Apparel Sourcing Intelligence - Worldwide

Cambodian government gets subtly different pressures from foreign buyers and unions over minimum wages

In separate mid-September letters to the Cambodian government, a group of European buyers and the major international union federations pushed for surprisingly similar, but still different, approaches to setting Cambodia’s minimum wage for 2015.

Eight European buyers – H&M, Inditex, C&A, N Brown, Tchibo, Next Retail, Primark and New Look – wrote to Cambodia’s  Deputy Prime Minister Keat Chhon and GMAC Secretary-General Ken Loo, on September 18, saying that “our purchasing practices will enable the payment of a fair living wage and increased wages will be reflected in our FOB prices”. This part of the letter has led to claims from union activists of buyers’ “willingness to incorporate higher wages by paying more for garments.”

Other buyers – like Levi, Adidas, Puma, Gap and Walmart – described their attitude in similar words, though avoiding the implication that they backed a specific wage level

But the eight buyers signing the September 18 letter went on to link their preparedness to pay higher prices to “productivity and efficiency gains and the development of the skills of workers, carried out in cooperation with unions at workplace level.”  They added:

“Our experience within global sourcing markets shows, when we compare the productivity and efficiency with Cambodian factories, that there are significant opportunities for development and improvement,”To harness these opportunities, we will support the development and provision of processes that will enable our suppliers to deliver higher productivity and efficiency.

The buyers added that they expect the government and GMAC to establish processes “to ensure all workers receive the new agreed minimum wage by monitoring wage implementation and policing suppliers that fail to meet the new minimum wage level.”This will ensure an equal level playing field and create a competitive advantage for the factories that comply with the new minimum wage.”

“Our experience within global sourcing markets shows, when we compare the productivity and efficiency within Cambodian factories, that there are significant opportunities for development and improvement. The brands also say they expect the government and GMAC to establish processes to ensure all workers receive the new wage, once it is set, and implement an annual collective bargaining process for the industry. While our sourcing volumes are forecast to increase in the market, we are closely scrutinizing the approach the Cambodian Government and GMAC are taking to promote the above issues,” the letter says.

The letter finishes with a warning that the brands expect “freedom of association, the right to collective bargaining, fair living wages, stability and peaceful conflict resolution” in Cambodia if their orders are to continue increasing.”

It does not, as some are concluding, give a flat commitment to increasing prices in line with wage increases. And there was no indication any other buyers – or any Americans – agreed with them

Nonetheless, the three main international union federations – IndustriALL Global Union, the ITUC and UNI Global Union – wrote to Cambodia’s Prime Minster Hun Sen on September 17, calling for “an immediate and substantial rise to the minimum wage”, and stressing that a “2013 government-commissioned study” had found that the minimum wage should be between $157 and $177 dollars a month.

Not to be outdone, the Brussels-based Foreign Trade Association – a lobbying group of many European retailers and importers across many product categories – released on September 15 a letter it had sent in July to Hun Sen,  askikng the Cambodian “government to establish effective industrial relations and to set up an action plan for improving the minimum wage determination mechanism.”