CAMBODIA: FACTORY MONITORING PROJECT PREPARES FOR

UNCLAS SECTION 01 OF 02 PHNOM PENH 000526 SIPDIS SIPDIS STATE FOR EAP/MLS, DRL/IL LABOR FOR ILAB--JONA LAI E.O. 12958: N/A TAGS: ELAB ECON PHUM CB SUBJECT: CAMBODIA: FACTORY MONITORING PROJECT PREPARES FOR INDEPENDENCE ¶1. SUMMARY. Better Factories Cambodia, the ground-breaking garment factory monitoring project run by the International Labor Organization (ILO) and funded largely by the US government, has plans in place to ensure its sustainability once it becomes a fully independent organization in 2009. The organization plans to work with the World Bank-affiliated Mekong Private Development Facility to prepare for a successful transition and to partner with the NGO Business for Social Responsibility to nurture buyer involvement and to attract new garment buyers to Cambodia. The World Bank will help to fund the organization during the 2006-2008 transition phase, with government, garment manufacturers, buyers, and unions to pay for the program starting in 2009. Meanwhile, the program's most recent factory monitoring report documents problems still affecting the garment sector: rising anti-union discrimination, illegal conversion from undetermined to fixed length contracts, and illegal strikes. END SUMMARY. Partnerships Help to Ensure Sustainability -------------- ¶2. Created with significant US funding and involvement as part of the US-Cambodia Bilateral Textile Agreement, Better Factories Cambodia will become an independent body in 2009. BFC is partnering with the Mekong Private Development Facility (MPDF),a multi-donor initiative set up by the World Bank's International Finance Corporation, to ensure that the transition to an independent organization is a success. Specifically, the MPDF will address: --changes to the organizational structure following the ILO's departure --funders and funding levels --capacity building in the areas of organizational and financial management and human resources --buyer engagement, including the semiannual Buyers' Forum, efforts to reduce duplication in training and monitoring, and cooperation with Business for Social Responsibility to organize buyers and promote Cambodia to new buyers --staff training ¶3. Meanwhile, buyers are discussing a two-year, $100,000 per year proposal to work with Business for Social Responsibility (BSR),a non-profit organization focused on helping corporations make ethical considerations an integral part of business operations. (Note: MPDF and the ILO would cover 50% of the cost and buyers would collectively cover the remaining 50%). BSR is envisioned as the locus for buyers' concerns and as an organization that can help promote Cambodia's worker-friendly garment industry, first among US buyers and eventually worldwide. Funding in Place...Almost -------------- ¶4. BFC's annual operational budget is USD 600,000. Starting in 2009, these costs will be met entirely by the Cambodian government (40% share),the Garment Manufacturer's Association of Cambodia (30%),and garment buyers (30%). Unions will collectively make a token contribution of $500 per year. The World Bank is funding the transition phase from 2006-2008. Initially, the World Bank will pick up nearly all of the operational costs, but their share will decrease quickly each year so that by 2009 the costs are entirely born by government, industry, buyers, and unions. Ros Harvey, Chief Technical Advisor, noted in a March 20 conversation with Econoff that the World Bank had still not finalized their funding, which was supposed to support the organization starting January 1, 2006. While she is hopeful that the agreement will be finalized this week, BFC will be run out of money to fund their operational activities in April unless this funding is received. (Note: USAID is also contributing about $250,000 per year for development of BFC's new information management system, which facilitates monitoring and makes detailed, personalized reports available to manufacturers and buyers. End Note.) ILO May Continue to Fund Top Job -------------- ¶5. Strong ILO leadership has been critical to BFC's success. Finding a dynamic leader to maintain the organization's innovative spirit, credibility, and close relationship with buyers will be difficult--both in the short term (current Chief Technical Advisor Ros Harvey departs in July) and once the organization becomes independent in 2009. However, Harvey noted that the ILO has continued to budget for a Chief Technical Advisor position long beyond 2009, and that there PHNOM PENH 00000526 002 OF 002 have already been discussions about seconding an ILO CTA to the independent organization. Monitoring Results Highlight Persistent Problems -------------- --- ¶6. Meanwhile, the latest Better Factories Cambodia synthesis report shows that while working conditions in factories remain very good overall, significant problems remain. Anti-union discrimination has been rising steadily over the past year. According to the latest synthesis report, sixteen percent of the factories monitored engaged in anti-union discrimination, ranging from termination of union leaders to the establishment of management-controlled unions to inquiring about plans to join the union during recruitment. There is also an upward trend of employers unilaterally changing contracts from undetermined contracts to fixed-term contracts in order to avoid seniority payments and, Harvey speculated, perhaps to intimidate workers as well. For their part, unions rarely comply with the legal requirements of holding a secret ballot vote and giving seven days notice before going on strike. Finally, while employers take pains to avoid hiring minors, fake birth certificates and other identification are easily available and there have been a number of cases of younger job applicants lying about their age. A Better Factory Cambodia survey now underway aims to establish how widespread this practice is. (Note: Cambodian labor law allows workers as young as 15 to work at garment factories, but restricts their working hours, the weight they can lift, etc. Given the abundance of job applicants, most garment factories hire only applicants who are over 18.) ¶7. COMMENT. US involvement in the creation of Better Factories Cambodia has had an enormous positive impact on the country, fueling the rise of the union movement and creating a worldwide reputation for good working conditions. The continuation of credible factory monitoring will be critical to the continued good health of the garment sector. This plan lays the foundation for a successful transition. The biggest challenge in the near term will be finding a suitable successor to the current Chief Technical Advisor, who is personally responsible for many of the organization's recent innovations and who has developed close relationships with key buyers. END COMMENT. Mussomeli