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Logo of Phnom Penh Post newspaper Phnom Penh Post - Cheaper power crucial to aid weak garment sector: survey

Cheaper power crucial to aid weak garment sector: survey

AUTHORITIES must move faster to cut electricity costs in order to breathe life into the country’s beleaguered garment industry, according to recommendations from a new survey of sector managers, which highlights widespread impacts from the global economic crisis while at the same time suggesting room for cautious optimism.

The report, released this week by the International Labour Organisation (ILO), presents a snapshot of the country’s key export industry, which has been hit hard by the global economic crisis.

Of factory managers surveyed, 88 percent reported being negatively affected, citing falling export orders, increasing costs and pressure from buyers to reduce prices as the main concerns.

“Many firms have reduced price in order to survive the global economic slowdown,” the report states.

Such pressures have seen factories shed employees and struggle to reduce costs in an attempt to stay afloat. At least 45,000 workers were laid off last year, Ministry of Labour statistics revealed in March.

Of the 66 factory managers surveyed, more than half reported having to adjust their workforce to cope with the crisis; one-fifth said they resorted to terminating permanent employees.

“These job losses potentially leave laid-off workers vulnerable to various forms of risky employment, exploitation, unsafe migration and trafficking,” the report states.

The report suggests an urgent need to break down critical constraints identified by factory managers, who specified high electricity costs as the chief concern.

The ILO acknowledged that the government has made moves to increase its energy supply and reduce costs, which are considered among the highest in the region.

“However, there remains an urgent need to identify shorter-term strategies for lowering electricity costs, such as accelerating the import of electricity from neighbouring countries and accelerating investment in hydropower projects,” the report states, arguing that lower electricity costs would make the industry more competitive.

However, the survey also noted that 60 percent of managers said they planned to hire new workers in the next 12 months, and more than half anticipated stronger demand for their products in the coming year, suggesting there may be some room for optimism.

“Although merely an expectation, this may suggest that the worst is now over for the garment sector,” the report states.

An industry representative said factories have seen an improvement in demand this year, but prices remain alarmingly low.

“Currently, the situation has improved in that there are now orders coming to garment factories,” said Ken Loo, the secretary general of the
Garment Manufacturers Association of Cambodia (GMAC). “However, the price levels of these orders are still very weak, meaning the factories may or may not be able to make any profit from these orders.”

During the 15th Government-Private Sector Forum Tuesday, Finance Minister Keat Chhon said the government will continue waiving its 1 percent monthly advanced profit tax through 2012, as well as helping to pay 0.3 percent of occupational-risk funds for garment workers until year's end.

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