On any given morning, Cambodia’s 600,000 garment workers file through the gates of factories across the country, ready to produce the country’s largest export, the linchpin of the nation’s economy. Most will cut, sew and stitch the t-shirts, shoes and dresses by hand or with the simplest of machines. Compared to workers in Vietnam or Thailand, their labour is often called ‘low-skilled’, or even ‘unskilled’. But soon this could all change. In July, the International Labour Organisation (ILO) released a study warning that automation could be the future of Cambodia’s garment industry, posing significant risks for 88% of workers employed in the textile, clothing and footwear (TCF) industry. The effects on employees would be calamitous. “For some countries like Cambodia, where TCF production dominates an undiversified manufacturing sector and makes up around 60% of manufacturing employment, the impact will be felt more strongly than others,” the report stated.
According to an owner of a garment factory just outside of Phnom Penh, who requested anonymity, the desire for automation is a logical one, given the sector’s woes: increasing wages, low-value production and increased regional competition. The result, as he put it rather directly, was that many of his fellow business owners (often non-Cambodians, like himself) are more willing to “invest in machinery than people”. Machines do not strike, and machines can be taken away, he said.
A later report by the ILO, published in August, came to similar conclusions as this anonymous source. It found prices being paid by foreign brands, mostly from the US or Europe, were stagnating, chiefly because of increased supply from countries such as Vietnam, Bangladesh, and, a future concern, Myanmar. Between 2006 and 2015, the cost of garment produce exported by Cambodia rose by just 5.4%. At the same time, wages for garment workers increased by much more: from $61 per month in 2010 to $140 this year. In September, annual negotiations over minimum wages for garment workers began once again, though no announcement has been made by trade unions as to how much of an increase they desire.
“Investors require a certain return on their invested capital – if they do not obtain this, they may reconsider further investments in the Cambodian garment sector,” the report stated. Indeed, Ken Loo, president of the Garment Manufacturers Association in Cambodia, told local media recently that 70 of its members have closed factories this year, compared to only 35 opening, an indication of struggling investment.
The August ILO report concluded that to retain industry competitiveness, owners could either raise the costs charged to global brands for production or increase productivity remarkably – a third option of cutting wages was not discussed and seems highly unlikely. And for many, the best way of increasing productivity is through automation: from robotic machines that can perform the same cutting and stitching as workers, to the latest in 3D printing and computer-aided design.
For Ath Thorn, president of the Coalition of Cambodian Apparel Workers’ Democratic Union, employers’ talk of low productivity is self-seeking. He says that if productivity is low, it is the result of employers treating their workers poorly, reducing their motivation, and that it is the workers, not the employers, who are really suffering. The fact that revenue for the industry increased by 14.5% during the first quarter of the year, worth $1.8 billion, according to the ILO, might justify his position.
“When there are no violations of the right of workers, the workers will be confident and help make this sector work as smoothly as possible,” he said.
As well as the better treatment of workers, and respecting their rights, Thorn added that employers could also boost productivity by providing better training, longer contracts and, most likely not to the same extent as many factory owners desire, the introduction of more modern machinery.
However, the path to automation appears an uncertain one for Cambodia. William Conklin, Cambodia country director at workers advocacy NGO Solidarity Centre, says that the industry’s current concerns stem partly from its lack of evolution. “It really hasn’t changed in 15 years,” he said. Conklin puts this down to a lack of vision by the industry players. For example, everyone has recently been looking nervously at Vietnam, especially if the Trans-Pacific Partnership (TPP) comes to fruition, which would open Vietnamese exports up to significant new markets. “But Vietnam said it would be part of TPP in 2009,” he said, adding that a long-term strategy to deal with this has yet to be put in place. “Nobody is thinking of how to compete. Maybe, they can’t compete. Vietnamese garment factories are huge, with 5,000 to 10,000 workers each, and much local, Vietnamese investment.”
Aside from perspectives, there are also logistical problems. First, automation would require significant capital investment, but investors and factory owners (95% foreign, Conklin estimates) have “shown no inclination, with a few exceptions, to really do much investment in the industry itself”. Secondly, energy costs in Cambodia are the highest in Southeast Asia, ranging from $0.18 to $1 per kilowatt-hour, according to a 2015 report by the ADB. Automation, therefore, would no doubt drive up costs significantly, most likely requiring long-term government investment in energy production, Conklin added. Third, the introduction of new machinery would require more training of workers, which again would require more investment and improved relations between employers and employees, which might require another raise in the minimum wage.
Nevertheless, a paradigm shift needs to take place, with every stakeholder engaged, Conklin said. Exactly what that shift is remains to be seen. However, there is a simple choice, he said: “Away from low-wage, low-cost…to a higher-end, where workers are not just commodities but assets? Or, continue to scrape-by, without anything to set Cambodia apart?”