After weeks of occasionally tumultuous negotiations saw 2016’s minimum wage for garment workers raised to $140 earlier this month, Prime Minister Hun Sen warned yesterday that the new rate could cause factories to flee Cambodia, even though he was credited with personally intervening to push the number higher.
“In Myanmar, workers’ wages increased to $67, Laos is at about $80, Bangladesh’s special economic zones receive $75, India and Nepal are still very low, but in Cambodia, the wage will reach $140 in a few months,” the premier said during a speech at the National Institute of Education in Phnom Penh yesterday.
“So, maybe some factories will move out of Cambodia to places where the price of labour is cheaper. But we all have to try and work together in order to keep those factories in our country.”
The warning comes despite the fact that Hun Sen was credited with a last-minute $5 increase to the final wage when it was announced on October 8.
William Conklin, country director at the US-based Solidarity Center, said that warnings about cutthroat competitors stealing Cambodia’s largest export earner hadn’t panned out in the past, while the premier’s $5 intervention likely had an eye on the upcoming 2018 elections.
“I think it’s something they say every time,” Conklin said. “[But] there’s no indication that brands are moving away.”
The effects of the previous minimum wage hike, which came into effect on January 1 and boosted the base salary of garment workers from $100 to the current $128 a month, remain unclear.
Although employers warned that the increase could wreak havoc, the Ministry of Commerce reported that garment exports for the first half of 2015 increased 9 per cent year-on-year.
Meanwhile, in June, an International Labor Organization bulletin said that factory openings for the year so far exceeded closings by 16, although ILO experts warned not to draw conclusions from the data.
Employers remain adamant, however, that unless key issues in the garment sector are resolved, next year’s $140 rate will cause more factories to take flight.
“If buyers do not pay more, it’s a foregone conclusion,” said Ken Loo, secretary general of the Garment Manufacturers Association in Cambodia.
“We need to raise productivity, and we need to get together with the trade unions to put pressure on buyers to pay us more.”
Nevertheless, Loo said that hoping for buyers to up their prices was ultimately “wishful thinking”.
“Why should they pay more if they are able to source the same product cheaper from other countries?”
Sweden-based retailer H&M is the only foreign brand to publicly back next year’s raise so far, but did not respond as of press time to questions about whether it would fork out more to Cambodian factories.
On the shop floor, the debate about the industry’s economic sustainability seems far off. Some garment workers remain disappointed that the minimum wage was far from the $160 figure pushed for by the unions.
With union leaders meeting on Wednesday to discuss whether to hold demonstrations on the matter, Pun Sina, a 35-year-old worker at the Tai Nan factory in Kandal province, said she would consider joining if enough workers took part.
“I am very happy [about the increase], but am also concerned that the price of goods at the market will be increased when they know workers got higher wages,” she said.