By Ros Dina
In November 2008, employers in the sector of garment manufacturing in Cambodia sounded the alarm. 2009 did not promise to be a good year due to the sudden bankruptcy of their main foreign clients and the major drop in orders. Their fear was unfortunately relevant as this pillar of Cambodia’s economic growth was badly hit by the global financial and economic downturn, even more so than the three other key-sectors in Cambodia, namely tourism, agriculture and construction. During the first two months in 2009, textile exportations plummeted and several dozens of factories had to close down due to a lack of orders, thus leaving more than 50,000 workers jobless. The situation led Van Sou Ieng, chairman of the national association of employers in that sector, to ask workers to avoid engaging into any social movement in order to prevent the situation from worsening.
Exports facing risk of further decline
Van Sou Ieng, the leading figure among big corporates of the garment manufacturing industry in Cambodia, was re-elected chair of GMAC (Garment Manufacturers Association in Cambodia) mid-March and says he is going through the most difficult times since his first mandate back in 1996. “I am in a very delicate situation today, because I don’t know how to manage that. There are no jobs for our workers any more. Hopes for foreign investment in Cambodia appear scarcer and scarcer with every passing day. Besides, as the global economy suffered a massive downturn, investors are not going to come here in the near future…”, Van Sou Ieng recently deplored, in a much unusual manner. He therefore decided to urge workers to remain calm and asserted that disorderly social movements might have disastrous consequences: “I am asking all workers not to make illegal claims in these difficult times, otherwise they will lose everything, together with the closing down of factories”, he said, protesting against the excessive number of trade unions – more than a thousand for some 300 active factories.
According to the GMAC chairman, textile exports suffered a 30% decline in January compared to the same period of time the previous year. And the decrease is but escalating: it could reach 40% during the next quarter, compared with exports registered at the same time in 2008. As around a hundred factories closed down since late 2008, according to GMAC, 10% to 20% of those still active are at risk of being condemned to the same fate by May or June this year, Van Sou Ieng reckons.
Order books in need of filling in
In the first quarter of 2009, orders from abroad were scarce according to figures provided by the garment manufacturers association. Orders only reach 60% of figures collected in the first quarter of 2008. “According to what was reported to me, factories are only running at 60% capacity compared with the first quarter of 2008. These figures should remain stable during the next quarter, provided new difficulties like strikes and demonstrations are not started off”, Van Sou Ieng warned, insisting on the utter need to respect lead time, otherwise clients from the United States and the European Union will turn without hesitating to other countries in direct competition with Cambodia.
Minister of Commerce Cham Prasidh paints for his part a much darker picture: in January and February, the total amount of textile exportations is said to only have fluctuated between 60 and 70 million dollars per month, compared to 200 million dollars per month over the same months the year before. Yet, 2008 was not a particularly auspicious year, as garment exports only progressed by 0.7% compared with 2007. According to the 2008 annual report released by the Ministry of Commerce, annual exportations in that sector amounted to 2.249 billion dollars in 2008, when they reached 2.23 billion in 2007.
And prime Minister Hun Sen too, after having expressed his optimism, acknowledged that the sector of garment manufacturing in Cambodia was suffering a worrying decline in activity due to the global economic context. On the occasion of a graduation ceremony held on Tuesday March 24 in Phnom Penh, the head of government explained that Cambodian factories were directly affected by a drop in consumption on American and European markets due to unemployment. Inevitably, if clothes – generally speaking and those made in Cambodia in particular – do not sell well, orders in the next few months will go down, he explained in front of a student audience.
The scope thus appears much grimmer than what representatives of GMAC stated back in November 2008 at the 14th Government-Private Sector Forum (G-PSF). But according to sources, figures that are supposed to provide overall input about the extent of the damage seem to differ. Indeed, Su Sem, the Minister of Industry Mines and Energy, declared on March 17th at a meeting with Minister of Industry and Commerce of Vietnam Vu Huy Hoang, that 82 garment factories closed down in Cambodia in 2008, thus depriving 52,000 Cambodian workers of their job. The garment industry, which used to represent 7% of the Kingdom’s GDP, is said to have only brought in a 2% share, according to him.
Unemployment: not a big deal?
