VZCZCXRO5783
PP RUEHCHI RUEHDT RUEHHM RUEHJO RUEHNH
DE RUEHPF #1693/01 2611025
ZNR UUUUU ZZH
P 181025Z SEP 06
FM AMEMBASSY PHNOM PENH
TO RUEHC/SECSTATE WASHDC PRIORITY 7326
INFO RUCNASE/ASEAN MEMBER COLLECTIVE PRIORITY
RUEHXI/LABOR COLLECTIVE PRIORITY

UNCLAS SECTION 01 OF 02 PHNOM PENH 001693 
 
SIPDIS 
 
SENSITIVE 
SIPDIS 
 
STATE FOR EAP/MLS, DRL/IL--MARK MITTELHAUSER, 
EB/TPP/ABT--TOM LERSTEN 
 
E.O. 12958: N/A 
TAGS: ELAB ECON KTEX CB
SUBJECT: SLOW PROGRESS IN CAMBODIAN GARMENT SECTOR LABOR 
NEGOTIATIONS 
 
REF: A. PHNOM PENH 1204 
 
     ¶B. PHNOM PENH 1614 
 
¶1.  (SBU) SUMMARY.  After two rounds of negotiations, unions 
and garment manufacturers have managed to reduce the gap 
between their proposed minimum wage increases only slightly. 
Unions--which entered the negotiations demanding USD 82--are 
now asking for USD 76, to be phased in over three years. 
Garment manufacturers, frustrated by what they see as 
unreasonably high offers by unions, have barely budged on 
their proposal, increasing from USD 51 to USD 51.50 over 
three years.  Meanwhile, the parties have not even been able 
to discuss other important issues, including binding 
arbitration and other pay increases.  END SUMMARY. 
 
Little Progress Made in Narrowing Minimum Wage Gap 
--------------------------------------------- ----- 
 
¶2. (U) During the first negotiating session on September 11, 
the two sides made little progress, but garment manufacturers 
and labor observers remained hopeful that the opening session 
reflected union showboating that could be ditched in favor of 
more realistic proposals during the second round of 
negotiations.  Unions entered negotiations demanding an 
increase to USD 82 per month to be phased in over three years 
(i.e. a 50% increase in the first year, an additional 10% in 
the second year, and an additional 10% in the third year, 
leading to a final minimum wage of USD 82).  Garment 
manufacturers proposed raising the minimum wage by USD 
2--less than 5%--each year for three years. 
 
¶3. (U) During the second round of negotiations, which were 
held on September 18, unions reduced their demands only 
slightly, from increases of 50%, 10%, and 10% in three 
successive years to increases of 40%, 10%, and 10%. 
Frustrated that union demands remain at unrealistic levels, 
garment manufacturers barely budged on their proposal, 
offering an additional fifty cents in their first year 
increase and holding their second and third year increases to 
USD 2 each. 
 
Thinking Behind Union and Manufacturer Proposals 
--------------------------------------------- --- 
 
¶4.  (SBU)  At a strategy session on Sept. 15, many unions 
agreed that a realistic target was likely to be increases of 
20%, 10% and 10% over three successive years.  However, Ath 
Thorn, the often rash president of the Cambodian Coalition of 
Apparel Workers Democratic Union, told other union leaders 
that that he had promised his members at least USD 63 per 
month in the first year, and could not back away from this 
commitment.  (NOTE:  In contrast, Ath Thorn has told us 
privately that he would agree to a phased-in increase to USD 
63 per month over three years if other unions agree, but he 
does not want to publicize this.  END NOTE.)  After the Sept. 
18 session, several leading labor leaders told Labor 
Assistant that they believe that GMAC is still gauging their 
tenacity and may be willing to make more significant 
increases in the future.  They remain hopeful that 
negotiations will ultimately be successful. 
 
¶5.  (SBU) GMAC Secretary General Ken Loo told Poleconoff 
after the Sept. 18 negotiations concluded that he has very 
little room to raise the minimum wage as dropping prices for 
garments have cut in to factories' profit margins.  He claims 
that most garment factories operate at 3-5% profit margins, 
and some are losing money.  Factory managers fear that an 
increase in the minimum wage will lead workers to demand 
higher piece rates as well, further raising labor costs. 
Instead, he would prefer to see workers become more 
productive and raise their incomes via increasing piece rate 
bonuses.  Nonetheless, he affirmed that GMAC was committed to 
the negotiation process, no matter how slow. 
 
Meanwhile, Other Issues Take A Back Seat 
---------------------------------------- 
 
¶6.  (SBU) While an increase in the minimum wage was unions' 
main concern, the slow progress made on this topic means that 
other important areas have not yet been addressed.  Unions 
have slowly realized that an increase in the minimum wage 
will do little to help the majority of their members, who 
already earn more than the minimum.  They have asked for 
attendance and seniority bonuses to be doubled--from USD 5 
each per month to USD 10 each per month--as a way of raising 
the incomes of all members.  In addition, garment factory 
owners and international labor observers have been hoping to 
 
PHNOM PENH 00001693  002 OF 002 
 
 
stem the recent surge in labor unrest by securing an 
agreement to final and binding arbitration in exchange for no 
strikes or lockouts.  Given the slow progress on minimum 
wage, these issues have not even been discussed. 
 
¶7.  COMMENT.  While no one expected negotiations to proceed 
quickly, the glacial pace of compromise has disappointed 
international labor observers.  The negotiating parties, 
themselves, however remain relatively confident that 
incremental progress can continue to be made.  The real 
question is, if such a slow pace continues, will the 
government ask the recently reconvened tripartite Labor 
Advisory Council to take up the issue?  Such a move would 
likely lead to a quicker--though perhaps less widely 
accepted--minimum wage rate increase, but would almost 
certainly leave out the binding arbitration and no strike 
provisions.  END COMMENT. 
MUSSOMELI