PHNOM PENH (Khmer Times) – Cambodia’s $5.5 billion garment industry saw a significant slowdown in 2014, as foreign brands weighed the costs of rising wages and a restive labor pool, the sector’s main industry body said.
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“We don’t have the final figures for 2014 in yet, but from all available data we expect that last year’s garment sector growth is going to be flat,” said Ken Loo, secretary-general of the Garment Manufacturers Association in Cambodia (GMAC).
The association, which represents all Cambodian export-oriented garment factories, reported that during the first 11 months of 2014 orders for apparel and footwear from Cambodian factories inched up just 1 percent – a striking contrast from the 20.5 percent average year-on-year growth of the previous five years.
The sluggish growth is largely the result of a decline in purchase orders from American buyers, Mr. Loo told Khmer Times. He said frequent strikes, wage hikes and negative world press have “contributed to making Cambodian factories less competitive.”
Ministry of Commerce data shows an 11 percent decline in garment exports from Cambodia to the US in 2014, while competitors Vietnam and Bangladesh reported double-digit growth in recent months.
Mr. Loo said the constant threat of wildcat strikes has eroded the confidence of foreign buyers in Cambodian factories and their ability to honor contracts and deliver goods on time.
He said 2014 began with an opposition-led nationwide garment workers strike that resulted in factory shutdowns, delays in shipments and deadly confrontations between protesters and security forces. By year’s end, garment workers had held 436 strikes in 279 factories – all in what GMAC claims is a “clear breach of the rules governing industrial action.”
“We’re not concerned about the number of strikes, but rather that all these strikes are illegal wildcat strikes,” Mr Loo said. “We don’t want to deny workers the right to industrial action, but we do want to make sure it is carried out in accordance with the law.”
The strikes have pressured the government to address wage issues. In February 2014, Cambodia raised the minimum wage for garment workers from $80 a month to $100 – but still short of the unions’ demand for $160 a month. In November, the government agreed to hike the minimum raise further, raising it another 28 percent.
Effective Jan. 1, 2015 the minimum wage stands at $128 a month plus a mandatory $17 monthly transportation and housing allowance. That puts Cambodian garment worker wages at par with high-end wages in Vietnam, and twice those of workers in Bangladesh, where apparel factories pay workers as little as $68 a month.
The risk, said Mr. Loo, is that international buyers like Levi’s, H&M, Puma and Gap will shop around for the lowest price.
“Wages were only adjusted in January , so it’s too early to see their full impact,” he said. “But there’s been an obvious slowdown in new factory openings. So far in 2015 only one new garment factory has registered.”
He warned that if wages continue to rise Cambodia could price itself out of the market.
Pav Sina, president of the Collective Union of Movement of Workers (CUMW), doubts that. He attributes the slump in garment orders to the uncertainty surrounding minimum wage talks early last year.
“Buyers did not want to place orders during the negotiation period because they were afraid unions would [reject the government’s [proposed] minimum wage,” he said. “They waited for Cambodia to set a new minimum wage before placing new orders.”
Mr. Sina insisted that international buyers still find Cambodia’s labor costs competitive. Now that the minimum wage has been set, he expects factory orders to pick up again.
Garment orders are made months or even years in advance of delivery – so it could still be several months before factory production reflects this growth, he noted.
Garment workers who protested for a higher minimum wage last year are not oblivious to the wider ramifications. Some have expressed concern that ongoing wage protests could send factories packing – laying to waste a sector that provides 600,000 local jobs.
Phorn Phea, a 20-year-old line worker at Ghim Li (Cambodia) Pte Ltd, said his salary increased to $130 a month, from $105, as a result of the revised minimum wage. He also receives benefits and overtime pay, providing enough money to cover his basic living expenses.
“Our factory changed ownership after we held a strike last year over wages,” he said. “If we demand too high a minimum wage they will shut down the factory or find another country to operate in. I can’t afford that – I have a family to support.”