Garment Sector Competes and Thrives in Cambodia

August 5, 2007

Phnom Penh, August 5, 2007- Wearing a dark-blue uniform, with red trim, and standing next to a huge ironing machine in a garment factory in Phnom Penh, 20-years-old, Son Sean, smiles and responds: “My family has better living conditions now,” she pauses and continues while pushing a collar into the machine, “From my earnings, my mother has been able to build a 5 by 7 meter brick house with a tiled roof, and my 15 year-old sister has been able to continue her schooling.”

Son Sean is one of many garment workers who come from the poor Cambodian province of Svay Rieng, located about 120 km east of Phnom Penh. She earns on average about US$70 per month, depending on how much overtime she gets, and each month, Sean sends US$50 to US$90 cash home to support her 50-year old widowed mother and her younger sister, who studies in the fifth grade.  

Sean’s co-worker, Vong Pak, 39, smiles proudly when asked whether she supports members of her family with her earnings. “From my salary I support my 68-year-old mother, my four children and I pay for my children’s schooling,” she says while sewing a shirt.  Pak is the breadwinner of the family. Three of her four children, who are 14, 12, 7, and 3 years old, are in school now.

" From my earnings, my mother has been able to build a 5 by 7 meter brick house with a tiled roof, and my 15 year-old sister has been able to continue her schooling "

Son Sean

20-year old garment factory worker

Both Sean and Pak work at the New Island Clothing garment factory (NIC), along with more than 800 other workers. NIC is one of 290 garment factories in Cambodia which exports goods to the United States and Europe.  NIC operates in six countries: Cambodia, Indonesia, Sri Lanka, Vietnam, Lithuania and Mauritius. The company produces men's and ladies’ formal and casual shirts, supplying these to Marks & Spencers, as well as to premium overseas customers. New Island is a winner of Cambodia’s First Corporate Citizenship Awards which were sponsored by the World Bank Group’s private sector financing arm, the International Finance Corporation (IFC) in 2005.

Cambodia’s garment industry is the country’s main industry and its leading export revenue earner.  In 2006, exports totaled US$2.5 billion and the sector employed 330,000 mostly poorer rural women, who in turn support extended families. In total, an estimated 1.7 million people depend on the garment industry directly or indirectly.
According to the report Export Diversification and Value Addition for Human Development which was published by the Economic Institute of Cambodia in June 2007, garment industry workers earn an average of US$73 per month, 29 percent of which comes from overtime work.   

Representing almost 80 percent of Cambodia’s total exports, the sector is crucial to Cambodia’s economy.  However, increasing global competition makes the industry vulnerable, and so  a variety of approaches are needed to help the industry sustain itself.

World Bank Group President, Robert Zoellick visited a garment factory, and met with private sector representatives.  The garment sector is Cambodia’s largest industry, worth US$2.5 billion in 2006, and accounting for 80 percent of exports.  Mr. Zoellick’s association with the garment sector goes back to 2001 when, as United States Trade Representative, he extended a program of support to Cambodian manufacturers which provided incentives for compliance with labor standards established by the International Labor Organization (ILO). Cambodia’s garment sector has grown steadily, even after the end of the Multi-Fiber Arrangement in 2005 which had afforded some protection from bigger producers.

Mr. Zoellick said it was heartening to see the strength of the sector, and that its success contained lessons about the important role of adhering to internationally acceptable standards in building confidence with foreign buyers and investors.
“These lessons apply more broadly,” he said. “They can be put into action so that not only the garment sector thrives, but other sectors do as well, and Cambodia can develop an international brand for socially responsible production, resource development and tourism. That reputation would help Cambodia to sustain high growth and overcome poverty in the face of tough global competition.”

The World bank Group is providing important assistance to the garment sector to improve its global competitiveness by working with the government and the private sector on a number of trade-related reforms, in particular those which will reduce the time and cost involved in importing raw materials and exporting finished products.

IFC provides advisory services to the sector through its multi-donor funded Mekong Private Sector Development Facility. Over the last three years, IFC advisory staff have been promoting corporate social responsibility through training in human relations skills for garment factory supervisors and by helping to ensure long term sustainability for ILO's labor monitoring and remediation program, Better Factories Cambodia. IFC has also partnered with ILO in facilitating the Buyers’ Forum which brings together buyers and other key stakeholders for regular meetings.

Richard Ranken, IFC Director for East Asia and Pacific, who accompanied President Zoellick on his tour of New Island Clothing, said that while improving corporate social responsibility was crucial for garment industry success, so is collaboration among buyers, government, the industry and workers’ representatives to further strengthen the industry’s competitive position. “More and better infrastructure is critically needed as well in Cambodia, and IFC stands ready to support this too.”

The World Bank has supported the government on private sector development through the Trade Facilitation and Competitiveness Project, with a US$10 million grant. This includes the Bank’s support to ILO’s Better Factories Cambodia.