Better Factories Cambodia – a 15-year journey

An employee works at a garment factory in Phnom Penh Por Sen Chey district in 2014.Vireak Mai

Better Factories Cambodia – a 15-year journey

Phnom Penh Post | 20 October 2016

This week, a pioneering collaboration between the government of Cambodia, the United Nations’ International Labour Organisation, and garment industry factory owners and their workers turned 15. This collaboration is Better Factories Cambodia, and we believe this collaboration has brought crucial improvements to the garment sector.

The Cambodian garment sector is the true engine of the country, providing livelihoods to 700,000 workers and approximately 2 million of their family members, and billions in export income. But 15 years ago the industry, and the country, were in a different place.

Emerging from a devastating civil war, Cambodia was one of the poorest economies in the world. As with many other developing countries, the garment sector was one of the first industries to be established. Foreign investors quickly realised the capacity for Cambodia to meet the demands of the fashion industry. With the availability of competitive labour and attractive investment incentives, the textile industry took off. With it, came much needed jobs, improvements to livelihoods and development in a country that was trying to find its feet.

Recognising the vast potential a thriving garment industry could have for the recovery of Cambodia, in 2001 the US granted Cambodian factories favourable access to US markets on condition of improved labour standards. To support monitoring of these standards both governments turned to the UN’s International Labour Organization (ILO). Together with its tripartite partners – the Royal Government of Cambodia (RGC), the Garment Manufacturers of Cambodia (GMAC) and Trade Unions – the ILO established Better Factories Cambodia and set out to improve conditions for workers.

In doing so they helped Cambodia discover a niche that would keep it on a level playing field with countries where garment production was cheaper. And this niche was compliance. Cambodia’s reputation as an ethical sourcing destination for garments took an upturn.

In 2001, Cambodia became the first ever country to establish factory assessments by the ILO as a legal requirement for garment exporting factories. And then they made the assessments public – a bold step by a government in a post-conflict country seeking to revive an industry from the ruins of war.

The initiative paid dividends. Between 2001 and 2004, three things happened in quick succession: factory conditions improved visibly with breaches to core labour standards decreasing significantly; industry boomed – there was a $500 million increase on yearly garment exports, which, similarly to today, made up 80 percent of total exports; and brands began to see Cambodia as an ethical country in which to manufacture garments.

Improvements continued after 2004, with implementation of critical labour standards increasing across the industry. For instance, when BFC and the tripartite partnership began, less than 70 percent of factories were paying minimum wage. Today, according to our data, almost all factories in the country are paying minimum wage. These improvements have gone hand in hand with strong incremental growth to the industry.

So how has it worked?

BFC improves labour conditions and the profitability of the garment industry through a combination of factory assessments, tailored training for both workers and managers, factory advisory services, and public disclosure of working conditions on factory floors. These components have served to improve working conditions, improve business outcomes for factories, and attract brands.

This seismic shift in the garment sector has brought with it profound lessons for the industry. While some factories and brands moved with the times to avoid the legal implications of failing to comply and the reputational damage associated with unfair working conditions, the better ones – those who understood that short-sighted management decisions based on short term costs have short term gains – realised that going beyond the bare necessities leads to profitability and resilience.

Worker-manager engagement is the cornerstone of our work. By helping managers and workers sit around the same table, negotiate and listen to each other in a fair way, BFC supports factories and workers to find their own solutions that work for both. These bipartite mechanisms serve to address workplace problems in effective ways, immediately impacting the quality and productivity of factories. When workers know who to talk to about a problem and, more importantly, have the confidence and knowledge of their rights to do something about it, issues are resolved more quickly.

The good news is that, improvements in working conditions are self-sustaining; once factories become compliant, they rarely fall back into noncompliance. While some factories initially comply because they are legally obliged to, the savvy ones are quick to realise the business benefits of compliance. These benefits were highlighted by the global financial crisis of 2008 when the factories working with BFC survived the economic meltdown as others floundered. Such lessons today ensure that factories are compliant not just out of fear of public reporting or in order to attract responsible buyers, but because being compliant is the smart business choice.

The past 15 years has not been without its challenges: instability, industrial disputes, and global economic crisis to name a few. The period has seen many discussions, consultations, agreements, and disagreements, as well as failure and achievements. Throughout it all, the BFC partnership has continuously evolved towards a model that benefits all in the supply chain from the worker to the investor, the successes of BFC led to the roll out of Better Work which operates across three continents, also catalysing changes along global supply chains.

This week, Labour Minister Ith Sam Heng, Commerce Minister Pan Sorasak and GMAC are renewing their commitment to BFC so that the programme, in close collaboration with its constituents, can continue its work to support individuals, factories and the country.

There are still many challenges ahead, BFC and our partners know this. While stepping up efforts to make our work more sustainable, in factories as well as with our partners, we will continue to focus on helping to ensure that the Cambodian workers work in safe factories, where their rights are being respected and where they are empowered to resolve workplace issues with an increasingly skilled management force.

We are certain there is still enormous potential in this sector: by understanding and nurturing this potential, we can further improve livelihoods and take Cambodia to the next level of social justice and sustainable development.

Esther Germans is the program manager for Better Factories Cambodia