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