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Garments competitiveness ‘at risk’

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Garment workers at the then-named Phnom Penh Special Economic Zone. Hong Menea

Garments competitiveness ‘at risk’

Rising labour, transportation, logistics and electricity costs could potentially undermine the competitive advantage of Cambodia’s textile-linked industries, according to research conducted by a prominent local economist.

In “Cambodia’s current minimum wage and competitiveness”, Royal Academy of Cambodia economics researcher Ky Sereyvath explores the future sustainability of the competitive opportunities in the domestic garment sector as well as its present and potential competitive advantages over nearby countries along with the weaknesses that could impede them.

Speaking to The Post, Sereyvath noted that the study highlights how Vietnam’s lower labour costs and Cambodia’s sole deep-sea port’s limited ability to handle large container ships have dulled the Kingdom’s competitive edge over neighbouring countries.

He explained that substantial volumes of cargo bound for Cambodia must first go though Vietnam and Thailand, driving up costs.

He propounded that additional deep-sea ports in Preah Sihanouk, Koh Kong and Kampot provinces would allow Cambodia to export goods at lower prices and be competitive with advanced economies in ASEAN.

Sereyvath also underscored that customs procedures remain relatively complicated and that electricity rates pose an especially tough challenge for the garment sector.

“The study found that some factories and industries still do not adhere to the proper principles or maintain good working conditions, which is a challenge. Those factories need to be reorganised to keep them from taking undue advantage of workers,” he said.

The Ministry of Labour and Vocational Training is set to hold six additional tripartite meetings to discuss the 2023 minimum wage for textile-related sectors – on August 24 and 31, and September 7, 14, 22 and 23. This year’s minimum wage is $194.

The National Council on Minimum Wage (NCMW) said that at the first meeting, on August 15, it presented updated figures of formal data and reputable academic research on social criteria – such as household status, inflation rates and the cost of living – and economic criteria including productivity, competitiveness of the country, the labour market situation and sectoral profitability to negotiate the 2023 minimum wage.

“We listened to the positions of each representative and party in terms of change in social and economic criteria,” the NCMW said in a statement.

The NCMW comprises officials from the labour ministry, factory owner representatives, industry stakeholders and workers’ representatives from civil society organisations and trade unions.

Speaking to The Post early this month, Kaing Monika, deputy secretary-general of Garment Manufacturers Association in Cambodia, the apex trade body for the industry, acknowledged the difficult situation facing the Kingdom’s workers and the delicate balance between supporting their living conditions and improving the industry’s competitiveness.

Monika commented that while the sector experienced robust export performance in the first half of the year, the unstable global environment and economic downturn in Western countries that constitute some of the biggest buyers of Cambodian garments translate to “serious concern over the export situation for the second half”.

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