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Factories to foot the bill for new worker benefits

Garment workers walk along a street in Kanda Svay Rolum commune for a lunch break earlier this year.
Garment workers walk along a street in Kanda Svay Rolum commune for a lunch break earlier this year. Alex Willemyns

Factories to foot the bill for new worker benefits

Garment and footwear manufacturers have called on the government to provide facilities to help offset the higher costs on production that they will face as the result of a benefits package that Prime Minister Hun Sen pledged to garment factory workers this week.

The premier announced on Sunday that Cambodian garment factory workers would receive free health care from their employers, free access to public transport, and a minimum wage increase to at least $168 per month, from the current $153.

Kaing Monika, deputy secretary-general of the Garment Manufacturers Association in Cambodia (GMAC), said yesterday that the industry body’s members were concerned about their ability to remain competitive. He said the benefits package, if it comes into effect, would require the nation’s garment and footwear manufacturers to spend at least an additional $10 million per month on factory worker wages, and another $3.5 million per month on health care.

“We believe that the government has done a clear study and considered carefully before making the decision,” he said. “However, we hope that the government will facilitate and provide some encouraging policies to offset the additional costs and to support the private sector, otherwise we will face hard times.”

Kaing proposed that the government provide facilities to help manufacturers lower their operating costs such as lower electricity fees, eliminate unnecessary red tape, and implement reforms to improve the logistics system.

Cambodia’s garment and footwear industry generated over $6.5 billion last year while providing jobs for about 700,000 workers. Factory worker salaries continue to climb, with the minimum monthly wage increasing to $153 this year, from $140 in 2016.

In addition to raising the official minimum wage, the government has put in place the National Social Security Fund, a national scheme to provide health insurance and worker injury compensation to factory employees.

Currently, contributions to the fund are split between the worker and their employer, with each paying 1.3 percent of the worker’s gross monthly salary. Starting January 1, according to the premier’s announcement, employers will cover the entire cost of the health insurance scheme.

Monika said while the revised payment system would raise the operating costs of employers, taking care of workers’ health was a priority of GMAC, as it can improve morale and raise productivity.

“We hope that when our workers receive more advantages, they will love their job and maintain the stability of the industry,” he said.

“What we want from workers in return is for them to increase their productivity, because when production costs increase the only way to offset these costs is to increase productivity.”

Chan Sophal, director at the Centre for Policy Studies, said labour productivity in Cambodia is lower compared to neighbouring countries, leaving more room for development. He said improving workers’ wages, health care, transport and working environment was likely to benefit employers by resulting in increased worker efficiency.

Sophal noted that while the garment sector is a footloose industry, a small increase in local production costs was unlikely to make manufacturers consider relocating from Cambodia to another country as wages were also rising in rival garment-producing countries such as Vietnam and China. The additional costs of production would ultimately be passed along to buyers.

“If international buyers can offer a higher price for our products, [in recognition that it] will contribute to improving workers’ living conditions, it will also help to maintain investors,” he said.

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