92187 Cambodia DFGG Learning Note 11 Partnerships for Financial Sustainability Efforts to ensure the sustainability of the Arbitration Council in Cambodia The Arbitration Council is a body established to resolve with the tripartite Stakeholder Advisory Group made up of collective labor disputes. At present over 90% of these representatives from: disputes are from the garment industry, and over 1,900  The Ministry of Labor and Vocational Training; cases have been heard. This Learning Note captures the experience of the Arbitration Council Foundation – the  The employers’ associations, including the Cambodian supporting arm of the Arbitration Council – in its effort to Federation of Business and Employer Associations broker a financial arrangement to sustain the operations (CAMFEBA) and the Garment Manufacturers of Arbitration Council after the DFGG project financed by Association in Cambodia (GMAC); and the World Bank closes. The note sets out the issues,  The trade union federations, including the Cambodia processes and key challenges. It also makes suggestions Labour Union Federation (CLUF), Coalition of for future steps to operationalize a multi-stakeholder Cambodian Apparel Workers’ Democratic Union financial sustainability strategy. (C.CAWDU), Cambodian Workers Labor Federation Union (CWLFU), and the Cambodian Tourism and Background Service Workers’ Federation (CTSWF). The Arbitration Council in Cambodia was established in In 2014, the ACF then organized a think tank to carry 2003 to resolve collective labor disputes between a group forward the basic strategy into the design and of workers and their employers on issues pertaining to implementation of a sustainability action plan for the labor rights and interests as well as working conditions. The Arbitration Council. The ACF also continued to engage with AC provides dispute resolution services through mediation representatives of government, employers, trade unions and arbitration of labor disputes, as well as through and others, such as the American Center for International capacity building of workers and their employers. Labor Solidarity (ACILS), Better Factories Cambodia (BFC) and the International Labour Organization (ILO), to ensure Since 2009, the AC registered more than 1,260 collective the recommendations and inputs of key partners and labor disputes, covering a total of approximately 613,000 stakeholders were taken into account. workers. The AC is cost effective in carrying out its services and is improving. In 2009, the average cost per case was US$2,095 per case. In 2012 this had declined to US$1,231 and in 2013, the average cost per case was nearly half of the 2009 cost at US$1,081. Additionally, the average cost of a 10-day strike in Cambodia is estimated at US$500,000. Avoiding one strike therefore covers the annual costs of running the AC’s dispute resolution services. Although the Arbitration Council is considered a state institution, the RGC does not support the AC’s operations with a budget. Instead, the AC has relied on funding from international donors to support critical labor dispute resolution work. It was funded initially through the International Labour Organization, and in 2009 transitioned to support from the Demand for Good Governance (DFGG) Project financed by the World Bank. Aside from the DFGG fund, packages of support from DFAT and a stream of A multi-stakeholder financing facility. In accordance with revenue generated from ACF activities, the AC receives no the sustainability action plan, ACF is establishing the other source of income. This is a critical challenge for the Arbitration Council Multi-Stakeholder Financing Facility sustainability of its dispute resolution work over the (ACMFF). This facility will be capable of receiving funds medium and long-term. from a diverse source of contributors, including international development agencies and funds, Sustainability Strategy and Action Plan international brands and, importantly, the AC’s tripartite stakeholders. In the near term and over the next 3 years, An inclusive process. In 2012, the Arbitration Council the ACF still expects contributions from international Foundation (ACF) started the process of developing a donors to comprise the primary proportion of sustainability strategy that looked ahead to 2020. Working contributions. In the medium to long term, the ACF Cambodia DFGG Financial sustainability of the Arbitration Council expects reliance on international donors to gradually be sustainability plans must be secured and maintained. The reduced and the contributions from the tripartite proposed model under which workers and employers stakeholders to be increased. To this end, at present, the directly contribute to support labour dispute resolution ACF is coordinating with the Ministry of Labour and services has not been utilized in other nations or Vocational Training to secure funds from the Cambodia jurisdictions. While other models exist