Background

Cambodia entered the export-oriented global garment and textile industry in the 1990s. It benefitted from government promotion of foreign direct investments through tax holidays and duty-free imports of machinery and materials.[5]

Between 1995 and 2006, bilateral trade agreements with the United States, the European Union, and Canada spurred the garment industry’s growth. The US, EU, Canada, and Japan are the largest importers of Cambodian garments and textiles and shoes.[6] Except for the downturn resulting from the 2008 global economic crisis, the industry has grown consistently.

The Cambodian garment industry is largely foreign-owned, with investors largely from Taiwan, Hong Kong, China, and South Korea.[7] Less than 10 percent of factories are owned by Cambodians.[8]

A majority of factories undertake “cut-make-trim” functions—manufacturing clothes from imported textiles based on designs provided by international buyers.[9] Phnom Penh, the capital, is a hub for garment factories, but garment factories have mushroomed elsewhere, notably in adjoining Kandal province. Factories vary in size and operations, ranging from those with more than 8,000 workers with export licenses that directly supply international apparel buyers to small, unmarked factories with fewer than 100 workers that subcontract for larger factories.[10]

Women workers dominate the garment sector. The International Labour Organization (ILO) estimates that women comprise about 90 to 92 percent of Cambodia’s garment sector.^[11]

According to July 2014 government data reported in the media, Cambodia’s 1,200 garment businesses employ 733,300 workers.[12] This figure does not include home-based workers.[13]

Key Actors Influencing Labor Conditions

Manufacturers, government officials, trade union representatives, international buyers, and third-party monitors all influence labor practices in Cambodia’s garment industry.

The Cambodian Labor Ministry sets policy and its labor inspectorate is responsible for monitoring and compliance.  The 1997 Cambodian Labor Law governs all garment factories irrespective of their size.[14] It regulates working conditions in factories, including through rules governing overtime work, minimum age of work in factories, pregnant workers, and leave. All factories with more than eight workers should have internal regulations governing working conditions. The Labor Ministry has issued model internal regulations. Even though the law has strong protections for workers on many subjects, its enforcement—as described below—has been abysmal, in large part because of an ineffectual labor inspectorate crippled by corruption and outpaced by factory growth.[15]

Independent trade unions play an important role in improving conditions through collective bargaining agreements, reporting labor rights violations, and helping workers seek redress.  A 2014 report shows that 29 percent of the 371 factories surveyed had no unions; 42 percent had one union; 17 percent had two unions; and 12 percent of the factories had between three and five unions.[16]

According to June 2013 data compiled by the Cambodia-based staff of the Solidarity Center, an international labor rights group, there at least 63 garment trade union federations in Cambodia,[17] of which only a handful are considered independent. Workers and activists widely believe the rest to be pro-management and pro-government “yellow unions.”[18]

Unions can bring complaints affecting workers before the Arbitration Council, whose arbiters interpret the Labor Law to decide disputes. The Arbitration Council’s decisions are considered authoritative interpretations of the Labor Law and its applications. The decisions can also be binding depending on the nature of the dispute and the parties involved. 

Another key player is the Garment Manufacturers Association of Cambodia (GMAC), which has more than 600 operational factory-members.[19] GMAC is the most powerful, well-organized employer association influencing labor conditions. For example, it is represented on tripartite bodies like the Labor Advisory Committee, takes public and vocal positions on policy issues like the minimum wage and use of short-term contracts; and plays a critical role in influencing industrial relations. While many of GMAC’s positions appear in conflict with worker rights, it has in the past taken measures aimed at improving working conditions. For example, GMAC signed a memorandum with several union confederations where parties agreed to treat arbitral awards as binding.[20] In December 2014, GMAC signed an agreement to help eradicate child labor in Cambodia’s garment industry.[21] 

Cambodia also has an important third-party monitor—the Better Factories Cambodia (BFC) program—created in response to the 1999 US-Cambodia bilateral trade agreement that linked annual import quotas to demonstrable improvements in labor conditions in garment factories.[22] 

Better Factories Cambodia

The 2001 BFC program—now a partnership between the International Finance Corporation (IFC) and ILO— remains the most important third-party monitor of labor conditions in Cambodia’s garment factories,[23] despite having lost clout when trade-related incentives expired in 2005.[24] 

Garment manufacturers must participate in BFC’s factory monitoring program to get Cambodian government export licenses. According to January 2015 data, BFC monitors 536 garment and 12 footwear factories.[25]

The level of transparency in BFC’s reporting on factory conditions has varied over time. Initially, BFC publicly named factories and key labor rights problems as part of its biannual reports, with follow-up reports outlining remedial measures the factories had taken. Since 2005-2006, BFC no longer publishes its factory-specific findings and instead provides an overview of working conditions of factories surveyed through synthesis reports. It makes its factory-level monitoring reports available to factories free of cost, and other third parties, for example international brands, at a cost.[26] Third parties—including labor unions and NGOs—cannot access these reports unless the factory authorizes such access and the third parties pay a fee to BFC.

