$10 pair of jeans made in Cambodia is a hot item in recession-hit Japan

Legs to stand on: Jeans priced at 990 yen are displayed at the Nishikasai g.u. shop in Edogawa Ward, Tokyo, on April 8. MINORU MATSUTANI PHOTO

Cheap jeans fitting well in recession

Uniqlo spinoff g.u. makes a statement with ¥990 dungarees, but profit proving elusive

Wednesday, April 15, 2009
By MINORU MATSUTANI
Staff writer
The Japan Times

Nobody can ever have too many pairs of jeans, and thus the philosophy of GOV Retailing is to make them available on the cheap — a notion that is paying off for the new g.u. chain.

GOV Retailing, a wholly owned subsidiary of Fast Retailing Co., began selling ¥990 jeans at its 69 g.u. outlets on March 10. That's a quarter of what denim pants sell for at Fast Retailing's Uniqlo stores, which have set the new standard for low-priced clothing and are thriving on the recession.

"We are offering the lowest possible prices for a pair of jeans, in the process changing the widely held view that jeans have to cost more," GOV President Shuichi Nakajima said in an interview with The Japan Times.

G.U. is off to a hot start. In the first month, sales of the ¥990 jeans were double what the company had expected, leading the firm to raise its annual target to more than 1 million pairs from its initial goal of 500,000.

If the forecast is met, the jeans sales will probably account for about a quarter of the ¥4 billion in combined sales the 69 g.u. outlets across Japan logged in the business year to last August.

Ultracheap jeans made headlines when Fast Retailing President Tadashi Yanai announced a new product lineup at a news conference last month. His Uniqlo chain had already achieved supremacy in the cheap clothing arena, and it appeared he was on a quest to expand further.

"We first thought of selling jeans for ¥1,490, less than a half of ¥3,990 at Uniqlo. But Yanai told us at a weekly meeting in October that ¥990 would have a bigger impact," Nakajima said. "Everybody in the meeting agreed, and then we began working on it."

Before then, GOV employees had been negotiating with factories in Cambodia with the aim of setting the retail price at ¥1,490, but after this decision, Nakajima and his colleagues paid visits to the factories to negotiate further cost cuts. The company uses fabric from China and manufacturers in Cambodia to make the ¥990 jeans.

GOV Retailing also pursued various cost-cutting measures, including reducing the number of material suppliers and factories producing its clothing.

It also uses the same fabric for as many outfits as possible and shares resources with Fast Retailing, he said, declining comment on further cost-cutting details.

The ¥990 jeans have been a success. "We wouldn't do it if it was losing money," Nakajima said.

Although the profit margin from the jeans may be small, it gives GOV Retailing name recognition and customers who frequent g.u. shops buy other products, Japaninvest Group PLC analyst Mikihiko Yamato said, adding that the Uniqlo connection adds to the ¥990 jeans' reputation.

"Just because they're cheap, it doesn't mean they will sell. But because Uniqlo does it, (the jeans) sell," Yamato said. "Everybody knows Uniqlo for its low prices and decent quality."

The ¥990 jeans are a perfect fit for the recession, when consumers crave cheap goods, he said, noting that the apparel industry has watched sales plunge dramatically since November.

Same-store clothing sales at large department stores fell a record 14 percent in December from a year ago, according to the Ministry of Economy, Trade and Industry. The ministry began releasing the monthly data in 1988.

But same-store sales at Uniqlo in Japan, have shown year-on-year rises in every month except October, according to Fast Retailing, whose business year starts in September. GOV does not disclose statistics for g.u.

Fast Retailing started the g.u. brand in October 2006 and has yet to achieve a profit. It posted a group net profit of ¥35.6 billion in the six months to February, up 26 percent from a year earlier, even after consolidating GOV's loss.

GOV Retailing hopes g.u. can turn a profit by attracting customers with its low prices. Other products include T-shirts and polo shirts selling for half or a third the price of their Uniqlo counterparts.

Analyst Yamato believes the g.u.-Uniqlo price differential means the two chains aren't in competition with each other.

"Those buying g.u.'s ¥990 jeans buy them because they put affordability before quality. But those buying Uniqlo's ¥3,990 jeans buy them because they want to buy from Uniqlo," he said, noting, however, that g.u. jeans' quality is "good enough."

Nakajima hopes the ¥990 jeans enhance g.u.'s name recognition. The brand is derived from the term "jiyuu" (freedom).

"Everybody knows Uniqlo, but nobody knows g.u.," he said.

"We created the brand to make consumers ask, 'Why don't we wear clothes more freely?' Because our products are cheap, people can buy them without hesitation. We created the brand to bring joy to our consumers," he said.

"It's just a coincidence that the economy is in recession. But we will continue to provide low-priced clothes even when the economy is good."

University student Saki Obi, 18, hanging out at a g.u. shop in Edogawa Ward, Tokyo, after school recently, said, "Jeans are a type of clothing we cannot have too many of, so it helps a great deal that they are so cheap."

She said it was just a matter of time before she bought a pair, but added, "My mother bought them."

Chea Mony calls for a nationwide demonstration

Chea Mony, FTUWKC President (Photo: Cambodge Soir Hebdo)

Thursday, March 26, 2009
Everyday.com.kh
Translated from Khmer by Socheata

Chea Mony, President of the Free Trade Union of Workers in the Kingdom of Cambodia (FTUWKC) called for a demonstration to protest the firing of union representatives in a number of factories. Chea Mony told reporters in the morning of 25 March that Cambodia, just like any other countries in the world, is facing with financial crisis, Cambodian factories have closed their door one after another, and some factories were firing workers for no justified reason. He added that, up until now, 19 representatives of the workers who are also union representatives were fired, and their firing did not respect the labor law rules. He claimed that he will lead a mass strike in the entire country in order to protest the firing of union representatives. Chea Mony did not indicate the exact date of this demonstration yet, but he indicated that it will be held soon. Regarding this planned demonstration, the Kampuchea Thmei newspaper said that it could not contact Touch Naroth, the Phom Penh police commissioner, to obtain his reaction because nobody picked up his phone.

CAMBODIA: 'Getting Decent Jobs for Women - The Challenge'

By Andrew Nette

PHNOM PENH, Aug 14 (IPS) - ‘Women are cloth, men are gold’. This traditional Khmer saying is quoted by many studies on gender in Cambodia as emblematic of the different value accorded to men and women in this country of 14 million.

But it takes on a different perspective in Cham Choa district and other areas of Phnom Penh, the heart of the country’s garment industry.

Rooming houses, shacks and apartment blocks intermingle with large nondescript factory buildings. Legions of mainly young female workers mill around stalls selling produce, toiletries and clothing.

These women are part of a major shift in the Cambodian economy over the last decade as employment opportunities slowly move from agriculture to new industries such as services, garment export and construction.

Cambodia’s women are at the forefront of this transition.

According to the soon to be released Cambodia Gender Assessment (CGA), produced by the Ministry of Women Affairs, Cambodia’s female labour force participation rate is high by regional standards, at 71 percent of the working age population over 15 years of age.

This is compared to 64 percent in Thailand, 56 percent in Laos and 87 percent in Vietnam.

"More than 50 percent of the active female population contribute to the economy of their country," said Dr Ing Kantha Phavi, Minister for Women’s Affairs, in an interview with IPS. "The problem is that this [contribution] is still mainly in the informal sector."

"The challenge Cambodian women face is not just to access employment, but decent, better paying employment."

While the majority -- 83 percent -- remain self-employed or unpaid family workers, new employment opportunities for women have opened up, particularly in the garment industry, which accounted for 1.4 percent of total female employment in 1998, rising to 5.5 percent in 2004.

This is part of what many believe has been a gradual positive shift in the situation of Cambodian women over the last decade.

"Positive trends towards greater equality include increasing girls enrolment in primary education (and resulting rises in female literacy) and expanded employment opportunities," the World Bank’s 2007 Cambodia Report noted.

Observers believe much of this progress is the result of sustained, if highly uneven, economic growth over the last few years. Poverty levels fell, according to the Bank, by 47 – 35 percent between 1994 and 2004.

