2016 2 1 3 Homlong
2016 2 1 3 Homlong
By Nathalie Homlong
Elisabeth Springler†
The garment industry accounts for a lion’s share of Cambodiaʼs exports, and about a
quarter of industrial employment in the country. An agreement with the USA on
preferential trade terms based on the stipulation of better working conditions led to an
improvement of working conditions in Cambodiaʼs garment industry. This also has
had a positive effect on demand for garments produced in Cambodia, as good working
conditions are increasingly important for clothing brands. In the last years, however,
after the end of a trade agreement with the USA, the industry has been increasingly
experiencing strikes and labor unrest, as well as a decline in demand. Also, China (a
major investor in this industry) has partly moved production to cheaper locations.
This leads to the following research questions/starting points:
Introduction
Professor, Volda University College, Norway.
†
Professor, Program Director European Economy and Business Management, UAS bfi Vienna,
Austria.
https://doi.org/10.30958/ajbe.2-1-3 doi=10.30958/ajbe.2-1-3
Vol. 2, No. 1 Homlong et al.: Cambodia’s Garment Industry and Labor Conditions…
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Given the facts discussed in the previous section, two implications for the
promotion of economic development can be derived: Firstly, it means that a
lack in higher technology sectors also hinders national macroeconomic demand
and increases the dependence on an emerging market of exports. Secondly, the
segmentation of the labor market also promotes increasing income inequality
between employees (King 2001), and hinders the establishment of a so-called
middle class (Appelbaum 1985). The relative wage increase of rather small
elite of employees in the higher technology sectors diminishes also overall
national consumption, compared to a situation of more equal wages.
Promoting, national consumption, which in turn should enable to fulfill the
transition from a less developed economy towards a higher developed economy
as it was shown, for example by the adjusted structural approaches of Japan
(Oatlely 2010), which focused on a strong educational element, mainly these
economic policies are demanded (King 2001) by enforceable worker rights as
elements of the re-regulation of the labor market, wage-fixing institutions to
establish and maintain the real value of minimum wages, and public sector
intervention on the labor market especially for those who are unemployed.
As the focus of this paper, is the potential of the garment industry in
Cambodia for sustainable economic and social development, unemployment is
only touched marginally. Therefore, the potential of the sector to promote
sustainable economic development will be measured by its capability to
promote national consumption. This in turn should enable capital accumulation
and promote innovation in other sectors of the economy.
Following from this, especially the demanded economic policies regarding
the level and enforcements of labor rights and working conditions and the
institutional structure of the wage bargaining process shall be analyzed.
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the garment industry, which serve as the basis for an analysis of strengths and
weaknesses of this sector in the following section.
Institutional Settings
Workers’ rights and labor conditions are set in the Labor Code of 1997 and
the eight core labor conventions of the ILO were signed in 1999 (National
Institute of Statistics 2010). The Labor Code gave the Ministry of Labor the
authority to set minimum wages. So far the garment, textile and footware
industry is the only industries were minimum wages have been set (Cambodia
Institute of Development Study 2009). The establishment of trade unions and
the process of collective bargaining in the garment industry emerged primarily
after 2004. In the year 2004 first collective bargaining agreements were
reached in the hotel industry (National Institute of Statistics 2010). For the
garment industry, the government supported the establishment of the federation
of employers, the Garment Manufacturers Association of Cambodia (GMAC),
which as the oldest employers’ association was established in 1996 (ACTIF
2010). In industrial relations 28 federations of trade unions represent workers
1
Figure for 2011; Table II.69 (WTO 2013).
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Vol. 2, No. 1 Homlong et al.: Cambodia’s Garment Industry and Labor Conditions…
in the garment sector and interact with the employers’ associations in the
garment industry, which are members in the umbrella organization The
Cambodian Federation of Employers and Business Associations (National
Institute of Statistics 2010).
As Figure 1 shows, unionization rates in the garment industry increased
after the global financial crisis from 43% to 58%, indicating the workers’
overall willingness to engage in the bargaining processes and in improving
working conditions. Similarly, numerous garment factories reported to have at
least one workers’ union in their company. Nevertheless, the social pressure on
workers is apparent when looking at the percentage of companies admitting to
violating the workers’ rights to forming an association. Data seems to reflect
the dual picture of the current situation in the Cambodian garment industry.
