Cambodia Investment Review

EuroCham committee to help reshape Cambodia’s garment sector

EuroCham committee to help reshape Cambodia’s garment sector

Brian Badzmierowski

The pandemic shined a new light on the garment industry in Cambodia, proving how indispensable it is to the economy and the workers that keep the industry churning.

While workers suffered layoffs and wage losses during the pandemic, the industry as a whole proved resilient. Garment exports jumped to $11.39 billion in 2021, a 15 percent increase from 2020. From 2019 to 2020, exports fell from $10.6 billion to $9.5 billion, a 10.4 percent decrease.

Low-cost labor figures remain a key selling point as global companies shift their orders to Cambodia from countries such as Vietnam, Thailand, Indonesia, and Myanmar, but long-term plans are being drafted to reshape the sector. 

The European Chamber of Commerce in Cambodia (EuroCham) plans to be a major player in the retooling of the industry after it recently announced the formation of its Garment and Manufacturing Committee.

The committee, which is still in the planning stages, will bring a European perspective to the garment and manufacturing industry and aims to raise industry standards across the board by promoting sustainable production, upskilling and protecting workers, implementing new technology, and introducing more value-added products to the supply chain.

Noë Schellinck, EuroCham’s advocacy manager, said one of the committee’s priorities will be implementing the European legislative initiatives on human rights and environmental due diligence.

On February 23, the European Commission adopted a proposal for a directive on corporate sustainability and due diligence that aims to foster sustainable and responsible corporate behavior throughout global value chains.

Another key action of the committee will be orchestrating a national program to train factories in Occupational Safety and Health (OSH) standards and compliance issues. 

Providing fair and safe working environments is at the core of EuroCham’s activities, regardless of the industry, Schellinck said. For example, the chamber’s human resources committee helped negotiate the increased minimum wage for garment workers last year and EuroCham representatives played active roles in creating the new Law on Investment, which provides incentives for improved working environments.

“While Cambodia must watch over its regional competitiveness, we do not bargain over basic employee’s rights and fair remuneration,” he said.

Noë Schellinck EuroCham committee
Noë Schellinck, EuroCham’s advocacy manager, said renewable energy is a key priority for the new Garment and Manufacturing Committee.

Securing a sustainable future for Cambodia’s garment industry

“Instead of a race to the bottom, we encourage a race to the top: higher productivity, higher standards, better infrastructure and skills – and technological advancements that more durably will lead to higher welfare for all stakeholders – employers, employees, and customers.

Improving sustainability in the industry is another key priority of the committee, and Schellinck pointed out several practices that could be improved to pave a better way forward. Above all, there needs to be a push for cheaper, renewable sources of energy, such as rooftop solar energy,” he said.

When asked about waste-to-energy boilers, he said they were not typically being used correctly in Cambodia. Adding household waste and plastics to the furnace, in addition to textiles, creates disastrous environmental and health effects, especially when the boilers are poorly maintained. 

While they offer a low-cost heat source, Schellinck said the overarching goal should be to reduce waste and prioritize renewable sources of energy.

“Proactively reducing fabric waste and working towards circularity is the real priority here and the only true environmentally-friendly solution,” he said.

Unsafe environmental practices will also affect investment as brands continue to prioritize sustainable and socially responsible practices.

“Many companies have subscribed to 2030 net-zero targets, and they simply need clarity today if their strategic environmental targets will be achievable by continuing to source in Cambodia,” Schellinck added.

Massimiliano Tropeano, a senior advisor for the garment sector at German development agency GIZ, was recently hired by EuroCham to serve as a sustainability and garment expert. 

With over a decade of experience in the private sector, Tropeano will spearhead the committee’s efforts. He said one of his goals is to harmonize efforts between the private sector and development agencies to plot a sustainable path forward for the industry.

Tropeano is currently working on GIZ’s FABRIC project, an initiative that aims to improve sustainability practices in the industry and champion female garment workers’ rights.

One key project of GIZ FABRIC is the introduction of the Green Machine, the world’s first technology able to recycle cotton and polyester fabric blends at scale. Tropeano said a feasibility study is underway before a pilot program for the technology will be launched in Indonesia.

“An industrial scale of this blend textile recycling machine could potentially change the production landscape of Cambodia in terms of sustainability, green positioning of the industry, and the perception of ‘Made in Cambodia,’” he said.

“The Green Machine will be able to create the first recycled fabric in the country and if it goes well, that means you can have value-added fabric in Cambodia.” 

Citing statistics from the Ministry of Environment and Sarom Trading, the private company responsible for industrial waste in Cambodia, Tropeano said 60 percent of waste produced in Cambodia is textile waste or derivatives of the industry.

Shellinck added that other innovations are being developed as well to reduce waste, including using artificial intelligence to assess the durability of materials and implementing modernized pattern-drawing techniques.

He said new fabrics could open up new areas of opportunity for the industry and attract local investors.

“Personally, I am very excited about the future of novel fabrics and biodegradable materials. Cambodia already attracts many creative minds. If we can build an enabling environment in Cambodia, where there is space for such innovations and the actual production of raw materials in the country itself, this will help further diversify the sector and will encourage local investment,” he said.

Representatives of the Garment and Manufacturing Committee, the Green Business Committee, the Ministry of Mines and Energy, the Electricity Authority of Cambodia and Electricite du Cambodge discuss rooftop solar energy on February 25.

Matching tech with education

Schellinck and Tropeano agreed that technology is only part of the solution, as a comprehensive strategy to implement it and train workers will need to accompany these advances. 

“Adopting new technologies cannot be taken for granted; they require skills, training, incentivization, and so on. There is a huge diversity in the nature of Cambodian garment factories, many of which cannot afford technological innovations by themselves,” Tropeano said.

The trick will be integrating new tech and practices into factories while ensuring workers can rise as well. Tropeano said he doesn’t necessarily believe tech will cause massive layoffs in the sector, rather skills would be adapted and upgraded to ensure workers can stay relevant.

Tropeano said EuroCham is working with the Garment Manufacturing Association of Cambodia (GMAC) to organize courses that will cover three main topics: global sourcing with a focus on sustainability, social and environmental compliance, and an introduction to textiles with a focus on recycling.

He added that courses teaching soft skills, English skills, and managerial skills could also be utilized to help Cambodians rise to the top ranks in factories. 

Tropeano said he expects a leap to occur in the next 20 years, and said capacity-building needs to be prioritized now to ensure a smooth transition. 

A highly anticipated strategic plan outlined by the government is set to be released this month and is expected to address key issues surrounding the upskilling of workers.

While cheap labor is the status quo at the moment, Schellinck said now is the time to plan for a more modernized industry.

“Of course, Cambodia’s position is receiving more and more pressure from technological developments and regional competition, and at a certain point, its cheap labor will no longer suffice as a unique selling point. We need to build in that future in our work today, through advocating for diversification and upskilling, reinforcing local investments, building local demand, and providing oxygen to innovation.”

At the end of this month, EuroCham will continue its efforts to spread knowledge among stakeholders in the sector by hosting a Garment Sector 4.0 webinar to discuss what the future of the industry may look like.

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