Bursting the Bubble

A (mis)guide on CSR and Trade Agreement application in the Cambodian garment industry

29 September 2014 | by

Workers claims for a fair living wage.

CCHR President Ou Virak commented on January that “While many of the political demonstrations which have taken place over the last few months have been met with restraint from the security forces, there is an increasingly clear link between the excessive use of force by security forces and the protection of big businesses of Cambodia”. Of the 25 cases where we noted excessive use of force, 21 were related to strikes by garment workers or protests over land. Previous non-violent strikes aimed to the Cambodian government in early 2014 ended up in a military crackdown and thus riots. Five garment workers were shot dead, one still missing after 9 months and more than 30 were injured and they were not the first for the sector. A ban on public assembly was also put in place with 23 labour leaders arrested.  The International Labour Organization (ILO) said it was “deeply disturbed” by the continuing violence in Cambodia. While military interventions might mean stability for foreign interests and investment, it has created fear for Cambodia’s garment workers. Since a great share of investors and final consumers are European, I think it may be needed to take a look into the situation to figure out what is going on.

This week (mid-September 2014), garment workers are raising their voices again in their quest for a wage increase. Fair or not, this time they directed the call to the global clothing brands that buy and sub-contract supply from Cambodia since the Cambodian government proved itself to be unresponsive to its citizens demands and hyper-sensitive to business organisations and investors.

The campaign claims that “The buyer must provide basic wages $177”, this is aimed at pressuring global brands such as H&M, Walmart, Levi’s, Gap Puma, C&A, Adidas and Zara to directly negotiate a higher wage for workers with their suppliers. Union leaders explained that the $177-minimum wage demand is based on the average monthly spending of garment workers. If the minimum wage does not reach the $177 immediately, the increase in food prices and housing costs make it impossible for the textile workers to meet their basic needs, and have promised strikes if these demands are not met.

According to Asia Floor Wage, the report Tailored Wages, as per United Nations Guiding Principles on Business and Human Rights, “in cases where the state fails to protect human rights – such as when the legal minimum wage fails to meet the minimum subsistence level (living wage) – business still has an obligation to respect the human right to a living wage”. It is known that there is enough money to do so. “There is a huge gap between what the brands say and what the brands do. If brands want to say they are socially responsible and get the marketing benefits from that, they need to start taking concrete action.”

Cambodia Business associations looks elsewhere.

Business leaders have agreed that what happens in Cambodia’s all-important garment industry does not stay in the garment industry – a sector which accounted for a third of the country’s $15.25-billion GDP last year.

When garment worker wages go up, young professionals and recent graduates just starting out on their careers adjust their own expectations, a business representative stated, “We are paying them $100-something or $160. So if the non-skilled workers’ salaries increase to $160, what will be the demand from those young professionals?” Mr. Bolene said. I wonder whether the trade agreements has to raise the welfare levels across all layers of the developing countries and to improve wealth distribution as formal objective? I will give you a clue… Article 2(d) of the EU-Cambodia Cooperation Agreement. So what are you fearing Mr Bolene? Shouldn’t the EU take a more active part enforcing legally binding legislation to force EU companies to respect Human Rights developments and improvement in life and working conditions?

Rami Sharaf, chief executive officer of RMA Cambodia, justified the repression. He said that it was in the interest of every sector seeking Foreign Direct Investment (FDI) to avoid strikes and protests similar to those of the past year:

“If this thing will not be solved in a strategic way that will take [account of] where we will be once we are integrated in the Asean bigger picture, we are gambling on our GDP, we are gambling on the No. 1 factor attracting investment to come to Cambodia today, which is stability, steady growth of 7 to 7.5 [percent] every year, year over year, for the last five years… And we know by the facts that in the last year, when we had the strikes and we had the confrontation, many of those investors kept sitting on the fence saying, ‘You know what? Let me wait and see'”

They linked a decrease on the orders to the protest for more fair wages. Kaing Monika, Deputy Secretary-General of the Garment Manufacturers Association in Cambodia (GMAC) said GMAC recently surveyed 247 of its 500-plus member factories. Of those 123 did not have enough orders to last them to the end of the year, 126 had scaled down the use of overtime shifts, 160 had seen their buyers reduce their orders by an average of 40 percent and 86 had shut down some of their production lines. A consequence of the bad management of labour relations in the country, not by the protesters themselves.

National Business Associations shoot everyone but themselves. The Cambodian Federation of Employers and Business Associations (CAMFEBA) also blames a lack of investor confidence on the media. Event business event moderators and the audience were urged to chastise the media for its coverage of the country’s labor relations, to the extent that Business lawyer Matthew Rendall, CAMFEBA’s Deputy Secretary-General and one of the day’s moderators, accused the press of being too emotional in its reporting on garment-sector wages.

Facts and figures

After a quick review on the data available there are some interesting fact that we should take into account before we take an opinion for ourselves.

Cambodia’s economy is dependent on the garment industry. The majority of textiles exported (70 percent) are destined for popular brands. It employs half a million workers and accounts for about 80 percent of Cambodia’s exports. According to the ILO, the country just topped $5bn worth of garment exports last year for the first time.

The garment industry is also very important because its workers, most of whom are women, not only support themselves but also send remittances to their families in the countryside. About 80 percent of the country still lives as subsistence farmers with young garment workers providing a vital link, sending money home to aging parents and siblings in school. Not only is the garment industry the lifeblood of the country, it is a lifeline to impoverished families.

The current free trade agreement under the World Trade Organization began after the previous Multi-Fiber Agreement phased out in 2004. Hailed as a benefit to development, unit prices for garments sold to western countries instead dropped, though overall the orders increased. Flexibility in contracts is preferred by western brands sourcing from Cambodia, so short-term contracts have replaced longer ones. This has contributed to the worsening of working conditions, as documented by a 2012 World Bank report.

Conclusions

The current system of consumers owning cheap, disposable clothes in very high volume cannot sustain itself economically or environmentally. We have maybe 10 years left of cheap clothing. CSR has proven to be unsuccessful in filling the social gaps produced by their economic activity. Trade agreements are a way to downgrade living and working conditions all over the world, and even a way to circumvent national democracies, turning governments against its citizens.

Liana Foxvog, Communications Director of the International Labour Rights Forum, stated that over the past two decades, multinationals have spread their supply chains around the world, driving a “race to the bottom” among developing countries. “We have seen low wages, repression of freedom of association as well as poor working conditions,” Foxvog said – and I agree.

“We need a system that is different from the current business-as-usual model where brands and retailers will shop around to different factories and say who will make this shirt for two dollars. If a factory won’t, they can find a factory that will. “We need workers to once and for all have a fair living wage and will no longer have to face hunger and mass fainting,” she said. “We know companies can pay more.” Garment-producing countries need to take wage completely out of the competition and start competing instead on logistics or raw material supplies.

And the TTIP did not take place yet… buy popcorn…

What do you think?