VZCZCXRO2934
PP RUEHHM RUEHJO RUEHPOD
DE RUEHPF #0503/01 1710820
ZNR UUUUU ZZH
P 190820Z JUN 08
FM AMEMBASSY PHNOM PENH
TO RUEHC/SECSTATE WASHDC PRIORITY 9657
INFO RUEHXI/LABOR COLLECTIVE PRIORITY
RUEHGV/USMISSION GENEVA 1657
RUEHC/DEPT OF LABOR WASHINGTON DC

UNCLAS SECTION 01 OF 03 PHNOM PENH 000503 
 
SIPDIS 
 
STATE FOR EAP/MLS, DRL/IL, EB/TPP/ABT-CLEMENTS 
LABOR FOR ILAB, CSR-MITTELHAUSER 
GENEVA FOR PSA 
 
E.O. 12958: N/A 
TAGS: ELAB ECON KTEX CB
SUBJECT: WORKING CONDITIONS IMPROVED, BUT LABOR UNIONS STILL 
ENCOUNTER HARDSHIPS 
 
¶1.  Summary:  Even as a recent report touted Cambodia's low labor 
costs, labor union leaders and employers report that working 
conditions and respect for the labor law and regulations have 
continued to improve in Cambodia's garment sector in recent years 
due largely to the USG-funded Better Factories Cambodia program. 
These factors may make Cambodia a favored source for U.S. garment 
buyers.  However, lower productivity among Cambodia's inexperienced 
workers is a problem.  Moreover, despite improvements in working 
conditions, incidents of violence and intimidation and illegal 
dismissals remain serious concerns among labor leaders.  Labor union 
leaders complained about ineffective dispute resolution, inter-union 
rivalry, and difficulty in negotiating collective bargaining 
agreements with management.  Unionists report there are spot labor 
shortages due to rising inflation and low wages.  End Summary. 
 
Cambodia's Cost of Labor Second Lowest 
-------------------------------------- 
 
¶2.  According to a recent study of 40 apparel-producing countries, 
Cambodia's cost of labor ranked second-lowest, at $0.33 per hour. 
Only Bangladesh's labor costs were lower, at $0.22 per hour, 
according to the study by Jassin-O'Rourke Group, a U.S. research 
consulting firm.  The study was made between December and March. 
Managing Director Mary O'Rourke was quoted by The Cambodia Daily 
newspaper as saying that Cambodia remains highly regarded among 
retail and traditional apparel brand owners and will likely continue 
to enjoy Asian-led investment to expand capacity, particularly as 
China's costs continue to rise. 
 
Working Conditions Improved and Respect for the Labor Law and 
Regulations Observed 
--------------------------- ----------------------------- 
 
¶3.  Labor conditions are another bright spot for Cambodia.  In 
meetings with Labor Assistant, labor union leaders reported that 
working conditions in the garment sector have improved since the 
International Labor Organization (ILO) began monitoring working 
conditions in 2001.  In its October 2007 report, the ILO's Better 
Factories Cambodia program stated that working conditions continued 
to improve from May to October 2007 with progress seen in compliance 
with the labor law and international standards in all major 
categories of working conditions such as contracts, wages, working 
hours, leave, welfare and labor relations.  Nonetheless, there still 
are some improvements to be made, such as addressing anti-union 
discrimination and unfair treatment of pregnant workers. 
 
Violence Still a Concern, Inter-union Competition Strong 
------------------------- ------------------------------ 
 
¶4.  Violence and intimidation against unionists is still a critical 
concern among labor leaders.  Hy Vuthy, a local union leader of the 
Free Trade Union of Workers of the Kingdom of Cambodia (FTU), was 
killed on February 24, 2007 in the early morning after leaving work. 
 The perpetrators have not been found.  This killing follows the 
2004 murders of FTU leaders Chea Vichea and Ros Sovannareth.  Chea 
Mony, president of the formerly pro-opposition FTU said that a dozen 
of his local union leaders were intimidated or beaten up by 
gangsters in 2007.  He suspected management and rival union 
federations of such acts, but he could not prove their involvement. 
Ath Thun, president of the politically independent Coalition of 
Cambodian Apparel Workers Democratic Union (CCAWDU), accused 
management of hiring gangsters to intimidate him and his local union 
leaders, an allegation which was strongly denied by employers, who 
said the charge was groundless.  Three other union federation 
presidents accused rival union federations of engaging in violent 
intimidation, with the Khmer Youth Federation of Trade Unions being 
the target of the most complaints. 
 
