Beyond Garment Sector, Worries Over Wage Hike

When it comes to wages, business leaders this week agreed that what happens in Cambodia’s all-important garment industry does not stay in the garment industry, which accounted for a third of the country’s $15.25-billion GDP last year.

Representatives across industries, from restaurants and hotels to auto dealers, said during a conference in Phnom Penh on Monday that wage increases for the country’s 600,000 garment workers affected them all.

The event, which was hosted by the Cambodian Federation of Employers and Business Associations (Camfeba) and drew about 150 businesspeople, came just as the government, factories and unions close in on a decision on where to set the garment sector’s monthly minimum wage, now at $100, for 2015.

The last time the minimum wage was revised in December, unions staged industry-crippling strikes after their demand for a mandatory $160 monthly wage was not met. They are threatening to do the same if their new demand for $177 is not heeded this time around.

“Today it’s not just a case of ‘Oh, it’s the garment sector, we don’t need to talk about it.’ It’s really affecting other sectors,” said Sandra D’Amico, vice president of Camfeba. “What happens in the garment industry affects all of us.”

Pech Bolene, vice president of the Young Entrepreneurs Association, which works with a broad range of small- and medium-sized businesses, agreed.

“We are already fighting to recruit good people from all the big companies. So we are not able to afford too much money to get good people to work with our companies,” Mr. Bolene said.

When garment worker wages go up, young professionals and recent graduates just starting out on their careers adjust their own expectations, he said.

“We are paying them $100-something or $160. So if the non-skilled workers’ salaries increase

to $160, what will be the demand from those young professionals?” Mr. Bolene said.

Rami Sharaf, chief executive officer of RMA Cambodia, which invests in everything from auto distributors to power generators and restaurant chains, said investor confidence in the garment industry affects overall investor confidence in the country.

Mr. Sharaf said it was in the interest of every sector seeking foreign direct investment (FDI) to avoid strikes and protests similar to those of the past year, especially when the Asean Economic Community takes effect at the end of 2015 and barriers to the flow of labor between member states begin to fall.

“[I]f this thing will not be solved in a strategic way that will take [account of] where we will be once we are integrated in the Asean bigger picture, we are gambling on our GDP, we are gambling on the No. 1 factor attracting investment to come to Cambodia today, which is stability, steady growth of 7 to 7.5 [percent] every year, year over year, for the last five years,” he said.

“And we know by the facts that in the last year, when we had the strikes and we had the confrontation, many of those investors kept sitting on the fence saying, ‘You know what? Let me wait and see,’” he added.

In its outlook on the Cambodian economy for 2014, the Asian Development Bank said net FDI was still robust, but less than what it was the year before, owing partly to political tensions following last year’s disputed national election.

The nationwide garment strikes that began in late December peaked in early January when military police shot into a crowd of stone-throwing protesters in Phnom Penh, killing at least five workers and wounding dozens more—earning the government international rebuke from rights groups and even some clothing brands.

And while garment exports have continued to rise year on year over the first two quarters of 2014, some brands have cut back on their orders.

Kaing Monika, deputy secretary-general of the Garment Manufacturers Association in Cambodia (GMAC), told the crowd on Monday that the effects of those cutbacks would soon be apparent.

Mr. Monika said GMAC recently surveyed 247 of its 500-plus member factories. Of those, he said, 123 did not have enough orders to last them to the end of the year, 126 had scaled down the use of overtime shifts, 160 had seen their buyers reduce their orders by an average of 40 percent and 86 had shut down some of their production lines.

Camfeba also seemed to place some of the blame for a lack of investor confidence on the media.

In a draft of Monday’s agenda prepared by the host, event moderators and the audience were urged to chastise the media for its coverage of the country’s labor relations.

“A lot of challenges are related to bad press reporting that is constantly negative,” the agenda says.

“Bad and negative press affects all of us as well as how FDI views Cambodia. I want other industries to bring this up, to say that the bad press in one sector is impacting the rest of us,” it says.

Business lawyer Matthew Rendall, Camfeba’s deputy secretary-general and one of the day’s moderators, accused the press of being too emotional in its reporting on garment-sector wages.

“It’s such an important issue that it impacts other industries,” he said.

“So today’s an opportunity to hear from everybody, particularly outside the garment sector…and how they think the issue’s being handled, because most of us only hear about it from the press, and the articles are far too based on emotion rather than the facts.”

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