At the same time, years of war and civil conflict have left Cambodia’s health, social and economic indicators among the worst in Southeast Asia.

As part of this, women continue to face serious economic, legal and social barriers, which the Bank says are part of a broader institutional bias against the poor and marginalised.

"Significant traditional inequalities persist and new ones are emerging," said the Bank, reinforced by lower standards of education and prevailing attitudes regarding what are ‘appropriate’ occupations for women.

The plight of the garment sector illustrates the broader challenge in creating sufficient employment for Cambodia’s rapidly growing labour force.

According to the CGA, approximately 62 percent of the total population and 44 percent of the labour force is under 25 years of age. Of this group 55 percent are women.

It also demonstrates the difficulties of safeguarding the economic gains made by Cambodian women, which remain fragile.

Approximately 90 percent of employees in the garment industry are women.

Despite maturing since the 1990s, the sector remains plagued by lower levels of productivity than its key competitors. The largely untrained female workforce is overseen by mainly foreign middle managers.

The recession in the U.S. -- the market for 70 percent of Cambodia’s garment exports -- is only one of many problems. Others include skyrocketing power prices, poor infrastructure and high compliance costs.

In developing countries like Cambodia, the garment sector often kick-starts industrialisation and is the precursor to the arrival of other manufacturing such as food processing, before itself relocating to other, lower-cost countries.

Even a minor downturn would have major economic implications.

"If textiles goes, you’ll have 300,000 people employed today on the road tomorrow, not to mention supporting businesses large and small, including mine, that would also be in trouble," said Paul Thomas, director of the freight company, Flow Forwarding Cambodia.

Some estimate up to a million people are either directly employed in the industry or depend on the pay packets of those who are.

Despite generating billions in foreign investment, Cambodia’s weak regulatory and legal frameworks and corruption are significant barriers to long-term sustainable growth.

According to Thomas, the government has given little thought to investment in alternative industry in Cambodia beyond garments and agriculture that could provide sustainable employment opportunities.

"The attitude is very much ‘let foreign businesses come and do it’, but no work has been done on paving the way and targeting what investment they want," he said.

"To raise their participation in formal employment and decision-making institutions women need skills and information about how markets and the law function," said Phavi.

"When you talk about increasing women’s participation in the labour force, you have to be very specific about what kind of participation you are talking about," said Chea Vannath, a regular commentator on social and political affairs.

"Are you talking about the informal sector where women are already heavily represented? Or 8 am to 5 pm professional jobs?"

"We are not going to increase women’s participation in professional jobs until we have things like adequate child care facilities, care for older people and salaries that keep up with the cost of living."

Two of the most significant barriers to increasing women’s participation in the workforce are their education and health status.

While Phavi maintained the government had made progress, the Cambodian Gender Assessment said Cambodia continues to have some of the weakest health indicators in the region.

"In order to participate in economic activity and contribute to the economy you have to be healthy," she said.

"The high rate of maternal mortality, while declining, is a real concern and a real challenge. We need to look at why, with all the aid we have received, this has not decreased more in the past."

"This is also a cultural problem. The woman is the last to get medical attention after the children and the father. They are in bad shape by the time they come [to the doctor]."

More immediate and obvious implications for the future employment and earning capacity of women is their educational status.

While the CGA noted progress at attaining gender parity at the primary school level, overall levels of education remain low for the nation generally and women in particular.

Although enrolment rates and gender parity "have improved at all levels of education … the female share of enrolment drops at each higher level of education," it said.

Approximately 40 percent of women aged 25-44 are illiterate (vs 22 percent for men). Although improving in younger age groups, 23 percent of young women aged 15-24 are illiterate (vs 16 percent of young men).

"The Cambodian government is committed to increasing education opportunities for women at all levels, from primary school to university, during the next five year mandate," said Phavi.

A particular focus is on increasing access to vocational education.

"We have some vocational training centres now but not enough and they are not responding to demand. This is important in the context of the garment industry, which we not only want to stay [in Cambodia], but to value add and not just use labour."

In the absence of job opportunities in Cambodia, increasing numbers of Khmer women are choosing to work overseas, mainly in Thailand, Malaysia and South Korea.

"We are not sure about the exact numbers but they are significant," said Phavi. "Although we are concerned about the conditions some of these women face overseas, we [the government] encourage labour migration due to the level of local unemployment."

Vietnam garments a hit in US [-Cambodia lacks behind VN for garment volume share of the US market]

Thursday, August 7, 2008
Bloomberg

Vietnam gained more American market share last year among garment and textile supplying nations than any country except China, according to a US report.

Vietnam’s share by volume of the American market for textiles and apparel rose to 2.8 percent last year from 2.2 percent in 2006, the US International Trade Commission said in a report this week.

While China’s share of the market jumped to 40.2 percent from 35.7 percent, all other countries who supply more than Vietnam lost market share or held steady.

Last year “was characterized by a shift in US textile and apparel imports from Central American and South American countries toward lower-priced Asian suppliers,” the US International Trade Commission said in the report, posted on the agency’s Web site.

Garments are Vietnam’s second-biggest export after crude oil.

Its garment exports received a boost last year by the removal of US quotas as part of Vietnam’s accession to the World Trade Organization.

“Vietnam’s garment industry is going to catch up with other countries in terms of vertical integration,” said Chris Freund, managing director of Mekong Capital in Ho Chi Minh City, which manages funds that hold shares in two garment producers.

Heading upstream

“The industry will go more upstream over time, similar to what happened in Taiwan and the Republic of Korea,” Freund said.

“Vietnam will begin to produce yarn, which should lower costs and also make Vietnam more competitive in terms of timing.”

Measured by volume, Vietnam was the ninth-biggest supplier of garments and textiles to the US in 2007, moving up from 10th in 2006 by passing Taiwan.

Among non-Asian countries ahead of Vietnam, Mexico’s market share slipped to 5.7 percent in 2007 from 6.6 percent while Canada’s slumped to 3.6 percent from 4.7 percent.

“Mexico has lost volume in the key categories of knit and woven shirts and bottoms in recent years,” Benjamin Juarez of the agricultural attaché’s office at the US Embassy in Mexico City, wrote in a May report.

“Higher production and labor costs relative to key competitors continue to hamper the competitiveness of the Mexican apparel industry,” Juarez wrote.

Among Asian countries, Pakistan’s market share fell to 6 percent from 6.8 percent while the Republic of Korea’s slipped to 3.7 percent from 4.1 percent, according to the US International Trade Commission report.
Pakistan’s issues

“Investment in the textile sector is on the decline” in Pakistan, agricultural specialist Mohammad Shafiq Ur Rehman at the US Embassy in Islamabad wrote in a May report.

“The severe electricity shortfall from April to September 2008 will slow down industrial production while raising the cost of production and likely resulting in product quality issues,” Rehman wrote.

The All-Pakistan Textile Mills Association said last month the garment industry’s competitiveness had been hurt by higher prices for gas, which factories must use due to power outages, and by high interest rates.

While the overall volume of garment and textile exports to the US from Bangladesh, Cambodia, India and Indonesia increased in 2007, all four countries’ market shares held steady, according to the US International Trade Commission report.

India’s share by volume of the US garment and textile market was 5.1 percent in both 2006 and 2007; Indonesia’s was 3.1 percent; Bangladesh’s was 2.9 percent; and Cambodia’s was 1.7 percent.

Labour shortages in Cambodia's garment industry

Protest of garment workers at the Fortune textile factory (Photo: SRP)

Wednesday, June 18, 2008
ABC Radio Australia

Unions and manufacturers are at odds over the supply of labour in Cambodia.

Cambodia's garment industry says it is facing labour shortages with the cost of living forcing garment workers out of Phnom Penh.

Manufacturers are planning to shift production to the provinces to cope.

But the unions say the real problem is low pay.

Most of Cambodia's 300-odd garment factories are located in and around the capital of Phnom Penh.

For more than a decade they've been a magnet to young women from the provinces - seeking monthly salaries of $US60.

But now many of the 400,000 workers are heading in the opposite direction, forced out of the capital by the spiralling cost of living.

