Cambodia’s longstanding reputation as a “success story” in efforts to end sweatshop abuses in export garment production—a reputation which has stood, in significant part, on the presence of the ILO’s long-running Better Factories Cambodia (BFC) factory monitoring program—is wearing thin.

For over a decade, the Cambodian apparel manufacturing industry has sought competitive advantage in the international marketplace by seeking to obtain and preserve a reputation for relatively greater respect for labor rights than other garment-exporting countries in the region. An examination of the Cambodian garment industry’s recent track record with respect to labor rights, however, raises serious doubts about whether this reputation is warranted. The owners of Cambodian garment factories, the international apparel brands and retailers who buy their products, the Cambodian government, and BFC itself all claim that the system of monitoring and reporting described in this report has significantly improved working conditions for Cambodian garment factory employees. Our research suggests, however, that during the eleven years of BFC’s operations in Cambodia, wages and basic job security have actually declined for Cambodian garment workers, and that other goals of the labor movement, particularly genuine collective bargaining between employers and workers and basic elements of occupational safety and health, continue to be elusive. This research suggests that perhaps the predominant narrative of success and incremental progress has shielded BFC and other important actors from doing more to improve the real working conditions that Cambodian garment workers face today.

BFC’s ability to address these problems effectively is constrained by the fact that, like most private factory inspection regimes, it focuses on uncovering labor rights violations by factory owners, and for the most part does not address buying practices by brands and retailers that strongly contribute to these conditions. Yet even taking this limitation into account, BFC’s current operating practices also contribute to the program’s under-effectiveness, due primarily to a glaring lack of transparency and an institutional overemphasis on protecting the interests of factory owners and international buyers, rather than responding to appeals from garment workers to protect them from abuse.

BFC was originally established to monitor Cambodia’s compliance with the 1999 US-Cambodia Textile and Apparel Trade Agreement (UCTA), which granted the country’s garment manufacturers expanded access to the lucrative American apparel market in return for improvements in the labor rights environment in their factories. Since the phase-out of the import quota system in 2005, however, BFC’s role has changed to resemble more closely that of most other factory auditing bodies: providing confidential factory monitoring reports to factory owners, and, on a for-pay basis, to international buyers.

While BFC continues to report publicly on labor conditions in the Cambodian garment industry, it does so with less transparency than it did prior to 2005. Reporting occurs without any direct linkage to the financial incentives (in the form of growing export quotas) that once motivated the entire sector—including the factory owners—to strive towards steadily improved labor standards in Cambodia. When after 2005 Cambodia’s textile exports to the United States no longer hinged on improving labor standards, BFC’s institutional power as the sole designated monitor of those labor conditions also decreased. Without the transparency that could otherwise feed into a consumer-driven incentive scheme motivating factory owners and buyers to correct for labor violations and strive for improved working conditions, BFC has been increasingly powerless to address longstanding labor rights problems in the Cambodian garment industry or to prevent a slow backward slide in certain conditions for workers.

This report, based on in-country research and extensive interviews with stakeholders, analyzes the garment sector in Cambodia and recommends structural and other reforms that could make BFC a more effective force for protecting worker rights.

Despite the significant flaws and shortcomings that are discussed in this report, the BFC program is being widely replicated in other garment-producing countries through the ILO’s Better Work program The findings in this report, however, suggest that, with respect to certain key areas of labor rights promotion, relying on BFC as a model for programs in other countries is unlikely to produce significant progress for garment workers. These concerns are underscored by the fact that the import-quotas that were so essential to BFC’s early success prior to 2005 were phased out when the Uruguay Round of WTO trade negotiations brought the textiles sector under GATT rules. Thus, unless BFC and other BFC-inspired ILO Better Work programs develop effective mechanisms to substitute for the defunct export-quota-linked incentives, the BFC model risks losing its relevance both in Cambodia and globally.

Background

In 1999, the United States and Cambodia signed the UCTA, granting Cambodian garment manufacturers progressively greater access to the American apparel market, provided that the labor rights environment in Cambodian garment factories improved. To measure whether or not such improvement was, indeed, occurring, the International Labour Organization (ILO) in 2001 began to monitor working conditions in the country’s garment industry through what today is known as the Better Factories Cambodia (BFC) program. For six years, the US Government relied on BFC’s monitoring and reporting to decide semi-annually whether to increase the import quota for Cambodian apparel into the United States. At the same time, apparel brands used BFC’s reporting as a primary tool for monitoring their Cambodian vendors’ compliance with their codes of conduct. The Royal Cambodian Government retained the responsibility to enforce Cambodian labor laws and standards.

Though the UCTA expired in 2005, BFC has continued to monitor Cambodian factories. Despite fears that the end of guaranteed import quotas into the United States would render the Cambodian garment industry uncompetitive with other major apparel manufacturing countries, the sector has continued to grow. Cambodia’s sustained success derives mainly from it having some of the lowest garment worker wages in the world, but also, in some part, from its reputation as a country in which the rights of garment workers are relatively better protected than in some of its leading competitor garment-exporting countries.

