Potential competition from China and skyrocketing inflation are threatening Cambodia’s garment industry, economists, industry and union leaders said Tuesday.
Neou Seiha, senior researcher for the Economic Institute of Cambodia, said Tuesday at an economics forum on Cambodia’s transition into the World Trade Organization, that the scheduled lifting of restrictions on Chinese exports by the US and the European Union at the end of the year is cause for concern.
“The majority of Cambodia’s textile factories are owned by Chinese people,” he said. “It is really serious, and we are concerned that those Chinese businesspeople will move to open garment factories in their own country,” he added.
Cheat Khmera, a senior labor officer for the Garment Manufacturers’ Association of Cambodia, said 20 percent of China’s garment producers have opened factories in Cambodia, but he is concerned that with the lifting of restrictions, the factories will be closed and operation relocated to China.
However, Cambodia’s cheaper labor should continue to attract buyers, Cheat Khmera said.
“That is a priority to attract investors,” he said of keeping wage costs down, adding that of the 326 GMAC member factories, more than 200 are owned by Chinese businesspeople from Taiwan, Hong Kong, Macao and mainland China.
Cambodia’s high inflation rate is driving some urban garment workers to look for jobs in rural areas where the cost of living is lower, Cheat Khemara said.
“Some former workers…are going to work for other garment factories in their home provinces where those workers are not required to pay as much money for long-distance transportation,” which was required while working in Phnom Penh,” Cheat Khemara said.
GMAC research also found that karaoke parlors are luring away garment workers, who are mostly female, with higher wages and the possibility of bonus payments, he added.
Free Trade Union President Chea Mony said Tuesday by telephone that more than 10 Chinese-owned garment factories in Phnom Penh and Sihanoukville have closed since November.
“I am really worried that the unemployment rate will dramatically increase in our country,” Chea Mony said.
He added that the ever-increasing inflation rate has driven about 27,000 garment factory workers, who make a minimum of $50 per month, to quit in search of higher pay.
On Monday, the UN’s International Labor Organization released its biannual report by Better Factories Cambodia about the current state of the garment industry.
The government-supported monitoring group used a dozen inspectors to keep tabs on 200 of Cambodia’s garment factories, said Sophal Chea, ILO national program assistant.
The monitors found that garment factories are “continuing the trend of having good labor law compliance,” Sophal Chea said Tuesday.
Most of the factories—97 percent of those inspected—pay at least the $50-a-month minimum wage, according to the report.
Factory management and workers identified 35 strikes at 27 factories. The striking workers did not comply with legal requirements during most of them, the report said.
A quarter of the female workers who participated in a gender survey reported verbal abuse from management and co-workers.
Just less than half of the factories monitored provide personal protective equipment, the report said.
Low productivity in comparison with neighboring countries, high electricity costs and inflation are the leading concerns for the industry, Sophal Chea said.