Chea Mony, the President of the Free Trade Unions of Workers in Kingdom of Cambodia, told Radio Australia's Connect Asia program, the factories are now competing for the workers who are left.

They've asked him to recruit thousands of workers but, he says, he simply cannot find them.

"Some factories order 1,000, some order 2,000 and some order 500 workers and we cannot find that many workers," Mr Mony said.

The Garment Manufacturing Association in Cambodia, GMAC, says factories from around the capital are planning to disperse to the provinces with the support of the government.

However, Chea Mony says if factories move to the provinces, workers would be likely to be exploited with low salaries and poorer conditions.

"There wouldn't be any unions and the law wouldn't be respected.

"They would simply say if you can work with us you continue to work, or if you cannot cope with it, then it's up to you," Mr Mony said.

He says workers are deserting garment factories to find higher paying jobs in Thailand.

Search for better pay

Chea Mony says even doubling Cambodia's current minimum wage wouldn't meet the basic needs of a factory worker living in the capital.

Chan Sophal, president of Cambodia's Economist Association, believes Cambodia's real inflation rate is about 30 per cent - well above the most recent official figure of 18.7 per cent.

He says Cambodia still has plenty of labour available but warns that at current low rates of pay garment factories will continue to lose workers.

"To say Cambodia is short of labour is not true.

"[There are] at least 200,000 workers now in Thailand, Malaysia, Korea.

"Especially in rural areas, wages also are rising so the garment industry has to offer attractive wages if they want labour," Mr Sophal said.

Average hourly wage for Cambodian garment workers: $0.33

Indian workers highest paid in S Asia

Sunday, June 1, 2008 (Dhaka)
Indo-Asian News Service

Indian workers employed in the garment manufacturing sector get the highest wage among South Asians while Bangladesh workers get the lowest, a study published in Dhaka says.

Indian garment industry workers get the highest wage at 51 US cents per hour. The average hourly wage of a garment worker is $0.51 in India, $0.44 in Indonesia, $0.43 in Sri Lanka, $0.38 in Vietnam, $0.37 in Pakistan and $0.33 in Cambodia, says Global Apparel Manufacturing Labour Cost Update 2008, prepared by US-consulting house Jassin-O'Rourke Group.

Bangladeshi workers are at the bottom. At 22 US cents per hour, a Bangladeshi worker gets a fourth of the 86 US cents that his Chinese counterpart takes home.

The study quoted Dhaka's labour leaders as observing that the Bangladeshi workers were being deprived while factory owners claimed they could not make much profit because of low payments from the importers.

''Tales of miserable wages for Bangladeshi garment workers are not fresh any more,'' said Nazma Akter, a Bangladeshi labour leader, who represents the Garment Workers Unity Forum, a newspaper said.

LABOUR-CAMBODIA: US Recession May Hit Anti-Sweatshop Campaign

Hawking outside a textile factory - the industry provides livelihood for a million people in Cambodia. (Photo Credit: Andrew Nette/IPS)

By Andrew Nette

PHNOM PENH, Apr 30 (IPS) - Recession in the United States is endangering a unique experiment that has seen Cambodia become a leading player in the campaign to eradicate sweatshops in the textile industry.

"I think that the industry is going through a tough time," said Ken Loo, until recently secretary of the Garment Manufacturers Association of Cambodia and still closely associated with the sector.

"We export 70 percent to the U.S., so with their economy in recession we expect spending on clothing to drop."

Even a minor downturn in the textile industry will have major economic implications for Cambodia.

The industry makes up approximately 80 percent of the country’s total exports and employs a large number of people. Some estimates claim that up to a million people --out of a population of 13 million -- are either directly or indirectly dependent on the industry.

"What happens in the garment industry in Cambodia matters far beyond the country’s borders," argues Phnom Penh-based author Rachel Louis Snyder. "Whether it succeeds or fails is important because this is the one country that has tried to eradicate sweat shops in an organised way."

"If it does not work here, where is the impetus anywhere else?"

Snyder is the author of ‘Fugitive Denim: A Moving Story of People and Pants in the Borderless World of Global Trade’, which was recently published in the U.S.

The Cambodian chapters focus on the situation that arose when Phnom Penh and the Clinton administration inked a trade deal that linked Cambodia’s export quota for the textiles to the U.S. to efforts to eradicate sweatshops.

Under the deal, Cambodia had to rewrite its labour laws, welcome the formation of trade unions and allow the International Labour Organisation (ILO) to monitor factories and publish their findings.

"This made Cambodia a giant experiment," said Snyder. "The big question was whether it would work and it did. The industry grew and labour and social conditions improved enormously."

The trade deal expired in January 2005 when Cambodia joined the World Trade Organisation.

A series of transitional quotas, what Snyder calls ‘the quota system lite’ where then put in place by Washington to ensure that China could not export more than a certain volume of textiles in certain categories.

These measures, designed to safeguard Cambodia’s textile industry, will finish at the end of 2008, provoking fears that the industry, still young by international standards, could be swamped by power houses such as China and Vietnam where labour and social conditions are not as good.

"These are expiring at a time of potentially global recession when consumers will be looking for cheaper gear," said Snyder.

"Wherever you have economic pressure, the first things to go are labour laws and social conditions. This is a crucial time for Cambodia. They are at risk of losing this incredible experiment."

Observers agree that linking trade quotas to labour standards was the major impetus for Cambodia to work on improving labour conditions. Another has been an innovative programme run by the ILO called ‘Better Factories Cambodia’.

In order to get an export permit textile factories must sign up to the programme and agree to be monitored by ILO teams on a regular basis.

This monitoring process, which the employers help pay for, includes surprise spot checks and in-depth audits that assess the factory’s performance in up to 500 areas.

Although the detailed reports are confidential factories will release at the request of buyers.

According to Tuomo Poutiainen, Chief Technical Advisor for Better Factories Cambodia, the programme currently monitors 298 export garment factories and involves buyers representing approximately 60 percent of Cambodia’s textile exports.

While Poutiainen admits that they do not get everyone, particularly smaller sub-contractors that are not covered by the programme, he stresses that it "is enforced (by the government) quite rigorously, there are some time delays but all exporters get drawn in."

"When the quota system was in place the increased incentives for factories to be involved were explicit," said Poutiainen. "Cambodia’s share of exports to the U.S. was conditional on progress made on working conditions."

He believes the leverage now comes from the buyers, who request the detailed reports, including big name brands such as Nike, Columbia, Gap and Levi Strauss.

"Labour conditions are now part of the reputation niche of Cambodia," particularly for companies keen to prove their socially responsible credentials," said Poutiainen. "Ignore this and the industry will suffer."

As the assassination of high-profile labour leader Chea Vichea in 2004 graphically demonstrated, there is still a long way to go in terms of upholding labour standards in Cambodia.

Cambodian Union leaders list a number of issues that need attention, including failure to payment of entitlements and politically motivated attacks on union representatives.

Poutiainen agrees, adding issues such as double book keeping, unpaid overtime and occupational health and safety.

"It is obvious that we don’t think backsliding on labour conditions is a solution to the problem," said Loo. "Rather we want to increase productivity."

Most observes agree that the ILO programme has helped stave off the crisis that many believed would happen after the original U.S. trade deal signed by the Clinton administration expired in 2005.

It has also helped Cambodia to build a solid base in the face of significant disadvantages facing the industry.

Cambodia has to import virtually all raw materials relating to the textile industry. Power costs are high, there is a lack of extensive port facilities and corruption adds significantly to overheads.

Loo agrees that while selling Cambodia as a niche market on labour conditions has been important, the main factors for international buyers remain price, lead times and quality.

"The ILO programme is definitely a plus in that it has brought Cambodia to the surface and given us a lot of visibility to buyers all over the world."

"But compliance alone is not enough to sustain the industry. If compliance were really that important everyone would be in Cambodia. The image has its advantages. It is one of many things the buyers look at but it is not the only thing that buyers look at."

While business is supportive, publicly and privately, of the ILO’s monitoring programme, Loo says they do have concerns about how it is administered.

