VZCZCXRO8027
PP RUEHCHI RUEHDT RUEHHM RUEHNH
DE RUEHPF #0525/01 2090958
ZNR UUUUU ZZH
P 280958Z JUL 09
FM AMEMBASSY PHNOM PENH
TO RUEHC/SECSTATE WASHINGTON DC PRIORITY
INFO RUCNASE/ASEAN MEMBER COLLECTIVE PRIORITY
RUEHC/DEPT OF LABOR WASHINGTON DC PRIORITY

UNCLAS SECTION 01 OF 03 PHNOM PENH 000525 
 
SIPDIS 
 
STATE FOR EAP/MLS, DRL/IL - DOL FOR ILAB 
 
E.O. 12958: N/A 
TAGS: ELAB ECON PGOV PHUM CB
SUBJECT: CAMBODIA'S ANTI-SWEATSHOP BRAND INTICES BUYERS BUT 
LACKS COHESIVE MARKETING STRATEGY 
 
REF: PHNOM PENH 409 
 
¶1.  SUMMARY. Cambodia's garment industry is known for its 
innovative programs such as Better Factories Cambodia and is 
recognized as a global leader in responsible competitiveness. 
 Companies concerned with image and social responsibility 
continue to source from Cambodia during the global economic 
crisis and have pointed to the responsible labor policies of 
the government as being key criteria for sourcing decisions. 
However, industry leaders have long predicted that high labor 
standards would not be enough for Cambodia to retain its edge 
in the competitive garment sector.  As buyers continue to 
press for lower costs, Cambodia's garment sector struggles to 
keep up, and is quickly realizing the need to better 
publicize and promote its anti-sweatshop brand.  END SUMMARY. 
 
BACKGROUND 
----------- 
 
¶2.  In 1999, Cambodia and the United States entered into a 
bilateral textile agreement which set a quota on textile and 
apparel exports to the U.S. and reduced tariffs on imports 
from the U.S.  The agreement also included additional quota 
if factory working conditions complied with Cambodian labor 
law and international labor practices.  In response to the 
need to ensure Cambodia's factories lived up to the 
agreement, the International Labor Organization (ILO), in 
cooperation with the Garment Manufacturer's Association of 
Cambodia (GMAC), created Better Factories Cambodia (BFC), 
which was financed by both the U.S. and Cambodian 
governments.  BFC began to inspect factory working conditions 
and provided the government, factories, and buyers with 
detailed reports.  In fact, the Ministry of Commerce to this 
day requires registration with BFC and acceptance of 
unannounced, independent monitoring in order to export 
garments. 
 
¶3.  This initiative, coupled with U.S.-funded training to 
promote workers' rights through the American Center for 
International Labor Solidarity (ACILS) and the ILO, helped to 
fuel the rise of the union movement in Cambodia and created a 
worldwide reputation for good working conditions.  In 
addition to the individual factory reports, BFC produces 
semi-annual synthesis reports which summarize information 
about working conditions and labor standards in Cambodian 
garment factories that are registered with BFC.  Initial 
reports found high instances of involuntary overtime work, 
anti-union discrimination, and incorrect payment of wages. 
However, subsequent editions (the latest, still in draft 
form, is the 22nd synthesis report produced by BFC), show 
continued improvements in every category.  Most importantly, 
the reports confirmed to international buyers that Cambodian 
garment factories allow freedom of association, pay at least 
minimum wage, contain no child labor, forced labor, and have 
few documented instances of sexual harassment.  The 
monitoring of work conditions by BFC helped lure brands such 
as Adidas, Nike, and Gap, eager to avoid bad publicity from 
sweatshops.  BFC is close to being 100% self-sustainable, and 
the Cambodian experiment has now become a model for others, 
spurring the creation of the joint ILO-International Finance 
Corporation (IFC) Better Works initiative, which will 
implement the Cambodian concept in countries throughout the 
world. 
 
BENEFITS 
--------- 
 
¶4.  According to Technical Advisor Tuomo Poutiainen, BFC 
benefits workers, employers and their organizations as well 
as unions.  It also benefits socially responsible consumers 
in Western countries who desire sweatshop-free products, and 
has helped to reduce poverty in Cambodia through the creation 
of more jobs with better working conditions.  Even with the 
global financial downturn and subsequent local effects, the 
garment industry continues to fuel Cambodia's economy.  The 
ILO estimates that the garment industry contributes to the 
livelihoods of over 1.7 million people through remittances to 
the country side and through direct economic activity such as 
transport.  It directly employs approximately 290,000 people 
in garment and 33,000 in footwear factories.  The majority of 
the workers are employed in production, however approximately 
10% hold managerial jobs.  According to the Garment Industry 
Productivity Project (GIPC) program manager, the number of 
Cambodians in management positions is slowly starting to 
increase as employers begin to recognize the cost benefit of 
hiring locally, and as employees become better trained 
through government and NGO programs. 
 
