The true cost of progress

Author: Katie Bjorem   Date Posted: 8 September 2017 

The sun has barely started its scorching ascent, yet the Cambodian streets are already restless, as across the country thousands of workers clamber into the back of open aired trucks.


Six days a week these crowded vehicles rush more than 700,000(1) workers along arterial roads to the gates of garment factories.

In warehouses brimming with people and fabric, workers cut, sew, press and pack the clothes that account for over 80% of the country’s exports.(2)

A core industry for local labour and for international trade, it could easily be said that the whirr of sewing machines is the heartbeat of the country’s export economy.

"The threat of a slow exodus of international businesses from Cambodia is now looming ominously over the textile industry."

It’s unsurprising, then, that as elections loom the sheer size of the garment industry has made it a target for political campaigning, culminating recently with the government’s promise to increase worker’s wages by 10% and enforce higher provisions.(3)

These policies follow a string of rigorous changes to workers’ wages and conditions, as wages have compounded from $61 to $153 USD in just five years.(4)

In developing countries, the provision of a fair wage and good working conditions is worth celebrating and, as you would expect, the dramatic increase in wages has been met with raucous jubilation from trade unions and staff.

 

But lurking beneath the festivity, the industry itself is beginning to groan under the weight of blistering change as Cambodia starts to lose its competitive edge.

In fact, last year more than 70 factories closed(5) and the growth of exports has dramatically slowed.(6) The threat of a slow exodus of international businesses from Cambodia is now looming ominously over the textile industry.

Which raises an important question: how can we ensure that an increase in workers’ fundamental rights does not result in the loss of workers’ jobs?

There’s no easy answer, but a vivisection of both the domestic and international response can at least provide a diagnosis of some of the major issues.

Firstly, while regulating wages and conditions is an important step for the government, it’s essentially a hollow initiative if it’s not supported by the necessary infrastructure and provisions. In theory, increasing the taxable income of such a large percentage of society, should result in an increase of social services: better roads, affordable electricity, improved technology, and education and health care should lead to higher productivity in the short term and higher skills in the long term. However, the rate of productivity in factories is not increasing, nor is it comparable to countries like Vietnam and China.(7)

This is exacerbated by a scarcity of training opportunities for staff, vividly demonstrated by the thousands of workers in factories performing the same procedure year after year.

According to the Asian Development Bank, 40% of Cambodians lack sufficient education to adequately perform their jobs,(8) which has also hindered the birth of new industries in the country, such as low-tech manufacturing.

As manpower is progressively replaced by machines, the absence of vocational training will leave workers with little to offer as assembly lines become increasingly automated in the so-called “Fourth Industrial Revolution”.

Without the government providing the scaffolding, the industry could easily fall like a house of cards, and currently there would be no alternative to offer thousands of redundant individuals. It’s probable that if Cambodia is no longer a primary production base for apparel, the country’s main export could easily become workers desperately seeking positions in other countries. It’s worth nothing, that the brands you’re wearing aren’t weathering any of the costs associated with increased wages.

The large cluster of factories on the outskirts of the country’s bustling capital, pumping out products for a myriad of different labels from H&M to Armani, are not owned by the labels they produce.(9) Instead, large brands outsource production to a multitude of different factories that compete ferociously against each other to offer the lowest possible price per piece.(10)

To put this in context, it’s estimated that the new wage policy and provisions stipulated by the current government will cost each factory more than 10 million dollars a month in increased overheads,(11) with the foreign owned manufacturers having little incentive or ability to absorb the costs and remain competitive.(12)

So, at the heart of the garment industry lies a paradox: western corporates demand better factory standards and better wages, but refuse to pay for the increase in price per unit that inevitably follows.

Sounds disheartening? Only if you underestimate the power of the consumer. Every time you buy a piece of clothing you get a chance to cast a vote. It’s important to realise that large corporations’ policies are fundamentally a reflection of the consumer trends. Essentially, if the consumer continues to extol the principles of ethical clothing, but is unwilling to forego the convenience of fast-fashion, the developmental progress made in countries, such as Cambodia, will inevitably falter and collapse.

However, if we advocate and accept a reasonable price for products and actively support brands that can guarantee no exploitation, we have a chance to redefine what good-value means.

Fair wages and great working conditions should not be the death knell, but rather the very pulse of progress.

1. CNV International: Country study Cambodia Labour Standards in the Garment Supply Chain https://www.cnvinternationaal.nl/_Resources/Persistent/0e05eebdbf4a1a6c31409dc12aee83b8f532a4b5/20161102%20CNV%20CS%20Cambo_clickable%20extern%20ENG%20DEF.pdf

2. CNV International: Country study Cambodia Labour Standards in the Garment Supply Chain https://www.cnvinternationaal.nl/_Resources/Persistent/0e05eebdbf4a1a6c31409dc12aee83b8f532a4b5/20161102%20CNV%20CS%20Cambo_clickable%20extern%20ENG%20DEF.pdf

3. ‘Sourcing costs in Cambodia about to get more expensive’ https://sourcingjournalonline.com/apparel-sourcing-cambodia-wage-increase

4. ‘Cambodian garment factories face demand for higher wages’ http://www.bbc.com/news/business-16940455

5. ‘Garment factories close, motives debated’ https://www.cambodiadaily.com/news/garment-factories-close-motives-debated-117303/

6. Cambodian Economic Update http://www.worldbank.org/en/country/cambodia/publication/cambodia-economic-update-april-2017

7. CNV International: Country study Cambodia Labour Standards in the Garment Supply Chain https://www.cnvinternationaal.nl/_Resources/Persistent/0e05eebdbf4a1a6c31409dc12aee83b8f532a4b5/20161102%20CNV%20CS%20Cambo_clickable%20extern%20ENG%20DEF.pdf

8. The Fourth Industrial Revolution South East Asia http://sea-globe.com/fourth-industrial-revolution-southeast-asia/

9. ‘ANZ Insights Textile and Garment Industry’ http://www.anzbusiness.com/content/dam/anz-superregional/Textiles%26GarmentIndustryUpdate.pdf

10. ‘ANZ Insights Textile and Garment Industry’ http://www.anzbusiness.com/content/dam/anz-superregional/Textiles%26GarmentIndustryUpdate.pdf

11. ‘Sourcing costs in Cambodia about to get more expensive’ https://sourcingjournalonline.com/apparel-sourcing-cambodia-wage-increase/

12. ‘Cambodian Garment and Footwear Sector Bulletin’ http://www.ilo.org/wcmsp5/groups/public/---asia/---ro-bangkok/documents/publication/wcms_517535.pdf