Labor rights groups have criticized BFC’s changes and called for greater transparency in its monitoring and reporting methods.[27] Despite pressure from the government and garment manufacturers to keep names of non-compliant factory confidential, in March 2014, BFC launched its Transparency Database, which publicly names the 10 “low compliance” factories every three months.[28]

Brands can participate in BFC in different ways. They can endorse BFC, buy BFC’s monitoring reports, and join in BFC’s buyers’ forum, a platform that brings together buyers, government authorities, factories, and unions to discuss key concerns and possible ways forward. They can also purchase BFC’s training and advisory services. According to January 2015 data, about 40 of the 200 brands representing 60 percent of the orders placed in Cambodia endorsed BFC.[29]

BFC has been a model for the IFC-ILO Better Work Program that operates in other garment-producing countries, including Vietnam, Indonesia, Bangladesh, and Haiti.[30]

International Apparel Buyers

Many top apparel brands including H&M, Marks and Spencer, Adidas, and Gap source their products from factories in Cambodia. Many brands attempt to demonstrate their commitment to international labor standards by incorporating them in their codes of conduct. Through their own internal factory audits and engagement with external monitors like BFC, brands track labor compliance and are well-placed to exert pressure on suppliers to make changes. Some brands also undertake such monitoring for subcontractors. They may also set up grievance redress mechanisms to respond to complaints by workers employed by their suppliers and subcontractors.

International apparel buyers also play an important role in demanding that labor conditions meet international standards and in applying pressure on the Cambodian government to enforce the Labor Law, including through public and private advocacy.[31] As noted earlier, brands can also actively engage with third-party monitors like BFC. 

A buyer’s pricing and purchasing practices can contribute to robust or poor labor conditions.[32] For example, when an international buyer places frequent orders or makes last-minute changes without adequate turnaround time, the additional pressure may contribute to factories exacting excessive and forced overtime from workers.[33] Ken Loo, the secretary general of GMAC, described how buyers’ refusal to adjust their prices after a minimum wage increase impacted factories:

Factories may then pass the cost on to workers through higher—and what workers describe as unattainable—production targets, making labor rights violations more likely.

Recent Flashpoints in Cambodia’s Garment Industry

Over the last few years, repeated incidents in which scores of garment workers fainted while working, industry-wide protests over minimum wages, and an extremely hostile environment for independent unions in Cambodia have raised the profile of problems in the garment industry among labor rights advocates locally and globally.

Building and fire safety have come under more scrutiny following the partial collapse of structures in two factories in 2013, resulting in the death of two workers, and a factory fire in July 2014.[35] A spate of mass fainting among Cambodian garment workers led the Labor Ministry to form a committee in August 2014 to investigate the cause of these faintings.[36]

Against this backdrop, protests for an adequate minimum wage rocked the Cambodian garment industry in December 2013. GMAC advised its member-factories to suspend operations, straining already tense labor relations. On December 31, 2013, the Labor Ministry increased the minimum wage to $100 per month from $80 effective February 1, 2014.[37]

On January 2, 2014, workers defied a government deadline to end protests and demonstrated, demanding $160 as minimum wage. Workers cited a December 2013 tripartite government-constituted task force report that estimated that a living wage should fall between $157 and $177 in support of their demands.

Overnight on January 2 and 3, hundreds of police and gendarmes were deployed to clear workers protesting. Violent clashes broke out with some protesters. On the morning of January 3, the authorities sent a large force of gendarmes to seize control of the area, some of whom fired their assault rifles towards the crowds, killing six people. A person beaten by gendarmes later died of his injuries. Twenty-three human rights defenders and workers arrested during these incidents were later charged with responsibility for the violence, tried and convicted, and sentenced to prison terms, despite there being no evidence against them.  Their sentences were all suspended, but they remain at risk of imprisonment.[38] No gendarmes were prosecuted.

International outrage followed this crushing of the garment worker protests and arrests. Many international brands wrote to the Cambodian government requesting that it initiate an investigation into government violence and also create a wage-setting policy.[39] A new government committee led by a former minister of economy and finance began work in January on a new minimum wage policy.

Meanwhile, independent trade unions alleged that the government had suspended new union registrations after the January protests.[40] Talks around the hike in minimum wages were ongoing since January 2014 with strained industrial relations between factories and unions. In September 2014, days before another round of negotiation on minimum wages, the government announced that it was initiating a criminal investigation against six independent union leaders and summoned them to appear before a court.[41] Soon after, independent unions and labor rights groups launched a new advocacy campaign demanding a monthly minimum wage of $177.[42] In November 2014, the Cambodian government announced a revised minimum wage of $128 effective January 2015.[43]