Vietnam in WTO worries Cambodia garment sector

2007-01-22
By Seth Meixner

Cambodian garment manufacturers are seeing red over Vietnam's WTO entry last week, which they say threatens to undermine this country's crucial textile sector.

"When it comes to buyers, it still comes down to price," said Ken Loo, secretary general of the Garment Manufacturers Association of Cambodia.

"With Vietnam - the overall costs will be lower than Cambodia," he added. "Obviously, Vietnam's accession to the WTO grants them equal access to the markets. It poses a huge threat to Cambodia."

Labour-intensive industries like the garment sector are expected to benefit first in Vietnam, known for its industrious, low-wage workforce, experts say.

Loo said in a recent interview that better infrastructure and significantly lower production costs will also give Vietnam an advantage over Cambodia, which relies on the garment sector for more than 80 percent of its export earnings.

Cambodia's labour-friendly image allowed it to weather the end of a global quota system that insulated it from competitors, and some experts say this is enough for the country to continue attracting buyers.

One business analyst who did not want to be named pointed out "Cambodia's good and widely acknowledged record on complying with labor standards - which means that big international buyers don't have to worry about consumers boycotting them over sweat shops."

While Sok Hach of the Economic Institute of Cambodia, a local think tank, said, "The impact will be limited," adding that comparatively low wages and productivity similar to Vietnam would help counter any moves by Cambodia's neighbor into the market.

But when asked if Cambodia actually has anything different from Vietnam to offer buyers, Loo said: "Nothing much really, which is why we are so worried."

"Vietnam is our direct competitor and we are fighting for the same portion of the pie," he said.

Loo dismissed any comparative advantage Cambodia might have over its competitors on labor practices as "(labor) compliance people talking to other compliance people."

Cambodia's garment sector continues to expand - exports in 2005 totalled almost 2.2-billion dollars and the industry boasts nearly 300 factories employing over 280,000 people.

But the industry is going to have to reorganize with Vietnam's entry into the market, said Tuomo Poutiainen, chief technical advisor with the International Labour Organization's Better Factories Cambodia program, which monitors industry labour practices.

Vietnam's WTO accession "will undoubtedly increase the competition," he told AFP.

"In order for (the) Cambodian garment industry to be able to compete it must increase productivity, quality and lead times while retaining its reputation as having high labour standards," he added.

But labour issues also continue to plague factory owners, who complain that the government has failed to regulate unions which frequently strike, incurring heavy losses.

"We have many, many wildcat strikes, illegal strikes which result in huge production losses ... these are direct losses, which we can calculate. There are a lot of indirect losses like the loss of buyer confidence, not meeting production times," Loo said.

Unlike Vietnam, where laws allow only one labour union per enterprise, owners say Cambodian factories often grind to a standstill under pressure from numerous workers' groups.

"We've been trying over the past five years ... to encourage the government to take measures. It's an uphill task and we have not made much progress. We hope the government will start realizing the impact this has in this sector," Loo said.

But the ILO's Poutiainen said maintaining an attractive investment climate was responsibility of all parties.

"For the buyers to have faith in sourcing from Cambodia ... all industry actors need to pitch in and understand the value of collectively working for and marketing Cambodia as a stable, high quality sourcing destination with socially responsible production," he said.