VZCZCXRO4840
RR RUEHCHI RUEHDT RUEHHM RUEHJO RUEHNH
DE RUEHPF #0526/01 0791026
ZNR UUUUU ZZH
R 201026Z MAR 06
FM AMEMBASSY PHNOM PENH
TO RUEHC/SECSTATE WASHDC 6296
INFO RUCNASE/ASEAN MEMBER COLLECTIVE
RUEHXI/LABOR COLLECTIVE

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