Unions and labour rights groups have spent recent months unashamedly drilling home a stark reminder: Cambodia’s minimum garment wage, at $61 per month, compares poorly with those in Thailand – where workers earn more than $200 a month – and Vietnam, which has a base wage of $110 in some areas.

One country deliberately left out of these comparisons is Myanmar, where, according to different sources, the minimum wage for garment workers languishes between $28 and $40 a month.

With the lifting of sanctions opening up what was long regarded a pariah state, stakeholders in Myanmar’s garment industry are expecting an explosion as Western investors seek to cash in on the opportunities such conditions spawn.

“In the near future, thousands of garment factories will appear in Myanmar,” U Aung Winn, vice chairman of the Myanmar Garment Manufacturers Association (MGMA), said in November.

The industry, in fact, has already been expanding. Although Myanmar was shunned by the West until last year, Japan more than doubled its orders from the country in 2011, as did South Korea.

This gathering of momentum has not gone unnoticed in Phnom Penh.

Vong Sovann, deputy secretary-general of the Ministry of Social Affairs’ strike resolution committee, told the Post that the government was strongly considering how an emerging garment sector in Myanmar might affect Cambodia’s billion-dollar industry, which provides about 85 per cent of the country’s exports and employment for 400,000-plus workers.

“Factory owners are always looking for places they can make money,” he said. “This is linked with the wage issue. Sometimes if workers are asking too much, investors will run to another place... and wages are lower in Myanmar.”

Because of this, Sovann said, the ministry was carefully considering its role in raising the minimum garment wage, especially after negotiations between factories and unions again ended without agreement last Monday.

Feeling the effects

It’s not just the government that’s keeping a watchful eye on Myanmar.

Ken Loo, Garment Manufacturers Association in Cambodia secretary-general, said the growth of that country’s garment industry was already affecting Cambodia.

“We are aware of some investors – factories, vendors and brands; you can’t have one without the other – who have plans to move to Myanmar,” he said.

With a minimum wage for workers of just $28 and a population of about 50 million people, Myanmar is positioned as an attractive marketplace for investors, Loo said.

Furthermore, Loo believes the country will begin receiving General Sales Tax benefits as early as June and eventually be granted other benefits and concessions from the US and the EU that Cambodia enjoys.

“They will be a very strong competitor to Cambodia in coming years. It’s important to keep costs to a minimum here – wages are a big component of cost, of course,” Loo said.

However, it’s ultimately too early for investors to go to Myanmar en masse, he insists.

“They need time to build up infrastructure,” Loo added, predicting that the nation was about four years away from offering Cambodia real competition.

Huang Dazhong, a representative of New Archid, a Hong Kong-based company that operates in Cambodia as a producer of garments and a vendor for big brands, said his company was looking to Myanmar as a potential new marketplace sooner than that.

“We will probably expand to Myanmar – or at least consider it – in the next two years,” he said.

New Archid has a factory in Kandal province that supplies to Swedish clothing giant H&M, and also acts as a vendor, or middleman, for H&M and other brands, by linking them with additional factories.

“The brands we supply have expressed interest [in Myanmar], but they know that right now is still not the right time.”

Myanmar does not yet have the infrastructure to handle an influx of major Western brands, but it would be difficult to say what will happen to New Archid’s Cambodian factories when it does, Dazhong said.

H&M spokeswoman Anna Eriksson said her company was always looking for “new production capacity”, but declined to elaborate on details of any long-term plans it might have for Cambodia and Myanmar.

“Currently, there are no concrete plans to buy products from Myanmar. Hence, we chose not to speculate as to [your] questions,” she said.

Fearing an exodus

When a contingent from Stanford Law School in the US visited Cambodia last month, Stephan Sonnenberg, a clinical lecturer from its International Human Rights and Conflict Resolution Clinic, said global brands were well placed to vacate a country quickly if they found a better option elsewhere.

“They can threaten to [leave Cambodia], and they have a global distribution network that’s engineered very specifically to be able to do that at very short notice,” he said.

To what extent brands, vendors and factories in Cambodia are willing to leave the country is something Rong Chhun, president of the Cambodian Confederation of Unions, is keeping a close eye on.

“It’s a real danger, and we’re worried about factories and buyers moving their investment to Myanmar and elsewhere,” he said.

Chhun, who has been part of a recent union push for a minimum wage of at least $100, however, believes such a pay increase would not place increased pressure on factories and buyers.

“People should not say that investors would move to Myanmar just because wages are low there,” he said. “Sooner or later, Myanmar will reform its industry, and its workers will be paid more than they are here.”

What the government really needs to do to protect the industry is to commit to eliminating corruption and better enforcing the Labour Law, Chhun said.

Yim Serey Vathanak, a trade unions national project co-ordinator for the International Labour Organization, believes established investors in Cambodia might be reluctant to start fresh somewhere else without major incentives to do so.

“Some brands race to the bottom and don’t want to be responsible for working conditions,” he said. “Maybe some [investors] are willing to move because their production here is small . . . but for those who want to keep their reputation, there isn’t much difference in leaving Cambodia for lower wages.”

Threats of such a migration, at this point, are a “red herring”, according to Dave Welsh, American Center for International Labour Solidarity country manager. “Brands are not yet showing signs that they support a Burmese industry,” he said, adding that a minimum wage of about $40, “to the extent that it exists” in an economy that’s not formalised, would rise as inflationary pressures took effect.

Many brands are not in Cambodia for cost-saving reasons but because the Kingdom’s industry, which has a monitoring system in the form of the ILO’s Better Factories Cambodia, provides good public relations material.

According to Welsh, “the race to the bottom is already happening in Bangladesh”, where wages are much lower than Cambodia’s and conditions are widely condemned.

If conditions do not improve in Bangladesh – where at least 112 workers died in a factory blaze in November – the country is more likely than Cambodia to lose part of its industry to Myanmar, Welsh said.

In fact, the Cambodian industry could continue to grow, as it enjoys trade benefits from the US and EU that Myanmar would likely not be granted, he added.

“Actually, the industry here is booming. The interesting stat is the growth in buyers from the rest of the world. The EU and the US are still where the vast majority of [garments] are going, but it’s growing elsewhere,” Welsh said. 

To contact the reporters on this story: Shane Worrell at [email protected] and Mom Kunthear at [email protected]

With assistance from Danson Cheong and The Myanmar Times