Retailers Are Raising the Bar on Cambodian Garment Sector

While pledging loyalty, 43 international retailers representing 23 different global clothing brands made it clear Wednesday that the bar has been raised for Cambo­dia’s garment sector.

Garment retailers who gathered at Hotel Le Royal in Phnom Penh for the Cambodia Buyers’ Forum promised to keep patronizing Cambodia’s garment sector amid heightened competition in the coming years, provided Cam­bodia can offer consistent prices, maintain quality and guarantee on-time delivery.

The buyers from popular la­bels—including Adidas, Gap, Levi Strauss, Sears, Wal-Mart and the Walt Disney Company—also stres­sed the continued need for the International Labor Organiza­tion’s Better Factories Cambodia program, which oversees around 280 factories and whose mandate is set to end next year.

Labor compliance, aided since 1999 by the ILO’s watchful presence, has long been a distinguishing factor of Cambodia’s garment industry, which accounts for 80 percent of the nation’s exports and employed more than 337,000 workers as of April.

But, as competition intensifies in the region—thanks in large part to Vietnam’s recent ascension to the World Trade Organi­za­tion—buyers emphasized the need for Cambodia to focus on other areas of the industry as well.

“We need labor compliance, but of course, as you know, we still need cheap prices, high quality,” said Michael Kobori, Levi Strauss Co vice president of global code of conduct.

“There are many different things that buyers are looking for,” he said, adding that the 23 brands in attendance accounted for 60 percent of Cambodia’s garment exports.

When Vietnam became a member of the WTO in January many restrictions on their ex­ports were eliminated, such as prohibitive taxes that had previously kept Vietnamese goods out of the international markets Cam­bodia exports to.

Van Sou Ieng, chairman of the Garment Manufacturers Associa­tion of Cambodia, said that Viet­nam poses a serious threat and the impact has already been felt in Cambodia’s garment sector.

Cambodia’s garment exports increased 12 percent in the first half of 2007, while Vietnam saw a 25 percent increase, he said.

“We need to improve productivity…. We need to improve delivery because those two things are extremely competitive in Viet­nam, Bangladesh and Indonesia. If we don’t work to improve those issues, we will fail in competition with these other countries,” he said.

He estimated that Cambodia’s productivity is about 30 percent lower than Vietnam’s, something he attributed to a difference in work ethic and the fact that Viet­namese workers receive more money directly for the work they do, because Vietnamese producers do not incur as many costs to transport their products.

“One Cambodian worker produces 12 or 13 trousers per day, but one Vietnamese worker produces 20 trousers,” he said.

“Our workers are from the countryside…. They can’t sit for two hours straight, so they like to go to the toilet,” he said, adding that the work ethic among the Cambodian labor force is improving.

He said Vietnam’s target export for 2007 is $7 billion. He is cautiously optimistic Cambodia, which exported $2 billion worth of garments in 2006, will reach its 2007 goal of $2.6 billion. But a 6 percent drop in August is discouraging, he added.

Van Sou Ieng also said that he does not think the US and the European Union will completely lift safeguards on Chinese ex­ports, which they are set to do at the beginning of next year.

“Safeguards against Chinese exports are an important part of Cambodia’s growth,” he said.

The US, which takes the lion’s share of Cambodia’s garments, is currently considering a measure to slash tariffs on Cambodian imports. If passed, the measure could help Cambodia compete with countries, like China, that can produce more products quick­­ly and at a cheaper price.

Ith Sam Heng, Minister of Social Affairs, said he believes the reputation for good labor compliance in the Cambodian garment industry will ensure that the industry remains stable in the coming years.

“We are not only working to be good for the buyers, but in fact, we are working for the rights of workers,” he said.

“For me, I predict that for 2008 and 2009, the garment industry will be good. I don’t think there should be any problems,” he added.

Stephane Guimbert, senior World Bank economist, said that Better Factories has been instrumental in streamlining import-export procedures as well as eliminating “the worst labor abuses in Cambodia.”

“We at the World Bank Group have high expectations for what Better Factories Cambodia can achieve if it continues long term,” he said.

The World Bank is now working with the International Finance Corporation to ensure that Better Factories can remain in Cambo­dia beyond 2008 independent from the ILO.

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