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Wage hike affects Cambodia as orders move away

After the government in Cambodia ordered an increase in wages of garment workers, western apparel companies, are seeking better deals from other destinations. The Southeast Asian country's garment and textile exports increased 1 per cent in the January-November period of 2014, to $4.52 billion, according to the Garment Manufacturers Association in Cambodia. Full-year figures have yet to be released, but the industry expects a single-digit growth.

Grand Twins International, Cambodia, a Taiwanese garment company's local unit reported a 12 per cent decline in 2014 to roughly 230.7 billion riel ($57.1 million). Net profit plunged 52 per cent to around 14 billion riel. The industry started suffering after labour disputes hit it in 2013, with workers’ agitation leading to large-scale strikes around the country for increase in wages. Some of the demonstrations led to riot like situation. To ease tension, the government increased monthly minimum wage from $61 to $80 in 2013, to $100 last year, and to $128 in January. After adding other benefits like housing assistance, transportation and other allowances, a worker’s minimum earning reach to more than $150.

However, it is much higher compared to neighboring Vietnam where the highest minimum wage in urban areas is around $140 and its productivity is 30 per cent higher than Cambodia. So, companies like Gap, H&M, Walmart and other are moving their orders from Cambodian factories to other destinations that offer lower production costs.