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Cambodia, Sri Lanka Take Steps to Boost Competitiveness

An International Finance Corporation (IFC) program to help Cambodian garment suppliers slash their energy and water consumption is bearing fruit just as the Southeast Asian country is looking to boost its competitiveness and productivity in the textile trade.

Ten cut-and-sew and garment-washing manufacturers that implemented resource efficiency measures in 2019 and 2020 as part of the IFC’s Cambodia Improvement Program (CIP) have reduced their energy and water consumption by 18 percent and 29 percent respectively, according to the agency, which lends to companies in developing countries.

Despite the disruptive nature of the pandemic, participating manufacturers were able to adopt 60 percent of the program’s recommendations over a period of 22 months, from low-cost measures that avoided steam loss to more complex schemes that included the installation of highly efficient washing systems. Once all recommendations are completed, the interventions could collectively reduce their annual energy consumption by 29 percent, water by 44 percent and greenhouse-gas emissions by 25 percent over 2018 levels, the IFC said.

The news followed the unveiling of Cambodia Garment, Footwear and Travel Goods Sector Development Strategy 2022-2027, a five-year roadmap by the Cambodian government to transform the country’s production of garment, footwear and travel goods into an environmentally sustainable and high-value-added operation. The apparel sector is Cambodia’s largest employer with roughly 800,000 mostly female workers. ​​Europe, its biggest customer, receives roughly 40 percent of the country’s clothing exports, which rose by 15.2 percent year over year to $11.38 billion in 2021 as orders spilled over from post-coup Myanmar and locked down Vietnam. Still, high energy costs and low productivity continue to blunt Cambodia’s edge in the region.

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“High energy costs and poor productivity have impacted the competitiveness of Cambodia’s garment industry,” Rana Karadsheh-Haddad, IFC Asia Pacific regional director for manufacturing, agribusiness and services, said in a statement. “It’s why IFC has been supporting the greening of global textile value chains at the local level to promote sustainable private sector growth and improve the competitiveness of local manufacturers. Building on these positive results, IFC will leverage its partnerships with leading global brands to drive sustainability in Cambodia’s garment sector, boost the recovery and build resilience.”

Suppliers with higher sustainability profiles are able to receive pricing incentives from IFC’s Global Trade Supplier Finance (GTSF) program, which offers short-term financing to exporting manufacturers by discounting their invoices once they are approved by their buyers. In 2021, the GTSF program mustered $276 million for Cambodian factories.

The CIP, which the IFC launched in 2019 with support from Korea’s Ministry of Economic and Finance, aims to boost the garment industry’s competitiveness, productivity and sustainable growth while helping Cambodia hit its 40 percent greenhouse-gas reduction target by 2030. Part of the agency’s wider ambition to decarbonize manufacturing industries across Asia through knowledge and expertise sharing, it runs alongside similar programs in Bangladesh, Pakistan and Vietnam.

A ‘human-centered recovery’

Over in Sri Lanka, the IFC and International Labour Organization’s Better Work program is just getting started on its own “industry-level intervention” to steer the South Asian country’s Covid-19-hit garment sector toward a “future of increased resilience, efficiency and sustainability.”

With the support of the European Union, the Better Work team will work closely with the Sri Lankan government, employers, workers and their organizations on the scheme, though traditional Better Work factory services such as compliance assessments in individual manufacturers will not be offered in the island nation.

The garment industry is Sri Lanka’s largest exporter and employs 350,000 predominantly female workers. While the pandemic slowed the sector’s growth, apparel exports rebounded by 23 percent to reach $5.42 billion in 2021. A bigger danger, however, is the country’s ongoing financial crisis—the worst Sri Lanka has seen in decades—which threatens to roll back any progress, especially as rolling power blackouts continue to disrupt production planning and manufacturing, making orders difficult to fulfill. On Tuesday, the government announced a pre-emptive default on foreign debt totaling $51 billion as a “last resort” after running out of foreign currency to pay for fuel and food.

Meanwhile, Better Work Sri Lanka will focus its efforts on issues such as occupational safety and health, including Covid-19 management and awareness campaigns promoting improved mental health and well-being. The program will also tackle gender, diversity and inclusion, providing leadership skills training and development for female workers, addressing harassment and violence in the workplace and facilitating access to pregnancy-related healthcare, childcare and maternity protection. Small and medium enterprises (SMEs), too, will receive leadership and financial literacy training for SME management, management systems, productivity interventions and increasing visibility to supply chain partners, the initiative said.

Better Work’s Sri Lankan push builds off its Acadamy initiative, during which it engaged one of the country’s largest denim manufacturing groups, Orit Apparels Lanka, and its long-term buyer Levi Strauss on how to improve workplace cooperation and worker-manager dialogue. The work also complements other IFC measures in Sri Lanka’s apparel sector, including the SheWorks program to drive gender equality in the workplace, the organization said.

“This flagship program could not have arrived at a more appropriate time, as the country and the industry start to recover and rebuild from the pandemic,” Simrin Singh, ILO director for Sri Lanka and the Maldives, said in a statement. “With Better Work’s extensive experience, tools and partnerships, I am convinced the program will succeed in exemplifying what a human-centered recovery means, with greater industry competitiveness and decent work for all.”