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Cambodia: Greater Transparency Spurs Improved Factory Compliance

In the last year, the world has paid greater attention to global garment factory conditions, and in Cambodia the added scrutiny has proved beneficial to boosting compliance.

The International Labour Organization’s (ILO) Better Factories Cambodia (BFC) program, established to monitor factories and help them maintain improvements, recently released its thirty-second synthesis report, assessing 393 factories to determine the status of working conditions there.

And following a downward trend between 2010 and 2013, the report revealed that overall compliance levels have gone up in the country between May 2014 and April 2015.

In the 14 years since BFC’s establishment, labor conditions have improved and data has shown that once garment factories better their working conditions, lapsing into former subpar ways isn’t likely.

“Despite the slight upward trend in non?compliance after 2010 (associated with an overall decrease of compliance across the industry), the overall trend is a strong decrease in non?compliance, suggesting a growing “culture of compliance” that may allow new factories to be in compliance more quickly,” the report noted.

Overtime and Occupational Safety and Health (OSH) matters are still among the top 10 compliance concerns, but BFC believes much of this could be remedied with comprehensive OSH management systems.

Standard factory practices and pressure from the supply chain continue to contribute to the ongoing issue of overtime and non-compliance on working more than two hours of overtime per day has been as high as 76 percent.

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Cambodia also established a yearly minimum wage adjustment. After lengthy deliberations last year by a designated Labor Advisory Committee, a new monthly minimum wage of $128 a month for regular workers was announced, though garment manufacturers were pushing for a lower $100 a month and workers wanted $177.

BFC had been reporting factory-level working conditions from 2001 to 2006 but stopped after garment quotas were eliminated but the speed of improvements at the country’s facilities slowed noticeably and the practice was reinstated last year.

Disclosing factory performance and compliance publically, according to BFC, promotes good practices and puts pressure on under-performers to improve.

“There is growing evidence that public reporting has created the intended dynamic: factories are making changes and, in the aggregate, improvements are being made in key areas of non?compliance,” according to the report. “Public reporting also facilitates follow-up actions by government and strengthens Cambodia’s reputation as an ethical sourcing destination.”

Cambodia’s apparel sector exports, which account for roughly one-third of the country’s GDP and employs 4 percent of its population, reached a record-high $5.8 billion last year, a 9.3% jump over 2013 with garments accounting for 92 percent of the total, and footwear the remainder.

For the first quarter of 2015, Cambodia exported $1.5 billion in garments and footwear, a 10.6% increase over the same quarter last year.

The industry there has grown in the last few years, albeit at a slightly slower pace, with garment and footwear factories totaling 626 and the end of 2014 compared to 528 the previous year. And as of March this year, 640 facilities are operating, employing roughly 605,100 workers.

“The somewhat slower growth of Cambodia’s garment and footwear sector in 2014 can be attributed to rising local production costs, the ongoing impact of labor unrest in early 2014, as well as strengthened competition from regional neighbors Bangladesh, Burma and Vietnam,” according to the report. “Importantly, the EU overtook the U.S. as Cambodia’s largest garment and footwear export market in 2014—the share of garment and footwear exports to the EU was 42 percent (up from 36 percent in 2013) whereas the share of exports to the U.S. was 33 percent (down from 39 percent in 2013).”

Cambodia’s garment sector has been rife with strikes in recent years, but after ongoing unrest at the start of 2014, BFC said the number of strikes fell 25 percent to 108 in the year, down from 147 in 2013.

“Although overall compliance levels show a slight increase, there are areas with positive as well as negative change. Positive changes are most commonly due to greater commitment on the part of the employer to address working conditions, increased worker?management cooperation at the factory level and greater commitment or pressure from the buyer with the factory to make change,” the report noted. “Negative changes can be due to a decline in the factory’s business, leading them to deprioritize working conditions, change in management or not sustainably addressing working conditions.”