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### Viewing cable 06PHNOMPENH2240, CAMBODIA: GARMENT BUYERS URGE IMPROVED

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Reference ID | Created | Released | Classification | Origin
--- | --- | --- | --- | ---
06PHNOMPENH2240 | 2006-12-28 05:25 | 2011-07-11 00:00 | UNCLASSIFIED//FOR OFFICIAL USE ONLY | Embassy Phnom Penh

`

    VZCZCXRO5057
    PP RUEHCHI RUEHDT RUEHHM RUEHJO RUEHNH
    DE RUEHPF #2240/01 3620525
    ZNR UUUUU ZZH
    P 280525Z DEC 06
    FM AMEMBASSY PHNOM PENH
    TO RUEHC/SECSTATE WASHDC PRIORITY 7756
    INFO RUCNASE/ASEAN MEMBER COLLECTIVE PRIORITY
    RUEHXI/LABOR COLLECTIVE PRIORITY
    RUCPDOC/DEPT OF COMMERCE WASHDC PRIORITY
    RUEHC/DEPT OF LABOR WASHDC PRIORITY

` `

    UNCLAS SECTION 01 OF 03 PHNOM PENH 002240

    SIPDIS

    SENSITIVE
    SIPDIS

    STATE FOR EAP/MLS, EB/TPP, DRL/ILCSR
    LABOR FOR ILAB--CHRIS WATSON AND JONA LAI
    COMMERCE FOR OTEXA

    E.O. 12958: N/A
    TAGS: ELAB ETRD KTEX PHUM
    SUBJECT: CAMBODIA:  GARMENT BUYERS URGE IMPROVED
    COMPETITIVENESS, ILO INVOLVEMENT IN FACTORY MONITORING

    ¶1.  (SBU) SUMMARY.  Buyers of Cambodian-made garments urged
    the Better Factories Cambodia factory monitoring project to
    maintain credibility by continuing International Labor
    Organization (ILO) involvement and to meet financial
    challenges by encouraging more buyers to participate.
    Cambodia's good working conditions are no longer enough to
    ensure its share of the global textile market, and instead
    the nation's garment factories must improve price, quality,
    and turnaround time.  While individual buyers often complain
    privately about disappointing and irresponsible behavior by
    unions, factories, and the Cambodian government, they missed
    a key opportunity to present this as a common concern.  END
    SUMMARY.

    ¶2.  (U) Better Factories Cambodia, the ILO-run factory
    monitoring program, recently brought together 19
    representatives from 12 brands for their semiannual Buyers'
    Forum, which was held Dec. 5 and 6 in Phnom Penh.  While the
    Buyers' Forum is focused on ways to make factory monitoring
    and training programs more effective and to plan for the
    project's sustainability, it is also a unique opportunity for
    buyers to come together and talk about their experiences
    sourcing garment production in Cambodia.  The project was
    originally started with US Department of Labor funding, and
    now receives some support from USAID as well as from buyers,
    unions, the Cambodian government, and other foreign aid
    donors.

    Buyers Complain Privately, but not to Government or Unions
    --------------------------------------------- -------------

    ¶3.  (SBU)  Over the past several months, several garment
    buyers and a labor rights organization have expressed
    concerns to us and others about the level of labor unrest and
    irresponsible behavior by unions and factories and the
    government's inability or unwillingness to promote labor
    peace.  The Gap, the top buyer of Cambodian garments,
    dispatched an expatriate official to Cambodia for six weeks
    over the summer to investigate specific allegations of labor
    abuses and to promote cooperation between unions and
    factories.  In June, Levi Strauss, the second largest buyer
    of Cambodian garments, told the Garment Manufacturers'
    Association of Cambodia (GMAC) that they were reversing a
    planned expansion in Cambodia and were instead scaling back
    production in response to increased labor unrest.  European
    retailer Hennes and Mauritz (H & M) complained of receiving
    protest letters from "all of Sweden" when allegations of poor
    working conditions at a Cambodian factory were publicized in
    Europe.  And the US-based Fair Labor Association reported a
    sharp increase in complaints about Cambodian factories,
    prompting them to launch three full investigations in
    Cambodia this year--a dramatic figure considering they
    typically launch only 2-3 investigations worldwide each year.
     (COMMENT: The dramatic increase in these complaints seem to
    reflect both the tense labor situation from March to May this
    year and the unions' sudden discovery and indiscriminate use
    of the internet as a tool for finding and contacting labor
    rights organizations and buyers directly.  END COMMENT.)

    ¶4.  (SBU) Because the Buyers' Forum is the only time that a
    large number of garment buyers gather in Cambodia
    simultaneously, some garment buyers and the embassy had
    encouraged Better Factories to use the occasion to organize
    dialogues with government officials and unions about top
    buyer concerns (e.g. excessive and illegal strikes,
    anti-union discrimination, and labor-related violence) and to
    allow buyers to explain purchasing decisions and consumer
    behavior to unions.  Instead, the forum focused on
    sustainability questions, and there was just one private
    meeting with government officials--a breakfast with Ministry
    of Commerce Secretary of State Pan Sorasak.  In contrast to
    their strong condemnation of human rights abuses during
    meetings with government officials during last year's Buyers
    Forum, this year buyers raised few issues during the
    breakfast.  The one vocal exception was Gap representative
    Naurin Muzzafar, who expressed concern about police violence
    towards workers, and specifically cited the shooting of a
    worker at Bright Sky Garment Factory in October.  Better
    Factories staffer Conor Boyle noted that Pan Sorasak's
    response was vague and unsatisfactory.