In the lead-up to 2010, when the ILO is scheduled to reconfigure and possibly reduce its involvement in the Better Factories programme, GMAC wants the government to make monitoring voluntary.

"If it was a purely voluntary system, most manufacturers would not sign up to it," he admits. "But the manufacturers would face pressure from the buyers. You would also weed out factories and buyers whose priority is not compliance. Those that remained would be fully supportive of compliance."

He says that GMAC has put the argument to government. "They have made it clear they want it to be compulsory.’

"One cannot expect that the industry will grow but what appears likely to happen is a consolidation, smaller, less productive producers will suffer, others will prosper," said Poutiainen. "This will effect the industry but it is not a crash."

"The buyers have worked for a long time with this programme and have invested a great deal of time and social capital in Cambodia and have a lot of relationships. They have an interest in continuing to invest in Cambodia."

"No growth in the garment industry this year in fact the industry will see a slight shrinkage of 5-10 percent," is Loo’s blunt assessment.

"I would say that in our existing state we are not well placed to compete but one factor that could turn this around is our efforts to get duty free access to US markets,’’ Loo said. "The U.S. has given this to all least developed countries except those in Asia, I don’t know why."

The Cambodia government and textile industry has been lobbying the U.S. on this issue for a number of years. Loo is hopeful that an agreement will be reached this year. "The impact of the recession will be worse this year if duty free does not happen,’’ Loo said.

For Garments, Hope Despite Opposition

Garment workers

By Erik Wasson, VOA Khmer
Original report from Washington
15 April 2008

Duty-free access is key for Cambodia because the US buys 70 percent of Cambodia’s garments and currently charges a 17 percent average tariff on them.

Cambodia fears that at the end of this year, when US emergency quotas on Chinese garments expire, factories will give up on Cambodia’s 330,000 garment workers and relocate either to China or Vietnam, which now enjoys the quota-free access of a full World Trade Organization member.

Hoping a tariff cut will keep factories where they are, Cambodian Commerce Minister Cham Prasidh traveled several times to Washington in 2007 to press the case.

Representative Jim McDermott introduced a bill in Congress that would cut the tariffs.

“We’re talking about people, about countries where people live on about $2 a day,” McDermott told VOA Khmer recently. “And my view that’s the bottom line. It doesn’t make any difference what color you are or what language you speak, if you’re living on $2 a day, you need some help.”

McDermott, a Democrat who served in the Peace Corps in Africa, introduced the New Partnership for Development bill in October, and this bill would expand duty-free garment access to all least developed countries.

Currently major garment producers Bangladesh and Cambodia are the only developing countries that do not benefit from other special trade preference programs that grant duty-free access.

The bill has the strong support of the US retailers and importers who want to increase their profits by paying less for the garments.

But because of strong opposition from the US textile industry, as well as African and Central American countries, and increasing anti-trade rhetoric by Democrats in Congress running for president, trade watchers in Washington believe the bill has little chance of succeeding this year.

Last month, the US textile industry and garment makers in Africa and Central America wrote to Congress urging it to deny duty-free access to Bangladesh and Cambodia. These nations describe Cambodia as an industrial powerhouse that will cost them jobs

Under existing preference programs, many poor countries must use US fabric to get duty-free access when shipping garments back to the US.

Restrictions on African garments also limit their use of non-African fabric. These restrictions are important sources of textile jobs in the states of North Carolina, South Carolina, Georgia and Alabama.

“If this act went through, we could lose tens of thousands of US textile jobs because we would lose billions of dollars in yarn and fabric orders currently being exported overseas and turned into clothing and brought back into the United States,” textile lobbyist Cass Johnson, the president of the National Council of Textile Organization, told VOA Khmer. “Those apparel orders would be lost because Bangladesh and Cambodia, two countries that use no US yarns or fabrics, would be replacing those orders with new apparel orders that are made of Chinese yarns or fabrics.”

“That’s because the bill gives them extraordinary new benefits which make it impossible for us or our overseas export partners to compete,” Johnson said. “We send nearly $10 million worth of yarns and fabrics to Mexico, the Andean countries and to the CAFTA region under various trade promotion programs.”

US textile makers see Cambodia’s growing garment exports, up 20 percent from 2006 to 2007 despite a 49 percent decrease in the last quarter of 2007, as a major threat

“ Bangladesh and Cambodia, even without this new bill, have taken about $2 billion of apparel trade from the region,” Johnson said. “They are super-competitive countries. They have grown 60 percent over the last three years. This bill would supercharge that growth. You would see billions and billions of dollars lost from the region. You’ve got to think: that is potentially hundreds of thousands of jobs.”

The letter to Congress was signed by business groups in South Africa, Lesotho, Kenya, and Madagascar in Africa; and Peru, Nicaragua, Mexico, Colombia, the Dominican Republic, Ecuador, Guatemala, Honduras, and El Salvador in the Americas.

Jas Bedi, the Chairman of the Kenya Apparel Manufacturers Exporters Association, said the bill undermines the African Growth and Opportunity Act, signed into law in 2000, which gives duty-free access to lesser developed African countries.

“Kenyan industry is similar to the rest of Africa [and] is struggling to survive with no gain in market share with the expiry of the Multifiber Agreement since 2005,” he said. “This new bill will not help the situation.”

Lobbyists, including some retail supporters of McDermott’s bill, said that 2009 would be the first opportunity to discuss new benefits for Cambodia. This year several US preference programs expire and when an attempt to extend them and add new benefits for Africa failed in a House committee last month, these supporters were discouraged.

McDermott disagrees.

“My feeling is that there is, there is always time in a legislative session, when we’re talking March, to do something,” he said.

McDermott said that the fight to get his bill passed has become complicated. There is a battle in the US Congress over enacting a new free trade agreement with Colombia.

President George W. Bush has made that bill his top trade priority, but Democrats and union leaders in the US are against it.

The battle is forcing Democrats to choose sides, and they are choosing to oppose greater trade.

Statements by senators Hillary Clinton and Barack Obama, the leading Democratic candidates for president, against the cornerstone of US trade policy, the NAFTA agreement with Mexico and Canada, have further motivated Democrats to oppose new trade benefits.

“But there’s quite a bit of time for us to do something,” McDermott said. “We’ve been talking about having hearings on this bill in April. And so, I already think there’s a real possibility that we’ll get a lot of that done.”

McDermott included benefits in the bill to appease worried African countries after they complained last year. One limits the amount of clothing Cambodia could claim duty-free access for to the amount of garment it currently produces.

This could avoid a massive increase or “surge” in new Cambodian garments that would dominate the market. Deapite the pressure, McDermott said that he will not take Cambodia and Bangladesh out of the bill

“Poor countries, LDCs [lesser-developed countries] ought to be dealt with,” he said. “And if you’re an African LDC, you’re not a whole lot different than an Asian LDC or a South American LDC...The fear of the Africans is that they’re going to lose everything, that it’s all going to be sucked up by the Asians. Well, we put in protections, we put in firewalls that you couldn’t get more than they’re producing already and for the next ten years.”

Lobbyist Johnson said these safeguards are not enough.

“When countries have had these caps before they very cleverly get around them by offering importers the ability to use part of the cap but only if they will bring in new business,” Johnson said. “There are various ways around the cap that countries and importers have used in the past. I’m sure Bangladesh and Cambodia would be no exception.”

Johnson also said that the supporters of the bill are not really concerned with helping Cambodia or making clothes cheaper for American consumers, so much as enriching themselves.

“Major importers and retailers are supporting this bill,” Johnson said. “One of the reasons, and this is one of the stories you don’t hear about this bill, is they get $900 million a year in duty savings. They pay $900 million in duties on apparel goods coming from those two countries and that would be a gift from the US treasury into their pockets, which doesn’t help the people in Bangladesh and Cambodia much but it does help US retailers get a little richer.”

Asked if his LDC bill is dead now that developing countries have joined forces with the US textile industry against it, McDermott noted that his bill has the support of powerful House Ways and Means Committee chairman, New York congressman Charles Rangel

“When somebody tells me a bill is dead,” he said, laughing, “that makes it even more fun when we make it happen.”