The industry’s post-2005 expansion, therefore, has occurred in an atmosphere of continual tension: Buyers seek to enjoy the reputational advantages of sourcing from Cambodia (and participating in BFC) while demanding the lowest possible prices for their garments. Factory owners, in turn, must restrict labor costs to meet these demands and promise to maintain respect for worker rights. Workers seek to preserve employment, while struggling to realize the promises of a better livelihood and greater dignity in the workplace.

Worker Rights in Cambodia after Eleven Years of BFC

Despite BFC having monitored Cambodian garment factories for the past decade, Cambodian garment workers continue to face very difficult working conditions. Wages in Cambodian apparel factories have fallen significantly in real terms over the past ten years, while garment workers in some other apparel-exporting countries in the region have seen their wages rise, including in China, Indonesia, and Vietnam (none of which, until very recently, had equivalent ILO programs). Loss of buying power, combined with pervasive excessive working hours and poor health and safety conditions, have contributed to a wave of incidents of mass-fainting among Cambodian factory workers—allegedly caused, at least in part, by exhaustion, overheating, and malnutrition.

While the Cambodian garment industry has prospered and expanded, employment for garment factory workers has grown more precarious, and constructive industrial relations continue to be elusive. Employers have shifted their workforces almost exclusively to employment on serial temporary contracts (“fixed duration contracts” or “FDCs”), and have used threats of nonrenewal of such agreements to pressure workers into non-voluntary overtime and to disrupt union organizing. This coercion, combined with both employer and state influence over many labor organizations, and repeated incidents of violence and mass retaliation against more independent trade unions,[1] has undermined workers’ efforts to secure better working conditions. As a result, genuine collective bargaining remains practically non-existent. Additionally, many garment factories subcontract orders to smaller factories that are currently completely outside of BFC’s monitoring program and exhibit even worse working conditions than those which are regularly monitored by BFC.

These problems cannot simply be ascribed to the existence of unscrupulous factory managers. Undoubtedly, the enormous pressure international buyers put on the Cambodian garment industry to keep costs low and the Cambodian government’s inability to enforce its progressive labor law effectively also contribute significantly to these pervasive problems.

As described above, since the expiration of US import quotas tied to improved labor standards in Cambodia, BFC has lost a powerful tool to promote factories’ progress on labor rights and counterbalance the disincentives created by buyers’ relentless pressure to keep prices low. A system that makes feasible better labor conditions in factories through higher prices paid by brands and retailers is an obvious antidote. There has been increasing recognition among international labor rights advocates that buyers must adjust their purchasing practices if significant improvements in factory conditions are to be achieved and sustained.[2] Such reforms, however necessary, are beyond the scope of this report. The report focuses instead on changes that BFC can and should make now, within its existing structure and operations, to more effectively bolster respect for worker rights in Cambodia’s garment industry.

Clearly, there are many stakeholders involved in the production of apparel in Cambodia (and other apparel producing countries), its export, and its sale to end-consumers. There are also numerous other for-profit and non-for-profit actors, in addition to BFC and the ILO’s other Better Work programs, that monitor, report on, and/or seek to improve conditions for workers in garment factories, both in Cambodia and in other apparel-exporting countries. This report focuses on BFC. As discussed above, BFC has served as the model for several other ILO programs, including some that are still in the planning phase. Additionally, many of the other industry actors—such as global brands, governments, and factory managers—often cite their support for, or participation in, BFC as their primary contribution to the improvement of labor conditions in Cambodia, and thereby, an implicit justification for not taking other measures, themselves, to address these issues.[3]

BFC is often described as a model for collaborative improvement of labor standards in the export garment industries of developing countries. By highlighting significant ways in which this claim has been overstated, this report makes clear the need for other stakeholders both to take more effective action, on their own, to improve conditions for Cambodian garment workers, and to support a set of measures to make BFC a more effective agent for achieving such progress. It is the second part of this agenda—reforming BFC’s institutional practices and approach to its mission—that is the primary subject of this study and its recommendations.

BFC’s “Black Box Monitoring” Model

Because BFC lacks any actual enforcement power to compel or prohibit specific conduct on the part of factory owners or buyers, much of its influence, actual and potential, rests on its role as a reporting body on working conditions and labor practices at both the factory and industry-wide levels. For this reason, a major focus of this research is BFC’s two primary reporting vehicles: its twice annual public synthesis reports, which aggregate data across all of BFC’s monitoring activities every six months, and its confidential factory reports, which present to individual factory managers and their buyers factory-specific information about the labor conditions prevailing at each factory subject to BFC inspections.

