While the minimum wage increase was expected to have a negative impact, Cambodia’s garment and footwear sector is performing well, says a new International Labor Organization (ILO) bulletin. Exports in the first quarter hit $1.48 billion, nearly 8 percent increase over the first quarter of 2014 driven by strong demand by the European Union, which has overtaken the US as Cambodia’s main garment importer.

The bulletin, titled ‘Labor Standards in Global Supply Chains’, is a new quarterly publication published by the ILO using data from the Ministries of Commerce and Labor, the National Institute of Statistics, and the Cambodia Investment Board.

Last year, the garment and footwear industry grew by 9.3 percent to $5.8 billion, up from $5.3 billion in 2013. Footwear exports grew even faster, increasing by 23.9 percent to $438 million in 2014 over the previous year. As per the Cambodian Investment Board, 78 new garment and footwear factories were approved in 2014, with a total value of $452 million of fixed assets. In the first quarter of 2015, 19 more factories, worth a total of $72 million gained approval. With new factory openings, employment is on the rise. According to official figures, the total garment worker population increased from 497,200 in 2013 to 580,900 in 2014. During the first quarter, that number hit 605,100.

GMAC members were earlier worried that raising the minimum wage to $128 per month, effective last January, would make Cambodia less competitive compared to countries like Bangladesh, which has a minimum wage of $71 per month. Parts of Vietnam also have a lower minimum wage than Cambodia: $100 per month. GMAC warned of factory closures and investors moving to cheaper destinations. However, so far, this pattern hasn’t materialized. Only 11 factories closed in 2014. In the first quarter of 2015, factory openings exceeded closures by 14, said the bulletin found.

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