Sweatshop laborers back unions

April 07, 2008
By JUSTIN CRIPE
justin.cripe@goshennews.com
Goshen News (Indiana, USA)

Phal Savin of Cambodia spent many years sewing clothing for Wal-Mart. A mother of five, she was recently fired for trying to form a union.

She is now vice president of the Coalition of Cambodia Apparel Workers Democratic Union (CCAWDU).

Didier Leiton of Costa Rica worked for 17 years on pineapple and banana plantations and is now an organizer with the Union of Agricultural and Plantation Workers. He has been “blacklisted” by the plantations for his activities with the union.

Both spoke at Goshen College Sunday evening against sweatshops, with their target being large department stores.

Leiton explained to the audience of approximately 60 people that he worked in the plantations for 15 hours a day, without even making minimum wage.

“Pineapples are being produced under cruel conditions, not even acceptable for animals,” Leiton said through a translator.

Savin spent years working in garment factories in Cambodia as a seamstress, and when her working conditions became too unbearable, she decided to form a union, one that is not under control by political parties or government.

“We would work eight hour days, with another two to four hours of overtime that we wouldn’t get paid for,” she said through a translator.

Both took recent visits to the Goshen Wal-Mart to see how the products they made are priced compared to their wages, and their initial thoughts were that while the store was clean with a huge market, the cost of products far exceeds their income. Savin even recognized specific items of clothing she had made herself.

“The price of a shirt is $8, but I earn only $1,” Savin said.

While both said that auditors — people who are hired to make sure no sweatshops are taking place — help the situation, those people do not meet directly with the workers so they do not know how dire the working conditions are.

“Unions are the only way to represent workers so they can have a better quality of life,” Leiton said.

Trina Tocco, program coordinator for the International Labor Rights Forum, said there are several things that people in the United States can do to show support of people facing harsh working conditions.

She suggested communicating directly with factories and writing letters and post cards to the major department stores in question.

“We aren’t saying never go to places like Wal-Mart, just shop with a conscience,” Tocco said.

Throughout Asia, Exporters Brace for Tremors From a U.S. Pullback

Exporters like the Huangyan No. 1 Canned Food Factory in Huangyan, in eastern China’s Zhejiang Province, are expecting to produce fewer canned tangerines for export. (Associated Press)

January 25, 2008
By KEITH BRADSHER
The New York Times

HONG KONG — Asian exporters are already feeling the effects of an American economic downturn — effects that may be magnified by a weak dollar, volatile world markets and fears that more bad loans may be ticking in the coffers of American companies.

Rather than waiting for things to get worse, companies from Chinese garment businesses to Japanese equipment manufacturers are changing how they operate.

The weakening American demand is clear. American orders for small tractors fell 5 percent last year at the Kubota Corporation in Osaka and are expected to fall further this year. Orders from the United States have been weak for a year at Top Form, the Hong Kong company that is the world’s largest bra manufacturer. And at Aigret Industries, a manufacturer of multiline phone systems and fax machines in Xiamen, China, orders from the United States plunged 30 percent in the fourth quarter compared with a year ago.

In some Asian industries, the result has been deep gloom. At the Evergreen Knitting Company in Ningbo, China, orders from the United States for T-shirts and sweaters abruptly dropped 20 percent this winter. The company expects some rival Chinese knitwear producers to shut down altogether.

“We anticipate that this year, 10 to 20 percent of the knitwear factories will have to close due to the inability to compete,” said Sean Zhu, Evergreen’s sales manager.

In response to the downturn, some companies are pursuing remedies that will affect economic output, like Aigret Industries, which has lengthened next month’s Chinese New Year vacation for its workers to 20 days, instead of the usual 10.

Others are investing in more technological research and developing new models, like the Xigo Electric Company in Zhongshan, China, which manufactures air-conditioners and liquid-crystal display television sets.

“We really felt the impact of the slowdown in the U.S. during the second half of 2007,” said Stan He, a Xigo sales manager. “Orders were generally down by 10 to 20 percent relative to the same period a year ago.”

Asian exporters lie at the center of the debate in financial markets over the extent to which Asia has decoupled from the United States and can grow strongly even if the American economy slows significantly. The evidence so far is that the effects of an American slowdown will vary widely, depending on each country’s reliance on exports and the extent to which each country’s economy is currently overheating or stumbling.

China, which has struggled in recent months with rising inflation, has actually benefited from slower exports — although a steeper decline could prove a problem. The Chinese government announced on Thursday that growth eased to 11.2 percent in the fourth quarter, from 11.5 percent in the third quarter and 11.9 percent in the second quarter.

The modest slowing, almost entirely because of less brisk growth in exports, helped reduce inflation to 6.5 percent in December from 6.9 percent in November, the government said.

But with fixed-asset investment still soaring in China, Xie Fuzhan, the director of the National Bureau of Statistics, warned at a press conference in Beijing that China was still worried that overall growth was too fast to be sustained without inflationary pressures.

For countries that were already struggling with weak growth and faced little if any inflation, like Japan, weak exports are proving a serious setback.

“Now we see ‘re-coupling,’ ” said Tetsufumi Yamakawa, chief economist in Tokyo for Goldman Sachs. “The economy of Japan is proving disappointingly fragile to external shocks.”

China overtook Canada last year as the largest exporter to the United States. But year-over-year growth in Chinese exports to the United States slowed sharply last autumn, posting a gain of just 7 percent in November from a year earlier. That was only slightly greater than the appreciation of the Chinese currency against the dollar over the same period, suggesting that the actual volume of Chinese goods headed to the United States stagnated.

For Japan, Malaysia, Thailand, Australia, Bangladesh, Sri Lanka, Cambodia and Indonesia, exports to the United States actually dropped in dollar terms in November.

On Wednesday, Citigroup cut its average estimate for economic growth this year among Asian economies by four-tenths of a percent, while reducing its estimate for growth in the United States by seven-tenths of a percent, to 1.6 percent.

The question across Asia is how much worse can it get.

Willie Fung, the chairman of Top Form, said that American stores were not oversupplied with bras after the Christmas season.

“Apparently it is not going from bad to worse. I hardly notice any changes over the past couple months as far as demand is concerned,” he said.

A few exporters are even upbeat.

“I have not seen orders go down from the U.S. or from Europe,” said Alice Lam, a sales manager at the Shunde Growth Corporation, which assembles bookcases and other furniture in Shunde, in southeastern China, from imported Taiwanese steel.

But many exporters are worried. Kubota is trying to increase sales of larger tractors and expand market share in Thailand, China and Europe to offset small tractor weakness in America.

Fuji Heavy Industry, which makes Subaru cars, is also fretting. “Our concern about the future of the U.S. economy is becoming very strong, though our sales aren’t declining now,” said Shinichi Murata, a Fuji spokesman. He said Subaru may offer incentives, like price cuts or better terms on car financing deals.

China’s garment industry is particularly wary.

“Because of the subprime crisis in the U.S., the U.S. economy is not as big as in years before — a lot of Chinese textile companies are getting fewer and fewer orders from the U.S.,” said Cao Xinyu, the deputy director of the China Chamber of Commerce for the Import and Export of Textiles.

But executives at six different manufacturers said in separate telephone interviews this week that their biggest worries lay not in the United States but at home.

The Chinese government is imposing stricter labor laws and tighter environmental regulations while cracking down on corporate tax evasion and making it harder for companies to claim large rebates of the value added taxes that they pay.

Chinese officials have imposed export quotas on the number of garments shipped, forcing companies to make fewer but costlier products that compete with clothing from higher wage countries. “They really have stepped up their efforts,” Mr. Fung of Top Form said, “to attain what they want to see.”

Martin Fackler contributed reporting from Tokyo and David Barboza from Shanghai.

Hundreds remember Cambodian labour leader's murder

Incense sticks burn during a rememberance ceremony marking the death of labour leader Chea Vichea in Phnom Penh, January 22. Hundreds gathered Tuesday in Cambodia's capital to mark the death of the labour leader, whose slaying four years ago badly fractured the country's nascent workers' movement. (AFP/Tang Chhin Sothy)

PHNOM PENH (AFP) - Hundreds gathered Tuesday in Cambodia's capital to mark the death of labour leader Chea Vichea, whose slaying four years ago badly fractured the country's nascent workers' movement.

