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Cablegate: Cambodia: Garment Buyers Urge Improved

VZCZCXRO5057
PP RUEHCHI RUEHDT RUEHHM RUEHJO RUEHNH
DE RUEHPF #2240/01 3620525
ZNR UUUUU ZZH
P 280525Z DEC 06
FM AMEMBASSY PHNOM PENH
TO RUEHC/SECSTATE WASHDC PRIORITY 7756
INFO RUCNASE/ASEAN MEMBER COLLECTIVE PRIORITY
RUEHXI/LABOR COLLECTIVE PRIORITY
RUCPDOC/DEPT OF COMMERCE WASHDC PRIORITY
RUEHC/DEPT OF LABOR WASHDC PRIORITY

UNCLAS SECTION 01 OF 03 PHNOM PENH 002240

SIPDIS

SENSITIVE
SIPDIS

STATE FOR EAP/MLS, EB/TPP, DRL/ILCSR
LABOR FOR ILAB--CHRIS WATSON AND JONA LAI
COMMERCE FOR OTEXA

E.O. 12958: N/A
TAGS: ELAB ETRD KTEX PHUM
SUBJECT: CAMBODIA: GARMENT BUYERS URGE IMPROVED
COMPETITIVENESS, ILO INVOLVEMENT IN FACTORY MONITORING


1. (SBU) SUMMARY. Buyers of Cambodian-made garments urged
the Better Factories Cambodia factory monitoring project to
maintain credibility by continuing International Labor
Organization (ILO) involvement and to meet financial
challenges by encouraging more buyers to participate.
Cambodia's good working conditions are no longer enough to
ensure its share of the global textile market, and instead
the nation's garment factories must improve price, quality,
and turnaround time. While individual buyers often complain
privately about disappointing and irresponsible behavior by
unions, factories, and the Cambodian government, they missed
a key opportunity to present this as a common concern. END
SUMMARY.

2. (U) Better Factories Cambodia, the ILO-run factory
monitoring program, recently brought together 19
representatives from 12 brands for their semiannual Buyers'
Forum, which was held Dec. 5 and 6 in Phnom Penh. While the
Buyers' Forum is focused on ways to make factory monitoring
and training programs more effective and to plan for the
project's sustainability, it is also a unique opportunity for
buyers to come together and talk about their experiences
sourcing garment production in Cambodia. The project was
originally started with US Department of Labor funding, and
now receives some support from USAID as well as from buyers,
unions, the Cambodian government, and other foreign aid
donors.

Buyers Complain Privately, but not to Government or Unions
--------------------------------------------- -------------

3. (SBU) Over the past several months, several garment
buyers and a labor rights organization have expressed
concerns to us and others about the level of labor unrest and
irresponsible behavior by unions and factories and the
government's inability or unwillingness to promote labor
peace. The Gap, the top buyer of Cambodian garments,
dispatched an expatriate official to Cambodia for six weeks
over the summer to investigate specific allegations of labor
abuses and to promote cooperation between unions and
factories. In June, Levi Strauss, the second largest buyer
of Cambodian garments, told the Garment Manufacturers'
Association of Cambodia (GMAC) that they were reversing a
planned expansion in Cambodia and were instead scaling back
production in response to increased labor unrest. European
retailer Hennes and Mauritz (H & M) complained of receiving
protest letters from "all of Sweden" when allegations of poor
working conditions at a Cambodian factory were publicized in
Europe. And the US-based Fair Labor Association reported a
sharp increase in complaints about Cambodian factories,
prompting them to launch three full investigations in
Cambodia this year--a dramatic figure considering they
typically launch only 2-3 investigations worldwide each year.
(COMMENT: The dramatic increase in these complaints seem to
reflect both the tense labor situation from March to May this
year and the unions' sudden discovery and indiscriminate use
of the internet as a tool for finding and contacting labor
rights organizations and buyers directly. END COMMENT.)

4. (SBU) Because the Buyers' Forum is the only time that a
large number of garment buyers gather in Cambodia
simultaneously, some garment buyers and the embassy had
encouraged Better Factories to use the occasion to organize
dialogues with government officials and unions about top
buyer concerns (e.g. excessive and illegal strikes,
anti-union discrimination, and labor-related violence) and to
allow buyers to explain purchasing decisions and consumer
behavior to unions. Instead, the forum focused on
sustainability questions, and there was just one private
meeting with government officials--a breakfast with Ministry
of Commerce Secretary of State Pan Sorasak. In contrast to
their strong condemnation of human rights abuses during
meetings with government officials during last year's Buyers
Forum, this year buyers raised few issues during the
breakfast. The one vocal exception was Gap representative
Naurin Muzzafar, who expressed concern about police violence
towards workers, and specifically cited the shooting of a
worker at Bright Sky Garment Factory in October. Better
Factories staffer Conor Boyle noted that Pan Sorasak's
response was vague and unsatisfactory.

