CAMBODIA QUESTIONS VALUE OF HIGH LABOR STANDARDS

UNCLAS SECTION 01 OF 02 PHNOM PENH 000409

SIPDIS

STATE FOR EAP/MLS, DRL/IL - DOL FOR ILAB

E.O. 12958: N/A
TAGS: ELAB ECON PGOV PHUM CB
SUBJECT: CAMBODIA QUESTIONS VALUE OF HIGH LABOR STANDARDS


1. SUMMARY: As the global economic crisis takes a firm hold
in Cambodia, garment manufacturers, service providers and
government officials have started to question the value of
Cambodia's high labor standards. Unions and employers are
further at odds regarding what constitutes a fair wage during
a difficult period for Cambodia's garment industry which has
seen dozens of factory closures and massive layoffs. While
industrial relations remain contentious, there has been a
significant reduction in strikes this year. Union leaders
attribute this to the new trend of suppressing freedom of
expression in Cambodia which they claim has already had a
negative effect on workers' rights. END SUMMARY.

High Labor Standards - Why Bother?
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2. The current bleak state of affairs within the garment and
tourism sectors includes diminished exports (down 35% in the
first quarter),reduced numbers of tourists (down 2.18% in
the first quarter),factory closures (approximately 25 net
closures in the first quarter),and massive layoffs (as many
as 40,000 since March alone). The loss of a $50 million
potential contract to Bangladesh, in which the Japanese firm
involved cited the number of strikes as one reason for the
decision to not source from Cambodia, has been provided as
one example of industrial relations interfering with the
garment sector's ability to win and keep business. Taken
together, these factors have led some within the government,
along with factory owners, to question the value of
Cambodia's high labor standards championed by the
International Labor Organization's (ILO's) Better Factories
initiative. Minister of Commerce Cham Prasidh recently
warned buyers that the Royal Government of Cambodia (RGC)
could be forced to revisit the importance it places on labor
standards "if the result of the support of ILO labor
compliance means fewer purchasing orders and less business
for Cambodia." He went on to state that "in dire
circumstances in which prices are falling, CSR (Corporate
Social Responsibility) could be relegated to the back stage."
An ILO representative told Poloff that he is now scrambling
to rally buyers to contact relevant government officials
directly to reinforce the importance of upholding Cambodia's
labor standards.

Want More? Make More!
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3. Union demands for higher wages are also prompting
negative reactions from the government and employers. The
Committee for Fair Wages, a coalition of seven labor
federations representing 80% of Cambodia's garment workers
has started a campaign to increase the minimum wage from $50
to $93 a month. The National Institute of Statistics
recently issued a report which calculated $3 a day is
required for an adequate standard of living. Garment workers
currently earn $1.93 per day. A separate report released by
the Cambodian Institute of Development Study (CIDS) found
that garment workers require at least $90 per month in order
to maintain a decent standard of living. The government and
the Garment Manufacturers Association in Cambodia (GMAC)
dismiss both the union request and the report as being
unrealistic due to the global economic crisis, low
productivity, informal expenses, and high cost of utilities.
However, the CIDS president stated that an increase in wages
would motivate the workers to increase productivity and
reduce strikes. GMAC Chairman Van Sou Ieng contends that
would be like "counting the chickens before they hatch." He
elaborated by stating he has no problem raising wages, as
long as workers first produce more and unions discontinue
strikes.

Scared to Strike
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4. In reality, strikes for the first five months of the year
are down 67% compared to the same period last year. Industry
experts attribute the decline to a wide range of causes, from
the current economic situation to increased numbers of "most
representative unions," government pressure, and fear of
repercussions. There are currently seven high profile
disinformation or defamation lawsuits against critics of the
government. Although none currently involve unions or
workers, union leaders worry that the new trend of curtailing
freedom of expression has already had a negative effect on
union rights. The president of CCAWDU, the most independent
union in Cambodia, claims "the right to protest and freedom
of speech have been restricted in recent months." Other
union leaders, including those of pro-government unions, also
expressed concern that freedom of expression has declined,

PHNOM PENH 00000409 002 OF 002


citing intimidation due to the recent lawsuits. However, the
American Center for International Labor Solidarity (ACILS)
Country Director attributes the decline in strikes to the
global economic crisis, and not to threats of lawsuits or
other government interference.


5. Unions also claim that a new draft law on peaceful
demonstrations is further evidence of the RGC's plan to crack
down on labor rights and freedom of expression. The National
Assembly is currently reviewing the draft law, which would
include restrictions on demonstration venues, sizes and
times. Opposition lawmakers have criticized the draft for
not clearly defining the phrase "public order," which could
potentially leave the RGC open to interpret which protests
disturb such order and arbitrarily shut them down. Rong
Chhun, president of the Cambodian Confederation of Unions
(CCU) sent a letter to the National Assembly requesting the
deletion of clause 1 and 2 of Article 14 of the draft law on
demonstrations, which defines a peaceful protest as a
gathering of no more than 200 people. He also requested the
deletion of article 28, which states that public
demonstrations can be held at just a single venue in each
province, which the authorities would be obliged to build
within six months of the bill becoming law. The RGC has
responded by claiming that Cambodia needs venues where people
can assemble to demonstrate peacefully, and that this would
"protect social security and public and private property,"
but is not meant to reduce freedom of expression or assembly
in Cambodia.

Comment
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6. Whether due to the global economic crisis itself, or the
government simply using it as a pretext, labor standards and
associated freedom of expression are seemingly in jeopardy in
Cambodia. The fact that a respected high government official
stated that the Better Factories initiative may need to be
reevaluated due to declining orders has worried many in the
labor sector who strive to promote workers' rights in
Cambodia. The Embassy, ILO and buyers concerned with CSR
will continue to promote the importance of high labor
standards. In response to press inquiries, the Embassy
recently expressed concern about the constriction of free
expression in Cambodia. There have also been high level
discussions with the RGC on the topic. The government's
response over the next weeks to repeated and increased public
criticism will be key to determining whether labor standards
are at risk in Cambodia.
RODLEY