    Working Conditions Alone Won't Guarantee Export Growth
    --------------------------------------------- ---------

    PHNOM PENH 00002240  002 OF 003

    ¶5.  (U) Several garment buyers privately emphasized a message
    we've heard many times before:  good working conditions alone
    are no longer enough to ensure Cambodia's share of the
    garment manufacturing industry.  As more and more countries
    improve factories, garment buyers now have a long list of
    factories where workers enjoy excellent conditions.  Safe and
    fair working conditions are a prerequisite for being
    considered--not a competitive advantage in sourcing
    decisions.  Cambodia needs to focus on improving price,
    quality, and turnaround time if it is to compete with other
    producers.  Buyers cited Vietnam as Cambodia's top
    competitor, but said that other low-cost producers in the
    region, like India, Pakistan, and Sri Lanka, are also a
    threat.  Desta Rains of Jones New York reported that an Anne
    Klein representative had recently come to Cambodia to
    investigate the possibility of sourcing here, but found no
    factories that could produce garments up to their high
    quality standards.

    ¶6.  (SBU) While Cambodia's biggest buyers--like Gap--follow
    labor developments very closely, several others were
    surprisingly unconcerned and ill-informed about the recent
    increase in labor unrest.  Several noted that "at least it's
    not as bad as Bangladesh."  Nonetheless, Rains noted that
    during the spike in labor unrest several months ago, Jones
    New York had moved some of its production from a Cambodian
    factory to a Vietnamese factory operated by the same factory
    owner to ensure that the order was completed on time.

    ILO Involvement, Increased Buyer Participation Critical
    --------------------------------------------- ----------

    ¶7.  (U) Credibility and cost were buyers' top concerns during
    closed-door sustainability meetings on Dec. 5.  Talking with
    staff from Better Factories and the World Bank's Mekong
    Private Development Facility, buyers said that continued ILO
    involvement was a key part of maintaining the project's
    reputation for fairness and impartiality.  Several buyers
    referred to recent high-profile revelations of child labor at
    a Nike factory in Pakistan.  That factory, they noted, was
    monitored by a local organization, but those efforts were not
    enough to prevent or uncover the labor violations occurring
    there.

    ¶8.  (U) Buyers expressed concern over projections that their
    contributions would need to increase--perhaps even triple--as
    the project becomes fully self-financing.  As an alternative
    to increasing per factory contributions, buyers emphasized
    the need to encourage broader buyer participation in the
    factory monitoring project--something Better Factories is
    already working on.  According to Better Factories staff, 16
    of the 35 garment buyers sourcing from Cambodia have joined
    the factory monitoring program, representing 60% of the
    country's export volume.  Better Factories has entered into a
    partnership with the US firm Business for Social
    Responsibility to encourage non-participating buyers,
    including Columbia, JC Penney, Kohl's, Eddie Bauer, Kelwood,
    American Eagle, Zara, and C & A, to start supporting the
    project and using its factory monitoring reports.  However,
    ILO Chief Technical Advisor Tuomo Poutiainen warned that
    Better Factories has already recruited the "low-hanging
    fruit" and that even recruiting 2-3 more companies would be a
    big accomplishment.

    Unions Say Monitoring Too Lax, GMAC Says Too Strict
    --------------------------------------------- ------

    ¶9.  (U) Recently, Better Factories monitoring reports have
    come under fire from both GMAC, who accuses them of being too
    hard on factories, and unions, who say that the reports paint
    an overly rosy picture of Cambodia's garment industry.  The
    unions would like a sharper focus on areas of non-compliance,
    especially labor-related violence, while factories argue that
    standards are too high and take issue with findings based on
    worker reports.  Poutiainen told Poleconoff that he sees the
    criticism as a positive sign that unions are engaging more
    deeply in Better Factories operations and are realizing that
    the project's reports have an impact on buyers.  (NOTE:  The
    FTU has a seat on Better Factories' Project Advisory
    Committee, which reviews all synthesis reports before they
    are released publicly.  However, FTU and other union
    representatives have typically been reticent and rarely
    suggest changes to the reports, in contrast to outspoken
    participation from GMAC representatives.  END NOTE.)

    PHNOM PENH 00002240  003 OF 003

    Comment
    -------

    ¶10. (SBU) In some ways, Cambodia's factory monitoring program
    is a victim of its own success.  Its effective and innovative
    approach once set Cambodia apart from its competitors, but as
    other countries emulated this example, Cambodia's good
    working conditions have lost their uniqueness.  Government
    officials and factory owners understand that Cambodia must
    now compete on price, quality, and turnaround time.  However,
    many unions have bought in to the gospel of corporate social
    responsibility too deeply, and now believe erroneously that
    socially conscious retailers are so loyal to Cambodia that
    even rising prices and production delays would not lead them
    to source elsewhere.

    ¶11. (SBU) Individual garment buyers frequently complain to us
    about corrupt and illegal union behavior, factory-instigated
    violence and anti-union discrimination, an inept Ministry of
    Labor, and poor enforcement of the labor law.  However,
    buyers are reluctant to voice these concerns individually,
    lest they seem overly critical of workers or make enemies in
    the government.   Thus it is disappointing that garment
    buyers and the Better Factories project passed up a unique
    opportunity for buyers to speak with one voice in urging more
    responsibility from unions, factories, and the government
    alike.  END COMMENT.
    MUSSOMELI

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