Cablegate: Working Conditions Improved, but Labor Unions Still

DE RUEHPF #0503/01 1710820
P 190820Z JUN 08




E.O. 12958: N/A

1. Summary: Even as a recent report touted Cambodia's low labor
costs, labor union leaders and employers report that working
conditions and respect for the labor law and regulations have
continued to improve in Cambodia's garment sector in recent years
due largely to the USG-funded Better Factories Cambodia program.
These factors may make Cambodia a favored source for U.S. garment
buyers. However, lower productivity among Cambodia's inexperienced
workers is a problem. Moreover, despite improvements in working
conditions, incidents of violence and intimidation and illegal
dismissals remain serious concerns among labor leaders. Labor union
leaders complained about ineffective dispute resolution, inter-union
rivalry, and difficulty in negotiating collective bargaining
agreements with management. Unionists report there are spot labor
shortages due to rising inflation and low wages. End Summary.

Cambodia's Cost of Labor Second Lowest

2. According to a recent study of 40 apparel-producing countries,
Cambodia's cost of labor ranked second-lowest, at $0.33 per hour.
Only Bangladesh's labor costs were lower, at $0.22 per hour,
according to the study by Jassin-O'Rourke Group, a U.S. research
consulting firm. The study was made between December and March.
Managing Director Mary O'Rourke was quoted by The Cambodia Daily
newspaper as saying that Cambodia remains highly regarded among
retail and traditional apparel brand owners and will likely continue
to enjoy Asian-led investment to expand capacity, particularly as
China's costs continue to rise.

Working Conditions Improved and Respect for the Labor Law and
Regulations Observed
--------------------------- -----------------------------

3. Labor conditions are another bright spot for Cambodia. In
meetings with Labor Assistant, labor union leaders reported that
working conditions in the garment sector have improved since the
International Labor Organization (ILO) began monitoring working
conditions in 2001. In its October 2007 report, the ILO's Better
Factories Cambodia program stated that working conditions continued
to improve from May to October 2007 with progress seen in compliance
with the labor law and international standards in all major
categories of working conditions such as contracts, wages, working
hours, leave, welfare and labor relations. Nonetheless, there still
are some improvements to be made, such as addressing anti-union
discrimination and unfair treatment of pregnant workers.

Violence Still a Concern, Inter-union Competition Strong
------------------------- ------------------------------

4. Violence and intimidation against unionists is still a critical
concern among labor leaders. Hy Vuthy, a local union leader of the
Free Trade Union of Workers of the Kingdom of Cambodia (FTU), was
killed on February 24, 2007 in the early morning after leaving work.
The perpetrators have not been found. This killing follows the
2004 murders of FTU leaders Chea Vichea and Ros Sovannareth. Chea
Mony, president of the formerly pro-opposition FTU said that a dozen
of his local union leaders were intimidated or beaten up by
gangsters in 2007. He suspected management and rival union
federations of such acts, but he could not prove their involvement.
Ath Thun, president of the politically independent Coalition of
Cambodian Apparel Workers Democratic Union (CCAWDU), accused
management of hiring gangsters to intimidate him and his local union
leaders, an allegation which was strongly denied by employers, who
said the charge was groundless. Three other union federation
presidents accused rival union federations of engaging in violent
intimidation, with the Khmer Youth Federation of Trade Unions being
the target of the most complaints.

5. Non-violent forms of inter-union rivalry are very common in
Cambodia. However the nature of competition is changing. Today,
pro-government union federations are competing for members directly
with each other. In the past, pro-government union federations
competed with independent union federations and an
opposition-affiliated union federation. Labor federation leaders
accused each other of attracting rival local union leaders with
promises of mobile phones, walkie-talkies, money, and other
equipment in an effort to lure them into their respective union
federations. Alonzo Suson, country representative of the American
Center of International Labor Solidarity (ACILS), said that
inter-union competition is now very tough among union federations
regardless of their political affiliation.

Anti-union Discrimination Another Critical Issue
------------------------- ----------------------

6. Both pro-government and pro-opposition labor unions agree that

PHNOM PENH 00000503 002 OF 003

small unregulated factories pose particular problems for labor
rights because the managers of small factories discriminate against
those who participate in union activities through termination or
non-renewal of labor contracts. (Note: There are about 100 small
factories operating in Cambodia, each employing 100 to 200 workers.
Most of these factories operate illegally without registration and
licenses, and ILO monitors do not work with them since they are not
legally registered. End note.) In some factories, management
threatens to allow contracts of unionized workers to expire, a
common anti-labor tactic, and paying union leaders to quit their
jobs is still widespread in several small factories. However, labor
union leaders acknowledge that in big factories, which account for
the vast majority of Cambodia's garment industry, management
complies with labor laws and regulations without discriminating
against workers who participate in union activities.

7. In response to allegations of anti-union dismissals, Mr. Cheath
Khemara, Senior Labor Officer of the Garment Manufacturers
Association of Cambodia (GMAC), said that he doubted that local
union leaders were dismissed without good cause and said some local
union leaders did not respect the internal regulations of their
factories. He added that local union leaders act like gangsters and
threaten other workers. He affirmed that before initiating any
suspension or termination of any worker, the factory follows the
legal procedures and requirements set forth in the Labor Law and
regulations. However, Mr. Khemara acknowledged that small, illegal
factories may not follow these practices.

