Recession shows need for Cambodian garment factories to diversify – UN agency

UN News Centre

27 April 2010 – The global downturn has shed light on the need for Cambodian garment factories to both expand and diversify their markets to include those in Asia to reduce reliance on those in the United States and the European Union, according to a new report by the United Nations labour agency.

Nearly 90 per cent of the 66 factory managers surveyed reported having been adversely affected by the economic crisis, listing falling export orders, heightened pressure to reduce prices and the increased cost of inputs as the three main pressures they are facing.

The report by the International Labour Organization (ILO) said the recession has also exposed the need to look into boosting domestic demand for Cambodian garments.

The industry is almost entirely owned by foreigners and is export-oriented, and factories hire, on average, 700 workers and specialize in one of the following areas: T-shirts, jeans, pants, sportswear, underwear and pyjamas.

The ILO found that production-level workers have borne the brunt of job losses, while managers and other non-production staff have not been as severely affected.

A study released earlier this year found that factory closures or cutbacks due to reduced orders have forced many garment workers out of a job, with one in 10 unemployed workers having lost their positions two or more times last year and most still looking for work.

Today’s publication reported that only 5 per cent of factories exporting their products have provided assistance – in the form of counselling and help in securing new employment – to the workers they terminated.

It also pointed out the renewed urgency now for Cambodia to “develop a reliable and cost efficient electricity supply, for the benefit of all businesses,” including the garment industry, since high power costs are impeding the regional competitiveness of its garment firms.

Annual Conference Addresses Garment Woes

By Kong Sothanarith, VOA Khmer
Original report from Phnom Penh
14 December 2009

Cambodia lost nearly 100 factories and 40,000 jobs last year in the wake of the global financial crisis, a government official said Monday, though some other factories have since opened and put more people to work.

“The ministry noticed that from January through November 2009, garment and shoe factories, in total 93, have been closed,” Om Mean, undersecretary of state for the Ministry of Employment, told an annual conference for garment workers on Monday. More than 38,000 were originally put out of work by the closures, he said.

However, he estimated that job losses were now around 30,000, thanks to newly opened smaller factories replacing the larger, shuttered operations.

World Bank officials warn that the garment sector job losses will contribute to an increase in poverty, from 1 percent to 3 percent.

‘This is a grave impact,” said Qi Mao Fan, World Bank’s Cambodia director. “So investors and workers must ensure the standard of work and competitiveness.”

Sok Lao, executive director of the Arbitration Council Foundation, said garment factories could be saved by increased commitment of government institutions, investors and workers to cooperate.

The garment sector is Cambodia ’s top export earner, reaching $2 billion in 2008. Om Mean said Monday the country now has 516 factories and nearly 360,000 workers.

To improve the sector, the government must settle questions faced by investors, said Ath Thun, president of the Coalition of Cambodian Apparel Workers’ Democrat Union. Those include high prices for water and electricity, poor infrastructure, corruption and low worker capacity, he said.

Cambodia's Garment Workers Hit by Recession

By Ker Yann, VOA Khmer
Video Editor: Manilene Ek
10 November 2009

Over the last decade economic growth has helped lift Cambodia out of its poverty. The signs were everywhere; bustling construction sites around Phnom Penh ; young workers filing into factories, filling orders for eager clients abroad.

More than 400,000 jobs in the textile industry fuelled the hopes of many young women whose earnings in the city helped support their extended families in the countryside.

Ny Sopheak: "I worked in the packing section of a textile factory. I earned sometimes $60 a month from the factory work and I sent $10 a month to my father."

But that factory, like dozens of others, has now closed. The global recession scared investors and shut down factories.

Twenty-three-year-old Ny Sopheak, like 50,000 other Cambodians, recently lost her job in the garment industry.

This in a country where not having a job can mean not eating, or perhaps just having one meal a day.

Ny Sopheak: "Since I don't have enough food I feel so weak and I often get sick."

Today Ny is sharing one egg and some rice with her roommate, Horn Devy who also lost her factory job. That's one egg between two people. Horn feels she can't go on much longer.

Horn Devy: "It's very difficult. It's a hard life, living in a small room like this."

Horn is only 15 years old. She was sent to work to help out her family, small time farmers and basket weavers who can't make ends meet.

Horn's mother says she worries about her, so young, and away from the family. Even so, she wanted Horn to earn money, so that her brothers can finish school.

But having lost her job, Horn has gone from providing for her family to becoming an extra burden. Asked how she feels about this, she says,

Horn Devy: "It's hard to say. I am starving. When you have no food it's very difficult to feel anything."

Her story is unusual because of her young age, but all over Cambodia's capital there are women who are falling into abject poverty as they lose their jobs in the textile factories.

Meanwhile, thousands of factory workers have turned to the streets to pressure the government to guarantee their jobs, their incomes, and their access to food.

And while Cambodia has been hard-hit, other countries are worried too. Guaranteeing the availability of food for everyone is now an urgent issue for governments across Asia-Pacific.

Many governments are now looking at how to invest in agriculture, to stem tide of migration towards the cities, and to help make food more affordable.

But textile factories too, are needed. If they keep closing, experts worry that much of the progress achieved in places like Cambodia, in education, in economic development, and in human rights, could be at risk; and with it the future of the entire generation.