While a majority of companies aims at observing labor standards, the situation
is getting worse for workers in a minority of companies, where not even
fundamental rights are adhered to.
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With 83% (Figure for 2009), the workforce in this industry consists
predominantly of female workers (Savchenko and Acevedo 2012). About 85 to
90% of the workers originate from rural regions and migrated to more central
areas, where production sites are located. Earnings sent by workers to their
families residing in peripheral areas are also a major economic factor for the
rural areas of origin of these workers (Arnold 2013). Female garment workers
have on average 6.5 years of schooling, slightly more than the average of 6
years of schooling for the rest of the female labor force (Savchenko and
Acevedo 2012).
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hourly wage levels for garment workers in Cambodia, these are with USD 0.33
per hour among the lowest compared to the country’s main regional
competitors in East and South East Asia (Staritz 2011: Table 4.13). In this
context a comparison of wages in the garment industry compared to other
professions in Cambodia is also of interest. In an interview conducted in 2010,
a representative of a company that monitors working conditions in the garment
industry in Cambodia commented that the wage levels in the garment industry
in Cambodia were still clearly above those of other professions. While the
minimum wage for the garment industry was at USD 61, the minimum wage
for example for police was only USD 25 at that time (interview Gridling,
2010). In general, casual workers make up a significant share of the work force
in the monitored garment factories. Another important aspect in the contractual
framework is the fact that only a minority of workers, who are employed in a
garment factory over two years, also have a contract of a year or longer. More
than 40% of workers, who work for one company for more than two years, do
not even have a formal work contract.
100
95
90
85
80
75
70
65
60
55
50
1/2013 2/2012 1/2012 2/2011 1/2011 2/2010 1/2010 2/2009 1/2009 2/2008
payment for maternity leave paid sick leave
minimum wage for regulat workers minimum wage for casual workers
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As the sector showed strong economic dynamics in the last years and
experienced as well institutional and structural changes, specific strengths and
weaknesses can be detected. These are in the following explored. Furthermore,
this sections aims to shed some light on the potential reasons for the existing
shortcomings of the apparel sector in Cambodia.
SWOT Analysis
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garment companies are owned by FDIs from Taiwan, 19% by FDIs from Hong
Kong, and 18% by FDIs from China. Only a minority of 7% of garment
companies are Cambodian-owned. This dependence on these economies and
other economic actors (e.g. companies, investors and institutions) pose the
threat that main elements of the value chain of garment production can in the
future be transferred to other economies. Additional threats can be detected
related to wage levels, which are too low, resulting in strikes and hampering
social peace. Therefore a further increase in the minimum wage level could
serve as a tool to minimize this threat.
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Reasons for these shortcomings might be the strong increase in the number
of garment factories over the last years (412 exporting factories in the sector in
April 2013 compared to 261 in April 2009 and 313 factories in November
2008, Better Factories: various years) and the ongoing global pressure on the
wage level, which had already been comparatively low before the global
financial crisis and despite of international pressure, would need a significant
rise to create sustainable internal consumer demand.
45
40
35
30
25
20
15
10
5
Source: Better Factories (various years).
0
no contract UDC 1 year + 6 months-1 3-6 months < 3mont
Conclusions and Outlook year
The Bilateral Textile Agreement with the United States had helped
improving the working conditions in the Cambodian garment industry.
However, as shown in this paper, some aspects of working conditions in this
industry have not been maintained. Especially, in recent years part of the
companies cut corners in an attempt to reduce labor related costs when aiming
to compete with other low-cost producers. This has among others had the effect
that increasing numbers of factories are paying below minimum wages for
casual workers and are not following regulations regarding the payment of
maternity benefits. Child labor has become a lot more widespread in the
garment industry in recent years. The worsening of labor conditions is reflected
in a significant increase in the number of strikes. While such cost-cutting
practices might have short-term benefits for the producers, they threaten to
undermine the competitive position of Cambodia as a garment producer in the
long term. International clothing brands are under increasing scrutiny and
pressure to sell products that are produced under good working conditions. By
no longer adhering to standards set under the agreement with the United States,
Cambodia is giving up a unique selling position in an industry that can easily
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relocate to other business locations, especially given the fact that the majority
of garment producers in Cambodia are foreign owned.
References
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Interview
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