Target Scaling Back Cambodia Production

WASHINGTON — Cambodia’s commerce minister, here on Monday to make a pitch for more foreign direct investment, revealed that a second major U.S. company — Target Corp. — has reduced its orders in the Southeast Asian nation over labor unrest.

Speaking at the Center for International and Strategic Studies, Cambodian Commerce Minister Sun Chanthol said Target has pulled some production out of the country following a similar move by Levi Strauss & Co., which said in late May that it was scaling back on orders based on labor and human rights concerns.

“Levi Strauss reduced their orders from Cambodia,” Chanthol said. “Target also reduced their orders from Cambodia because they are afraid of the labor unrest and so on, but so far since the incident in January it is practically calm and safe.”

A Target spokesman said, “We can’t speak directly to the comments of the commerce minister as we don’t detail sourcing plans by region. As with any country, we adjust sourcing based on a number of factors.”

Cambodian workers, labor groups and union leaders have staged months of protests and strikes, calling for an increase in the country’s minimum wage to $160 a month from the current rate of $100 a month. The Cambodian government, under pressure, raised the minimum wage to the current rate from $80 in February.

A nationwide strike in Cambodia turned deadly on Jan. 3, when Cambodian security forces opened fire on thousands of workers, leaving five dead and injuring more than 40. The violence against garment workers has not only caused a backlash among U.S. buyers, but it has also raised the scrutiny of the Obama administration.

Chanthol said he met with U.S. Trade Representative Michael Froman on Thursday to discuss a potential bilateral investment treaty. The U.S. and Cambodia agreed to begin exploratory discussions of a potential BIT in 2012.

A USTR spokesman told WWD that Froman raised concerns about the Jan. 3 violence that killed five garment workers and the reported subsequent crackdown by the Cambodian government on the right to demonstrate and freedom of association. The spokesman did not respond to whether the violence and repression has hurt Cambodia’s prospects for a BIT with the U.S.

Chanthol said the government’s hope is that a BIT will serve as a stepping stone for the country to potentially join the Trans-Pacific Partnership talks between the U.S. and 11 other countries, including Vietnam, Malaysia, Japan and Singapore.

“Cambodia is not a party to TPP, but it doesn’t mean we do not want to be a part of TPP,” he said. “So we need to get ready — sign the bilateral investment treaty with the U.S., that is one condition that will lead us to TPP,” adding that Cambodia could be ready to join TPP, if accepted by the TPP partners, in three years.

Chanthol sought to reassure foreign investors that the government is making reforms on a wide range of issues, including corruption, minimum wage and the freedom of association. He said officials are meeting with the International Labor Organization and the World Bank to discuss the minimum wage issue and labor reforms.

“We are working with the ILO and sitting down with the World Bank to do a scientific calculation on what the number should be,” he said. “Is it $160 or should it be $200, or should it be $157? Before, we just pulled the number out of the air…but now we have to do it properly.”

Chanthol noted that a major factor in considering whether to increase the minimum wage rate again is global competitiveness.

“When we do this, we want to make sure Cambodia is still competitive,” Chanthol said. “You cannot price yourself out of the market. If you say $160 or $200, then [buyers] will say ‘Look, I’m going to Myanmar,’” because they pay a lower wage.

A group of representatives from 30 major clothing brands and international trade unions met with Cambodia’s deputy prime minister late last month to discuss concerns about violence and labor unrest, and stress the importance of stability in the garment sector.

It was the second meeting since the violence began on Jan. 3. Major buyers, including H&M, Levi’s, Gap, Inditex and Puma, have pressed for an end to the violence and a methodology for calculating the minimum wage.

Labor and human rights activists have argued that the government is intimidating workers and unions by bringing incitement charges against them and has also significantly reduced the space for freedom of association in the last year. Chanthol contended that the government upholds the rights of unions and said some factories have representatives from several different unions.

He said the government is in the process of drafting a union law “not to stop them from organizing a union, but at least for them to understand the role and responsibilities of employers, employees and unions.”