BFC currently provides information about individual factory conditions only to factory managers and to the brands that source apparel from that factory.[4] As a result, while factories can proclaim that they are subject to routine inspections by a well-reputed monitoring organization and buyers can claim to be acting responsibly by supporting the program, no one outside this limited set of actors has any specific knowledge about the substantive findings of those individual factory visits. This confidential reporting practice, which we term “Black Box Monitoring,” significantly reduces the incentives for factory owners and the brands that buy their products to improve working conditions. It also shields BFC itself from outside scrutiny of its monitoring methods, reducing the incentives for the organization to strengthen its monitoring and reporting work.

Relatedly, within Cambodia’s community of labor rights advocates there is a lack of clarity about BFC’s role, methods, and mandate. At the same time that BFC frequently claims credit for a far-reaching list of public initiatives focusing on some aspects of worker rights, it also hides behind its much narrower monitoring and reporting mandate to justify not taking a public stance on other important labor rights issues, particularly when this is likely to draw the ire of the government or factory owners. The contradiction in BFC’s public messaging, however, leads to criticism from other actors—including trade unions and the broader Cambodian labor rights community—that BFC remains silent on questions that directly affect the rights and welfare of garment workers. BFC needs to do more to clarify its institutional mandate. Labor rights advocates also voice frustration that BFC does not respond directly to reports of labor rights violations from factory workers—a frustration that stems, in part, from the surprising fact that BFC, unlike other leading factory monitoring programs, has no formal procedure for handling direct complaints from workers about labor rights abuses. Similarly, it is not well known that the BFC’s monitoring program extends only to the country’s 300 garment factories that are direct exporters (and thus does not reach subcontractor factories in which, it is commonly recognized, labor rights violations are more prevalent).

Reforming BFC through Transparency

During its early years, BFC played a significant role in the promotion of labor rights in Cambodia, particularly in the expansion of space for workers’ exercise of freedom of association. As described above, this was in large part due to the provision of the UCTA that additional expansion of the garment import quotas governing Cambodian apparel exports to the US market was contingent on continuing improvement in labor conditions. Almost all the stakeholders with whom we spoke in Cambodia recognized the important role the ILO and BFC—as the officially-designated institution tasked with monitoring and reporting on any improvements in Cambodian labor conditions—performed at that time.

Since the expiration of those import quotas in 2005, however, in some important aspects conditions for workers have actually worsened and, in others, new problems have arisen as Cambodia’s garment industry has continued to expand. Unfortunately, after 2005, BFC’s monitoring and reporting practices have also became notably less transparent in ways that made the program more protective of factory owners and less responsive to garment workers.

The recommendations proposed in this document address three central themes. First, we recommend that BFC take a vital step towards greater openness by issuing public reports on individual, identified factories. We call for those reports to detail not only BFC inspectors’ monitoring work and any labor rights violations that are uncovered, but also the steps taken by the factory managers and its buyers to remediate these problems. According to the reporting process proposed in this paper, BFC would first report its monitoring results to factory managers, buyers, and worker representatives to allow them the opportunity to remediate any areas of concern highlighted by BFC auditors. After this period for remediation, however, BFC would conduct a follow-up visit to the facility to verify progress made by the factory on these issues, and then issue a public report detailing both its original findings and the actions taken by the factory and/or its buyers to remedy the problems identified in that facility. In instances of severe violations, this approach might require a separate follow-up visit be made on an expedited basis. In most cases, however, it would simply require BFC inspectors to conduct their follow-up assessment concurrently with their next regular factory assessment, and to draft their ensuing public report with a greater focus on whether violations had been adequately remedied.

The second major theme of these recommendations concerns BFC’s dealings with garment workers—the people whom the program is supposed to benefit. We recommend that BFC make a much greater effort both to seek input from, and to respond to the concerns of, garment workers and their labor representatives. Specifically, we recommend that BFC gather information concerning factory conditions from workers and unions away from the workplace. Such off-site interviewing is less vulnerable to factory owners’ attempts to conceal violations by subtly (or explicitly) exerting pressure on workers. In addition, we recommend that the program develop a policy of not only documenting, but also responding directly to complaints from workers about abuses. Such a two-way communication channel between BFC and workers is essential to garner the trust of workers who turn to BFC with their complaints.

Third, we recommend that BFC expand its role in the remediation process once it identifies labor rights violations at particular factories. BFC should require buyers and factories to submit remediation plans jointly to BFC that detail a concrete action plan for achieving compliance with Cambodian labor laws and international labor standards. Factories and buyers could do this either by submitting their own Corrective Action Plan[5] or by subcontracting with BFC’s independent training unit. In either case, BFC could play a technical support and advisory role to ensure that the factories are able to come into compliance without interrupting their ongoing business operations, and that worker representatives are adequately consulted in this process.

We believe that these recommendations will help BFC function more effectively in what continues to be a difficult environment for garment workers.