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Wage fight ‘to wound’ key sector

Garment factories lost out on some $200 million in profits and another $70 million that should have been invested in production since workers walked out on December 25 in a strike for higher wages, according to Van Sou Ieng, president of the Garment Manufacturers Association in Cambodia.

Speaking at a presentation yesterday in Phnom Penh Hotel, Ieng said that in addition to missed profits, orders will go down 20 to 30 per cent this year, factories will have to rush through shipments to meet deadlines by using expensive air-freight options, and Cambodia will be thought of as high-risk by global brands, which will reduce prices.

“Now the factories are trying to recover from lost production time to deliver, and I am 80 per cent sure that no factory is making money because all will be shipped by air,” said Ieng, who appeared emotional over the crisis. “Over six months or four months, all the factories will lose money.

“[I hope] this year that the buyer continues to place the same quantity of orders – which I doubt,” he said. “In reality they will not do that; we will expect 20 to 30 per cent losses of orders. We might expect some buyers to reduce prices because they can say, ‘I take the risk in a place like Cambodia’, because it is a country of risk – which is happening.”

Until buyers can be given a guarantee of greater stability, prices will remain low, Ieng said.

He was speaking just days after garment workers armed with sticks, homemade weapons and rocks clashed with pro-government security forces outside Canadia Industrial Park in southwest Phnom Penh, leading to the shooting deaths of five protesters and dozens of injuries on Friday. All of those killed worked in Cambodia’s largest manufacturing industry, which accounted for $5.07 billion in exports through the first 11 months of this year. The walkout began after the government raised the minimum wage in the sector to $95, instead of $160 as demanded by unions.

Factories in provinces have reopened, with 80 per cent of workers returning, but some in Phnom Penh were operating with just 30 per cent personnel, according to Ieng.

Despite the disproportionate response from military police during clashes, Ieng pointed the finger squarely at “minority trade unions” for not being satisfied with the minimum wage increase and for stirring up “anarchy”.

Several prominent unions did not return calls seeking comment.

Minimum wage negotiations “should not be held under threat.… That isn’t what a democratic society should accept,” Ieng said, adding workers would lose their jobs if wages rose to $160.

A lack of transparency in company profits, however, does little to back up GMAC’s claims, according to Dave Welsh, country director for labour rights group Solidarity Center (ACILS).

“Doing the simple math, the overall conversion and growth from the industry … show [that] frankly, more than any other industry or at least to the same extent as any other major garment industry, there is room for dramatic improvement and dramatic increase in the minimum wage,” he said. “By GMAC’s own admission, they could absorb 150,000 more workers tomorrow.”

The quasi-governmental committee that sets the minimum wage lacks sufficient input to resolve the dispute, resulting in a flawed process responsible for the rising tensions, Welsh said.

“I don’t think workers left to their own devices find it an ideal way to spend a week facing guns and abuse by security forces. I am sure they would much like the labour law to be applied, and that demands good faith and negotiations industry-wide.”

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IsNoGood's picture

Dear Dave Welsh, country director for labour rights group Solidarity Center (ACILS).

Im sure your been isolated from reality for some time, but also that your job, is not determent by market or what local NGO works are getting in Laos, Vietnam or some of their other locations that any of the factory's are able to move to in matter of days.

Asking a private company to share financial info ? are you for real ? may I see your accounts so im able to make sure your salary is fair

Your likely one of the masters of democracy, who use the fact that Cambodia is relative open NGO's to setup your shop, why don't you move to Bangladesh that looks to have more issues ? And look to need your help more,

IsNoGood's picture

Perhaps a reminds from the US embassy cables:

http://www.wikileaks.org/plusd/cables/08DHAKA224_a.html

ACILS, Welsh finds the assertion that EPZ investors are ready for full unionization to be incredible, noting the past strong resistance of the investors to any labor organization efforts. Separately, ACILS also expressed the concern that full unionization in the EPZs could also lead to the introduction into the EPZs of more politicized unions from the broader national labor milieu. END COMMENT.)

Brenton's picture

It is ridiculous to ask private enterprises to reveal their profitability, they do not ask you to share their risks and losses. If due to strike or bad quality created by the workers, will Solidarity or the workers compensate the employers for losses ? Buyers knows that Cambodia labour is cheap but there are risks buying from Cambodia, e.g. poor quality compare to well established market like China, Indonesia and Thailand. There is also risk of non or late deliveries due to strike. Sometimes air freight garments may not help if the merchandise arrives too late for the season and the retailers will miss their earning target, buyers can lose their jobs too. So they will negotiate aggressively to get lower prices comparing to other markets to justify the risks.

The market cannot absorb dramatic increase in wage, this may force some factories to close and locate to cheaper markets. Most USA/Europe retailers and brands will issue statements about protecting labour rights but the actual buyer placing the orders will only focus on getting the price they want from a high risk market like Cambodia. Overnight this could make thousands of workers to lose their jobs.

The market ability to absorb more workers does not mean that the market can absorb dramatic increase in wage. Dear Dave Welsh, how many of us can double our monthly salary in our career life ???

Though the wage may be low compare to other markets, other costs are higher, e.g. freight which inflate all raw materials, equipment, etc.

Wage should be negotiated responsibly and not by force. Worker should not be manipulated for political purposes. All stakeholders and facilitators must act in the interest of the industry and the country as a whole.

Brenton's picture

At today wage level, Cambodia is competitive but strike is quite common. Double the wage and with the level of strike going on today, would potential investor still want to build factories in Cambodia to absorb 150,000 new workers ? Factories in Cambodia have closed because they could not sustain losses from strikes. Many potential investors may consider setting up factories in Vietnam which has a much larger and more stable labour pool. Vietnam also have a better support industry for apparel manufacturing like trims, fabrics, etc. Myanmar may be also be a better location. Cambodian workers may be the biggest loser if wage issues are not responsibly managed for the long term. Maybe it's time to reform laws governing labour unions to ensure fairness for all and ensure Cambodia continue to be a competitive market.

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