Global Brands Pledge to Pay More for Garments

Global fashion brands have waded into the fray over setting a new minimum wage for Cambodia’s 600,000 garment workers, committing for the first time to pay higher prices for stock so workers can receive “a fair living wage.”

Eight major firms—including Swedish powerhouse H&M, Inditex, the owner of Spanish chain Zara, and British high street retailers Primark, Next and New Look—wrote to the government and the Garment Manufacturers Association in Cambodia (GMAC) this week outlining their position on the ongoing wage negotiations.

A raise to the existing minimum monthly wage of $100 is expected to be decided on next month and will take effect in January. Unions are demanding a $177 floor wage while factories are pushing for $110.

In a letter dated Thursday and addressed to Deputy Prime Minister Keat Chhon and GMAC Secretary-General Ken Loo, the brands acknowledge that they will have to shell out more for Cambodian-made garments if workers are to be paid more than the current minimum wage of $100 a month.

“As responsible Business’ [sic] our purchasing practices will enable the payment of a fair living wage and increased wages will be reflected in our FOB prices,” reads the letter, which is also signed by representatives from Dutch fashion house C&A, British retailer N Brown Group and German chain Tchibo.

FOB refers to “free on board,” or the cost of the products when they are transferred from the factories to the brands.

The letter comes after eight Cambodian unions, backed by activists and labor unions around the world, began a campaign this Wednesday to pressure major buyers to back a new minimum wage of $177.

Dave Welsh, country director for the Solidarity Center, a U.S.-based labor rights group, called the intervention from buyers a “promising” step forward in the wage negotiations.

“It’s crucial,” he said of the brand’s engagement. “To my knowledge, it’s the first time brands have gone on the record to say they will adjust the cost of the supply chain to make sure there are no excuses on the ground in Cambodia, on the factories’ or on the government side, to absorb to increases in the minimum wage.”

However, Mr. Welsh pointed out that several major players were missing from the list, with not a single U.S. brand signed on to the letter.

“The call will go out to the American brands as to where they are, and there are some noticeable absences in European brands, such as M&S and Puma. So the question is, where are they?” he said, adding that many of the missing brands had also remained silent following nationwide garment sector strikes earlier this year that were fatally suppressed by military police, who shot dead five protesters on January 3.

Mr. Loo of GMAC, which represents the country’s approximately 500 export-certified factories, also welcomed the letter, but advised caution until the promise became a reality.

“H&M is the largest single company sourcing from Cambodia, but they don’t represent the majority and we still don’t know what is the position of the rest of the buyers, so that’s important because ultimately we are talking about ensuring the viability and survival of as many factories as we can,” he said. “So we want as many buyers to be on board as we can.”

Mr. Loo said he did not expect the letter to directly impact wage negotiations, which are scheduled to culminate by early October with a vote by the tripartite Labor Advisory Council made up of representatives from the government, unions and GMAC.

But two union leaders, who were part of a delegation Friday that delivered strongly worded petitions about the need for higher wages to the local offices of H&M, C&A and M&S, disagreed.

Pav Sina, the president of the Collective Union of Movement of Workers, and Yaing Sophorn, the president of the Cambodian Alliance of Trade Unions, both said they believed the buyers’ input would smooth the wage negotiation process.

“We expect the buyers will increase the chances of success because many suppliers who are buying garments from Cambodia make large profits, so they can offer to increase the amount they pay,” Mr. Sina said.

The letter does not specify how much more the brands are willing to pay for Cambodian-made garments and says that workers will also be expected to improve their skills in return.

“Our experience within global sourcing markets shows, when we compare the productivity and efficiency within Cambodian factories, that there are significant opportunities for development and improvement,” it says.

The brands also say they expect the government and GMAC to establish processes to ensure all workers receive the new wage, once it is set, and implement an annual collective bargaining process for the industry.

“While our sourcing volumes are forecast to increase in the market, we are closely scrutinizing the approach the Cambodian Government and GMAC are taking to promote the above issues,” the letter says.

It finishes with a warning that the brands expect “freedom of association, the right to collective bargaining, fair living wages, stability and peaceful conflict resolution” in Cambodia if their orders are to continue increasing.,

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