Dark clouds gather over Cambodia's garment industry

Bonus dispute and looming loss of EU trade preferences increase worries for 700,000 workers

Sineat Yon and Ate Hoekstra, Phnom Penh

Updated: February 11, 2019 03:17 AM GMT

Cambodia's Prime Minister Hun Sen meets garment workers during his visit to 15,000 factory employees in Phnom Penh on Aug. 15, 2018. Hun Sen courted garment workers by promising better conditions before the election last July. (Photo by AFP)

Sok Eng recently got her job back. The 39-year-old garment worker was fired a few months ago because management at Eastex Garment Co. in Phnom Penh were angry with her for setting up a small labor union.

Now that she's back at work, she has new concerns. One or two years ago, the factory ended the contracts of more than 1,000 workers because of a lack of orders. I fear that in the near future more of us will lose our jobs, she says.

These are gloomy times for Cambodia's garment industry, the country's biggest informal employer. The industry is confronted with two major challenges: a fight over seniority bonuses and the impact of the possible suspension of Cambodia from a lucrative trade scheme with the European Union.

The most pressing concern is about a new rule that workers are entitled to seniority bonuses twice a year. Workers support the plan but fear that employers will somehow find a way to pay them less than they are entitled to. The first payment is due in June.

There's a lot of confusion among my colleagues, says Doung Tola, a worker at E Garment Co. There are questions about the size of the bonus, and it's unclear how much you will receive if you have worked at a factory for six or seven years. We are waiting for a clear explanation from the prime minister.

In an attempt to win their support in last year's election, PM Hun Sen offered the workers, who form a massive voting bloc, more protection and higher incomes. The seniority payments were part of this charm offensive, although exact details remain vague.

In early January, the issue led to a strike at W&D Co., which produces clothing for brands such as Marks & Spencer, Columbia Sportswear and O'Neill. Workers demanded to receive their unpaid bonuses and said they wouldn't return to work until their demands were met. A court ordered the workers to go back to work. About 1,200 of them were fired when they refused to do so.

The recent strike at W&D shows that workers are worried about the payment of their seniority bonuses, says Khun Tharo, a program coordinator at the Center for Alliance of Labor and Human Rights (CENTRAL) in Phnom Penh.

W&D has started to change workers' contracts from unlimited duration to fixed terms, possibly in an attempt to get away from paying a large amount of money for seniority bonuses. Workers are now worried that they will lose their benefits and their seniority, says Khun Tharo.

European Union threat

An even bigger threat lies with the possible suspension of Cambodia from the Everything But Arms (EBA) trade scheme between the European Union and the world's least developed nations.

The EBA allows Cambodia to export its products tariff-free to EU countries. After repeated warnings, EU trade commissioner Cecilia Malmstrom announced in October that it had started to withdraw Cambodia from EBA preferences.

In a blog post Malmstrom explained that the move was a response to Cambodia's lack of respect for human rights and democracy. Last year Cambodia held controversial elections in which long-ruling Hun Sen claimed all parliament seats. 

Our recent EU mission to the country demonstrated serious and systemic violations of, for instance, freedom of expression, labor rights and freedom of association. This comes on top of longstanding issues regarding workers' rights and land grabbing, Malmstrom wrote.

Suspending Cambodia from the EBA could be disastrous. The garment factories, which supply to major brands such as H&M, Adidas, Nike, C&E and Puma, employ more than 700,000 Cambodians. The EU is by far the country's most important export market. A loss of trade preferences could mean that fashion brands turn away from Cambodian factories.

A recent report by the European Institute for Asian Studies estimated that close to 250,000 workers will lose their jobs if Cambodia is cut from the EBA. The report also warned of an increase of poverty.

Although the suspension won't start before 2020, workers already fear the impact. We have a lot of concerns about it, says garment worker Doung Tola. In my factory there are already fewer orders than before. This will impact a lot of people as well as those who indirectly benefit from the garment industry, such as food vendors, restaurants, landlords and stores.

Sok Eng, whose factory supplies H&M, has similar concerns. I think a suspension from the EBA would impact us badly.

Sok Eng fears discussing the issue in her workplace. I'm afraid that if I talk about this with my colleagues, the factory will fire me again and accuse me of defamation.

Khun Tharo of CENTRAL warned that a suspension from the EBA could lead to a crisis. It surely would lead to labor unrest similar to when the world economic crisis in 2008 heated up and impacted the industry. Back then factories were forced to close and workers took to the streets to claim compensation.

The Cambodian government initially said there was nothing to worry about. But it has recently changed its tone and implemented some reforms that are probably meant to improve relations with the EU, such as giving more freedom to opposition politicians

Ken Loo, secretary-general of the Garment Manufacturers Association in Cambodia, believes the country still has enough time to adapt.

Even when the EU does decide to cut Cambodia from the EBA, we still have at least another 20 months of trade preferences. We should make use of that time to get prepared. If we are prepared well enough, it won't be the end of the world, he says.

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