Chea Vichea, who headed the country's largest labour union and was a vocal critic of Prime Minister Hun Sen's government, was gunned down at a Phnom Penh newsstand in January 2004.

"He was the one who brought (the unions) all together. After him, there were divisions ... fighting against one other," said Kek Galabru, director of the Cambodian rights group Licadho.

Galabru was among the group of unionists, politicians and rights workers who led some 200 people to a wreath-laying ceremony at the scene of Chea Vichea's death.

The quick trial and conviction of the labour leader's alleged killers, Born Samnang and Sok Sam Oeun, remains a controversial issue among rights groups, who say their arrests were a cover-up for a political assassination.

"From the beginning, this case has been tainted by serious procedural flaws and violations of basic fair trial rights," said Sara Colm, a senior researcher for New York-based Human Rights Watch.

"A first step for justice in Chea Vichea's murder would be the prompt release of those unfairly convicted," she added in a statement signed by five other international rights groups.

Two other labour leaders were also later murdered in an escalation of attacks against workers' rights advocates.

Their deaths cast a pall over Cambodia's key garment industry, with several major clothing labels warning the government that swift justice was needed for their continued presence in the country.

The sector has achieved double-digit growth year-on-year and is now Cambodia's largest industrial employer, giving work to more than 330,000 people.

But the industry, which accounts for 80 percent of Cambodia's export earnings, is becoming increasingly vulnerable to foreign competition, and manufacturers fear ongoing labour upheavals could drive future investors away.

Cambodia's boom depends on USA

By David J. Lynch USA TODAY

PHNOM PENH, Cambodia — The streets of this riverside capital are thick with traffic, sport-utility vehicles favored by foreign aid workers as well as the more modest cars piloted by locals. Scaffolded construction sites dot the dusty downtown and locals spy Western investment bankers with the enthusiasm reserved elsewhere for celebrity sightings.

"It seems like a frontier town, with all of the excitement, all of the energy," says Nisha Agrawal, the World Bank's country manager.

The notion of a Cambodian boom may seem incongruous, if not slightly absurd. This remote corner of Southeast Asia, after all, remains best known for its "killing fields," where the genocidal Khmer Rouge slaughtered or starved at least 1.5 million of their countrymen.

But after a generation spent slumbering in the shadows of its fast-rising neighbors, Cambodia is on the move. The economy this year is expected to expand at a robust annual rate of 9.5% after three consecutive years of double-digit growth, the World Bank says.

U.S. brands fuel boom

Americans have fueled the boom with their purchases of Levi jeans, Gap (GPS) clothes and Nike (NKE) athletic shoes, all bearing made-in-Cambodia labels. Whether consumers will continue doing so, however, now depends on the complexities of U.S. trade law.

Cambodia's thriving garments industry has been protected since 2005 by U.S. restrictions on imports of clothing from China. But those limits expire by the end of 2008, potentially opening the door for China to seize market share at the expense of Cambodian producers.

China could grab 68% of the world apparel market, up from 50% today, says Roland Eng, the country's leading diplomat and a former Cambodian ambassador to the United States. "They will kill everybody," he says.

The government here is pinning its hopes on proposed U.S. legislation that would eliminate tariffs on products from the world's poorest countries, including Cambodia. This year, Cambodian clothing shipments to the USA are running at an annualized value of $2.6 billion, about twice the 2003 level, according to Commerce Department data. Without preferential access to the U.S. market, orders for Cambodian goods will plunge 35% as Chinese shipments soar, says Van Sou Ieng, chairman of the Garment Manufacturers' Association in Cambodia.

Factories here supply clothing to some of the USA's best-known brands, including Disney, (DIS) Sears (SHLD)and Wal-Mart. (WMT) They've been drawn to Cambodia, despite sky-high electricity costs, inadequate roads and pervasive corruption, because of an innovative program promoting good labor standards that began nine years ago with U.S. help.

The United States guaranteed Cambodia a specified amount of sales every year, encouraging the country's push to position itself as the sweatshop-free producer in a fiercely competitive global clothing market. "Cambodia is a special country," says Michael Kobori, vice president for global code of conduct at Levi Strauss, which buys its Signature model jeans from a Cambodian producer.

The San Francisco-based clothing company, which plans to continue relying on local suppliers after the limits on Chinese products are lifted, supports the tariff-elimination bill.

Prospects for approval of the measure, introduced by Rep. Jim McDermott, D-Wash., are cloudy. Rep. Charles Rangel, D-N.Y., the chairman of the House Ways and Means Committee, has endorsed the proposal, aimed at helping the world's poorest countries develop. But with public support for trade ebbing, and the economy weakening, lawmakers may shy in an election year from being seen as helping foreign workers.

The stakes for Cambodia's 14 million people in the coming U.S. debate are enormous. Even after the current boom, what the typical Cambodian earns in a year wouldn't buy a decent TV in the USA. (Per-capita income is just $550.) There are only 1,000 miles of paved roads in the entire country, which is roughly the size of Missouri, and only 10% of the population has access to electricity.
Scars remain from turmoil

Scars from the 1975-79 Khmer Rouge era remain vivid. Under radical leader Pol Pot, black-clad guerillas systematically murdered lawyers, doctors, teachers — sometimes even those wearing eyeglasses — in a demented bid to return Cambodia to a pristine, agricultural existence. The Khmer Rouge ultimately were ousted by a Vietnamese invasion.

Only in 1999 did the country enjoy its first entirely peaceful year in three decades. Today, a surge in tourism is clear evidence of the turnaround. For the first 10 months of this year, Cambodia recorded 1.6 million foreign visitors vs. 286,524 in 1998.

The stunning temples of Angkor Wat are the country's principal draw. On typical days, the extraordinary 12th-century monuments are packed shoulder to shoulder with hordes of South Korean, Japanese and American tourists.

Heart and soul of economy

While the country harbors long-term hopes of developing possible offshore oil deposits, the garments industry is the heart and soul of its economy. From virtually nothing in 1994, the industry has grown to an estimated $3 billion in exports and directly employs 355,000 workers. They in turn support an estimated 1.7 million people with regular payments to family members, who often live in poor rural villages with little economic activity, according to the International Finance Corp.

Sokla Sem, 29, came to the capital to find factory work 11 years ago after the death of her father. Working for a Chinese-owned shirt factory, she and her sister made a combined monthly salary of $150. Of that amount, they sent two-thirds to their mother to pay for the education of an older brother. Sem, like many young women here, has only a fourth-grade education.

After being fired in a dispute over pay, she became a labor activist. But she hasn't forgotten the economic imperative that drives the country's leading industry.

"It was very difficult for me when I started working in the factory," she says. "But I didn't care about the difficulty; I cared about making money that I could send home."

Cambodia places 6th largest garment exporter in world

PHNOM PENH, Dec. 11 (Xinhua) -- Cambodia has become the sixth largest garment exporting country in the world, the Chinese-language newspaper the Commercial Daily reported on Tuesday.

The newspapers quoted government spokesman Khieu Kanharith as saying that the pillar industry creates job opportunities for some 500,000 people in Cambodia. The spokesman made the remarks while paying a visit to Kampong Cham province.

Total monthly salary for the workers in the garment sector amounts to 300 million U.S. dollars, one million of which are remitted to their families in the countryside, said Kanharith, who is also Information Minister.

However, he said, the manufacturers have to import most equipment and raw materials, which increases their production cost.

Rural Cambodians should try to help produce more raw materials for the industry, he added.

70 to 75 percent of the kingdom's annual export volume come from garment export, according to official statistics.

Cambodia Ranks Fifth In Garment Exports: Institute

PHNOM PENH, Nov 30 Asia Pulse - Cambodia is emerging as one of the worlds largest garment and textile exporters after China, Bangladesh, Indonesia and Viet Nam, according to the Economic Institute of Cambodia.

