Despite Export Growth, Garment Sector Profits Could Stay Modest

Preliminary figures released by the Commerce Ministry yesterday confirmed optimism that Cambodia’s garment sector appeared to be bouncing back after the heavy losses in jobs and profits experienced throughout 2009.

Garment exports in the first five months of this year jumped by 14.1 percent to $1.01 billion, building on export levels recorded between January and April during which garment exports rose by 11.41 percent.

Despite rosier export data, market prices for garments are currently down by about 10 percent on the same period last year, according to the Commerce Ministry figures.

Adding further question marks to how well the industry is performing, manufacturers on Thursday will meet with labor unions before the government’s Labor Advisory Committee to discuss the possibility of a wage increase.

A coalition of about 20 labor unions delivered a joint statement yesterday to the government and the Garment Manufacturers Association in Cambodia requesting a minimum wage hike from the current $50 per month to $93. But manufacturers say that amount is out of reach given current market conditions.

“Our request has been sent already. Now we are waiting for a reaction,” said Ath Thon, president of the Coalition of Cambodian Apparel Workers Democratic Union, adding that about 40,000 workers would strike if demands are ignored at Thursday’s meeting.

Officials at the Ministry of Labor declined to comment on the wage increase demands yesterday.

Chuon Mom Thol, president of the CPP-affiliated Cambodian Union Federation, which is represented on the Labor Advisory Committee, said that a combination of late payment of wages and continuous reports of mass faintings at factories had given more weight to demands for a wage hike.

But lower prices on international markets are putting pressure on the government not to raise the minimum wage too much, he said.

“We are trying to fight hard at the advisory level to make sure we get something that we are happy with,” Mr Mom Thol said. “The workers always want more and the employer always wants to give less.”

Mr Mom Thol said the government would have to consider the wellbeing of garment workers while simultaneously keeping manufacturers who pay taxes to the government content enough to continue doing business in Cambodia.

Albert Tan, treasurer of GMAC and a senior vice president at Ocean Sky International, which operates the Suntex and Bright Sky garment factories in Phnom Penh, said that garment workers were already taking home nearly $93 per month after over time.

“If we base the pay on the minimum wage alone I don’t think we will get anything out of it,” Mr Tan said. “They need to have incentives for workers based on their skill levels.”

Mr Tan added that Thursday’s meeting would consist of a “collective agreement” and that GMAC would hold minimum wage discussions with the government every couple of years in the light of the inflation rate.

Sung Mang, manager at the company Winner Knitting Factory, which employs around 10,000 workers in five factories in Cambodia, said a wage increase would put the industry’s competitiveness at a disadvantage with cheap labor being one of its major selling points.

“We could afford an increase of no more than $10,” he said.

Commerce ministry data show that garment exports to the US–which accounted for about 52 percent of total exports from January until May–increased by 13.1 percent to $658.58 million in the first five months of 2010. Exports to Europe also experienced a sizeable recovery increasing by 10.9 percent to $204.78 million.

Garment exports between January and May accounted for 86.7 percent of total exports leaving Cambodia.


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