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Inditex, H&M Agree to Pay Up to Support Wage Increase in Cambodia

When it’s deliver-or-die, supply chains become the lifeblood of a company. To that end, the fashion industry has embraced technology to navigate today’s hyper-complicated supply chain, with myriad solutions shaping the first, middle and last mile. Call it Sourcing 2.0.

Eight leading global fashion brands, including Inditex and H&M, have agreed to pay higher prices for product made in Cambodia in an effort to aid in garment workers getting a fair living wage.

In a letter to the Cambodian government last week, Inditex, H&M, C&A, Primark, Next Retail, New Look, N Brown Group and German Tchibo, said, “As responsible Business’ our purchasing practices will enable the payment of a fair living wage and increased wages will be reflected in our FOB prices, taking also into account productivity and efficiency gains and the development of the skills of workers, carried out in cooperation with unions at workplace level,” the letter noted.

The move came just one day after garment workers and labor union representatives staged a Global Day of Action to campaign for better wages. Local unions have been fighting to see workers’ wages raised to $177 per month from the current $100. The Garment Manufacturers Association in Cambodia (GMAC) recently proposed raising the monthly rate to $115, but workers weren’t happy and have continued to take a stance against the nominal increase.

The undersigned brands noted their ongoing commitment to the country by continuing to source there, but stressed that there are “significant opportunities for development and improvement.”

Conditions in Cambodia have been tense as wage negotiations have led to rampant worker protests, which have at times turned violent, walk-outs and mass firings for forgoing work in favor of protesting.

In a statement on its website, H&M noted that it has been engaged in raising the minimum wage in Cambodia’s textile industry for several years, adding that, “A collaborative approach is crucial and that is why we today, together with other brands, have sent a letter to the Cambodian government and to Garment Manufacturers Association in Cambodia (GMAC) to clarify our shared position and intention in the upcoming wage negotiations in Cambodia.”

While it may be one thing to stipulate that workers should earn a higher minimum wage, seeing that those wages are in fact distributed, is another. In the letter, the brands said, “We also expect government and GMAC to establish processes to ensure all workers receive the new agreed minimum wage by monitoring wage implementation and policing suppliers that fail to meet the new minimum wage level.”

The brands concluded the letter with a warning saying, “While our sourcing volumes are forecast to increase in the market, we are closely scrutinizing the approach the Cambodian Government and GMAC are taking to promote the above issues. To support the forecast volumes there is a requirement to see a positive attitude and support for the establishment of freedom of association, the right to collective bargaining, fair living wages, stability and peaceful conflict resolution. This will then deliver the assurance and necessary trust in Cambodia to continue promoting the market as a strategic sourcing country.”

The government and GMAC, along with labor union leaders met last week to discuss the new wage rate, and according to IndustriALL, Cambodia’s Labour Advisory Committee (LAC) is set to announce a new minimum wage for apparel and textile workers in early October.

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