Better Factories Cambodia Project

By Melissa Friedhoff Post date: Mar 13, 2018


This case study focuses on Better Factories Cambodia (BFC)—a monitoring and remediation program of Better Work, a partnership between the UN’s International Labor Organization (ILO) and International Finance Corporation (IFC). The program is ongoing, but every few years Better Work releases progress reports and independent entities conduct impact assessments, so it is possible to consider the impact of the program within specific time frames. This case study analyzes the effectiveness of the program’s initial project from 2001 to 2010—this time frame was chosen for a few reasons: data availability, project uniqueness, and relevance to Cambodia’s democratization process.

The local and international stakeholders of the project include the BFC, the IFC, the Royal Government of Cambodia (RGC), the Garment Manufacturers of Cambodia (GMAC), trade unions, employers and factory management, workers, and consumers. The 2001 project framework linked government-level trade policy with factory-level labor rights and monitoring. The basic objective of the project was to improve working conditions and boost competiveness of Cambodia’s garment industry. The positive project outcomes include an improvement in labor conditions, a decreased capacity for government corruption, an expansion of civic engagement and policy advocacy for worker’s rights, and an increase in garment industry profitability. The negative project outcomes include some backsliding from external trade conditionality and inconsistent data collection. The BFC takeaways, lessons learned, and recommendations are the following: 

   - The garment industry has, still does, and will potentially affect the democratization process in Cambodia.
   - BFC multilayered approach confronted human rights abuses, government corruption, and global supply chain issues.
   - BFC impacted democratization in Cambodia’s institutions, workplaces and civil society.
   - A key element of BFC’s success was the collaboration between workers, factory management and government officials.
   - BFC was an innovative experiment in public knowledge transparency of business ethics and labor law compliance.
   - BFC could be improved through increased engagement with local NGOs, coordination with outside democracy promoters (such as
     CIPE), and awareness outreach with global buyers on worker’s rights in Cambodia.

Relevant Background 

Regional Context: Cambodia 

From 1970 to 1993, Cambodia suffered from political instability of the Khmer Rouge’s regime and the repercussions of a civil war. However, Cambodia’s recent history of nation building has led to a constitutional monarchy with elected parliamentary representatives. The country has experienced relative peace, worked towards liberal democracy (and arguably established a true multiparty system and free and fair elections), and transformed its economy into a free market system. Much of this success is due to external and internal democratization efforts: both the UN-led Paris Peace Agreements and grassroots democratic mobilization have had beneficial effects on Cambodian nation building. Cambodia is by no means an exceptional democracy: infrastructures of institutions are fragile, civil and political rights are neglected, and wealth disparities are prevalent. Because of this, Cambodia has been a focus country for many organizations that promote worker’s rights, poverty reduction, economic liberalization, and democratization.

The Global Garment Industry

The garment industry is either a leading or emerging market in many transitional democracies in South Asia, South America, and North Africa. In many cases, the country’s involvement in the production supply chain of the international clothing market has led to domestic economic growth and improved democratic function of the state. However, the garment industry has a variety of issues that hinder democratization including human rights abuses, unsustainable business practices, unregulated informal economies, government corruption, and unsafe built environments. In the last twenty years, the international community has turned their attention to and sought to fix these problems for various reasons—such as the heightened awareness of unethical labor, the expansion of the global garment market, the market investment potential, and the possibility the garment industry to impact democratization. 

The Global Garment Industry has experienced rapid expansion in the last twenty years. Since trade liberalization, the total value of textiles and clothing exports increased from 480 billion to 709 billion between 2005 and 2012, which represents 4 percent of total merchandise export worldwide. The production end is concentrated in developing countries because outsourced labor cheaper than domestic labor. As of 2014, an estimated 60 to 75 million people, 75% of which are women from disadvantaged or migrant backgrounds, are employed in the textile, clothing and footwear sector worldwide.

In Cambodia (as of 2014), clothing comprises 80% of the country’s exports, is valued at $4.97 billion, and employs approximately 400,000 to 650,000 people. 90% of garment workers are women (most of whom are from disadvantaged or migrant backgrounds). Current issues in Cambodia’s garment industry include unsafe or abusive sweatshop conditions, unfair wages, corruption in factories and the RGC, labor law implementation shortcomings, neglect of women’s rights, and unionization.

BFC Outline & Analysis

The BFC Project Details

BFC is one of seven Better Work focus country campaigns under the ILO and IFC umbrella. The Better Work website describes that the overall goal of the campaigns is to “bring diverse groups together—governments, global brands, factory owners, unions and works” and “creates lasting, positive change through assessments, training, advocacy and research that changes policies, attitudes and behavior”. 

BFC seems a credible program because it incorporates ILO core labor standards, is active in 1,450 factories, affects over, 2 million workers, takes a multilevel approach to ensure sustainable progress in Cambodia’s garment industry, and offers peer reviewed impact assessments. 