in Cambodia for national budget, and the ACF is working with tripartite contribution systems (such as ILO-BFC) and representatives of employers and employees to work out bipartite contributions systems (such as the National Social how contributions can be made by the clients of the AC Security Fund), the development and full functioning of the services. This would ensure the financial sustainability and proposed model for the AC will not occur overnight. A continued dispute resolution services of the AC. myriad of legal, financial, administrative and management systems and frameworks are expected to be required, Looking toward financial sustainability. The cornerstone of necessitating extensive review, analysis, advocacy, the long-term sustainability of the AC is direct bipartite co- establishment and enactment. contributions from both employers and workers as the clients of the AC to the ACMFF. This model, akin to an Moving forward insurance scheme, is based on the following:  the private sector will support a model of direct The AC has progressed from the development of a bipartite contributions because it sees the AC’s sustainability strategy to the implementation of the action benefits, and recognizes that the RGC is not yet in a plan to secure the AC’s sustainability. In the short to position to fully finance the AC. medium term, as per the action plan, international donor  confidence in the independence and neutrality of the funding will continue to keep the ball rolling. Importantly, AC is preserved by equal contributions by employers even though donor funding is expected to decrease over and workers. time, some level of donor presence will be maintained for  the garment and footwear industry will initially be the purposes of technical assistance and to maintain useful primary funder, as 91% of labor disputes brought to external pressure on the governance and standards of AC the AC originate from this key export industry. stakeholders. The process of seeking stakeholders’ commitment to the For the medium to longer term, the bipartite funding ACMFF and the direct bipartite contribution system model, based on equal employer/employee co- requires extensive outreach and dialogue, as well as careful contributions collected at the enterprise level, should be planning, preparation and navigation; but initial signs are the primary financing vehicle to fund the ACMFF, and promising. The tripartite stakeholders of the AC have thereby ensure the continued provision of labour dispute demonstrated strong support for the sustainability model. resolution services in Cambodia. The AC and ACF will  Representatives from GMAC expressed that, because continue to engage with trade unions, employers’ the industry benefits from the independent and associations and other partners to provide them with professional arbitration of their disputes by the AC, it is opportunity to help shape the AC sustainability model; and willing to participate in the funding of the AC.1 seek to obtain a clear commitment from the government to participate in the ACMFF and to facilitate the  The Ministry of Labour and Vocational Training offered establishment of a direct bipartite contribution system, in-principle support to assist in operationalizing the with a specific timeline for commencement. funding model.  Some unions, such as the Cambodian Tourism and Engaging the stakeholders is a critical part of the Service Workers’ Federation, also communicated their Arbitration Council’s sustainability action plan. willingness to contribute to an AC fund given their Engagement leads to empowerment of the parties and confidence in the AC’s service. generates a sense of ownership. It is the ACF’s objective to engage clients as partners in pursuit of our vision, ‘a Challenges just and economically vibrant Cambodia which is Challenges remain and there are still many steps to be renowned for industrial peace’. Sustainability of the taken. Broad stakeholder backing for the AC and its Arbitration Council requires the ACF effectively engaging with all stakeholders and the next phase of securing 1 finance will be critical. It is too soon to tell how long this Private sector representatives propose that the direct bipartite will take and what the primary blockages will be. contribution system be open up to the whole industry and not restricted to the garment and footwear industry because of the intrinsic and nascent need in all other industries for a fair and speedy alternative to the formal The DFGG Learning Note Series provides quick summaries of the lessons justice system in Cambodia. The participation of other industries would be learned in the DFGG project. beneficial to the AC long-term sustainability if the private sector adopts this DFGG Learning Note 11 reflects the ACF process of developing a option. sustainability strategy through two stages in 290102 and 2014. Written by Sok Lor and Hans S Hwang. Series editor Janelle Plummer.