The garment industry’s international buyers are paying less for textiles, causing factory managers in turn to put the squeeze on fabric and yarn manufacturers, garment manufacturers reported last week.
The price drop in textiles undermines a theory touted by the Ministry of Commerce that buyers will pay more for good working conditions. In an effort last month to become the first least developed country to join the World Trade Organization, Commerce Ministry Secretary of State Sok Siphana said that Cambodia’s reputation for fair working conditions would protect the industry.
But Roger Tan, the Garment Manufacturers Association in Cambodia’s co-vice chairman, said international buyers are paying less simply because they can.
“They can pay less in China or India, so they’ll demand to pay less here, too,” he said.
An economist for the Cambodia Development Resource Institute said a US economic downturn likely is straining production here, as US companies comprise the majority of Cambodia’s buyers.
Tan, who is managing director at Thai-Pore Garment Manufacturing Co, said jeans that normally sell for $5 a pair have dropped to about $2.50. As a result, Cambodia’s manufacturers are paying less for fabric and other production materials, he said.
GMAC Deputy Secretary-General David Van said Thursday that prices have been falling across the globe for several months.
“This trend has been progressing over the last year,” he said. “Buyers are squeezing manufacturers for lower prices worldwide. It’s not particular to Cambodia.”
A slumping US economy coupled with regional competition does not bode well for workers’ salaries, the economist said, noting that factories will shy away from wage increases to stay competitive. “Factory workers must compensate for the burden from the international market,” he said. The government can expect heightened demands for lowered business costs, he added.
Van agreed, saying the government must cut extra costs. Unofficial service charges added to shipping and bureaucratic transactions make doing business more expensive than in countries with transparent monitoring, he said.