Ministry of Labor Conciliators Perceived as Corrupt
------------------------------ --------------------

8. Labor union leaders complained that the labor dispute
conciliators of the Ministry of Labor and Vocational Training
(MOLVT) are not active in resolving the disputes between management
and workers, and instead encourage management to terminate workers
who make minor mistakes, are seen as troublemakers, or go on strike.
The labor union leaders accused some conciliators of corrupt
practices such as accepting bribes from management for a favorable
opinion. On some occasions, the conciliators even instructed
management on how to dismiss union leaders resulting in several
dismissals of factory-level union leaders. Koy Tepdaravuth, director
of MOLVT Labor Dispute Department, acknowledged some such cases, but
said they were not widespread. Mr. Koy promised to take appropriate
action, but such action would be a significant reversal from past

Woes for Collective Bargaining

9. Labor union leaders said lack of management interest, multiple
unions per factory, and MOLVT indifference in organizing "most
representative union" elections hampered efforts to negotiate
collective bargaining agreements (CBAs). Cheath Khemera agreed that
lack of "most representative" certification hinders collective
bargaining, with multiple unions wanting to bargain on behalf of the
same group of workers. MOLVT reported that it registered 19 CBAs in
2007. However, most of these CBAs are only conciliation agreements
between management and union representatives. Only five genuine
CBAs exist in the garment sector. ACILS is now working with the ILO
and MOLVT to address the issue by helping to organize a number of
workshops on collective bargaining and "most representative" status
for union leaders and factory management. Progress has been made on
the issue: ACILS reported MOLVT has issued more than 20
certifications of "most representative" unions and four new CBAs
between January and April 2008. A few other CBAs are under

Labor Shortages Due to Rising Inflation and Low Wages
---------------------- ------------------------------

10. Both employers and unionists reported there are spot shortages
of workers in the provinces of Kandal, Kampong Speu and Phnom Penh.
Employers admitted it is now quite hard to find a steady supply of
workers due to rising employment opportunities at border areas.
Workers who previously left these areas seeking opportunities in
bigger towns have recently begun returning to their hometowns to
find work at the newly established factories in special economic
zones. Both legal and illegal migration of Cambodian workers to
find work in neighboring Thailand, Malaysia and South Korea is also
a cause for an unsteady supply of local workers. Union leaders
indicated that the uneven labor supply was partly caused by the
rising inflation since workers could hardly bear the burden of daily
food expenses with their meager wages and save any money to send

PHNOM PENH 00000503 003 OF 003

back home. Some said workers, especially female workers, quit the
garment factory jobs to look for better paying jobs in karaoke
parlors, restaurants or the entertainment sector.

Productivity: Room For Improvement

11. In an interview with The Cambodia Daily, Mary O'Rourke,
Managing Director of Jassin-O'Rourke Group pointed out that Cambodia
should move away from children's clothing and toward adult and
business apparel, broadening its style complexity, adding that
Cambodia needs to find more sources for fabrics and increase labor
productivity. Leaders in the garment industry echoed O'Rourke's
advice for Cambodia to boost productivity. Van Sou Ieng, chairman
of the Garment Manufacturers of Cambodia told The Cambodia Daily
that while Chinese workers can produce 28 to 32 pairs of pants per
day and Vietnamese workers 18 to 22 pairs, Cambodian garment workers
produce 12 to 14 pairs per day. He added that productivity is low
in Cambodia because of a labor force of inexperienced workers from
the countryside. Tep Mona, director of the Garment Industry
Productivity Center, agreed that Cambodia's garment sector is only
operating at 35 to 40 percent efficiency; and workers are
considerably less productive than Vietnam's workforce. She added
that an increase in productivity is necessary to keep and attract

12. Ms. Mona pointed out that productivity can be increased if
workers are provided with high skills trainings and the factories
are equipped with up-to-date machinery. But she warned that this
needs to be consistent with increasing the output without increasing
the cost. Mr. Khemara agreed to her points of view and noted that
productivity allows Cambodia to compete with other low-cost garment
producing countries. He added that some Korean factories have
started to equip their factories with modern equipment. Mr. Khemara
indicated that MOLVT should provide up-to-date skills trainings for
new job seekers in order to meet job requirements. In the past, the
majority of workers were hard working and industrious. However,
with the current rising price of rice and goods, workers seem to be
less hard working and less industrious with paltry wages.

13. Comment: Better working conditions in Cambodian garment
factories remain a model for other developing countries. However,
other serious problems in the labor sector prevent the country from
being a perfect set-up: it is neither the high production center nor
the worker's paradise that is sometimes portrayed by casual
observers. Immature and inexperienced unions, lack of government
leadership and law enforcement, and overwhelmed and impatient
factory managers make for a labor sector characterized by frequent
short-term strikes, some violence and intimidation, and few
collective bargaining agreements. That said, the improvements in
the labor sector are noticeable. End Comment.


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