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Logo of Phnom Penh Post newspaper Phnom Penh Post - Cheap labour pays dividends

Cheap labour pays dividends

SOUTH Korean garment factory owners with facilities in China are considering moving to the Kingdom to take advantage of low labour costs, according to South Korean Chamber of Commerce President Nam-Shik Kang.

“I recently met with some new investors from Korea who want to move their production base to Cambodia from China,” Nam-Shik Kang told the Post yesterday, citing China’s rising wages as the impetus for the potential move.

Nam-Shik Kang said that China’s wages were increasing quickly as workers moved to the fast-growing IT and automobile industries, where they can demand better pay.

The Chinese government was responding to wage increase demands in order to keep workers in the garment factories, he said.

“No garment factory can thrive in China with these high wages, so now [factory owners] are seeking production bases in other countries, like Cambodia.”

Cambodia’s garment industry is one of its biggest exporters.

The sector was hit hard in 2009, as exports dropped an annualised 15.83 percent to $2.658 billion, according to the Ministry of Commerce.

Nam-Shik Kang’s comments coincide with a government move yesterday to raise the minimum wage for garment factory workers in Cambodia from $50 to $61 per month. However, the decision is effectively a $5 raise, given that the $6 living allowance that was previously paid on top of the minimum wage is now being included in the regular wages for Cambodia’s estimated 280,000 workers.

Some union officials, dissatisfied with the modest increase, have threatened to strike next week.

But Ministry of Labour and Vocational Training Secretary of State Oum Mean said it was important for Cambodia to take advantage of the new interest sparked by relatively low labour costs; otherwise, investors could “run away from us”, causing workers to suffer.

“We have many laws and regulations comparable to other countries to reassure and give confidence to these investors, especially given we have enough manpower [to support them] with low labour cost,” he said.

Currently, around 35 South Korean garment factories operate in the Kingdom, according to Nam-Shik Kang, as the garment sector enters a period of modest growth after a decline in US retail demand hit exports in 2009.

In the first five months of 2010, Cambodia’s garment exports rose more than 11 percent compared with the first five months of 2009, official statistics show.

However, Nam-Shik Kang said, Cambodia is not without its barriers to business as well.

High electricity costs, high expenses and other documentation costs and a complicated union structure were all potential challenges for investors, he said.

“The Cambodian government should manage this well because of the opportunity to bring new investors to this country,” he added.

But Cambodia Institute for Development Study economist and President Kang Chandararot disagreed.

“I believe these things are not great obstacles – we see new investors coming, so obviously they think they still can get profit,” he said.

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