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