Local garment factory owners say that exposure to the US market is hitting them hard, with cost cuts expected in everything from overtime to electricity.
Photo by: Heng Chivoan
A worker at the Whitex Garment Factory in Phnom Penh. The factory says that exposure to the US market is dragging down sales, with layoffs and cost cuts expected for 2009.
WITH global garment sales in free fall, local factory owners expect a tough 2009 with more layoffs and closures in store. Garment manufacturers are scrambling to slash their operating costs, with everything from electricity cuts to fewer night shifts expected.
"We all are trying to cut operation costs by 30 to 40 percent," said Ry Vanlo, compliance officer for Global Apparels Ltd. He added that demand has evaporated and his factory would run out of orders in March.
"Our buyers are offering lower prices, even though our costs remain high," said Ry Vanlo.
He said the factory has brought in sweeping cost cuts, affecting everything from overtime to utilities.
"We will turn off the lights when workers go for lunch and leave them off before shifts. The air conditioning has to be switched off when management is not in the office. We are trying to cut costs as much as possible or we won't be able to stay in business," he said.
Seven-hundred workers on the night shift would be transferred to the daytime to cut salary and electricity costs, and a hiring freeze has been brought into effect, he added.
Factories exporting to the US have been hardest-hit by the slowdown - the US Commerce Department reported a 2.5 percent drop in clothing store sales in December 2008.
Global Apparels exports 400,000 dozen garments per year, with 40 percent shipped to the US.
We don't want to hold a strike, we always want to work overtime.
"Orders could fall by 20 to 30 percent in the first three months of 2009. We will only be able to run day shifts," Ry Vanlo said.
He said that unions were also aware of the troubles facing the industry.
"The unions know that the factory may close its doors if there is a strike," Ry Vanlo said.
Layoffs and cutbacks
Garment Manufacturers Association of Cambodia President Van Sou Ieng said last week that 60 factories closed and 25,000 workers had been laid off in 2008.
"The year 2009 will not be a good year for business," said David Teo, Manager of Whitex Garments (Cambodia) Ltd.
Whitex Garments employs 1,500 workers to produce two million to three million pieces of underwear per month.
"We are on very tight deadlines, and if there is a strike, we will be in serious trouble.... We ship 99 percent of our garments to the US," he said.
Long Pannha, president of the Worker Rights Union, said the union at Whitex Factory would not strike unless the factory violates workers' rights.
"We don't want to hold a strike, we always want to work overtime to earn more income. We are happy if buyers order more so we have more work to do." he added.
Thon Kosal, 25, who has worked at Whitex Garment for two years, said the slowdown has made her concerned about job security.
If the factories close, I will go back home to farm with my family," she said.
At a conference last week, Minister of Commerce Cham Prasidh urged Asean members to integrate and target the low-end market.
"To survive we need to come up with a strategy and fight,"
"We must not fight each other or compete among the Asean members, but we should use the Asean name as a trademark for promoting products from the region," Cham Prasidh said.