The institute said Cambodias export earnings in garments and textiles are estimated to increase by 12 per cent in 2007 and 2008, compared with the figure in 2006.

The sector is also expected to inject more than US$3 billion to Cambodias annual national budget, against its US$2.6 billion contribution two years ago.

One of many reasons attributed to a success of Cambodia's garment and textile sector is that the country has a large workforce with reasonable costs, Cambodian Trade Minister Cham Prasith said.

The sector has created over 337,000 jobs for locals.

Cambodia to benefit from possible extensive duty-free garment access to U.S.

October 23, 2007

Cambodian garment producers predicted pivotal benefits upon the U.S. Congress' possible approval of a draft law to offer extensive duty-free access for garments produced in the kingdom, local media said on Tuesday.

"I think the bill will put us in a better position to compete with Vietnam and China," Ken Loo, secretary general of the Cambodian Garment Manufacturers Association, was quoted by English-Khmer language newspaper the Cambodian Daily as saying.

The bill, dubbed the New Partnership for Development Act and currently in the house for debate, would eliminate tariffs on trousers, shirts and coats imported at 2007 levels from Cambodian and Bangladesh.

According to an anonymous official at the Cambodian Commerce Ministry, a seven-member ministry delegation in its July visit to the U.S. detected no strong opposition in Washington to providing preferential access to Cambodian garments.

Cambodia, now the fifth largest exporter of garments to the U.S. , has lobbied U.S. lawmakers to reduce tariffs on clothing produced here, fearing that the competition from other countries could reduce Cambodia's U.S. market share.

In the first five months of 2007, Cambodian clothing exports went up by 17.9 percent, generating revenues of 984.9 million U.S. dollars, of which 738.28 million U.S. dollars came from the exports to the U.S., said official figures.

Garment has been the kingdom's largest pillar industry, which used to make up more than 70 percent of its export volumes.

Source: Xinhua

Cambodia's garment mills face impasse

With US help, Cambodia became the model for successful garment manufacturing and strong labor standards. (Photo: Chor Sokunthea/Reuters)

The once-favorable US tariffs that built a labor-friendly garment industry may now be its undoing.

September 05, 2007
By Erika Kinetz
Correspondent of The Christian Science Monitor
Phnom Penh, Cambodia

Not much gets made in Cambodia except clothes.

Garments account for an astonishing 80 percent of this impoverished Southeast Asian nation's exports, and the World Bank estimates that the industry, which was worth $2.5 billion last year, helps support – directly or indirectly – about 1 in 5 Cambodians, according to government estimates.

US trade policy essentially created Cambodia's garment industry, thanks to a 1999 bilateral deal that granted Cambodia preferential access to US markets in exchange for guarantees on labor standards. Now some argue that US trade policy – in the form of high tariffs – is helping to undo it.

The irony is especially acute because many observers now look to Cambodia as a model of labor-friendly manufacturing, and they say that if Cambodia fails, it will mean the death not just of one industry in one nation, but of the dream of ethical manufacturing itself.

"There was a door for small countries like Cambodia," says Cambodia's minister of commerce, Cham Prasidh. "Now there is no more door. Those who can produce cheaper and faster will sell more."

And that means China.

Shifts in the global garment industry are favoring more developed nations, like China, over the world's poorest. US quotas that benefited Cambodia have expired – or will soon – and the question Cambodia now faces is how to compete with nations that have better infrastructure, more qualified labor forces, deeper supply chains, faster productivity growth, and cheaper electricity.

One easy answer for Cambodia would be to have its major trading partner – the United States, which accounts for nearly two-thirds of Cambodia's garment exports – eliminate its tariffs. Cambodian officials have been lobbying Congress since 2004 to cut those tariffs, which last year averaged nearly 16 percent. China paid, on average, just over 3 percent on its top US exports.

Mr. Cham led a delegation to Washington in July to drum up support in Congress for the TRADE Act, a bipartisan bill introduced in the Senate in February that would slash tariffs on goods from 14 poor Asian nations, including Cambodia.

The US already provides generous trade benefits to many of the world's poorest countries through regional agreements in Africa and the Caribbean, and the EU and Canada already grant Cambodia access to their markets nearly duty- and quota-free.

Cambodian officials are hoping that later this month, House Democrats will introduce legislation that would exempt all of the world's poorest nations, including Cambodia, from tariffs.

Roland Eng, Cambodia's former ambassador to the US, maintains that legislation favoring poor countries won't affect the level of US imports, merely the pattern. "Instead of importing from China, you will import more from least-developed countries," says Mr. Eng. "We're not preventing jobs from going to the US; we're preventing jobs from going to China," he adds.

For an underdeveloped nation, Cambodia already pays relatively more in duties than some developed economies. Edward Gresser, the director of the trade and global markets project at the Washington-based Progressive Policy Institute, said in an e-mail that as of mid-2006, the US had collected $196 million in tariffs on $1.1 billion worth of Cambodian goods, but only $199 million on $27 billion in imports from Britain.

For its part, the US Embassy in Phnom Penh says that the United States is considering trade benefits for Cambodia, but within the stalled Doha round of negotiations at the World Trade Organization. Government and garment-industry officials in Cambodia are hoping for a faster, more localized solution. They say they can't afford to wait.

Next year, US safeguards on Chinese garment imports are set to expire and international monitoring of Cambodia's factories, a cornerstone of Cambodia's 1999 trade deal with the US, may also cease. That could spell the end of Cambodia's labor-friendly garment sector, which has been held up as a model by the industrialized world.

But despite the good intentions, Cambodia's good labor practices cost money in the long term, and Van Sou Ieng, the chairman of the Garment Manufacturer's Association of Cambodia, says it will be hard to live up to those standards if Cambodia can't compete on price, which he says is impossible without tariff relief.

Eng says the social and economic costs of a garment sector slowdown would be enormous. Most garment workers are women, who have left the traditionally protective structures of family and village that govern rural life. Unemployed, Eng says they will be particularly vulnerable to HIV infection and human trafficking. "All the social efforts of the past ten years will be in vain," he says.

It wasn't supposed to be that way. Rachel Louise Snyder, author of the forthcoming book "Fugitive Denim: A Moving Story of People and Pants in the Borderless World of Global Trade," says that if Cambodia's garment industry fails, the ramifications will extend far beyond the borders of this tiny nation.

"The industrialized world has set them up as an example of great positive social change that can be achieved with political and economic will," says Ms. Synder, who lives in Phnom Penh. "What does it say to the rest of the world if we allow them to fail?"

Garment makers urge regulation of unions in Cambodia [-GMAC tries to curtail labor unions?]

PHNOM PENH (AFP) - - Cambodian garment makers Tuesday urged the government to better regulate labour unions, saying illegal strikes and power struggles among more than 1,000 workers' groups threaten the key textile trade.

With an average of four unions per factory, managers spend more than half of their time negotiating often conflicting demands while productivity plummets, said Van Sou Ieng of the Garment Manufacturers Association of Cambodia (GMAC).

"In short, there are too many unions," he told a meeting between the private sector and government officials.

"The factory is becoming a place where unions fight for popularity as they seek to win members, and this is to the detriment ... of the workers," he said.

Illegal strikes -- sometimes as many as two a day -- and repercussions against workers who do not walk off the job are also endemic, he said.

"The frequency of these occurrences ... is becoming alarming, and if left unattended and unresolved, they will destroy Cambodia's reputation for attracting and maintaining investors," he said.

The garment sector remains a key pillar of impoverished Cambodia's economy, employing some 350,000 people and accounting for 80 percent of the country's export earnings.

But the industry is increasingly vulnerable to foreign competition, and manufacturers fear labour upheavals could drive future investors away, sinking the sector.

Union officials have accused factory owners of refusing to negotiate disputes, while forced overtime and clashes between Cambodian workers and foreign managers continue to disrupt output.

Union leaders would rather not strike, but are often forced to do so in the absence of collective bargaining agreements, said Nang Sothy, who headed a working group on industrial relations earlier this year.

"Illegal strikes will decrease by 95 percent if the factory owner and union discuss together to make the collective bargaining agreement," he said.

