The main issues facing the Cambodian garment industry are: start again here

• Building on the progress made in improving working conditions and enhancing its reputation for respect of labour standards
• Improving workplace relations between unions and management 
• Improving quality and productivity to better deal with competition
• Addressing infrastructure challenges that drive up the cost of production and erode competitiveness, such as the very high cost of electricity

• Addressing the lack of well developed value-added infrastructure, such as a domestic textile industry, such that most of Cambodian garment product is in the less profitable the “cut-make-trim” (CMT) stage of the value chain

• Enhancing the business environment, including supporting the rule of law

Better Factories Cambodia monitors factories that hold an export license. This is enforced by the Ministry of Commerce.  In September 2011, the Ministry of Commerce issued a Prakas on Sub-contract Management in Garment and Textile Industry. Article 3 in the Prakas states that “Only manufacturers who are the members of Garment Manufacturers Association in Cambodia registered with Better Factories Cambodia in accordance with the announcement made by the Ministry of Commerce are eligible to carry out sub-contract agreement.” Better Factories Cambodia looks forwards to working closely with our key partners while we are developing a new program that will drive change in sub-contract factories.

The more pressing issue is that the monitoring system is trusted by all parties – international buyers, unions, factory owners, managers and staff. At this point the ILO’s position as an independent and neutral administrator and observer is invaluable in setting up a reliable and trustworthy system. Buyers have said that they find the ILO’s presence in Cambodia very important because it gives them confidence that there is independent, transparent and credible assessment happening in the country. This administration will continue to be managed on a tripartite basis – by the government, employers and labour representatives.

Meanwhile, enforcement of labour standards remains the responsibility of the government. The Cambodian government fully supports Better Factories Cambodia and chairs its management committee through a senior official from the Ministry of Labour.  In 2012 Better Factories will embark on a program to work more closely with government labor inspectors.

The Better Factories Cambodia programme is not intended to guarantee complete compliance with labour standards. It focuses on continuous improvement. While problems still remain, over the last 10 years of the programme, genuine progress has been made.

Better Factories Cambodia is not an enforcement agency. Enforcement is the role of government. International buyers concerned about working conditions often use the ILO reports to help them monitor compliance with labour standards in their supply chains.

In late 2009, at the height of the global financial crisis, about 70,000 Cambodian garment workers – 20% of the industry’s workforce – had been laid off.  While some of production may have shifted to lower-wage countries, by 2010 the industry had substantially recovered.

In a 2004 World Bank survey, Cambodia’s key overseas buyers rated labour standards as a top priority in their decision to source from a country. The survey also found that almost 80% of buyers considered auditing of labour standards to be critical and had given high marks to the ILO’s monitoring. Buyers stated that improved labour standards have a positive effect on accident rates, workplace productivity, product quality, worker turnover and absenteeism.

Additionally, since January 2011 with the accessibility to export garments and textiles to European markets with no tariff under the EU’s  “Everything but Arms rule,” buyers continued to invest in Cambodia.

According to the Ministry of Commerce, total garment export values reached over $3.2 billion for the first 10 months of 2011, an increase of 32 per cent in comparison with the same period in 2010, while within this period exports to the EU rose 60 per cent to over $886 million.   

An Asian Development Bank report found that much depends on what steps are taken by the Cambodian government and, to a lesser extent, by the industry itself in the near future. Cambodian labour costs in the garment industry are among the lowest in the world, at 23 US cents per hour. However costs are driven up by informal and unpredictable payments within the government bureaucracy and the high costs of transport, electricity and other inputs. For example, electricity costs US 18 cents per kilowatt-hour in Cambodia, compared with other countries such as Vietnam, Laos PDR, China of less than 8 cents. However, the Royal Government of Cambodia is trying to lower the electricity cost through new hydropower projects.
 
Unofficial payments added up to 7 per cent to the cost of total sales. For example, the transport of one container from factory to the customer should cost just under US$4,000, according to the official schedule of charges, including port fees, loading costs and customs charges. However the real cost is well over US$6,000 – adding more than 37 per cent to the official costs.

Labour productivity also needs to improve. This would mean a combination of developing workers’ skills, using better technology in factories, and finding solutions to better the health and well-being of workers .

Yes.  Third parties, such as buyers and vendors, must pay a fee currently set at US $750 per factory per year when they subscribe to the IMS. This fee is likely to change in 2012.  The Application for Subscription contains detailed information about subscriptions.