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Costs don’t top brands’ concerns

Garment workers rally for a $160 minimum wage in Phnom Penh
Garment workers rally for a $160 minimum wage in Phnom Penh in December. Vireak Mai

Costs don’t top brands’ concerns

In their latest bid for a $160 minimum monthly wage for the garment industry, independent unions will lead a “stay at home” strike late next week.

While the chances of that figure being approved anytime soon seem slight – the government has only just announced a date for a committee to begin wage reform talks – industry and government officials have warned that another raise could drive factories and international brands out of Cambodia in search of cheaper markets.

According to International Labour Organization figures released early this year, Cambodia paid the fifth-lowest minimum wage of the world’s top 25 apparel-exporting countries and Myanmar. Only Pakistan, Bangladesh, Sri Lanka and Myanmar paid less than the Kingdom’s $100 per month.

The idea that buyers would commit to paying more to facilitate higher wages for workers in the industry seems unlikely to Ken Loo, secretary-general of the Garment Manufacturers Association in Cambodia (GMAC). Apparel firms that buy from Cambodia are only willing to pay so much before pulling out in favour of cheaper countries, he said.

“If the price that we’re costing buyers increases . . . then buyers will leave. It’s not a question of them wanting to leave, it’s a question of economics,” Loo said, adding a rising the minimum wage had already driven some brands out of the country – though he did not name any when asked.

In a speech on February 25, Prime Minister Hun Sen echoed the sentiment, sounding the alarm that factories and buyers could leave the country if the government implemented a wage hike.

“We are waiting to see if there are any factories that close their doors because of strikes demanding higher wages,” he said.

But analysts, rights groups and buyers themselves say government repression and acts of violence against unionists in the Kingdom’s garment sector – security forces shot dead at least four people in January – are a greater threat than the prospect of paying higher wages.

Sourcing from Cambodia is more expensive when compared to other Asian garment hubs such as Bangladesh and Myanmar. However, major apparel brands that buy from factories in Cambodia do so more for public relations reasons than cheap labour, said Dave Welsh, country director for labour rights group Solidarity Center.

In Welsh’s talks with buyers since the deadly strike in January, their apprehensions skewed more to news of violence than demands for higher wages. “Based on our conversations, it’s the human rights and labour law violation and the very, very bad press . . . that’s causing concern,” Welsh said.

Brands’ primary reason for being in Cambodia, he added, was the perception that the Kingdom had a “model industry”, boosted by its stringent 1997 Labour Law.

But the government’s use of heavy-handed tactics against unions pushing for higher wages has damaged that reputation, he said. “In the international community, in the last four months, that image has been eradicated.”

In emails to a Post reporter, spokespeople from H&M, Gap and Levi Strauss & Co listed human rights violations and resulting instability as their top concerns.

The Levi spokesperson said the company supports the government’s current work on a wage-setting mechanism, but did not specifically answer whether it would pay more in order for workers to earn a $160 minimum wage. Levis said the company is working with “all parties” to restore Cambodia’s standing as a country that “distinguishes itself through support for labor rights”.

While the brands would not say under what circumstances they would consider leaving Cambodia, Sumana Rajarethnam, a senior analyst for The Economist Intelligence Unit, said in an email that looking to cheaper markets posed a risk to brands’ reputations.

“Producers may be looking at countries such as Bangladesh or Myanmar as alternative destinations, but political risk in those countries is . . . high,” Rajarethnam wrote. “Working conditions and wages are perhaps not as good, so there is a reputational risk.”

Even if brands were to leave and factories shutter as a result, Solidarity Center’s Welsh said, in an industry in which some 600 factories pull in about $5.5 billion annually, any factories that closed down would soon be replaced by more.

ADDITIONAL REPORTING BY MOM KUNTHEAR

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