Tough road ahead for Cambodia garments

Monday, September 03, 2007
Seth Meixner
AFP

Keenly aware of the damage caused by the "sweatshop" label, Cambodia has worked hard for the past eight years creating a niche textile market for socially conscious consumers.

The garment industry, which accounts for 80 percent of the impoverished country's export earnings, continues to thrive, due in part to Cambodia successfully branding itself as one of the region's most labor-friendly manufacturing environments.

"We needed to be competitive, so we needed to be special," Commerce Minister Cham Prasidh said.

"Now Cambodia is well-known ... as a safe haven for international [clothing] brands, free of sweatshops."

Born out of a 1999 agreement with the United States that boosted import quotas in exchange for guarantees on workers' rights, the Better Factories Cambodia program has successfully brought on board the government and manufacturers, as well as international labor advocates.

But even as industry earnings this year look set to eclipse last year's record figures, trouble for this crucial sector could be looming just over the horizon.

The International Labor Organization, which monitors factories, is scaling back its involvement in the program, whose mandate expires next year, the same year general elections could bring to power a less labor- friendly government in Cambodia.

Labor compliance alone does not cement Cambodia's place in world textile markets, and the country must balance green labor practices with the realities of an increasingly competitive industry.

"There are other factors like price, quality and on-time delivery," said Ken Loo, secretary general of the Garment Manufacturers' Association of Cambodia. "We need to continue to improve our competitiveness by reducing corruption and more importantly reducing the overall costs of doing business in Cambodia."

Key to this, according to manufacturers, is reining in the multitude of labor unions that they blame for countless wildcat strikes and, in some cases, factory closures that last year cost some 11,000 jobs.

With uncertainty ahead, Cambodia turns to US to buoy garment sector

Cambodian garment workers are busy at a factory in Phnom Penh, in October 2006. Safeguards protecting Cambodia's garment sector expire by year's end, and the country hopes the United States, its biggest market, will help stave off a disastrous downturn in the industry which accounts 80 percent of all exports.

PHNOM PENH (AFP) — Safeguards protecting Cambodia's garment sector expire by year's end, and the country hopes the United States, its biggest market, will help stave off a disastrous downturn in the industry which accounts 80 percent of all exports.

Trade officials, led by Commerce Minister Cham Prasidh, were in Washington in July urging US Congress to pass legislation that would slash tariffs on goods from 14 of Asia's least developed countries, or LDCs, including Cambodia.

The measure is the only way to insulate Cambodian manufacturers from a changing global industry that increasingly favours larger producers, like China, with better infrastructure and cheaper production costs.

"We know our quality is the same as the Chinese, we are fighting only over the price," said Cham Prasidh, adding that US tariffs on Cambodian garment exports are between 15 and 25 percent.

"If we don't pay the duty, it means we are competitive," he told AFP in an interview last week.

"Our economy is mainly based on our export of garments ... anything that is affecting this sector is affecting the whole Cambodian economy."

Some 70 percent of all Cambodian textiles go to the US, said Ken Loo, secretary general of the Garment Manufacturers Association of Cambodia (GMAC).

Continued access to that market is crucial to the survival of the garment sector, which was worth 2.5 billion dollars last year and employs more than 330,000 people, mostly young women supporting families in rural Cambodia.

"If we are able to get a reduction or exemption ... it would definitely go a long way to ensure the continued growth and survival of the industry," Loo said.

Cambodia's garment sector was sent into a spin in the first months of 2005 following the end of US textile quotas that guaranteed the country protection from larger competitors.

Factories began closing in rapid succession and thousands of workers were made jobless.

"Safeguard" restrictions imposed on some Chinese textiles in mid-2005 by the US and European Union stabilised the sector, even spurring it on to greater growth.

But while Cambodian trade officials had lobbied Washington for tariff reductions since 2004, their efforts have taken on a greater urgency amid rising fear that the end of Chinese restrictions this year and next could again throw the industry into crisis.

"Our industry suffered significantly" in the months immediately following the expiration of the US quotas, said Loo.

"If safeguards are removed and no new mechanism put in place to restrict China, our industry will suffer similarly," he added.

Foreign diplomats are also closely watching developments, keenly aware of the industry's importance to Cambodia's economic health.

"The entire economy hinges on the success of the garment sector and America must absolutely get rid of the tariffs" if the sector is to survive, said one Western diplomat.

Cham Prasidh said his delegation met with more than 20 members of the US Congress during the July trip, and that "all of them were very supportive."

The Tariff Relief Assistance for Developing Economies, or TRADE Act which cuts tariffs to the 14 Asian LDCs, is already before the US Senate.

A parallel bill extending duty relief to all least developed countries is expected to be brought before the House of Representatives, Cham Prasidh said.

"Some (Congress people) have agreed to co-sponsor, but many of them are waiting to see the new legislation first," he said.

Other US officials point out that tariff relief for poor nations is already being considered within the Doha round of World Trade Organisation negotiations.

But those talks broke down last year, and Cham Prasidh said Cambodia -- as well other poor nations -- cannot wait for a Doha resolution.

"We don't know when these talks are going to be completed -- maybe this year, maybe not," he said.

"So that is the reason why we try to ask that LDCs get this quota-free and duty-free access as an early harvest rather than leave us to wait until the end of the Doha rounds," he added.

"The situation is very critical," he said, but efforts are being frustrated by a fluid political situation in Washington.

Several lawmakers who backed the original legislation are no longer in office, and US presidential elections next year only add to the political uncertainty.

"We continue to believe there is a slim chance to push this bill to be introduced and passed, because they have to find an option," Cham Prasidh said.

"Our bill is so instrumental for the LDCs, and everybody agreed with this perception," he added.

"The only question is whether the political environment will allow this type of bill to be passed."

Cambodia : Garment sector competes & thrives

August 6, 2007
World Bank

Wearing a dark-blue uniform, with red trim, and standing next to a huge ironing machine in a garment factory in Phnom Penh, 20-years-old, Son Sean, smiles and responds: “My family has better living conditions now,” she pauses and continues while pushing a collar into the machine, “From my earnings, my mother has been able to build a 5 by 7 meter brick house with a tiled roof, and my 15 year-old sister has been able to continue her schooling.”

Son Sean is one of many garment workers who come from the poor Cambodian province of Svay Rieng, located about 120 km east of Phnom Penh. She earns on average about US$70 per month, depending on how much overtime she gets, and each month, Sean sends US$50 to US$90 cash home to support her 50-year old widowed mother and her younger sister, who studies in the fifth grade.

Sean’s co-worker, Vong Pak, 39, smiles proudly when asked whether she supports members of her family with her earnings. “From my salary I support my 68-year-old mother, my four children and I pay for my children’s schooling,” she says while sewing a shirt. Pak is the breadwinner of the family. Three of her four children, who are 14, 12, 7, and 3 years old, are in school now.

Both Sean and Pak work at the New Island Clothing garment factory (NIC), along with more than 800 other workers. NIC is one of 290 garment factories in Cambodia which exports goods to the United States and Europe. NIC operates in six countries: Cambodia, Indonesia, Sri Lanka, Vietnam, Lithuania and Mauritius.

The company produces men's and ladies’ formal and casual shirts, supplying these to Marks & Spencers, as well as to premium overseas customers. New Island is a winner of Cambodia’s First Corporate Citizenship Awards which were sponsored by the World Bank Group’s private sector financing arm, the International Finance Corporation (IFC) in 2005.

Cambodia’s garment industry is the country’s main industry and its leading export revenue earner. In 2006, exports totaled US$2.5 billion and the sector employed 330,000 mostly poorer rural women, who in turn support extended families. In total, an estimated 1.7 million people depend on the garment industry directly or indirectly.

According to the report Export Diversification and Value Addition for Human Development which was published by the Economic Institute of Cambodia in June 2007, garment industry workers earn an average of US$73 per month, 29 percent of which comes from overtime work.

Representing almost 80 percent of Cambodia’s total exports, the sector is crucial to Cambodia’s economy. However, increasing global competition makes the industry vulnerable, and so a variety of approaches are needed to help the industry sustain itself.