First came the raw materials crunch. Then, the canceled orders started flooding in. Now, Cambodia’s $7 billion garment and footwear industry is on the brink of disaster as nearly one in six factories stands idle.
The labor ministry reported Tuesday that at least 91 garment factories in the Southeast Asian country have suspended work to date due to the fallout from the COVID-19 pandemic, with 61,500 workers now affected, an 86 percent uptick from less than a month ago.
Apparel manufacturing is Cambodia’s largest employer, contributing 40 percent of the nation’s gross domestic product. More than 600 factories and 750,000 workers create products for international brands such as Adidas, Levi Strauss, H&M and Puma.
Factories that have frozen operations are required by law to pay furloughed workers 60 percent of the minimum wage of $190 per month. The Cambodian government says it will be chipping in a “salary replacement” of roughly $38 per month.
The Garment Manufacturers Association in Cambodia (GMAC), a trade group based in the capital of Phnom Penh, is also appealing to all international buyers to honor their purchasing contracts in order to ensure the livelihoods of its workers and the survival of its now-embattled factories.
While all stakeholders are feeling the “extreme burden” caused by the coronavirus outbreak, it wrote in an open letter Thursday, factories operating on already razor-thin margins are less able to shoulder this burden than their buyers.
“The consequential burden faced by our workers who still need to put food on the table is enormous and extreme,” GMAC wrote. “We urge you to honor the terms of your purchasing contracts and fulfill your obligations by taking delivery and pay us for goods already produced and goods currently in production.”
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The organization also urged brands to put their frequently vaunted CSR principles into practice, starting with the people who make their products.
“Together, we can surely overcome this pandemic and protect the lives of our workers and their families and ensure the survival of our businesses,” it said.
Last month, apparel manufacturers from different countries told New York labor-advocacy group Human Rights Watch that very few brands assume any of the business risk when placing orders.
The former manager of a garment factory in Cambodia said, for instance, that brands typically foisted all payment terms and conditions on manufacturers without leaving any room to negotiate. Larger companies were also loath to make advance payments and they tended to have longer payment windows after goods were shipped than small- or medium-sized brands.
“These are extraordinarily challenging times, yet clothing brands facing tough business decisions to ride out the COVID-19 crisis should not forsake the factory workers who make their branded products,” Aruna Kashyap, senior counsel in the women’s rights division of Human Rights Watch, said in a statement. “Brands should take steps to minimize the devastating economic consequences for garment workers in their global supply chains and for their families who depend on this income to survive.”
Facing a public backlash, several brands, including H&M, Inditex, Marks & Spencer, Kiabi, PVH Corp. and Target have reportedly agreed to take in finished and work-in-progress garments. But many more, including Arcadia Group, which owns Topshop, Burton, Dorothy Perkins and Miss Selfridge, have not only canceled orders but are also extending payment terms.
Cambodia exported $9.3 billion in clothing and footwear last year, according to the Ministry of Industry and Handicraft, a year-on-year increase of 11 percent.