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Cambodia Poised to Announce New Minimum Wage

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Hoping to squelch rising civil unrest, Cambodia’s Ministry of Labour will soon announce a new minimum wage for its garment factory workers.

Recently, an ad hoc advisory board comprised of government officials, labor representatives and factory owners represented by the Garment Manufacturers Association in Cambodia (GMAC) winnowed the possible solutions to the wage salary crisis to three candidates. The most generous of the alternatives raises the current minimum wage from $80 per month to $160 per month, gradually rolled out over a five-year period in annual increments of $16.

Last March, the minimum wage was increased to $80 per month from $61 but that move stoked rather than dampened workers’ frustration with what they consider to be punishingly low salaries. Cambodia has also suffered intense criticism for its labor conditions and factory safety, and lack of accordance with social compliance in general. Last month, Better Factories for Cambodia (BFC), an auditing organization sponsored by the United Nations, announced a new, aggressive initiative to publicly list the factories that fail to meet their stringent requirements for safety.

Cambodia has certainly made great strides as an apparel exporter, experiencing a robust 22 percent increase in its shipment of orders over the last nine months in comparison to the same period last year. The total value of its exports topped $4.1 billion for the duration, much higher than last year’s $1.21 billion.

Foreign investment has recently poured into Cambodia from Australia, England, India, Japan, Korea, Malaysia, Singapore, China, Taiwan and the U.S. China alone sent the nation $121 million in 2013.

And as Cambodia continues to mature economically, it has become progressively more reliant upon its garment sector, which accounts for 80 percent of all exports.

But even that accelerated growth has not been without its attendant challenges. Between 2012 and 2013, Cambodia increased the number of its factories by a hefty 8 percent to 412. This is partly due to the changing topography of sourcing created by the increasing costliness of China, once a prime destination for retailers and brands looking for bargain manufacturing.

And civil unrest has resulted from increasingly contentious disputes regarding wages and general labor conditions. On Tuesday November 12, at least 600 workers thundered through Phnom Penh’s Meanchey district, demonstrating for improved working conditions and compensation. In the fog and ferment of the riotous protests, at least one person died. The strikes have persisted for months on end.

The good news for Cambodia is that it is positioning itself to become a more sophisticated manufacturing hub. Many retailers have begun to source much more complicated products from Cambodia, moving beyond basic staples like t-shirts and jeans, experimenting with intricate stitching, dyes and prints.

However, Cambodia’s labor force is still not advanced enough to produce much of the higher-end clothing made in China, the U.S. or Western Europe. Ken Loo, secretary general of GMAC, said, “That’s why we need a good vocational training institute. A lot of it also comes from on-the-job training. It’s still a question of do we have the ability to do it here.”

As Cambodia’s garment manufacturing sector matures, the pressure on wages to increase only grows more intense. The industry currently employs more than 300,000 workers, approximately 90 percent of them female.

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