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H&M reassess strategy amid EBA withdrawal

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Garment workers at a factory in Phnom Penh. Swedish fashion giant H&M Group said they were evaluating how the EU’s decision to withdraw one-fifth of the ‘Everything But Arms’ (EBA) scheme would impact their business and production strategy in Cambodia. Hong Menea

H&M reassess strategy amid EBA withdrawal

Swedish fashion giant H&M Group said they were evaluating how the EU’s decision to withdraw one-fifth of the ‘Everything But Arms’ (EBA) scheme would impact their business and production strategy in Cambodia.

The move came following the EU decision last week to suspend the scheme on selected garment and footwear products, travel goods, and sugar. The withdrawal is due to affect around $1.08 billion worth of annual exports to the EU.

Its statement said: “Without EBA, it will be difficult to continue the necessary transformation of the textile industry required in Cambodia, such as in the development of the industry-wide collective bargaining agreement.

“It will negatively impact future investments, as well as predictability and trust, two crucially important elements of a well-functioning industry.

“It will also make it difficult for Cambodia to create a modern and competitive industry, with a skilled workforce, and where labour rights are fully respected.”

H&M Group said Cambodia would continue to be a very attractive sourcing destination if the country complied with the EU’s requirements and launched essential strategic initiatives to modernise the textile industry.

“This includes developing an industry where labour rights are fully respected, and where stability and competitiveness are safeguarded.

“H&M Group wants to continue to play a part in developing Cambodia in a positive way, including reducing poverty and strengthening human rights.

“However, due to a lack of adequate initiatives in developing the Cambodian textile industry, and a partial withdrawal of the EBA privileges, we will now need to evaluate our strategy in Cambodia,” the statement said.

Collective Union of Movement of Workers president Pav Sina said he agreed with H&M Group and called on the government to work with the EU to retain full EBA privileges.

“A collective bargaining agreement is hard to have even with EBA because the employers do not want to have it. They think that if a collective bargaining agreement is in place, workers can get more benefits than what is stated in the law.

“Such an agreement is currently applied at 30 or 40 factories out of more than 1,000 in Cambodia,” he said.

He said when EBA is lost, Cambodian products will be less competitive. Due to the tax which will be applied, Cambodian products in the EU market will cost more than those from other countries that still have EBA. Consumers will naturally opt for the cheaper product.

Ministry of Economy and Finance spokesperson Meas Sok Sensan declined to comment on the H&M Group’s statement. But he said the government was prepared to face the challenge.

“If we look at the situation as a whole, it is different from popular perception. People generally think that when we are required to pay tax, they [factories] will leave Cambodia. But many will stay because they understand that the work environment in Cambodia is not that bad.

“They will also be supported by government contributions. They may think that despite the amount of tax, they can still keep their production line in Cambodia. We will follow up on this,” he said.

Sok Sensan said the economy would be hit by global challenges including Covid-19, world security and external trade wars, and not due to the partial loss of EBA.

“The government will undertake four priority points to face these challenges. The first task is to create more jobs for those who may lose their jobs and encourage them to look for overseas jobs depending on their capacity.

“The second is to improve infrastructure and reduce unnecessary expenses for the private sector. The third task is to organise the budget so it can be spent effectively and efficiently, with the last task being to improve the state institution’s leadership,” he said.

In the meantime, Cambodian Federation of Employers and Business Associations (Camfeba) on Monday issued a statement expressing disappointment about the partial loss of EBA.

According to the statement The Post received on Wednesday, Camfeba said the EU’s decision was not the appropriate way to achieve what the EU wished to see in Cambodia.

It said it will join its members and the government to do what they can to negate the effects of the withdrawal. They also said they were committed to assisting workers and the manufacturing sector to continue to thrive and diversify.

“We ask buyers in the affected sectors to look at diversification in Cambodia to maintain job levels. We encourage factory owners and workers to engage in close cooperation in the coming weeks to maintain peace and stability in the economic environment.

“We also ask the government to be swift and innovative in its implementation of fiscal support to the sector’s employers and workers,” the statement said.

“Camfeba urges the European Commission and Members of the European Parliament to reconsider the decision to withdraw privileges as a method of achieving political aims,” the statement ended.

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