The Phnom Penh Post

Differing views on factory data

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has become uncompetit­ive compared to other developing countries. One key concern is that the minimum wage, which has risen swiftly in recent years to $153 a month, could push factory owners to shift their production to lower-cost destinatio­ns.

Last August, the Garment Manufactur­ers Associatio­n in Cambodia (GMAC) raised a red flag when its management claimed it had evidence that political uncertaint­y, labour unrest and a lack of competitiv­eness was sending garment manufactur­ers packing.

GMAC secretary-general Ken Loo said at the time that his organisati­on’s membership rates had dropped, while garment and footwear orders had declined by 20 to 30 percent.

“We have been saying for many years that Cambodia is not competitiv­e and that companies will divest,” he told the Post. “There has been a decline in incoming investors, as well as our existing investors pulling out.”

Yang Sophorn, president of the Cambodian Alliance of Trade Unions (CATU), which represents about 10,000 workers, insisted that Cambodia remained an attractive low-cost destinatio­n for garment manufactur­ers despite recent wage hikes. She said the relatively high number of factory closures last year did not indicate a rise in bankruptci­es or relocation­s to cheaper manufactur­ing destinatio­ns.

Instead, she said that the figures likely reflected the widespread practice in the garment sector of owners shuttering their factories whenever their ta x holiday expires.

“Most factories close after five years then reopen, sometimes in the same location and other times in new location, with a new name but the same owner,” she said. “They do this because they want to avoid paying taxes to the government.”

Sophorn claims she was personally aware of eight factories in CATU’s membership pool that shut down last year only to reopen under a new name. The loophole allows factory owners to avoid taxes as well as seniority-based salary schedules and benefits.

“We repeatedly asked the Ministry of Labour why it does not record factories that reopen in the same location with the same owner but the ministry has declined to explain,” she said.

Sour, the Labour Ministry spokesman, said if union representa­tives have any evidence of factory owners abusing the system they should present it to the Min- istry of Commerce and the Council for the Developmen­t of Cambodia (CDC). He said Cambodia has strict procedures on declaring bankruptcy, and laws are in place to protect workers.

“Even if a factory closes [its management] must settle all liabilitie­s to its workers and other stakeholde­rs,” he said.

GMAC’s Loo said the unions could say what they want, but the organisati­on’s membership data do not lie.

“Unions have the right to claim that factories are reopening, but our records show GMAC membership­s has decreased,” he said, without providing figures. “The number went down because the minimum wage keeps rising while buyer’s orders are falling, so how can factories make a profit? So they have to shut down.”

 ?? KIMBERLY MCCOSKER ?? Employees work inside the Kin Tai garment factory on the outskirts of Phnom Penh in May 2015.
KIMBERLY MCCOSKER Employees work inside the Kin Tai garment factory on the outskirts of Phnom Penh in May 2015.

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