Rit Kor Kamakor Khmer - "Choking Khmer Workers": A Poem in Khmer by Srey Sra'em

Click on the poem to zoom in

Poem in Khmer by Srey Sra'em

Laid-Off Workers Look Overseas for Jobs

By Ros Sothea, VOA Khmer
Original report from Phnom Penh
09 July 2009

In an apartment in central Phnom Penh, a group of 20 Cambodian women, many of whom have lost their jobs in Cambodia’s flagging garment sector, gathered recently to discuss finding work abroad.

Among them was Kong Soviet, who suddenly smiled when she considered her prospects of work in an electronics company in Malaysia.

“I hope I can save some money during these two years in Malaysia, so that I can make a better living,” said the 29-year-old, who was laid off at a Takeo province factory two months ago and has been applying for jobs elsewhere ever since.

Like tens of thousands of factory workers, Kong Soviet lost her job in the wake of the global economic crisis, as orders from buyers in the US and other countries dropped off.

Since August, some 70 garment factories have closed shop, leaving around 60,000 workers unemployed.

Thousands of construction workers have lost their jobs, too, as projects shut down or were delayed. Residential construction has declined up to 40 percent since the global financial crisis began.

That has meant an increase in the number of workers looking for jobs in other countries.

Since mid-April, the number of Cambodians applying for overseas jobs, including in Thailand and Malaysia, has jumped 30 percent, according to On Bun Hak, chairman of the Association for Cambodian Recruitment Agencies.

“Most of them are workers who lost their jobs from the construction sector,” he said.

Oung Chan Rithy, who runs a recruitment agency, said her company had not in the past received applications from garment factory workers, but that has changed.

“Those who lost their job from factories and want to get a job overseas have increased around 5 percent,” she said. “That number will sharply increased in the coming months after the season for rice seedlings has passed.”

Cambodia sends some 7,000 to 8,000 legal workers to Thailand, Malaysia and South Korea, each year, according to the Association for Cambodian Recruitment Agencies.

Meanwhile, an estimated 20,000 people work in Thailand illegally, in construction, tourism and services like domestic help.

Remittances from these workers is $200 million to $300 million per year.

At the onset of the financial crisis last year, demand for employment fell, as neighboring countries felt the contraction of the markets, but in the past few months, labor demands from Malaysia have increased, On Bun Hak said.

That has been due to stricter laws of emigration in Indonesia, which feeds much of the Malaysian demand, he said.

South Korea has halved its own foreign labor quota, but around 2,000 workers have managed to find work there, said Heng Sur, chief of administration for the Ministry of Labor.

Ya Navuth, president of an immigration agency watchdog called Kharam, said limited job opportunities in Cambodia will now lead to an increase in both legal and illegal work abroad.

Exports to US slump by 23.6pc

Wednesday, 17 June 2009
Written by Steve Finch
The Phnom Penh Post

Garment woes behind fall in April exports to key market

CAMBODIAN exports to the United States continued to plummet in April, recording a 23.6 percent annualised drop to US$135.75 million, according to US trade figures reported late Monday, mostly caused by another huge decline in garment exports to the Kingdom's largest overseas market.

The decline was worse than in March, when total exports to the US dropped 22.2 percent, a suggestion that the worst may not be over, even if April's figures were not as severe as the 27 percent decrease posted in February.

But a 20.53 percent fall in total exports to the US in the first four months of the year to $646.8 million was not as steep as the declines experienced by other top exporters to the world's largest economy.

Japan saw its exports to the US plummet 43 percent, Malaysia was down 38 percent, and neighbouring Thailand saw a decline of 26 percent, according to figures released on the US International Trade Commission Web site.

Vietnam was the only country among the top 30 exporters to the US to report an increase up to April this year, recording a 3 percent rise compared with the same period last year.

The figures showed that the recent drop in US demand for garments - which account for 98 percent of the Kingdom's exports - was the major factor contributing to Cambodia's loss in export earnings.

The sector saw revenue from US sales fall from $801.3 million in the first four months of last year to $631 million up to April 2009. This 21.23 percent drop slightly outstripped the fall in total exports, suggesting that garments are suffering more than other Cambodian exports to the US, which are miniscule - just $15.8 million in the first four months of this year. The Kingdom sells more than half of its total export products to the US.

Overall, Cambodia's exports to the US fell back to levels roughly equal to 2006 up to April, suggesting that forecasts on Cambodia's export industry for 2009 are largely accurate.

"Merchandise exports will fall in 2009, mainly owing to the poor outlook for overseas sales of garments, which account for over 70 percent of total export revenue," the London-based Economist Intelligence Unit (EIU) projected this month, citing low US demand.

On Friday, USAID sponsored a garment forum that noted a lack of competitiveness in the sector caused by infrastructure constraints - namely export clearance times and electricity costs in the Kingdom.

"In addition to the slump in US and global demand for garment imports, there are a number of structural challenges to ... sustained competitiveness," US Embassy spokesman John Johnson said Tuesday, also citing low productivity and bureaucracy as constraints.

Unless addressed, analysts warn that, even following a global recovery, Cambodia will see prolonged decline in its main export sector.

"Even after US growth recovers, Cambodia's garment manufacturers will continue to lose market share to more efficient producers, particularly in Vietnam," the EIU said.

Garment Manufacturers Association of Cambodia Secretary General Roger Tan suggested Tuesday that "it [exports to the US] will probably be down, too, in May and June".

ADDITIONAL REPORTING BY NGUON SOVAN