The European Union (EU) has fired a warning shot over Cambodia’s bows over concerns about declining democratic and human rights, and the rule of law in this key clothing exporter.
In a note sent to just-style, the Delegation of the European Union to Cambodia noted a statement from the EU Council of Ministers on 26 February ordering that monitoring of these problems be stepped up.
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If the EU develops further concerns, Cambodia’s privileged access to the European clothing markets – which are of critical importance to its manufacturing industry – could be reined in, the delegation warned.
Cambodian exporters currently enjoy duty-free access to the EU under Everything But Arms (EBA) preferences made available to least developed countries
At present, Cambodian exporters enjoy duty-free access to the EU under Everything But Arms (EBA) preferences made available to least developed countries.
“The European Commission, in cooperation with the European External Action Service (EEAS), is closely monitoring the situation in Cambodia to assess compliance with the relevant human rights and labour rights conventions and has stepped up its engagement,” it added.”
EBA trade preferences can be temporarily withdrawn in case of serious and systematic violations laid down in a list of fundamental human rights and labour right conventions in accordance with the provisions of the [EU] GSP [generalised scheme of preferences] regulation,” the delegation said.
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By GlobalDataKen Loo, secretary-general of the Garment Manufacturers Association in Cambodia (GMAC), which represents around 600 factories employing 700,000 workers, notes it is so far “just a request for stepped up monitoring and does not say anything about reviewing Cambodia status under EBA.”
But he also warns the impact on the association’s members could not be overestimated, “given that exports to the EU currently accounts for approximately 42% of total exports.”
Negligible effect
Matt van Roosmalen, Phnom Penh-based manager at Emerging Markets Consulting (EMC), doubts that the EU would actually withdraw EBA from Cambodia, but should it even suspend these rights, this would hurt the country’s vulnerable workers as well as their dependents, while almost certainly failing to achieve any political objective.
“I believe such sanctions would have negligible effect on Cambodia’s political direction and would mostly hurt innocent garment workers deprived of employment,” van Roosmalen said.
Saponti Baroowa, associate director of business intelligence at pan-Asian consultancy Dezan Shira & Associates, in Ho Chi Minh City, Vietnam, predicts that while the ruling Cambodian People’s Party’s crackdown on the opposition will continue to invite negative publicity for the government, it is unlikely to affect the country’s overall reputation as a low-cost garment manufacturing base – and, in turn, is unlikely to affect the sourcing strategies of international brands.
“However, it is only a matter of time before the United Nations confirms Cambodia’s recent emergence from its erstwhile least developed country (LDC) status to that of a lower middle-income economy, which would anyway make the country lose its privileges under EBA after a grace period of at least three years to adjust to the changes,” Baroowa says.
He adds the Cambodian garment industry has to increasingly prepare itself to face the challenge of remaining competitive not only after losing its LDC status or potential EU sanctions, but also increasing competition from neighbouring Vietnam.
This will be ramped up even further when the latter’s garment exports gain duty-free access to the EU market once the EU-Vietnam Free Trade Agreement (EVFTA) comes into force.
One irony (not mentioned by Baroowa or others) is that Vietnam remains a one-party state.
Cambodia’s Prime Minister Hun Sen has been courting garment workers in the run-up to the general election in July 2018, promising them a range of benefits including free health-care from their employers and free access to public transport.
The country also raised the monthly minimum wage for the garment and footwear sector by 11% to $170 from the beginning of this year.
At the end of last year Cambodian garment makers urged international buyers to continue sourcing from the country.
Cambodian garment makers urge buyers for support
However, “deep concern” over the “recent setbacks to democracy in Cambodia,” has already prompted the US to cut its aid to the country.
Last month the White House said it had reviewed its assistance to Cambodia to ensure that “American taxpayer funds are not being used to support anti-democratic behaviour.”
Citing concerns including Senate elections on 25 February “that failed to represent the genuine will of the Cambodian people,” it will suspend or curtail several US Treasury Department, USAID, and American military assistance programmes that support Cambodia’s taxation department, local governments, and the military.
