Next year the world's garment industry enters a brave new world. The current quota
system that limits access to key markets will be abolished for all World Trade Organization
This is good news for garment giants such as China. But for Cambodia, it means tougher
competition. Whether or not the country itself has joined the WTO by then, its favorable
bilateral textile agreement with the United States, allowing generous quotas for
improved working conditions, will be abolished. And with production costs being higher
than those in neighboring countries, there are even fears that the country's garment
industry will pack up and go.
According to Ken Loo, secretary general of the Garment Manufacturers Association
in Cambodia, saving the industry after 2004 is a matter of reducing bribery and bureaucracy.
"We are being sucked dry by the unofficial fees. This gives us higher production
costs. I am talking about corruption, bribery. But also bureaucracy: there are simply
too many steps in the process. So both need to be decreased. One without the other
is not good enough. Things have improved, but we need more quick and dramatic changes.
I am not saying the government is not responding enough. But I am saying they need
to respond in a way that is more in keeping with the urgency the industry is in.
We only have six months to go."
What can the industry do to become more competitive?
"Although we have a reputation for delivering on time, we are behind in lead
times. What takes 55 days in China takes 90 days here. Workers here are less productive.
So we need to be more efficient. Another major problem is that raw material needs
to be imported from China. The Chinese control the whole value chain - from cotton
to exported clothes. That is their biggest advantage. In the long run, we must build
a similar chain. But that will take many years."
What is the general feeling in the industry at the moment?
"There is still a cautious optimism. We do see some new investments coming in.
And some may also feel that the US and European Union will not allow China to dominate
the market. Until 2008, there will still be a safeguard mechanism reimposing quotas
if one country becomes too dominant. Because of this, buyers will not set themselves
in the position of being dependent on one country. There needs to be an alternative
to China. That could be Cambodia. Another reason for the optimism is the social responsibility
label the bilateral textile agreement has given us."
How much is the label of Cambodia, as a place with decent working conditions, really
"The simple answer is that we don't know. There is value in it for top end buyers,
for sure. But that is not enough, they only account for a small number of all the
factories. So after the summer, we will take action to market this more. However,
we don't have the resources to do it all by ourselves, so we seek partners, like
You are also using lobbyists to pressure the US to lower its tariffs against Cambodia
after 2004. Why is this issue so important?
"It is important, both in terms of lowering the costs and morally. It is a way
for the US to indicate to the rest of the world: 'We are rewarding Cambodia for having
good labor standards.'
"We need a new signal after the quotas. With this and the improvements in productivity,
bureaucracy and corruption crystallizing, chances of survival are much better. In
March or April next year we will see the first signs of how much impact this has.
"We are trying our best, and I don't think anybody is going to leave just yet."