Working Conditions Alone Won't Guarantee Export Growth
--------------------------------------------- ---------


PHNOM PENH 00002240 002 OF 003


5. (U) Several garment buyers privately emphasized a message
we've heard many times before: good working conditions alone
are no longer enough to ensure Cambodia's share of the
garment manufacturing industry. As more and more countries
improve factories, garment buyers now have a long list of
factories where workers enjoy excellent conditions. Safe and
fair working conditions are a prerequisite for being
considered--not a competitive advantage in sourcing
decisions. Cambodia needs to focus on improving price,
quality, and turnaround time if it is to compete with other
producers. Buyers cited Vietnam as Cambodia's top
competitor, but said that other low-cost producers in the
region, like India, Pakistan, and Sri Lanka, are also a
threat. Desta Rains of Jones New York reported that an Anne
Klein representative had recently come to Cambodia to
investigate the possibility of sourcing here, but found no
factories that could produce garments up to their high
quality standards.

6. (SBU) While Cambodia's biggest buyers--like Gap--follow
labor developments very closely, several others were
surprisingly unconcerned and ill-informed about the recent
increase in labor unrest. Several noted that "at least it's
not as bad as Bangladesh." Nonetheless, Rains noted that
during the spike in labor unrest several months ago, Jones
New York had moved some of its production from a Cambodian
factory to a Vietnamese factory operated by the same factory
owner to ensure that the order was completed on time.

ILO Involvement, Increased Buyer Participation Critical
--------------------------------------------- ----------

7. (U) Credibility and cost were buyers' top concerns during
closed-door sustainability meetings on Dec. 5. Talking with
staff from Better Factories and the World Bank's Mekong
Private Development Facility, buyers said that continued ILO
involvement was a key part of maintaining the project's
reputation for fairness and impartiality. Several buyers
referred to recent high-profile revelations of child labor at
a Nike factory in Pakistan. That factory, they noted, was
monitored by a local organization, but those efforts were not
enough to prevent or uncover the labor violations occurring
there.

8. (U) Buyers expressed concern over projections that their
contributions would need to increase--perhaps even triple--as
the project becomes fully self-financing. As an alternative
to increasing per factory contributions, buyers emphasized
the need to encourage broader buyer participation in the
factory monitoring project--something Better Factories is
already working on. According to Better Factories staff, 16
of the 35 garment buyers sourcing from Cambodia have joined
the factory monitoring program, representing 60% of the
country's export volume. Better Factories has entered into a
partnership with the US firm Business for Social
Responsibility to encourage non-participating buyers,
including Columbia, JC Penney, Kohl's, Eddie Bauer, Kelwood,
American Eagle, Zara, and C & A, to start supporting the
project and using its factory monitoring reports. However,
ILO Chief Technical Advisor Tuomo Poutiainen warned that
Better Factories has already recruited the "low-hanging
fruit" and that even recruiting 2-3 more companies would be a
big accomplishment.

Unions Say Monitoring Too Lax, GMAC Says Too Strict
--------------------------------------------- ------

9. (U) Recently, Better Factories monitoring reports have
come under fire from both GMAC, who accuses them of being too
hard on factories, and unions, who say that the reports paint
an overly rosy picture of Cambodia's garment industry. The
unions would like a sharper focus on areas of non-compliance,
especially labor-related violence, while factories argue that
standards are too high and take issue with findings based on
worker reports. Poutiainen told Poleconoff that he sees the
criticism as a positive sign that unions are engaging more
deeply in Better Factories operations and are realizing that
the project's reports have an impact on buyers. (NOTE: The
FTU has a seat on Better Factories' Project Advisory
Committee, which reviews all synthesis reports before they
are released publicly. However, FTU and other union
representatives have typically been reticent and rarely
suggest changes to the reports, in contrast to outspoken
participation from GMAC representatives. END NOTE.)

PHNOM PENH 00002240 003 OF 003

Comment
-------

10. (SBU) In some ways, Cambodia's factory monitoring program
is a victim of its own success. Its effective and innovative
approach once set Cambodia apart from its competitors, but as
other countries emulated this example, Cambodia's good
working conditions have lost their uniqueness. Government
officials and factory owners understand that Cambodia must
now compete on price, quality, and turnaround time. However,
many unions have bought in to the gospel of corporate social
responsibility too deeply, and now believe erroneously that
socially conscious retailers are so loyal to Cambodia that
even rising prices and production delays would not lead them
to source elsewhere.

11. (SBU) Individual garment buyers frequently complain to us
about corrupt and illegal union behavior, factory-instigated
violence and anti-union discrimination, an inept Ministry of
Labor, and poor enforcement of the labor law. However,
buyers are reluctant to voice these concerns individually,
lest they seem overly critical of workers or make enemies in
the government. Thus it is disappointing that garment
buyers and the Better Factories project passed up a unique
opportunity for buyers to speak with one voice in urging more
responsibility from unions, factories, and the government
alike. END COMMENT.
MUSSOMELI

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