The Cambodian Ministry of Labor and Vocational Training will start talks with industry and labor unions next month to establish a minimum wage for textiles, apparel and footwear for 2019.
In October last year, Cambodia raised the minimum monthly wage of workers in its textiles and footwear industry by 11 percent to $170 following months of labor unrest that raised concern among U.S. importers.
To quell similar unrest, the government is reportedly taking steps to organize wage talks between factory owners, industry representatives and unions, according to Voa Cambodia. The country’s ministry requested that the talks consider social and economic criteria for the minimum wage to include inflation rates, living expenses, productivity, the country’s competitiveness, labor market conditions, profit margins and poverty levels.
Cambodia’s apparel and textile shipments to the U.S. increased 8.4% in value to $159.29 million in June, and were up 4.5% to 61.13 million in square meter equivalents, according to the U.S. Commerce Department’s Office of Textiles and Apparel.
Lifted by a rebound in textile and apparel exports, along with tourism and agriculture, economic growth in Cambodia remains strong and is projected to accelerate slightly to 6.9% in 2018 from 6.8% last year, a World Bank report said in May. The World Bank’s Cambodia Economic Update said rising government spending and favorable global conditions are expected to form a strong foundation for Cambodia’s high growth trajectory.
But risks remain, the report noted, including erosion of export competitiveness due to rapidly rising wages, vulnerabilities from a prolonged real estate and construction boom, potential election-related uncertainty, and “periodic jolts of protectionism and escalating trade disputes between the world’s largest trading nations.”
Textile and apparel exports to the European Union, including the U.K., grew 7.4% year-over-year in 2017, while those exports to the U.S. expanded 3.7% compared to a decline of 3.5% a year earlier. Despite rapidly rising wages, overall textile and apparel exports rose 7.7% in 2017, a slight deceleration from 8.4% growth in 2016, according to the report.
Cambodia’s footwear exports continued to expand, but average prices fell slightly. Attracted by “Everything but Arms” preferential treatment provided by the European Union, footwear products have expanded and become the second-largest manufacturing export after clothing and other textile articles.
It’s not yet clear how much the wage could go up, but factory owners are concerned about the country’s competitiveness.
“We are facing daily competition, meaning we just want the union side to consider the ability [of the employers] before they demand,” Ken Loo, secretary general of the Garment Manufacturers Association in Cambodia (GMAC), told Voa. “They beed to let us have space for competition. If the wages rise too high, they would stop ordering from us.”