country’s more than 700,000 garment workers, representatives of three brands told Khmer Times yesterday. They have no plans to shift sourcing to other countries where wages are lower, they said.

“We support higher wages for garments workers and are positive to the recent raise,” Silvia Raccagni, a spokesperson for German apparel and footwear maker, told Khmer Times. “Our presence on production markets is always long-term and we will stand behind continued commitment in Cambodia,” Ms. Raccagni added.  

“Cambodia is an important production market for H&M, and we see that we can contribute to jobs and reduce the unemployment in the country,” said Ulrika Isaksson, a spokesperson for Swedish retailer. Ms. Isaksson did not reveal, however, the amount of apparel it would buy from Cambodia, saying the company does not publicly disclose this information due to competition within supply chains. “Unfortunately, we cannot specify how much we buy or will buy, from different markets due to competitive reasons,” she said. 

Their comments followed a press release from the Garment Manufacturers Association in Cambodia (GMAC) yesterday that called for buyers to “implement more sustainable purchasing practices.” “The organization has been pressing buyers to pay their suppliers more to help them absorb rising operating costs especially wages,” the press release said. 

The new minimum wage, which takes effect in January, will see garment workers receive $140 a month for 48-hour work weeks, up from the $128 now. 

GMAC has consistently warned that rising wages are making the industry here less competitive when compared to rivals in Vietnam, China, Bangladesh and the emerging garment industry in Myanmar.

Brands “Committed to Cambodia”

Global brands, however, say they remain committed to buying clothing and footwear from Cambodian factories. 

Spokespersons for US brands The Gap and Levis Strauss previously said they would work with factories here to ensure that they complied with minimum wage payments. “Levi Strauss & Co expects our vendors to meet whatever new minimum wage is established in Cambodia, along with our other business requirements.  We will work with them to ensure this can be accomplished,” a spokesman for the company said. Ms. Raccagni noted that factory compliance with social welfare was also a factor in selecting factories within Adidas’ supply chain. “The Adidas Group suppliers are selected and retained based on a range of performance factors that include productivity, social compliance, technical capability, on-time delivery, innovation, and cost,” she said. 

“Cambodia is an important sourcing country for the Adidas Group and we are committed to it,” she added.

Productivity Declining?

GMAC’s press release also said that according to the International Labor Organization, productivity has been declining at Cambodian garment factories for the last three years. That figure, however, is from a study that has yet to be completed, according to a spokesperson for the ILO’s Better Factories Cambodia project. 

“This refers to a study that is still being finalized and can thus not be shared,” Ly Sokheng, a communications assistant with BFC said. When asked, “Does this mean the figure is not final?” Mr. Sokheng replied, “Yes.” 

Following wage increases in 2014, GMAC also cited ILO economists as saying that global brands should pay around 3 percent more for the garments and footwear they source here to cover the wage rise and ensure the industry remains sustainable. 

“Wages account for a massive portion of a factory’s operating costs. We now need to see all parties, including the buyers, focus on improving productivity to help offset rising costs and keep factories economically viable,” said GMAC secretary-general Ken Loo.

He told Khmer Times yesterday that the new minimum wage will definitely affect orders next year. “For sure the new minimum age will affect the orders next year… however, we still do not know to what extent at the moment. In order to remain competitive, we will need to focus on raising productivity and also to convince buyers to pay us more,” Mr. Loo said. 

Ms. Raccagni confirmed that Adidas will do this at the 24 factories it buys from here. 

“Wherever new and higher minimum wages are set, like in this case, the Adidas Group requires our suppliers to meet those wages and any other legally mandated allowances and benefits,” she explained. 

“Our prices will be adjusted accordingly, within the normal cycle of price negotiations, to support our suppliers fulfilling the new minimum wage levels. We will accommodate wage increases within our normal sourcing activities,” she added.

“This is now the second year of annual revision [of the minimum wage], and we welcome the predictability this gives all involved and enables suppliers to calculate the wage raise in their price to us for next year’s production,” Ms. Raccagni added. 

“As wages are only one of many factors which affect the purchasing price, we do not believe that wage increases will affect the prices in our stores,” she said.

Meanwhile Ath Thon, head of the Coalition of Cambodian Apparel Workers Democratic Union, said that $140 is still low. His, and other independent unions, had lobbied for a rise to $160. 

“We will hold talks among union members about what we have to do next on demanding a proper wage,” Mr. Thon said.  “We will ask our workers whether they accept the new wage. If they don’t accept it, we will protest,” he added.

Despite rising minimum wages, Mr. Loo said that GMAC had added 61 new members this year, compared to 85 for all of last year. In order to export garments and footwear from Cambodia, factories must join GMAC and be monitored by BFC. BFC inspects factories for compliance with Cambodian labor law and international labor standards. 

Cambodia’s garment exports rose about 14 per cent in the first half of the year to $3.3 billion, according to data from the Commerce Ministry. During the same period last year – when the industry was hit by labor unrest sparked by demands for higher wages – exports rose just 2.9 percent, data from the ministry shows.  Additional Reporting by Vincent MacIsaac.

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