Productivity growth in Southeast Asia, particularly in Cambodia, has been stagnant, making it hard for millions of poor workers to lift themselves out of poverty and threatening to undermine global competitiveness, according to a study released today by the International Labor Organization.
Productivity growth can lead to rising wages and better working conditions, according to industry watchers. They also say that it is crucial to keep Cambodia’s garment sector, which accounts for 80 percent of the nation’s exports, alive in an increasingly competitive global environment.
In its new report “Key indicators of the Labor Market, Fifth Edition,” the ILO found that from 1996 to 2006, productivity—calculated as output per employed person—grew on average only 1.6 percent per year in Southeast Asia, compared to a 50 percent rise in South Asia and a two-fold increase in East Asia.
Cambodia’s productivity growth was second-to-worst in the laggardly Southeast Asia region, ahead of the Philippines, the ILO found. The GDP per employed person has increased just 37 percent since 1980 in Cambodia, while in Vietnam and Thailand it has nearly tripled. China, meanwhile, has seen a near four-fold increase. Even troubled Burma saw more than a two-fold increase.
“Hundreds of millions of women and men are working hard and long but without the conditions they need to lift themselves and their families out of poverty,” ILO Director-General Juan Somavia said in a statement. “Releasing their underutilized capacities by raising their productive potential must be at the top of the international development agenda,” he added.
The ILO also found that the productivity gap between workers in developing and developed economies has continued to widen, a troubling sign, it said, of a lack of investment in training, equipment and technology.
Oum Mean, an undersecretary of state at the Ministry of Labor, said Sunday that Cambodia’s productivity growth is slow because the nation is still struggling to emerge from 30 years of civil war.
“We are a small country. We have built the country from nothing,” he said. He also said that most Cambodian workers are diligent and that the government has been working to bolster productivity through education. “This is a free market,” he said. “The government is teaching them to understand about competition.”
Today’s study comes on the heels of the ILO report “Labor and Social Trends in Asean 2007,” which found that Cambodia has the fastest growing labor force in Asean and is the only Asean nation where productivity actually declined from 2000 to 2005.
If the labor force continues to grow faster than the GDP, Cambodia’s workers may be on a race to the bottom, the ILO said. Already, one in three Cambodian workers live on less than $1 per day, compared with one in 10 across Asean. And the 6.3 percent decline in productivity from 2000 to 2005, the ILO wrote, “suggests a pursuit of export competitiveness that relies mainly on cheap and unskilled labor.”
As employment in the garment sector boomed—it increased by more than 100 percent per year from 1995 to 2000—productivity declined, the ILO found.
“The competitiveness in this industry may be relying much more on the country’s abundant and relatively cheap labor pool rather than on improved technology and production processes,” the ILO said.
Van Sou Ieng, chairman of the Garment Manufacturer’s Association of Cambodia, said that slow productivity growth could imperil the very future of the garment industry, which the government estimates helps support nearly one in five Cambodians.
“It means we’re going to be less competitive and the industry will always be doing cheap and lower quality goods,” he said.
Productivity growth, Van Sou Ieng said, rests on factors such as good equipment, education and workforce relations.
And, he added, unions aren’t doing much to help.
“Unions here are not receptive to new management techniques,” he said. “They are not very helpful in convincing their members to accept and understand new techniques of production. Unions are thinking only of social benefits and they don’t think about productivity at all.”
But Free Trade Union president Chea Mony said that corruption is a far greater drag on productivity growth than union leadership. Unskilled factory management, he added, can also be a problem.
“Unions are watchdogs to labor law implementation and do not decrease productivity,” he said.