GMAC says orders are down due to wage hike

GMAC says orders are down due to wage hike

Reports that buyer orders in Cambodia’s garment sector slowed to a crawl toward the end of 2014 have triggered mixed reasoning from industry representatives.

Bloomberg reported on February 2 that for the first 11 months of 2014, orders for the Kingdom’s garment and footwear factories increased just 1 per cent year-on-year.

Ken Loo, secretary-general at the Garment Manufacturers Association of Cambodia (GMAC) told the news agency that the slowdown was due to rapid wage hikes, frequent strikes, political instability, and negative media coverage that have “damaged the competitiveness of Cambodian factories”.

Loo confirmed the 11-month buyer orders figure of 1 per cent but declined the Post’s request for comment.

“This should not be to everybody’s surprise given what has happened in the past 18 months,” GMAC deputy secretary-general, Kaing Monika said. “The industry is heading downward definitely. The Bloomberg report appears to be correct with exports to the US suffering from quite a severe drop [in 2014].”

Cambodia’s garment exports doubled from 2009 to the end of 2013, recording average year-on-year growth of 20.5 per cent, GMAC data show.

Cambodia’s minimum wage has increased twice following the nationwide strikes of garment workers in January 2014, which resulted in five people being killed after security forces opened fire on protesters with live rounds. In February 2014, the minimum wage rose from $80 per month to $100, and on January 1, 2015, wages again rose to $128 per month.

Signs of an industry-wide order slump surfaced at the end of 2014’s third quarter, when garment exports slipped to $1.61 billion, down 4 per cent from $1.68 billion during the third quarter in 2013.

Dave Welsh, country director for labour-rights group Solidarity Centre, contested GMAC’s reasoning that the downturn is due largely to the wage hikes and the early 2014 protests.

“The major calculation in this downturn is the horrendous press and the government’s response that ensued after the early 2014 protests,” Welsh said.

“Furthermore, given that current export figures are based on orders made well before the minimum wage announcement, it’s absurd to make any correlation between the two.”

Walsh said the Cambodian government’s response and lack of an investigation into the January 2014 protests and the yet-to-be resolved trade union law were also key issues impacting buyer orders.

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