Campaign leaders of Better Work created BFC for a few reasons. First, they envisioned that a more stable supply chain model could not only help the garment industry but also influence other industry models in a similar way. Second, they hypothesized that a global garment industry could lift millions of people out of poverty by providing decent work, empowering women and driving local business and inclusive economic growth. And third, they expected that compliance with international human rights laws (such as ICCP, ICESCR, CRC, CEDAW) and providing the government with mechanisms to implement labor law could aid the country’s democratization process. 

The project used a two-pronged approach through workplace and government level initiatives.  The aims included the following:

   - Establishing and operating an independent system to monitor working conditions in garment factories.
   - Providing assistance in drafting new laws and regulations where necessary as a basis for improving working conditions and giving
     effect to the labor law.
   - Increasing the awareness of employers and workers of core international labor standards and workers' and employers' rights under
     Cambodian labor law.
   - Improving capacity-building techniques of employers and workers to improve working conditions in the garment sector through their
     own efforts.
   - Helping government officials to ensure greater compliance with core labor standards and Cambodian labor laws. 

Project Outcomes 

The project worked well in some respects. Between 2001 and 2004, factory conditions improved visibly and breaches to workplace standards decreased significantly, industry boomed ($500 million increase on yearly garment exports), and increased investment from external clothing brands on account of improved ethical manufacturing origins. Reports argue that this is due in part to organizations like the BFC. BFC also aided the Cambodian garment industry’s access to the global market: “while some factories initially comply because they are legally obliged to, the savvy ones are quick to realize the business benefits of compliance, [improvements in working conditions are self-sustaining]”. Thus, working with BFC became a smart business choice for garment factories—a fact that was highlighted when factories working with BFC survived during the global financial crisis of 2008 while other factories failed. Some standout programs of BFC include Social Dialogues (meant to give more voice to workers), Supervisory Skills Training for factory management, and publicizing labor law compliance certificates (since bureaucratic structures were weak at the time and this made them accountable).

On the other hand, the BFC had its flaws. First, the project used the US-Cambodia Textile and Trade Agreement (TATA), which created incentives and quotas to improve labor rights, as its legislative root. The conditionality of TATA was arguably too regulatory because it controversially linked export licenses with labor rights conditionality and gave the US and other import countries unfair market-pricing advantages. However, in 2004, the trade-driven incentives of TATA (such as the Multifibre Agreement) were phased out, which ended up being beneficial to BFC in the long run. Second, research suggests that BFC caused backsliding in democratization efforts—some critics argue that BFC encouraged political bribery and compelled factory officials to meet minimum standards (instead of working towards systemic change). Third, the methodology of collecting and dispersing monitoring information could be improved (BFC’s transparency database only covers 78.2% of the garment factories in Cambodia that possess licenses to export). 

BFC Impact on Democracy Promotion

While the 2001 BFC project was an economic policy and labor rights effort, it did impact Cambodia’s democratization process. Democratization refers to political changes moving in a democratic direction, like establishing basic levels of economic and social development (which BFC arguably helped do in Cambodia). BFC arguably impacted both institutional and workplace democracy. BFC encouraged community participation in worker’s rights advocacy (which created more social capital), freedom of speech in civil society (particularly among garment industry workers), and greater public accessibility to reports on business ethics of the garment industry. In other words, the private sector expanded considerably, which is an import step for transitioning democracies. BFC was also a unique form of democracy promotion because it helped Cambodia become the first country ever to establish factory assessments by ILO as a legal requirement for garment exporting factories and made assessments public—which was very bold move by government in post-conflict country seeking to revive industry from ruins of war.


Follow-Up Recommendations and Future Democratization in Cambodia

There are a few key lessons learned from the BFC project. First, an important element to BFC’s success was the collaboration between workers, factory management and government officials. Second, BFC’s multilayered framework created a multilevel effect on democratization: on workplace democracy through improved labor conditions, on institutional democracy through a decreased capacity for government corruption, and on participatory democracy through increased civic engagement. And third, BFC was an innovative experiment in transparency: though nontraditional, the BFC mandate pushed for public knowledge on business and government ethics and labor law compliance.

BFC had both pros and cons, but a few changes could maximize future effectiveness of the BFC program. First, there could have been more collaboration between BFC and local NGOs. BFC was an external project—monitoring and strategy suggestions were mostly from international consultants. CIPE could be the entity that helps facilitate this transition from an external imposition to internally-driven program. The BFC could also engage global buyers more to increase awareness of labor rights and fair trade sourcing of merchandise. The BFC also has the potential to incorporate environmentally sustainable methods in their factory compliance framework (such as strategy proposals for greener and safer factory environments).

In conclusion, the BFC program demonstrates the potential of garment industry to be a vehicle for democratization efforts in a country where clothing is a main export.