Cambodia could be a headache for apparel companies in 2014

Source from http://www.marketwatch.com

January 7, 2014, 1:12 PM

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By Andria Cheng

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Cambodian soldiers patrol along a street in Phnom Penh on January 4, 2014.

Cambodia’s garment industry could be a headache for apparel companies this year.

After a deadly Cambodia government crackdown on garment-worker protesters last week, apparel retailers and manufacturers from Gap Inc. GPS  to H&M sent an open letter to the government calling for all sides to resolve their dispute over the minimum wage peacefully.

The letter, addressed to the country’s Prime Minister Hun Sen, the Garment Manufacturers Association and several trade unions,  expressed “deep felt concern over the tragic events that took place on” Jan. 3, when the government’s crackdown reportedly killed at least four people and injured more than 30.

“It is with great concern that we have observed both the widespread civil unrest and the government’s use of deadly force,” the letter said. “Our primary concerns are for the security and safety of the workers employed by our suppliers and the long-term stability of the Cambodian garment industry.”

Zara parent Inditex, Levi Strauss & Co., Puma, Adidas ADDYY s, and Columbia Sportswear Co. COLM +0.03% also signed the letter. The companies said they “endorse and support the development of a regularly-scheduled wage review,” which they said is fundamental to peaceful wage negotiations in the future. They also pledged commitment to Cambodia and its long-term economic development.

The violent crackdown took place after garment workers rejected the government’s offer of a $15 monthly wage increase to $95 on Dec. 24 and a subsequent offer to increase wages to $100 a month as the workers called for a wage increase of $160 a month, Women’s Wear Daily reported.

The Asia Floor Wage Alliance, a group of trade unions and labor rights activists, estimates that a living wage for Cambodian garment workers should be $283 per month, the Wall Street Journal reported, adding the garment industry is the country’s largest export business, employing about 600,000 mostly female workers in about 800 clothing and shoe factories.

“Employers in the garment sector, a $5 billion annual export industry which increased production by over 20% last year, have been resisting attempts to improve and enforce labor laws and to publicly expose companies which breach the law,” said an international labor coalition that includes IndustriAll Global Union.

The country’s Garment Manufacturers Association told Women’s Wear Daily the brands are “listening to only one story,” and challenged the Western companies to show their commitment by continuing to place orders in Cambodia despite the industrial action and to increase their buying price by 15% to address the wage increase instated earlier in May, from $65 to $80.

The latest death toll from Cambodia highlights yet another complication challenging Western apparel companies as they are often forced to compete on price and lure customers in what is described as a race to the bottom. Western apparel sellers inked different initiatives last year to improve worker safety in Bangladesh in the wake of a garment factory collapse that killed more than 1,100. Bangladesh, whose nearly $20 billion apparel industry makes it the No. 2 garment exporter behind China, in November said it will raise the minimum wage for its garment workers to $68 a month from $38, according to media reports.

Cambodia’s apparel industry suffered estimated losses of more than $250 million in sales and investment during the nearly two-week nationwide strikes, Women’s Wear Daily reported.

– Andria Cheng