The joys and pains of moving the garment industry to Cambodia

Cambodia is famous for its low wages. The clothing industry is an industry with thin profit margins and is highly dependent on cheap labor. In recent years, as wages in China have risen, many garment factories have relocated to Cambodia and taken root there. Taiwan’s Kunzhou Garment Company even successfully went public in Cambodia, becoming a successful model for foreign-owned garment companies in Cambodia.
However, garment companies in Cambodia also encountered many problems: workers continued to demonstrate, and the calls for raising the minimum wage became louder and louder. Even though the garment companies temporarily compromised and raised the minimum wage level, after some time, the demand The call for a raise will be heard again. In January this year, conflicts broke out in Cambodia over wage disputes, and four workers were shot dead during the conflict.
The Taiwan-funded garment factory invested in Cambodia was successfully listed
We learned from a report in Cambodia’s “Phnom Penh Post” on June 13: Clothing manufacturer Kunzhou Co., Ltd. (GTI) expressed its intention to go public two years ago. On May 29 this year, Kunzhou Company finally went public, becoming the second listed company in Cambodia and the first private company to go public.
The first listed company in Cambodia was the state-owned Phnom Penh Water Supply Company, and Kunzhou Company became the second listed company, with an initial issue price of US$2.41 per share.
Kunzhou Garment Factory is located on the outskirts of Phnom Penh, the capital of Cambodia, employing a total of 5,600 employees and manufacturing sportswear for well-known brands such as Adidas and Reebok. Kunzhou Company is a Taiwan-funded enterprise that entered Cambodia in 1997. When it first arrived, the company rented a place in the Canadian Industrial Park to organize production. After step-by-step expansion, it moved to the current factory in 2006.
After Kunzhou Company raises funds through its initial stock issuance, it will implement two major expansion projects, which will increase the number of employees by 2,300.
It is understood that the monthly wages, severance compensation and working conditions provided by Kunzhou Company to workers are better than the average level of its peers. Srun Thida has worked in Kunzhou Garment Factory for more than 8 years. She said: “My monthly salary is about US$240, plus some bonuses. The salary in the factory depends on your position and work skills. If you learn faster, you can produce more quality in a short time With good clothing, your salary can be increased by US$10-30 every six months or one year.”
The Kunzhou Garment Factory produces 650,000 pieces of clothing every month. The production order in the factory is very regular: design drawings are first transmitted to the factory from clothing brands such as Adidas and Reebok, and factory designers immediately use computers and related equipment to type them out. Samples are produced; then pieces of fabric are cut into blocks according to the design drawings, and then transferred to 53 sewing production lines.
Thida, a seamstress, said: “Compared to other factories, the work discipline of Kunzhou Garment Factory is stricter. Employees are not allowed to answer the phone during work and must concentrate during work. However, the factory will not rush you to work more , but if workers work more, they will be rewarded by the factory.”
Although the labor wages offered by Kunzhou Garment Company are higher than the average level of its peers, some analysts still have doubts about its wage situation after its listing, because workers are still negotiating with the factory to increase the minimum wage. In January this year The issue sparked clashes between workers and police in March, a scene that is still vivid in people’s minds.
Douglas Clayton, CEO of Leopard Capital, said: “The garment industry is an industry with thin profits and is very dependent on cheap labor. The minimum wage in Cambodia is rising and has now reached 100 US dollars per month. It will continue to rise in the future.” It’s going up even more. At this point, it’s questionable how long this company wants to be here.”
At present, the two brands Adidas and Reebok consume 80% of Kunzhou Garment Company’s clothing. If the factory encounters another worker demonstration similar to January this year, once Adidas and Reebok put pressure on them, Kunzhou Company will face a very passive situation. It is understood that during the workers’ demonstration that broke out in January this year, a total of four demonstrators were shot dead by the police.
​Some Chinese garment factories have moved to Cambodia
Due to the increase in wages in China, manufacturing costs have generally increased, and some garment factories have moved from China to countries with lower labor costs such as Cambodia. In recent years, the number of new garment factories in Cambodia has gradually increased, which has promoted the growth of its garment exports. At the same time, Cambodia’s imports of garment equipment and raw materials have also increased year by year.
The Cambodian Garment Association said: “We have not only seen an increase in customers buying clothes, but also an increase in the number of new clothing factories. Many factories require imported equipment and clothing raw materials. The growth of Cambodia’s clothing industry is partly due to The minimum wage level in other countries has increased, and this situation is especially obvious in China. The direct result is that some factories have moved from abroad to Cambodia. We receive about 10 to 15 inquiries for new factories every month, and at least four of them every month Or five factories will become our members.”
Cambodia imports most of its clothing and shoemaking raw materials from Asian countries, including China, Japan and South Korea.The number of ports is particularly large.
The clothing industry is Cambodia’s most important industry, accounting for the main part of its national income, and clothing accounts for 80% of its export products. Most of the garment factories in Cambodia are simply processing. Almost all garment factories are foreign-invested. The investors are mainly from Taiwan, Japan, South Korea, Hong Kong, and mainland China. Cambodian garment factories are mainly concentrated in Phnom Penh and Sihanoukville, and most of the fabrics and accessories are imported from China. At present, Cambodian garment factories already have technological capabilities such as washing, beading, tie-dying, and embroidery, but they do not yet have dyeing and finishing capabilities.
​The minimum wage continues to rise
In January this year, garment workers went on strike over wage issues. The intensification of conflicts between workers and government security departments may lead to a drop in clothing orders in 2014 to about 20%-30%. During a protest by garment workers, the military opened fire on workers, killing at least four workers. Workers are demanding the minimum wage be raised to $160, compared with the current minimum wage of $60.
Internationally renowned clothing brands such as H&M, Gap, Levi’s and Adidas have many foundries in Cambodia. When labor disputes broke out in Cambodia, these internationally renowned brands called on all parties to resolve wage disputes peacefully.
Labor disputes are an old proposition. While Cambodia’s garment industry is developing at a rapid pace, the treatment of garment workers remains stagnant and their living standards are low. Workers who have been suppressed for a long time will inevitably explode. However, the situation in Cambodia will not be as serious as the unrest that occurred in Bangladesh, and the impact will not be as wide-ranging.