¶5.  Non-violent forms of inter-union rivalry are very common in 
Cambodia.  However the nature of competition is changing.  Today, 
pro-government union federations are competing for members directly 
with each other.  In the past, pro-government union federations 
competed with independent union federations and an 
opposition-affiliated union federation.  Labor federation leaders 
accused each other of attracting rival local union leaders with 
promises of mobile phones, walkie-talkies, money, and other 
equipment in an effort to lure them into their respective union 
federations.  Alonzo Suson, country representative of the American 
Center of International Labor Solidarity (ACILS), said that 
inter-union competition is now very tough among union federations 
regardless of their political affiliation. 
 
Anti-union Discrimination Another Critical Issue 
------------------------- ---------------------- 
 
¶6.  Both pro-government and pro-opposition labor unions agree that 
 
PHNOM PENH 00000503  002 OF 003 
 
 
small unregulated factories pose particular problems for labor 
rights because the managers of small factories discriminate against 
those who participate in union activities through termination or 
non-renewal of labor contracts.  (Note: There are about 100 small 
factories operating in Cambodia, each employing 100 to 200 workers. 
Most of these factories operate illegally without registration and 
licenses, and ILO monitors do not work with them since they are not 
legally registered. End note.)  In some factories, management 
threatens to allow contracts of unionized workers to expire, a 
common anti-labor tactic, and paying union leaders to quit their 
jobs is still widespread in several small factories.  However, labor 
union leaders acknowledge that in big factories, which account for 
the vast majority of Cambodia's garment industry, management 
complies with labor laws and regulations without discriminating 
against workers who participate in union activities. 
 
¶7.  In response to allegations of anti-union dismissals, Mr. Cheath 
Khemara, Senior Labor Officer of the Garment Manufacturers 
Association of Cambodia (GMAC), said that he doubted that local 
union leaders were dismissed without good cause and said some local 
union leaders did not respect the internal regulations of their 
factories.  He added that local union leaders act like gangsters and 
threaten other workers.  He affirmed that before initiating any 
suspension or termination of any worker, the factory follows the 
legal procedures and requirements set forth in the Labor Law and 
regulations.  However, Mr. Khemara acknowledged that small, illegal 
factories may not follow these practices. 
 
Ministry of Labor Conciliators Perceived as Corrupt 
------------------------------ -------------------- 
 
¶8.  Labor union leaders complained that the labor dispute 
conciliators of the Ministry of Labor and Vocational Training 
(MOLVT) are not active in resolving the disputes between management 
and workers, and instead encourage management to terminate workers 
who make minor mistakes, are seen as troublemakers, or go on strike. 
 The labor union leaders accused some conciliators of corrupt 
practices such as accepting bribes from management for a favorable 
opinion.  On some occasions, the conciliators even instructed 
management on how to dismiss union leaders resulting in several 
dismissals of factory-level union leaders. Koy Tepdaravuth, director 
of MOLVT Labor Dispute Department, acknowledged some such cases, but 
said they were not widespread.  Mr. Koy promised to take appropriate 
action, but such action would be a significant reversal from past 
practice. 
 
Woes for Collective Bargaining 
------------------------------ 
 
¶9. Labor union leaders said lack of management interest, multiple 
unions per factory, and MOLVT indifference in organizing "most 
representative union" elections hampered efforts to negotiate 
collective bargaining agreements (CBAs).  Cheath Khemera agreed that 
lack of "most representative" certification hinders collective 
bargaining, with multiple unions wanting to bargain on behalf of the 
same group of workers.  MOLVT reported that it registered 19 CBAs in 
¶2007.  However, most of these CBAs are only conciliation agreements 
between management and union representatives.  Only five genuine 
CBAs exist in the garment sector.  ACILS is now working with the ILO 
and MOLVT to address the issue by helping to organize a number of 
workshops on collective bargaining and "most representative" status 
for union leaders and factory management.  Progress has been made on 
the issue:  ACILS reported MOLVT has issued more than 20 
certifications of "most representative" unions and four new CBAs 
between January and April 2008.  A few other CBAs are under 
negotiation. 
 
