CAMBODIA Corporate Social Responsibility & the Apparel Sector Buyer survey results December 2004 Foreign Investment Advisory Service a joint service of the International Finance Corporation and THE WORLD BANK CAMBODIA BUYER SURVEY RESULTS The Government of Cambodia has asked the Foreign Investment Advisory Services (FIAS), a joint facility of the International Finance Corporation (IFC) and the World Bank, to undertake an advisory project based on CSR experience from around the world. The objective of the project is to assist the Ministry of Commerce and the industry to move away from current dependence on a quota-focused strategy towards a more market-led and sustainable strategy. A survey was conducted in May and June 2004 to determine current buyers' sourcing plans post-2004 with respect to Cambodia, the conditions that would be attached and their ranking of CSR-related issues compared with other sourcing considerations. Senior sourcing staff from 15 of the largest US and EU buyers accounting for 45% of Cambodia's garment exports were asked about their sourcing criteria and buying plans, using one-on-one structured interviews. Interviews targeted senior sourcing staff as opposed to compliance and CSR staff in order to avoid any bias towards CSR. AFD (French Agency for Development) is co-financing this study in the context of the implementation of a project for the promotion of the garment sector's exports in Cambodia, which is made on behalf of the French government program to strengthen trade capacities in developing countries, and is funded by AFD and the French Ministry of the Economy, Finance and Industry. QUESTION 1 ­ IN WHICH COUNTRIES OF SOUTH EAST ASIA DOES YOUR COMPANY HAVE INVESTMENT OR SOURCING ARRANGEMENTS ? Most respondents relied more heavily on sourcing rather than investment in the countries rated. Overall, both European and US companies tended to source from all of the countries listed relatively equally. Check all that apply Vietnam China Cambodia Thailand Bangladesh Investment 1 3 0 0 0 Sourcing 13 15 15 12 15 Other sourcing countries : Indonesia, India, Pakistan, Macao, Hong-Kong, Philippines, Taiwan, Korea, Malaysia, Sri Lanka, QUESTION 2 ­ PLEASE RATE THE IMPORTANCE OF EACH OF THE FOLLOWING COUNTRY-SPECIFIC FACTORS IN YOUR COMPANY'S DECISION TO SOURCE FROM OR INVEST IN A COUNTRY. (1= no importance; 2=minor importance; 3= moderate importance; 4 major importance; 5= critical importance) Labor stds Tariff pref Materials &supplies Risk mitigation Pol/Econ stability Corruption Protect. Right to org Customs delay Envtl. Stds Bureauc. Red tape Speed to market Inv. Prom. 1 2 3 4 5 Based on weighted data % Critical Major Moderate Minor None Mean Weighted (5) (4) (3) (2) (1) average Level of labor standards and 46.6 46.6 6.7 0 0 4.40 4.51 practices Tariff preferences such as the 33.3 60.0 6.7 0 0 4.27 4.12 Generalized System of preferences (GSP) or Free trade agreements Access to international 26.6 60.0 13.4 0 0 4.13 3.82 materials and/or supplies (yarn, fabric, button, zips...) imported or domestic Risk mitigation 6.7 60.0 26.6 6.7 0 3.67 3.60 (diversification) Political and economic 26.6 66.6 6.7 0 0 4.20 3.58 stability Corruption, law enforcement 6.7 66.7 26.6 0 0 3.80 3.45 and effective inspectorates Protecting the rights of 13.3 46.7 40.0 0 0 3.73 3.42 workers to organize unions Customs delay 20.0 46.7 26.6 6.7 0 3.80 3.25 Level of environmental 13.3 40.0 46.7 0 0 3.67 3.18 standards and practices Bureaucratic red tape 20.0 40.0 33.3 6.7 0 3.73 3.08 Speed to market 13.3 60.1 13.3 13,3 0 3.73 2.94 Investment promotion and 7.7 15.4 38.4 30.8 7.7 2.85 2.19 incentives QUESTION 3 ­ PLEASE RATE THE IMPORTANCE OF EACH OF THE FOLLOWING FACTORY-SPECIFIC FACTORS IN YOUR COMPANY'S DECISION TO SOURCE FROM OR INVEST IN A COUNTRY. (1= no importance; 2=minor importance; 3= moderate importance; 4 major importance; 5= critical importance) Price/Prod. Cost H&S practices Quality Prod. Capacity Skills & Productivity Techn. level Prod. Dvpt and services