SUCCESS STORIES 
 
PHNOM PENH 00000525  002 OF 003 
 
 
--------------- 
 
¶5. Socially responsible companies, such as the Gap and Walt 
Disney, have been solid supporters of the BFC project and 
Cambodia, stating they will continue to source from Cambodia 
due to its commitment to high labor standards.  The Walt 
Disney Company's International Labor Standards program 
prohibits the manufacture of Disney-branded products in 
countries with poor labor standards.  Cambodia was initially 
on this blacklist; however in 2005 Disney launched a pilot 
program in Cambodia to reevaluate the situation based on the 
emergence of the BFC project's independent monitoring 
reports.  The pilot was successful and now licensees and 
vendors sourcing in Cambodia utilize the monitoring and 
remediation resources offered by the ILO as a condition of 
sourcing Disney-branded products in Cambodia.  Cambodia's 
commitment to responsible labor practices has even made it 
into a book and the blogosphere.  After visiting factories in 
Cambodia, Kelsey Timmerman, author of, "Where Am I Wearing? A 
Global Tour to the Countries, Factories and People that Make 
Our Clothes," stated he would not hesitate to buy a pair of 
Levi's made in Cambodia.  He recognized BFC's role in 
fostering improved labor standards and favorably compared the 
quantity and quality of unions and workers' knowledge of 
their rights to that in Bangladesh, where wages are poor, 
knowledge is low, and unions are few. 
 
THE BOTTOM LINE 
--------------- 
 
¶6.  While many companies originally came to Cambodia and are 
committed to staying due to its reputation as being a labor 
friendly country, some buyers continue to emphasize the point 
that good working conditions alone are not enough to ensure 
Cambodia's share of the garment manufacturing industry.  As 
Better Factories expands into more countries under the new 
name of Better Work, garment buyers will have more options 
for socially responsible sourcing.  GMAC, the Ministry of 
Labor, and slowly even unions are beginning to understand and 
respond to the need for improved productivity, price, and 
quality in order to remain competitive.  In response, 
training centers have been initiated to enhance the basic 
knowledge of garment workers with the intention that they 
will be able to enter into higher quality markets in the 
future.  The ILO and ACILS have been working with the unions 
to explain the global financial crisis and the economics of 
the garment sector, and encouraging them to work with 
management and settle disputes legally rather than resulting 
to disruptive wildcat strikes.  Additionally, the ILO and IFC 
are working to launch a pilot project focusing on energy 
efficiency and cost savings. 
 
BRANDING 
-------- 
 
¶7.  Once a year an International Buyers Forum is organized by 
BFC and IFC which provides an opportunity for mainly regional 
representatives from international companies to meet together 
with government, suppliers, and unions.  Last year, 28 
representatives from leading garment brands across the U.S. 
and Europe, including Adidas, Gap, H&M, Wal-Mart, Levi 
Strauss & Co., and the Walt Disney Company attended.  In 
addition to providing a medium for discussion, the Forum 
allows Cambodia to promote itself to new buyers.  This is an 
area which GMAC and the RGC seemingly overlooked when the 
sector was thriving.  However, both now realize the need for 
a positive branding and marketing campaign to attract more 
image-conscious multinational companies to Cambodia. 
According to BFC, GMAC is in the process of developing a real 
marketing strategy which will emphasize the niche labor 
reputation and will include short video clips for 
professional trade marketing efforts later in the year. 
Earlier this month BFC, RGC and GMAC jointly launched the 
second edition of the "I am precious" competition, which is a 
campaign to promote Cambodian garment workers, to recognize 
the value of the work they do, and to enable them to 
demonstrate their talents through a dress and T-shirt design 
competition.  Industry stakeholders see the competition as 
part of a bigger push to grow the Cambodian part of the value 
chain, and as a mechanism to promote the industry and attract 
international buyers. 
 
¶8. COMMENT:  While there is increased advocacy and awareness 
about the potential benefits of promoting Cambodia's positive 
labor practices, the RGC, GMAC, and other stakeholders 
currently lack a cohesive marketing strategy.  Some question 
the importance of such a strategy, stating that companies' 
key priority will be the bottom line, which is why Cambodia 
is losing ground to countries such as Bangladesh (Ref A). 
 
PHNOM PENH 00000525  003 OF 003 
 
 
Author Kelsey Timmerman and others have been quoted as saying 
they would like to have the option of paying an extra $5 or 
$10 for a shirt labeled "Good Working Conditions."  A planned 
conference in DC hosted by IFC in November is intended to 
support the Cambodian stakeholders and the Cambodian approach 
to improving labor standards, and will generate positive 
publicity for the sector.  Leveraging the activism of 
university students, such as those involved in United 
Students Against Sweatshops, could be another avenue for 
stakeholders to explore.  The Embassy plans to meet with 
interested parties during this year's Buyers Forum, and will 
continue to work with our counterparts in the tripartite 
system to develop future ideas and initiatives. END COMMENT. 
RODLEY