Cambodia’s Garment Industry Faces End of Unique US Market Access

Khun Thol is no economist. She’s a 21-year-old farm girl from Takeo who now works as an embroiderer’s assistant in a Phnom Penh garment factory. But even she knows the importance of Cambodia’s garment industry.

“If the factory were to close down, I would be faced with a shortage of money,” she said on a recent afternoon. “It not only affects me, but it also effects the Cambodian economy.”

Khun Thol and 180,000 workers like her may understand the basic benefits of the industry, the nation’s top export earner. But what they might not understand is that the industry will soon be facing one of its toughest challenges.

In 2005, a unique agreement that grants Cambodian garments and textiles exclusive access to lucrative US markets will expire, opening up the garment industry to competition with every other manufacturing country in the world.

Now, industry leaders are searching for a way to keep the industry here. In order to do so, leaders and officials said in interviews, Cambodia will have to clean up its act, enforce its labor law and put an end to the high costs of doing business here.

That way, the country could market itself as a “haven for workers’ rights,” said Jason Judd, country representative for the American Center for International Labor Solidarity.

Media-conscious US buyers could move more orders to Cambodian factories—not out of sympathy for poverty-stricken workers, but because it provides them with some public relations insurance if they are ever accused of buying from sweat shops, Judd said.

“Cambodia is on the verge of creating something very special, which will help it distinguish itself among international buyers,” said one US Embassy official.

High profile labels are highly sensitive to the kinds of criticism that can lead to the boycotts of their products. In the US in the past, some labels have endured serious boycotts by student and activist groups because they were accused of employing factories with poor labor standards.

With unions, factories and the government working together to present Cambodia as a country with high labor standards and an internationally recognized monitoring project, it might be able to find a competitive edge against larger countries that, while less expensive to operate in, may be too large to control labor rights in their domestic garment industries.

“That, I think, is the only real hope for the industry,” Judd said. “It’s that or nothing.”

The government is pushing to establish Cambodia’s positive image. “It has no child labor. It has no forced labor. It has no sweat shops,” claimed Sok Siphana, secretary of state for the Ministry of Commerce.

A team of International Labor Organization monitors has begun inspecting factories to ensure they comply with the labor law-a concession by factory owners that the government hopes will put buyers more at ease.

US buyers should be willing to pay slightly higher prices for that, giving Cambodia a competitive advantage, Sok Siphana said.

But so far, Judd said, the government’s labor ministry and factories have not done enough to allay the fears of US buyers when it comes to factory unrest or labor standards.

Factories must step up their compliance with the existing labor law, Judd said. “Work­ers aren’t asking for a lot. Nine out of ten times, strikes are because workers are asking for compliance with the law.”

But the real credibility will come when the Ministry of Labor begins to take on a greater role in enforcing the labor law. “The government is not credible,” Judd said. “And buyers know it.” The Ministry of Labor inspectors “don’t take their enforcement role seriously,” Judd said. “In fact, they refuse it.”

Intervention from ministry inspectors is rare, he said. And follow-ups are even rarer. But some ministry officials have branded this criticism as unfair.

“Whoever says we are not credible, they should know clearly about the labor law by themselves,” said one labor ministry official, who asked not to be named. “We always take part in and deal with all the workers’ issues. The buyers know clearly what we have done with them to enforce the labor laws.”

The officials blamed factories for not complying with the labor laws, and said that the workers blamed the ministry when they were forced “to work hard.”

GMAC and its member factories always say they need to take part in complying with the laws, the official said, but they have never respected the labor laws that exist.

The US Embassy official, however, said that while the ILO monitoring project was “seeing some good progress,” more needed to be done, especially on the government’s end.

“There is also an improving dialogue bet­ween manufacturers and labor,” the official said. “And the manufacturers themselves are becoming more convinced that they can protect their investments in Cambodia through improved working conditions and respect for labor rights.

“But for Cambodia to truly create a safe haven where buyers know they can protect the investments they’ve made in their name brands, then the Cambodian government must improve its enforcement,” the official said. “Especially with regard to those factories which do not address the legitimate concerns of the workers and the deficiencies identified by the ILO monitoring.”

Garment manufacturers, though, are worried that even though they are investing money in higher labor standards, they are falling victim to a double standard from the US. While rights advocates demand improved labor conditions, US buyers continue to de­mand rock-bottom prices for goods.

When Cambodia’s top private representative for manufacturing went to an annual conference of Asian textile industries earlier this month, he got an unsettling reaction to Cam­bodia’s efforts to comply with rigid labor standards and inspections.

“[US companies] want to pay the same money [to Cambodian factories] as to those factories in other countries that have no such compliance,” said Van Sou Ieng, president of the Garment Manufacturers Associations. “The US buyers have a double standard. The US buyers ask compliance. But on the commercial side…the price is ridiculous.”

But these US buyers are likely waiting for more signs of stability before they are likely to place orders and bring more investment to Cambodia, Judd said.

So far, the government and factories have enjoyed bonuses to the US quotas for doing relatively little, he said.

But as the 2005 deadline approaches, manufacturers are having to consider a heavy number of drawbacks that will no longer be counter-balanced by access to US markets. Those will have to be cleared up too, if in­vestors are to stay.

“We have very high expectations of government involvement in that,” said Honey Mind­anao, project supervisor at Luen Thai Garment. The investment question, Mindanao said, “only the government can settle.”

Tax incentives are gone. Red tape still exists. Corruption still occurs from ministry to ministry and office to office. “It’s already a big hindrance.”

“If that can be remedied, even when the quota goes, I’m sure a big portion of investors will consider staying,” Mindanao said.

(Additional reporting by Kuch Naren)

 

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