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GMAC: Cambodia Garment Sector Battles Stiff Competition in the Face of Higher Wages

Cambodia has had its share of malaise in the garment sector and according to the Garment Manufacturers Association of Cambodia, the low-cost country is facing challenging competition considering productivity there is low, wages are higher and labor strife is rampant.

According to the Phnom Penh Post, GMAC said Cambodia’s garment sector’s productivity is only 60 percent that of China’s.

“Low productivity and ever higher wages will be a real challenge to the industry here as overseas buyers are becoming more discerning about productivity and competitiveness when they choose where to source their products,” GMAC’s secretary-general Ken Loo, said in a statement.

Loo painted impunity as the reason for the country’s low competitiveness. Unions are allowed to operate as they please, he said, and they have been resistant to factory floor changes and are often at odds with rival unions over certain demands.

“It seems that’s what you’d expect [GMAC] to say, they’re trying to keep wages down,” William Conklin, country program director of the AFL-CIO’s Solidarity Center told the Post. “As everyone saw in the recent ILO report, [Cambodia’s] output is actually increasing, this despite the relatively large jump in wages last year.”

In its first bulletin on Cambodia’s garment and footwear sector, the International Labor Organization didn’t find conditions there to be quite as bleak as GMAC notes.

The bulletin, released last week, said Cambodia’s exports of clothes and shoes in the first quarter of the year grew 10.6% over the same period last year to $1.5 billion. The number of factories also saw a jump, increasing from 528 in 2013 to 640 as of March this year.

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Cambodia’s current minimum wage, which went up to $128 (from $100), doesn’t seem to have caused a contraction of export volumes as earlier predictions posited. And the new wage still rings in well lower than some of the country’s regional competitors: China’s minimum wage, according to the ILO, is $297, in the Philippines it’s $269 and in Thailand, $237. Cambodia’s rate is higher, however, than the $99-$119 in Pakistan, $71 in Bangladesh and $66 in Sri Lanka.

By GMAC’s account, exports to the EU have grown due to a zero-tariff scheme during the first quarter of 2015, but exports to the U.S. are down 8 percent.

According to the U.S. Office of Textiles and Apparel, however, imports from Cambodia for the first six months of the year are only down 0.51% over the same period in 2014.

The country’s garment association said it will do its duty to improve productivity in the sector, but some things still require aid.

“GMAC is developing an extensive training program for workers that will help improve productivity and modernize the industry but we need more work from other stakeholders on issues like electricity prices and transport infrastructure,” the Post reported Loo as saying.