Union Law Worries Garment Sector Investors From Hong Kong

A visiting delegation from the American Chamber of Commerce in Hong Kong, which handles tens of billions of dollars in regional investment, says it raised concerns about the low threshold for forming unions in a pending new law during meetings with government officials Monday.

Chamber president Richard Vuylsteke said Cambodia was the fourth stop for the group of delegates—after visits to Bangladesh, Burma and Vietnam—to gauge the “state of play” in the markets and their “attractiveness for investment, and specifically for apparel and footwear.”

The 19 delegates represent some major brands, including Walmart, Target, Adidas and Ralph Lauren. They spent the day in meetings with Deputy Prime Minister Sok An, Commerce Minister Sun Chanthol, Cambodian Development Council Secretary-General Sok Chenda Sophea, U.S. Ambassador William Todd and others.

Mr. Vuylsteke said the delegates’ main concern during their discussions was with a controversial law the government is drafting to regulate the country’s trade unions. Some unions and labor rights groups had complained that the proposed threshold for unionizing was set far too high in earlier drafts, at 20 percent of the employees at a given factory. In a major concession, the government recently slashed the proposed threshold to just 10 people.

“The concern is, if you’re going to run efficient factories…you can’t be worried about a dozen unions made up of a very small number of people wanting to negotiate or go on wildcat strikes at the drop of a hat,” Mr. Vuylsteke said.

“So there’s concern at this point where the union law’s going to go, if it’s going to lead to more stability or more to instability, and the jury is still out on that because it’s not done yet,” he added.

“Generally speaking, globally, you don’t have 20 or 30 unions in the same shop…or 10 unions, or eight. It depends on the size of the organization. How do you negotiate as management when those unions may not agree on what they want?” he said. “Globally you’re not going to find that, and so you don’t want to be an outlier here.”

The chamber president said the delegates would be paying close attention to how the law evolves.

“We’re going to watch this because it could have a real impact on the kinds of investment decisions being made,” he said. “It could really kill the place or it could really boom.”

Mr. Vuylsteke said the delegates also stressed the importance of workplace safety and programs to train the garment industry’s future technicians and managers.

“We learned that we need to come back again. A decision was made to set up a more detailed agenda on some of the topics we raised,” Mr. Vuylsteke said. “The good news for Cambodia is there’s a lot more interest now in doing a deeper dialogue.”

On this trip, the delegates did not meet with any members of the garment sector unions or the Garment Manufacturers Association in Cambodia (GMAC), which represents the country’s 500-plus exporting garment factories.

But GMAC secretary-general Ken Loo said he was glad to hear that an important group of regional investors shared his association’s concerns over the proposed threshold for unionizing.

“Buyers and employers, we have the same positions, we’re on the same side of many issues that affect our industry, because in many ways what affects them affects us,” he said.

Cambodia’s garment exports hit a record high of $5.8 billion dollars last year, according to the Commerce Ministry. And despite a minimum wage hike in January, the International Labor Organization says strong foreign investment through the first quarter of 2015 bodes well for the industry in the near future.

But GMAC has warned that a continued proliferation of unions could hurt productivity and make Cambodia less attractive to investors compared to its neighbors. Mr. Loo said the Hong Kong delegation’s concerns could help push the threshold for unionizing back up.

“It would certainly help, but I don’t know if it would be enough to tip the balance,” he said. “Coming from our mouths it’s not as credible for the government as to hear it from the buyers.”

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