Cambodia Strike Stalls Key Garment Industry

Wage Dispute Affects Nation's Largest Manufacturing Sector

The Wall Street Journal | Dec. 26, 2013 

PHNOM PENH, Cambodia—A nationwide strike by Cambodia's garment workers this week has stalled the nation's largest manufacturing industry, after tens of thousands of protesters skipped work to demand a higher minimum wage than what the government has offered.

 

Cambodian garment workers attended a protest in Phnom Penh on Dec. 25. European Pressphoto Agency

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The job action—the largest this year in a sector plagued by frequent strikes—has prompted Cambodia's garment industry association to call on its members to suspend operations this week, stoking concerns over a broader fallout for an economy heavily reliant on garment manufacturing as its main export earner and biggest formal sector employer.

Workers from more than 120 factories launched the job action Wednesday, union leaders said. They were protesting the government's decision this week to raise the industry's minimum wage by 19% to $95 a month, starting in April—well short of unions' demand for $160. The strike also drew support from Cambodia's main opposition force, which has been staging a nationwide protest this month against Prime Minister Hun Sen's rule.

"The current wages are too little and can't meet workers' needs," said Ath Thorn, president of the Coalition of Cambodian Apparel Workers' Democratic Union. "The government should solve this problem now—otherwise the protests will affect the garment investors if the situation worsens."

Officials, however, urged the strikers to accept the smaller-than-demanded wage increase. "It is a democratic decision, which has to be respected," said Oum Mean, secretary of state at the Ministry of Labor. "The workers want more, but if they keep insisting, I am afraid they may lose everything."

Cambodia's garment industry supplies apparel to retailers mainly in the U.S. and the European Union. The industry earned nearly $5.1 billion in the first 11 months of this year, up 22% from the year-earlier period, according to data released by the Commerce Ministry.

Cambodia has 795 garment and footwear factories that employ about 600,000 workers, mostly women, labor officials say. Manufacturers favor the country for its low wage costs, but industrial action is frequent, due to what union leaders say is widespread discontent with meager salaries, poor working conditions and lax enforcement of labor laws.

According to the Garment Manufacturers Association in Cambodia, garment workers have mounted 131 strikes from January to November, up from 121 in all of last year, and making 2013 the most strike-prone year since records began in 2003.

It isn't clear how many workers went on strike this week, though Mr. Thorn, the union leader, estimates about 300,000 people were involved. Local media said some 10,000 workers marched in Phnom Penh on Wednesday, while tens of thousands more skipped work elsewhere in the country.

The strike also came as the opposition Cambodia National Rescue Party continued its protest against results of a disputed July election, rallying tens of thousands of supporters in the past week to demand Mr. Hun Sen to either call a fresh vote or resign. 

"What the workers are demanding is suitable. Inflation is rising and wages are comparatively lower than in other countries," said Kem Sokha, deputy leader of the Rescue Party. "If the government is incapable or unwilling to meet the workers' demands, they should step down."

It isn't clear how much the disruptions could cost manufacturers. Many manufacturers halted production after the Garment Manufacturers Association on Thursday told members to close their plants for the rest of this week, citing fears the strikers could turn violent and damage factories.

Economists say the latest strike, if prolonged, could sap Cambodia's exports and hurt growth in the broader economy, which is expected to expand by about 7% this year.

"If the situation gets worse, investors may be forced to leave and seek manufacturing bases in other countries," said Chan Sophal, president of the Cambodia Economic Association.

Cambodia last raised the garment industry's minimum wage in May, lifting it to $80 a month from $66—the largest bump in more than a decade, although garment workers' salaries remain equal to levels seen in 2000 after adjusting for inflation.

With wage-related unrest likely to recur, analysts say Cambodia is under pressure to speed its economic diversification beyond garments, tourism and agriculture.

"Cambodia's garment factories need to constantly increase their productivity and value addition as cheap labor is a fading advantage in a high-growth economy," said Douglas Clayton, chief executive at Leopard Capital, a private-equity firm that invests in frontier markets.

"Ultimately, Cambodia will be better off reducing its economic reliance on this one sector by developing other industries, such as toys, electronics assembly and food processing," he added.