Logo of Phnom Penh Post newspaper Phnom Penh Post - Strikes could undermine Cambodia's advantage

Strikes could undermine Cambodia's advantage

Strikes could undermine Cambodia's advantage

FEW could doubt the moral case for the strikes that look set to cripple Cambodia’s garment sector this week, but worker action could undermine one of the few advantages the Kingdom has over its competitors – low wages.

When garment producers look to Cambodia, low monthly wages remain one of the few competitive advantages the Kingdom has over major rivals in the industry.

At US$61 per month, Cambodia’s minimum wage for garment workers is one of the lowest in the world.

Only Bangladesh pays less at $45 per month, and neighbouring Vietnam offers a minimum wage of between $63 and $90 per month.

If Cambodia’s garment industry is to remain competitive on the global stage and raise wages, the key is to offer investors a reason to come to the
Kingdom.

And unfortunately little else about the country offers foreign companies a competitive advantage.

In terms of costs, Cambodia remains one of the most expensive garment exporters in the world.

Electricity, a major cost for factories, was three times as expensive in Cambodia last year as in Vietnam at $0.22 per kilowatt-hour, according to the International Monetary Fund.

And the Kingdom’s neighbour offers a workforce that the World Bank ranks as more efficient and productive than that in Cambodia.

In addition, garment exporters in Cambodia have been plagued by persistently high export costs. Given Cambodia’s lack of a deepwater port all shipments must go via Hong Kong, Singapore or southern Vietnam.

Therefore this week’s strikes pose a real threat to an industry that last year suffered a much more significant downturn than its main competitors and is only just in recovery.

After a 15.6 percent rise in exports in the first half of this year, Cambodia is only just starting to get back to the same level of production experienced before the onset of the global economic crisis.

It was notable that Cambodia faired much worse during the slump last year than competitors Vietnam and Bangladesh, a sign that buyers looked to more competitive products according to the IMF. Therefore, Cambodia’s dilemma of paying its workers well while remaining competitive on costs is an issue that must be addressed at the structural level of the economy.

In the long term, the government has to begin to initiate economic policies that don’t simply rely on paying the Kingdom’s workers a low wage.

If foreign companies were able to operate here without incurring high costs, the industry could compete and expand in a hugely competitive global market.

In many ways this week’s strikes represent a symptom of the main problems facing Cambodia’s economy – the key is therefore to cure the underlying problems.

Unfortunately, if companies were to pay the $93 per month demanded by unions then the Kingdom’s wages would be higher than Vietnam’s.

In such a scenario why would a foreign company decide to come to Cambodia?

MOST VIEWED

  • Stock photo agencies cash in on Khmer Rouge tragedy
    Stock-photo companies selling images from S-21 raises ethics concerns

    A woman with short-cropped hair stares directly into the camera, her head cocked slightly to the side. On her lap is a sleeping infant just barely in the frame. The woman was the wife of a Khmer Rouge officer who fell out of favour, and

  • Prime Minister: Take back islands from inactive developers

    The government will “take back” land on roughly 30 islands from private companies that have not made progress on planned developments, Prime Minister Hun Sen said in a speech on Monday that also targeted land-grabbing villagers and idle provincial governors. Speaking at the inauguration of the

  • Land on capital’s riverfront is opened up for investment

    The government has signed off on a proposal to designate more than 9 hectares of land along Phnom Penh’s riverfront as state-private land, opening it up for private investment or long-term leasing. The 9.25-hectare stretch of riverfront from the capital’s Night Market to the

  • Royal Group's Koh Rong luxury hotel officially opens

    The Royal Sands Koh Rong hotel on Monday marked its official launch as the first luxury resort on Cambodia’s most visited island. Prime Minister Hun Sen presided over the inauguration of the hotel, which has been open since December, and features rooms priced at