Online Extra: Will Cambodia's Garment Industry Shred?

Even though it has worked hard boosting workers' rights to gain business, that may not matter after January, 2005

It's nearing dusk on the outskirts of the Cambodian capital of Phnom Penh, and Van Serom leans against a dusty flatbed truck, its wheels sunk into the mud. Dark-skinned, with big brown eyes, she has an easy smile that belies her fatigue. Her day starts at 4 a.m., and she gets home after 7 p.m. For the past year, this 18-year-old has been working at European Trend, a fashion-garment factory stitching Levi Strauss jeans, 10 hours a day, 6 days a week. On Sundays she helps out on her family's rice farm.

Nearby, vendors wait for the laborers to knock off for the day. They sell green bananas, rice noodle soup, and hard-boiled eggs from tables about a foot off the ground, which is littered with plastic bags embedded in the mud. Also for sale are a few bottles of nail polish, cheap plastic hair clips and rubber bands, knitted hats, key chains, and underwear. Though nothing costs more than a dollar, Van Serom isn't tempted. She has seven other people back home to worry about.

With my motorcycle driver interpreting, Van Perom chats as she waits for the back of the truck to fill up with other workers. She has draped a grimy pink towel over her head for protection against the dusty, 45-kilometer ride back home, a journey she makes standing up all the way. Sometimes when the truck is really crammed, their bodies prop her up, and she can sleep on her feet.


  Despite this exhausting routine, Van Perom wishes she could work longer hours for the lucrative overtime pay. Her basic monthly wage is $48, and she can make $70 with two overtime hours per day. "We want more overtime. We need it," she exclaims. I'd like to work three or four hours of overtime per day."

The problem is, she can't. Cambodia's labor laws forbid garment factories from having their workers spend more than 10 hours a day on the job. And because these plants are probably the most carefully monitored in the world, most managers don't dare ask their workers to do more, for fear of getting caught by their European and North American customers.

Indeed, that's exactly what happened to another factory next to European Trend. Compliance officers from one of its major buyers, Gap (GPS ), discovered that the factory was running shifts of up to 12 hours and pulled the plug on all orders 11 months ago. "They blacklisted us for one year," moans a manager who requested anonymity. He's worried that if his other customers get wind of what happened, he'll lose his business from Phillips-Van Heusen (PVH ), Wal-Mart (WMT ), and Abercrombie & Fitch (ANF ).


  That kind of thinking is exactly what the U.S. government and the International Labor Organization (ILO) have been trying to promote in Cambodia since a 1999 agreement that linked garment quotas to labor standards. The system seems to have worked well. Based on ILO monitoring of working conditions, Cambodia has been able to obtain yearly quota increases of from 9% to 12%.

However, while improving working conditions in Cambodia may make consumers and shareholders at Gap and Nike (NKE ) sleep better, it's unclear who's really being protected. True, conditions like ventilation, health care, and bathrooms have certainly improved since the deal was struck, but shouldn't impoverished workers like Van Serom be allowed to put in more time if the work is there and they wish?

The strict compliance is also a headache for manufacturers who complain that it makes them uncompetitive -- the race-to-the-bottom argument. To hear Arun Premchand, general manager at Wearwel Cambodia Ltd., life just isn't fair. "China is competitive because they are noncompliant. They have people working 14 or 15 hours a day. If I work my factory more than 10 hours, I get shut down by Gap, Sears (S ), or other U.S. buyers. They are not able to enforce this in China."


  That doesn't mean Cambodia's labor record is squeaky clean. "We're not saying there are no problems. It's clear there are," says Lejo Sibbel, an official with the ILO based in Phnom Penh. He says illegal overtime remains widespread at certain times of the year such as during the busy pre-Christmas season, and it isn't always voluntary.

Still, Ray Chew, manager of the Garment Manufacturers Association in Cambodia (GMAC) says the labor record is the only card the country will have left to play after January 1, 2005. That's the expiration date for the 30-year-old Multi-Fiber Arrangement -- a 1974 global pact that gives 47 nations a share of the European and U.S. markets for clothing and textiles. After that, garments will no longer be subject to quotas.

"Don't talk about costs. We cannot compete with China. We have to try to create a niche market where we respect workers' labor rights and look into how the socially conscious buyers in the EU and America look at the garment supply picture."


  Indeed, Cambodia's $48 monthly minimum wage is far higher than in China's interior, and this country of 6.5 million has no indigenous textile industry, so all fabric is imported. Plus, Cambodia is notoriously corrupt and has a poor infrastructure, which jacks costs up even further.

While Cambodia's labor compliance record is a plus, at the end of the day, it all comes down to cost, says Roger Tan, managing director of Thai-Pore Garment Manufacturing Co. "I have not yet met a buyer who said, 'Your conditions are very good, and although you are more expensive, that's fine.' They'll say, 'Your price is too high.'" If that's the only criterion, then come January 1, 2005, Van Serom and thousands like her might be out of a job.

By Frederik Balfour in Phnom Penh

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