Garment Exports Still ‘Solid’ Amid Raises: ILO

Cambodia’s garment industry continued to perform “solidly” through the first half of the year, allaying fears that recent minimum wage increases would cripple one of the country’s main economic engines, according to the latest figures released by the International Labor Organization (ILO).

According to its latest industry bulletin, drawing on data from the Ministry of Commerce, garment exports over the first half of the year hit $3 billion, growing 12.7 percent over the same period last year.

That’s even better than the 10.2 percent year-on-year growth the industry saw in the first half of 2014, despite an unusually high 28 percent hike in the minimum wage for garment workers that took effect this past January.

Another raise, from $128 to $140 per month, will take effect this coming January. Though the ILO declined to speculate on exactly what impact the new raise would have, it said Cambodia’s garment industry—“the backbone of the country’s economy”—has been weathering recent raises well.

“There were fears in the past that minimum wage rises would cause the industry to falter,” ILO country director Maurizio Bussi said in a statement accompanying the latest figures.

“The data shows that the sector continued to perform quite well—Cambodia’s market share of garment and footwear exports has continued to rise in recent years. Of course, this positive experience from the past minimum wage increases does not guarantee that future increases will necessarily be as benign for the industry,” he said.

Drawing on U.N. trade data, the ILO said Cambodia’s share of garment exports among all developing countries has steadily gone up over the past decade, from 1.1 percent in 2005 to 1.8 percent last year.

The Garment Manufacturers As­sociation in Cambodia (GMAC), which represents all the industry’s exporting factories, has warned against the sharp raises to the minimum wage in recent years, predicting a major slowdown—even contraction—ahead of each one.

In October, just before the Labor Ministry set the new minimum wage at $140—a year-on-year rise of 9 percent—GMAC said the factories could only afford a 3 to 4 percent raise next year, and that multiple factories had already had to close because of the last wage hike.

But according to the data the ILO pulled from the Commerce Ministry, only one factory closed during the first half of the year, compared with seven that closed over the same period in 2014.

At the same time, 30 new factories opened during the first six months of this year, an additional $152 million worth of investments in the industry were approved, and an extra 42,000 jobs were created.

Though all three areas grew at a slower rate than they did in 2014, Matthew Cowgill, a regional technical adviser for the ILO on labor standards, said they were still growing at a “decent pace.”

“You’re right that some measures did not grow as fast in the first half of 2015 as they had in some previous years,” he said by email, “but growth has still been solid. For example, employment was 10.2 percent higher in the first half of 2015 than it had been in the first half of 2014.”

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