The future of the Cambodian garment and footwear Industry

The Cambodian garment and footwear industry continues to be plagued by violations of Core Labour Standards (CLS) and chronically low wages, a recent study by Friedrich-Ebert-Stiftung found.

A roundtable discussion in Phnom Penh on July 5, 2017 saw representatives from trade unions, government ministries, employer organizations, brands, the International Labour Organization (ILO) and non-governmental organizations (NGOs) come together to discuss the future of the industry in light of these findings.

The research was conducted as part of the Friedrich-Ebert-Stiftung’s regional project on Core Labour Standards Plus (CLS+). It found particularly concerning violations with regards to job security, work intensification and freedom of association. The study, written by Edlira Xhafa and Veasna Nuon, makes a number of policy recommendations regarding industry in general, and the development of industrial relations in particular, in the context of a globalized production chain.

"Transformations in the industry would not simply require higher wages, but also incentive-led skills upgrading and labour-law enforcement"

Speaking as part of the panel responding to these recommendations, Chea Sophak, economist with Cambodia’s Ministry of Economy and Finance, outlined many of the challenges that the industry is still facing. But he emphasized that a new garment and footwear sector strategy is being developed by the Supreme National Economic Council with the aim to strengthen the sector and begin to move up the value chain. Chhuon Momthol, President of the Cambodian Union Federation, said that transformations in the industry would not simply require higher wages, but also incentive-led skills upgrading and labour-law enforcement. He also said that stronger respect for the law from unions and employers can lead to much-needed improvement in industrial relations.

The Cambodian garment industry grew under the US-Cambodia Trade Agreement on Textiles and Apparel (TATA), which from 1999 to 2004 linked social and labour clauses to US import quotas. This led to temporary improvements in labour standards and in 2001 the establishment of the ILO monitoring project Better Factories Cambodia (BFC). BFC continues to play an important role in monitoring factories. They have also supported the development of the supreme national economic council’s new industrial strategy to strengthen the garment and footwear sector, said Sara Park, technical officer at Better Factories Cambodia.

Growing pressure on labour standards and wages emanates in large parts from buyers and brands purchasing practices and prices.

But participants also underlined the work still to be done. Yang Sophorn, President of the Cambodian Alliance of Trade Unions, asked “how can we make the sector stronger, whilst also protecting workers’ rights and improving living conditions?” Citing issues around a liveable minimum wage and labour law enforcement, she pointed out that, although the burden to address these issues lies with the government, brands and buyers must also take more responsibility.

The issue of buyers’ responsibilities and purchasing practices became a key theme throughout the discussion and the research. After TATA ended in 2005, the Cambodian garment industry found itself at the mercy of a hyper-competitive global garment industry, competing with, among others, China, Vietnam and India. This led to a growing pressure on labour standards and wages, emanating in large parts from buyers and brands purchasing practices and prices. Kim Pichda, legal manager at the Garment Manufacturers Association of Cambodia (GMAC), believes that Cambodia is still an ethical production hub, but that ethical production requires fair pricing from further up the supply chain.

One key recommendation resulting from the Friedrich-Ebert-Stiftung research is the development of industry collective bargaining, an attempt to embed the global brands further into the industrial relations in Cambodia

The asymmetric power relations of the global garment industry impose constraints on Cambodian industrial development and create pressures in factories and at national level—especially at times when trade unions are actively organizing for higher wages. Addressing these supply chain dynamics is therefore crucial to improve labour standards in the garment industry in Cambodia and beyond. One key recommendation resulting from the Friedrich-Ebert-Stiftung research is therefore the development of industry collective bargaining, an attempt to embed the global brands further into the industrial relations in Cambodia. The concept was, in theory, welcomed by all participants on Wednesday. However, concerns were raised that the collective bargaining system, even at the factory level, does not yet function sufficiently well.

Participants in Wednesday’s roundtable generally agreed with the findings of the research that, in Cambodia, trade agreements and preferential market access through the EU General Scheme of Preferences have led to significant growth in the industry and in industrial employment. And yet, despite initial attempts to include social and labour clauses in the US-Cambodia agreement, decent work remains elusive and concerns of freedom of association and collective bargaining rights have become stronger. The industry needs to overcome a number of serious challenges in terms of technological investment, skills development and respect for CLS+. Reforming international trade agreements and preferential schemes are an important tool to addressing the supply chain dynamics that lead to these decent work and developmental deficits.   

The Friedrich-Ebert Stiftung research on Cambodia is part of a wider CLS+ project, which was recently discussed at a meeting in the European Parliament in Brussels.