The Phnom Penh Post article titled Unions agree to push for $177 wage at meet published on June 23 reflects a debate on what should be the appropriate level of the legal minimum wage in Cambodia today.
Ken Loo, secretary-general of the Garment Manufacturers Association in Cambodia, was quoted as saying about the unions’ target that “$177 per month is unreasonable, and much higher than other competing garment manufacturing countries”.
He reportedly added that “current levels are [already] high, and we are not competitive with current levels”.
In reaction to the above assertions by the employers’ representative, I would like to make two remarks.
• Firstly, with regard to the current salaries of Cambodian workers compared with those of their counterparts in other countries, it would be more appropriate to compare real salaries and not nominal salaries.
Travellers and tourists know that the cost of living in Cambodia is notably higher than in neighbouring countries, especially Vietnam, which is our main competitor in the garment sector.
Given the differential in the cost of living, it would be only fair and socially responsible to recognise that, in terms of living standard, Cambodian workers still have a long way to catch up with their counterparts in many other countries, especially Vietnam.
Such a discrepancy continues to prevail notwithstanding the fact that Cambodia and Vietnam have set similar nominal minimum wages expressed in US dollars ($128).
The difference in living standard is obvious for any observer who pays close attention to Cambodian workers’ relatively and extremely poor living conditions.
An analysis based on the concept of Purchasing Power Parity (PPP) would lead to the same conclusion.
One of the reasons why the cost of living is higher in Cambodia than in neighbouring countries is the fact that Cambodia has a dollarised economy: our national currency, the riel, only represents a tiny portion (approximately 5 per cent) of the money supply and is practically pegged to the US Dollar.
The lower level of real salaries for Cambodian workers is compounded by poor or inexistent or, when available, costly public services in our country while workers in other countries such as Vietnam enjoy better public or social services (urban transports, housing, health care, children’s education) or have to spend much less on such crucial services.
• Secondly, with regard to Cambodia being “not competitive”, it is worth pointing to the fact that, in the garment industry, workers’ salaries represent less than 20 per cent of total production cost and are not the only – and not even the main – factor affecting the industry’s competitiveness.
The main factors jeopardising Cambodia’s competitiveness vis-a-vis neighbouring countries are: poor infrastructures leading to higher transportation costs; abnormally high electricity cost; shockingly high merchandise handling and scanning costs at state-run port facilities; and, most importantly, corruption-based costs disguised as “administrative costs” (facilitation fees, unofficial taxes, various bribes paid under the table, imposed profit-sharing schemes, state racket practices).
Turning a blind eye to these corruption-based costs that most seriously affect competitiveness is unfair to workers who are presented as scapegoats allowing the authorities to hide their responsibilities for making investors incur undue and exorbitant costs, thus jeopardising the country’s competitiveness.
Cambodia’s dollarised economy, besides pushing up the cost of living for the local population, also weakens the country’s competitiveness in international trade.
In contrast, over the past 10 years, Vietnam has devaluated its currency, the dong, several times, especially vis-a-vis the US dollar, in order to boost its competitiveness.
A country with a weak economy – like Cambodia – cannot adopt a strong foreign currency – such as the US dollar – as its own without serious consequences for its competitiveness (see also the example of Greece with the euro).
In conclusion, responding to the government and the employers’ arguments in the ongoing discussion about the possibility or the opportunity of raising the minimum wage for workers, I would like to stress that the big battle to preserve Cambodia’s competitiveness does not primarily depend on the workers, but on the government and the employers themselves when it comes to stopping corruption practices and implementing reforms meant to make Cambodia a better run and a more business-friendly country for legitimate investors.
I am sad to notice that, under the present circumstances, because of a lack of political will to address the real issues facing Cambodia, the sacrifices necessary to preserve the country’s competitiveness are very unfairly imposed on the workers alone.
We are led to ask this final question: What is the real purpose of industrialisation?
Is it industrialisation for the sake of industrialisation? Or does it also and mainly concern the well-being of the people behind the industrialisation process, meaning the workers as human beings?
As long as this growing segment of the population is merely considered as a factor of production that must be shaped to ensure the industry’s competitiveness at any cost (remember the four workers shot dead in January 2014 for asking for an increase in the minimum wage and better living conditions), the country’s social fabric is in jeopardy and Cambodia would never be able to achieve the sustainable and equitable development we are longing for.
Former finance minister