 
 
 
Labor Shortages Due to Rising Inflation and Low Wages 
---------------------- ------------------------------ 
 
¶10.  Both employers and unionists reported there are spot shortages 
of workers in the provinces of Kandal, Kampong Speu and Phnom Penh. 
Employers admitted it is now quite hard to find a steady supply of 
workers due to rising employment opportunities at border areas. 
Workers who previously left these areas seeking opportunities in 
bigger towns have recently begun returning to their hometowns to 
find work at the newly established factories in special economic 
zones.  Both legal and illegal migration of Cambodian workers to 
find work in neighboring Thailand, Malaysia and South Korea is also 
a cause for an unsteady supply of local workers.  Union leaders 
indicated that the uneven labor supply was partly caused by the 
rising inflation since workers could hardly bear the burden of daily 
food expenses with their meager wages and save any money to send 
 
PHNOM PENH 00000503  003 OF 003 
 
 
back home.  Some said workers, especially female workers, quit the 
garment factory jobs to look for better paying jobs in karaoke 
parlors, restaurants or the entertainment sector. 
 
Productivity: Room For Improvement 
---------------------------------- 
 
¶11.  In an interview with The Cambodia Daily, Mary O'Rourke, 
Managing Director of Jassin-O'Rourke Group pointed out that Cambodia 
should move away from children's clothing and toward adult and 
business apparel, broadening its style complexity, adding that 
Cambodia needs to find more sources for fabrics and increase labor 
productivity.  Leaders in the garment industry echoed O'Rourke's 
advice for Cambodia to boost productivity.  Van Sou Ieng, chairman 
of the Garment Manufacturers of Cambodia told The Cambodia Daily 
that while Chinese workers can produce 28 to 32 pairs of pants per 
day and Vietnamese workers 18 to 22 pairs, Cambodian garment workers 
produce 12 to 14 pairs per day.  He added that productivity is low 
in Cambodia because of a labor force of inexperienced workers from 
the countryside.  Tep Mona, director of the Garment Industry 
Productivity Center, agreed that Cambodia's garment sector is only 
operating at 35 to 40 percent efficiency; and workers are 
considerably less productive than Vietnam's workforce.  She added 
that an increase in productivity is necessary to keep and attract 
investors. 
 
¶12.  Ms. Mona pointed out that productivity can be increased if 
workers are provided with high skills trainings and the factories 
are equipped with up-to-date machinery.  But she warned that this 
needs to be consistent with increasing the output without increasing 
the cost.  Mr. Khemara agreed to her points of view and noted that 
productivity allows Cambodia to compete with other low-cost garment 
producing countries.  He added that some Korean factories have 
started to equip their factories with modern equipment.  Mr. Khemara 
indicated that MOLVT should provide up-to-date skills trainings for 
new job seekers in order to meet job requirements.  In the past, the 
majority of workers were hard working and industrious.  However, 
with the current rising price of rice and goods, workers seem to be 
less hard working and less industrious with paltry wages. 
 
¶13.  Comment: Better working conditions in Cambodian garment 
factories remain a model for other developing countries. However, 
other serious problems in the labor sector prevent the country from 
being a perfect set-up: it is neither the high production center nor 
the worker's paradise that is sometimes portrayed by casual 
observers.  Immature and inexperienced unions, lack of government 
leadership and law enforcement, and overwhelmed and impatient 
factory managers make for a labor sector characterized by frequent 
short-term strikes, some violence and intimidation, and few 
collective bargaining agreements.  That said, the improvements in 
the labor sector are noticeable.  End Comment. 
 
Mussomeli