Abstract
Cambodia has struggled to diversify its economy in the past decade despite nearly double-digit growth per annum. Chinese interest and investment during this time comes at a critical juncture. This investment is driven from Taiwan and Hong Kong and spilled into multiple industries, but most notably the garment industry which represents 35 % of Cambodia’s GDP and is by far its largest foreign exchange earner. Moreover, Mainland China’s courting of Cambodia in front of a helpless America is seen as a beachhead for China’s string of pearls throughout Southeast Asia. A greater question arising is, what effects will Chinese influence have on Cambodia? The specific investment in garments demonstrates hand-in-hand governance, where governments and firms work together to create an environment generating growth, and thus far has produced positive results. A major point to consider relates to governance and how it may change when Cambodia continues to become entangled with Chinese interests and influence. Surprisingly, Cambodia has been able to achieve significant growth with foreign investment despite poor governance. The garment industry is an exception to the rule and may have enjoyed good enough governance to succeed.
This chapter is an updated version of my refereed journal article “Cambodia’s Garment Industry: A Case Study in Governance,” Journal of Southeast Asian Economies (formerly known as ASEAN Economic Bulletin), Volume 30, Number 1, April 2013, pp. 91–105. I am grateful for the excellent research assistance provided by Richard Chhuon, Jim Chhor, and Asiroh Cham for that earlier article and thank Dimitri Randall for this chapter in particular. I thank the dozens of respondents across industry, labor, governmental, and nongovernmental sectors who agreed to be interviewed. Earlier unpublished research (Ear 2009a, b) from which these 2008 and 2009 interviews originated was funded by the World Bank’s Public Sector Group.
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Notes
- 1.
This section draws on earlier work by the author’s doctoral dissertation, The Political Economy of Aid, Governance, and Policy-Making: Cambodia in Global, National, and Sectoral Perspectives (University of California, Berkeley, 2006).
- 2.
As quoted in Bank (2002).
- 3.
Indeed, even before the Treaty of Westphalia was signed in 1648 (giving birth to the modern-day nation-state), notions of governance reach as far back as Aristotle, Cicero, Machiavelli, and Montesquieu.
- 4.
Reed (1927: 315).
- 5.
Kaufmann et al. (1999: 1).
- 6.
Hyden (1992: 7).
- 7.
- 8.
Material for this and the subsequent section draw from my earlier work for the World Bank, portions of which have appeared in a working paper for the Stanford Center of International Development; see Ear (2009b).
- 9.
So unprecedented was this linkage that a Harvard Business School case study on the US–Cambodia agreement was produced (HBS 2004). As with all HBS case studies, caution should be taken as these are not intended to be used as primary data.
- 10.
The ILO monitoring system is currently being rolled out on a voluntary basis to several other countries—Vietnam, Jordan, and Lesotho.
- 11.
The terms “white hat” and “black hat” were introduced in research by Hughes and Un (2007: 1) and is said to be used and understood by senior government officials: “The ‘white hat’ system conforms to donor expectations, and can be found in small pockets throughout the state. The black hat system operates through personalist connections of kinship, cronyism, or patron-clientism, and is used to generate slush funds, through the seeking of rent through corruption, to buy the continued support of key players. This is the system that was used to end the war in the 1990s and it is the system which maintains Cambodia’s high ratings for political stability.” The terms have also been picked up by Craig and Porter in a paper presented at workshop on critical approaches to post-conflict policy sponsored by the Department of International Development, University of Oxford, 25–26 June 2008, in a paper entitled “Post-conflict institutional development: The perversities of Black Hat and White Hat governance in Cambodia.”
- 12.
Between 300 and 500 garment factories are said to exist in Cambodia; the majority have between 1000 and 2000 workers, with a few companies having grown to several thousands of employees.
- 13.
- 14.
The identities of entrepreneurs, including Diaspora, matter since the garment industry is mainly foreign owned (although there are unavoidable links to local Cambodians in areas such as land, etc.). Both Western Diaspora and Chinese expatriates play significant roles across different sectors. Garment has a very strong Chinese element; ethnic Cambodians will send their children to Chinese-language schools so that they can work in middle management at garment factories doing accounting for example. Moreover, there is a strong Chinese ethnic component to business in Cambodia and more generally throughout Southeast Asia. Cambodians of Chinese ancestry include virtually the entire Phnom Penh Chamber of Commerce. For example, the modern rice mill operating in Cambodia is from a former Chinese-Cambodian businessman. Cham Prasidh is an ethnic Chinese Cambodian, as is the Minister of MAFF, Chan Sarun. Of course, while the manufacturers of garments are Asian, the “buyers” are Western.
- 15.
Between 300 and 500 garment factories are said to exist in Cambodia; the majority have between 1000 and 2000 workers, with a few companies having grown to several thousands of employees.
- 16.
GMAC (n.d.): “In 1999 GMAC was officially registered with the Ministry of Social Affairs, Labor, Veteran & Youth Affairs as a employers’ organization in compliance with the Cambodian Labor Law 1997. Later on, it was incorporated as an association with the Ministry of Commerce. GMAC performs many roles. At the outset, it was a pressure group, making representations to MOC on issues that affect the general interests of its members. Later on, when external developments posed a threat to the well-being and survival of the Cambodian garment industry, GMAC was at the forefront lobbying the RGC to improve it trade facilitation efficiency and reducing fees and levies to keep the industry competitive in the world market.”
- 17.
According to CamControl’s website (http://www.camcontrol.gov.kh/mission2.html): “Pursuant to article 14 of the Sub-Decree No. 54 AK September 22, 1997 on the organization and functioning the Ministry of Commerce, the Cambodia Import Export Inspection and Fraud Repression Department (CAMCONTROL) is responsible for:
-
1.
Controlling and suppressing on fraudulent goods being marketed
-
2.
Analyzing quality of food and consumption products
-
3.
Supervising and certifying the compliance with nation standard on quality, safety and trademark of food and consumption products except medicine, medical equipment and cosmetic products
-
4.
Inspecting goods exported and imported”
-
1.
- 18.
According to estimates, one day per worker was lost due to strikes in 2006. This is in addition to a relatively large number of public holidays (26 days in 2011).
- 19.
A garment factory owner interviewed in 2008 said: “Strike happens when they say toilet is broken … etc. Why are they not eager to resolve without strike? Because management does not necessarily respond … they sometimes disregard because it is not important to the production … What we ask for is to give due process before striking. If management doesn’t respond, you go to Ministry of Labor, and then to Arbitration Council. So give some time, but that does not happen. Some strikes, they don’t even know what they want.” According to the law, if there is a problem it should (1) be taken up in the factory, then (2) be referred to the Ministry of Labor—but that has weak capacity + expects payoffs to resolve issues, (3) the Arbitration Council. The AC’s decisions, however, are not binding—a trade-off for its desire to be independent.
- 20.
Labor union leader interviewed in 2008 said: “According to Cambodian labor law, 8 workers are sufficient to establish a union.” According to a Banker interviewed in 2008, “By law, you have to set up a staff association but most people don’t associate.”
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Ear, S. (2016). Greater China, Cambodia, and the Garment Industry. In: Kim, YC. (eds) Chinese Global Production Networks in ASEAN. Understanding China. Springer, Cham. https://doi.org/10.1007/978-3-319-24232-3_7
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