Cambodia’s garment industry is evolving and while robots and high-tech machines that can outperform local workers are likely at least five to 10 years away, new software developments are on the horizon that could start to transform the industry sooner.
Industry experts discussed what this future may look like during a recent webinar entitled Garment Industry 4.0 in Cambodia hosted by the European Chamber of Commerce in Cambodia (EuroCham) and funded by German development agency GIZ’s FABRIC project.
The panel of experts agreed it will be a balancing act between implementing new technologies, upskilling and protecting workers, and maintaining the country’s edge in the market – an edge that has been gained mostly on cheap labour.
For now, it appears cheap labour will continue to make Cambodia an attractive destination for suppliers because implementing new technology is still too expensive, electricity costs are too high, and the infrastructure needed to maintain new tech is limited.
Citing yet-to-be-published results of a UNIDO and ILO study, Soem Nara, the undersecretary of state at the Ministry of Industry, said that currently, Cambodian factories are highly dependent on overseas technical experts to install new tech on production lines and in back offices of factories.
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He said there is also a shortage of trained engineers and technical personnel in Cambodia. Furthermore, the return on investment for new tech is exceptionally long.
“Shortening the return on investment by rising prices may make finished goods uncompetitive with similar goods produced manually. The high price of IR automation in the GFT [garment, footwear, travel goods] sector weighs heavily on investment decisions,” he said.
Nara said the new Law on Investment could help solve some of these issues, as it includes incentives for investing in vocational programs and training to upskill workers.
Is Cambodia Ready for a Jump in Tech?
Moderator Massimiliano Tropeano, a senior integrated GIZ advisor for the garment sector at Eurocham, asked the panel if the Kingdom’s garment sector was indeed ready for a leapfrog moment in tech, considering the sector’s current low tech adoption rate.
Ken Loo, the secretary general of the Garment Manufacturers Association of Cambodia (GMAC), answered that investors will invest in new tech when it’s economically feasible, but that machines will not start replacing people in factories anytime soon.
Loo said the trends over the last three to five decades has been for companies to chase low labour costs when choosing suppliers, and that the real jump to new technology will only occur when it’s cheaper to invest in this tech than it is to pay workers to perform the same tasks.
He used the case of the auto-spreader machine as an example. Twenty years ago, he said the machines cost between $30,000 and $40,000. At that time, it was more cost-efficient to hire five workers to perform the same task.
Now that the cost has come down to $10,000, auto-spreaders have been widely adopted in the industry.
Implementing new management systems to better manage data, however, was something that should be adopted now in Cambodia and around the world, he said.
Solving inefficiencies with software
The current frontrunner in this developing market is FingerTip, a management platform that aims to synthesize data and encourage communication and transparency between all stakeholders in the garment supply chain.
Pierre Rabotin, the regional marketing manager at FingerTip, said the platform was designed locally with factory needs in mind.
Some of these needs include properly utilizing the massive amounts of data produced by factories by doing away with e-mails, spreadsheets, and hand-written reports, and replacing them with a single platform built for each stakeholder on the supply chain.
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Robin said this would help empower factories in their dealings with buyers. Traditionally, retailers hold much of the power, with the factories having to respond to their demands with little to no leverage. Having everyone on the same platform would create transparency that’s currently missing in the market, putting stakeholders on a more level playing field and giving them access to the same information, he said.
“Everybody has access to the same information, everything is transparent. You know who is responsible for what, when they’re supposed to do it. All of the communication is filtered and centralized, available for everyone to see. All your documents, all your trackers, all your data is on the platform,” he said.
He said the platform will help utilize data that factories have been gathering for decades on a daily basis and in the end, it will help factories make delivery dates, improve the quality of products, and quickly spot inefficiencies or discrepancies on the production line.
In the long-term future, new tech will start to make an appearance as it becomes cheaper, electricity costs decrease, and workers are trained to handle new tasks.
New tech’s effect on employment
Joseph Telfer, a managing partner at DataU, said new tech doesn’t necessarily mean installing machines that perform faster work. A push towards IR 4.0 could involve optimizing current practices, implementing best practices from around the globe, and using software to enhance traditional techniques.
At some point, job losses will occur, he said, although this won’t likely happen right away.
“Within the sector, we expect to see some loss of jobs but again, automation doesn’t necessarily in its first instance automatically create job losses. It can instead create efficiencies in margins, inventory control, or cash flow control. Therefore employment numbers can stay the same with output increasing,” Telfer said.
In the long term, he said reskilling and upskilling workers, including middle-aged workers, was essential to minimize job losses. He added that NGOs, development agencies, and the government would likely have to play a key role in protecting vulnerable members of society compared to the private sector
On March 21, the government released the Garment, Footwear, and Travel Goods Sector Development Strategy 2022 – 2027, which includes provisions to improve worker conditions.
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The five pillars of the strategy include: strengthening human resources capacity to increase productivity and create career paths for Cambodian workers; improving working conditions and worker welfare at factories; promoting investment in high value-added products; attracting investment in supporting industries; and promoting market diversification for the export of GTF goods
GIZ’s FABRIC project is taking a leading role as well by promoting worker rights through outreach programs, with a priority on female workers in the garment industry.
EuroCham’s recently launched garment sector committee also figures to play a role in increasing standards throughout the industry.
Sam Sethserey, the director of the Institute of Digital Research and Innovation at the Cambodian Academy of Technology, said any potential sectoral job losses in the future may be offset by net gains in other sectors. Looking at the larger picture, he said the increased productivity from automation would benefit the country’s economy and ultimately have the effect of improving more peoples’ livelihoods.
Increased exports would bring more money into the country and create job opportunities in other sectors, such as agriculture or construction, and higher salaries for upskilled workers would create more disposable income and demand for a wide range of products, he said.
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Luisa Gentile, a CSR project consultant at EuroCham, gave the closing remarks of the webinar and said since the business model still relies on cheap labour, it’s understandable why tech adoption would be delayed.
She said it would benefit the country to overcome the obstacles facing the adaptation of technology as soon as possible to ensure Cambodia can stake a claim as a regional leader in the sector.
Tropeano likewise pushed for a swift adoption of robotics and automation in the industry, and wouldn’t equate this evolution with job losses.
“I do not think that technology (robotics) can substitute the very manual activity of the workers around the needlepoint. However, the intrinsic nature of the work around the needle will have to change in the next 10 years. This means different job skills but also data acquisition and data elaboration around the machines and the workers’ performance,” he said.