At the Ministry of Labour, 73 factory closedowns were registered in 2008, on top of which come another 20 temporary suspensions of activity. But, as stated by the Ministry, 64 new garment manufacturing companies opened in Cambodia in the meantime. From January to mid-March 2009, the same services registered 22 closedowns, 27 suspensions and… 15 openings. Secretary of state at the Ministry of Labour Om Lean therefore reckons that an important part of the workers who were made redundant, mainly women, are likely to find jobs in the newly-opened factories. “Those workers are all experienced. They can leave factories that went bankrupt and go to those recently established. A lot of information goes around about workers who lose their job when paradoxically, new factories are lacking labour force!”, the high-ranking civil servant says, while deploring in the meantime the role of some intermediary protagonists who claim commissions for the recruitment of workers.
Om Mean’s words then tend to minimise the impact of the crisis on the fate of workers, just like prime Minister Hun Sen’s statements in a speech he pronounced as he was away in the province of Kampong Speu on March 9th. Indeed, the head of government estimated that the closedown of factories would have less tragic consequences in Cambodia than the currently ongoing dismissals in developed and industrial countries. His main argument was that in Cambodia, unemployed workers could always return to the countryside, to their parents’ place, and go back to rice cultivation, a possibility which workers in industrial countries do not have as there is not bridging with the agricultural world there.
Unions say Labour Law is being trampled on
Besides the fact that many workers come from very poor families who do not necessarily have ricefields to look after, the comparison between Cambodia and developed countries allows above all to remind that Cambodian workers, unlike workers in some Western countries, do not benefit from any unemployment benefit system and, as denounced by trade unions, they rarely receive any compensations, even though those are duly mentioned in the Labour Law.
Chea Mony, the president of the Free Trade Union of Workers of the Kingdom of Cambodia (FTUWKC), also estimates for his part that about 50,000 workers lost employment after the closedown of their factory late 2008. Some are still looking for a job in other factories in the capital. Others, indeed, have decided to go back to their village, he says, but rather because of their great disappointment and the trust they lost in employers after promises were made and broken. The majority of those unemployed workers received no compensation whatsoever after more than ten years of work for the same company, in some cases. The Labour Law stipulates that employers, unless a case of force majeure arises (such as death, disaster or closedown upon decision of the authorities) must, if workers employed on a non-fixed term contract are made redundant, grant them fifteen days’ worth of wages for every year of service, the maximum being six months of wages. Some employees, the FTUWKC president denounces, have not even been given their last salary, since their employer ran away and left hundreds of workers high and dry.
“Generally speaking, the blame is always put on poor people. We are told that workers’ strikes and demonstrations are the reasons for the closedown of factories. But from what I observed from January to March, there has not been a single strike and yet, fourteen factories closed down”, Chea Mony points out. “Besides, we are publicly asked not to gather up workers for strikes and demonstrations. But if employers did abide the law and, in the event of a factory closedown, paid out legal compensations to workers, nobody would want to go on strike or demonstrate!” Apart from two international factories, Way and Seng Yong, none has ever granted workers the full compensations they are entitled to, according to the Labour Law, he added.
Little appeal against fleeing employers
In front of the few unscrupulous employers who abandon their factory and their odd hundred workers to escape from their duties, workers as well as the authorities claim to be at loose ends. An inspector – who wishes to remain anonymous – from the Ministry of Labour’s Department in charge of solving conflicts, admitted that the situation can sometimes be very complicated. The law, he explains, says that workers can lodge a complaint at the Municipal or Provincial Court, which will then decide to set up a commission in charge of selling at auction the seized company’s property in order to pay back unpaid salaries and compensations to workers. “But this is not easy to do”, the Labour inspector adds. “We can see that with the case of the Phnom Penh Garment factory, whose manager ran away two years ago: workers still haven’t received any compensation.”
For secretary of state at the Ministry of Labour Om Mean, the difficulty mainly comes from the fact that some employers do not own the premises and material inside the factory and it is therefore difficult to claim compensation or seize the owner’s property when the employer has vanished. “On that type of case, we must cooperate with both investors [the owner of the premises and the employer] so that eventually, they can give some money to solve the problem with workers”, he says.
As for the failure to comply with what the Labour Law stipulates regarding compensations, Om Mean points out that a law on the collapse of factories was recently adopted and allows companies, in the event of bankruptcy, to only pay the equivalent of the last monthly salary, i.e. compensations which are a lot less important than those stated in the Labour Law. The measure, for that matter, did not generate any strike or demonstration.