Growth Masks Garment Sector Woes, Groups Say

Claims over the past six months that the garment sector is ailing following nationwide protests that were violently suppressed in January seem to be at odds with new figures from the Ministry of Industry and Handicrafts showing robust growth this year in the $5 billion industry.

The figures show an 8 percent year-on-year increase in the number of garment factories registered in the first six months of this year compared with 2013, bringing the number of garment manufacturing businesses in Cambodia to 1,200, according to Huot Pheng, director of the ministry’s registration department. Mr. Pheng said the number of workers in the industry is now at 733,300, up from 677,600 last year.

“The government is proving very successful in its work,” said Mr. Pheng, adding that the number of new factories in the provinces is also growing steadily as a result of a government policy encouraging investment outside of urban centers and in higher-tech production.

“Before, workers were running to factories in the cities for work, but now we see new factories are opening every day in rural areas in the provinces,” he said.

But Ken Loo, secretary-general of the Garment Manufacturers Association in Cambodia (GMAC), warned against interpreting the increase of factory registrations during the period as a sign the garment industry had avoided serious fallout from the strikes in January.

“A lot of work needs to be done in advance of new businesses registering, which means they will have been in the planning stage before the outbreak of strikes,” he said. Investors were moving to the provinces simply to avoid higher rents in oversaturated industrial centers, he added.

The real effects of the unrest on the industry, he said, will begin to show in the coming months as orders confirmed before the unrest began in November begin to dry up and the downturn is revealed.

“For sure, we know for a fact that orders are down,” he said. “That’s why the next three to six months are vital—many orders were temporarily removed and whether they come back or not will decide if there is a market for new businesses.”

While the outlook remains uncertain, Mr. Loo said that curbing illegal strikes, which hit a record high last year, should be the government’s priority in winning back investor confidence.

“If we can get our act together, of course buyers will come back,” he said.

Moeun Tola, head of the labor program at the Community Legal Education Center, agreed the new figures do not signify the garment industry is in good shape, but said that strikes were merely a symptom of the root causes of             the instability.

“We do not see that the garment industry is in good health,” he said. “But GMAC should not put the blame on the strikes, which were entirely to do with the low minimum wage and poor working conditions.”

The government’s own research has shown that the current minimum wage of $100 per month is at least $60 less than a living wage, but employers argue that when benefits and overtime are factored in, their workers are making an actual wage well above what is required by law.

Nonetheless, a number of global brands that source from Cambodia have said they would support a higher minimum wage, and called on the parties involved to quickly establish a new wage-setting mechanism.

“[Brands] don’t support the minimum wage as it is because they understand it is the root cause [of unrest] and that as long as it is not settled, industrial relations will not improve.”

henderson@cambodiadaily.com, reaksmey@cambodiadaily.com

© 2014, All rights reserved.