Storage and transportation Delivery lead times 1 2 3 4 5 Based on weighted data % Critical Major Moderate Minor None Mean Weighted (5) (4) (3) (2) (1) average Price, production costs 40.0 53.3 6.7 0 0 4.33 4.24 Level of health and safety 20.0 60.0 20.0 0 0 4.00 4.18 practices Product quality (or lack of 53.3 46.7 0 0 0 4.53 4.13 defects) Production capacity 0 93.3 6.7 0 0 3.93 3.93 Workforce skills and 6.7 80.0 13.3 0 0 3.93 3.90 productivity Technological level 13.3 46.7 40.0 0 0 3.73 3.60 Product development and 6.6 46.7 46.7 0 0 3.60 3.47 range of services Storage facilities and 13.3 40.0 40.0 6.7 0 3.60 3.47 transportation infrastructure Delivery lead times and 13.3 60.0 26.7 0 0 3.87 3.38 ability to produce rapid reorders QUESTION 4 ­ HOW WOULD YOU RATE THE PERFORMANCE OF THESE DIFFERENT COUNTRIES WITH RESPECT TO THE FOLLOWING FACTORS ? [1= very poor; 2=poor; 3= moderate; 4= good; 5= very good] Vietnam China Cambodia Thailand Bangladesh Country specific factors Political and economic stability A = 3.58 A = 4.07 A = 2.73 A = 3.85 A = 2.86 WA = 3.28 WA = 3.55 WA = 2.83 WA = 3.71 WA = 2.41 Speed to market A = 2.92 A = 3.79 A = 2.80 A = 3.15 A = 2.86 WA = 2.76 WA = 3.19 WA = 2.77 WA = 2.75 WA = 2.34 Level of labor standards and practices A = 3.17 A = 3.29 A = 3.27 A = 3.54 A = 2.79 WA = 2.80 WA = 2.96 WA = 3.54 WA = 3.12 WA = 2.36 Investment promotion and incentives A = 2.71 A = 3.00 A = 2.88 A = 2.83 A = 3.00 WA = 2.81 WA = 2.91 WA = 2.84 WA = 2.86 WA = 2.90 Anti-corruption efforts, law enforcement A = 2.67 A = 3.21 A = 2.27 A = 3.08 A = 2.21 and effective inspectorates WA = 2.15 WA = 2.45 WA = 2.47 WA = 2.84 WA = 2.19 Level of environmental standards and A = 2.75 A = 3.00 A = 2.80 A = 3.08 A = 2.36 practices WA = 2.21 WA = 2.33 WA = 2.77 WA = 2.81 WA = 2.23 Protecting the rights of workers to A = 2.55 A = 2.50 A = 2.87 A = 2.92 A = 2.50 organize unions WA = 1.41 WA = 1.49 WA = 3.22 WA = 2.66 WA = 2.00 Risk mitigation (diversification) A = 3.10 A = 3.18 A = 3.00 A = 3.50 A = 2.91 WA = 2.94 WA = 2.73 WA = 3.44 WA = 3.06 WA = 2.43 Access to international materials and/or A = 3.50 A = 4.23 A = 2.79 A = 3.73 A = 2.92 supplies (yarn, fabric, buttons, zip...) WA = 3.08 WA = 3.40 WA = 2.95 WA = 3.19 WA = 2.86 imported or domestic Tariff preferences such as the A = 2.92 A = 2.86 A = 3.60 A = 3.08 A = 3.71 Generalized System of Preferences WA = 2.87 WA = 2.78 WA = 3.22 WA = 2.90 WA = 3.20 (GSP) or Free Trade Agreements Customs delays A = 3.27 A = 3.69 A = 2.71 A = 3.71 A = 2.92 WA = 2.93 WA = 3.20 WA = 2.75 WA = 3.11 WA = 2.94 Bureaucratic red tape A = 3.00 A = 3.25 A = 2.69 A = 3.40 A = 2.92 WA = 2.79 WA = 2.94 WA = 2.66 WA = 3.03 WA = 2.81 Factory specific factors Workforce skills and productivity A = 3.67 A = 4.29 A = 3.07 A = 3.67 A = 2.79 WA = 3.33 WA = 4.00 WA = 3.44 WA = 3.27 WA = 2.31 Price / Production costs A = 3.67 A = 4314 A = 3.67 A = 2.92 A = 4.00 WA = 3.81 WA = 3.94 WA = 3.41 WA = 2.77 WA = 3.96 Product quality (or lack of defects) A = 3.55 A = 3.92 A = 3.43 A = 3.91 A = 3.31 WA = 3.13 WA = 3.95 WA = 3.62 WA = 3.21 WA = 3.08 Level of health and safety practices A = 3.17 A = 3.00 A = 3.13 A = 3.67 A = 2.71 WA = 2.91 WA = 2.87 WA = 3.44 WA = 3.68 WA = 2.26 Delivery lead times and ability to A = 3.00 A = 3.92 A = 2.86 A = 3.45 A = 2.85 produce rapid reorders WA = 2.90 WA = 3.32 WA = 2.89 WA = 2.99 WA = 2.86 Production capacity A = 3.45 A = 4.54 A = 3.00 A = 3.27 A = 3.54 WA = 3.10 WA = 4.17 WA = 3.00 WA = 2.92 WA = 3.12 Product development and range of A = 2.75 A = 3.79 A = 2.27 A = 3.42 A = 2.57 services provided WA = 2.57 WA = 3.03 WA = 2.40 WA = 2.98 WA = 2.52 Technological level A = 3.00 A = 3.64 A = 2.40 A = 3.33 A = 2.71 WA = 2.73 WA = 3.34 WA = 2.98 WA = 3.01 WA = 2.58 Storage facilities and transportation A = 3.36 A = 3.85 A = 2.71 A = 3.55 A = 2.69 infrastructure WA = 2.96 WA = 3.25 WA = 2.81 WA = 3.07 WA = 2.32 A = Average; WA = Weighted average LABOR PRACTICES QUESTION 5 ­ IN YOUR VIEW, HOW DO IMPROVED LABOR STANDARDS AFFECT YOUR SUPPLIER'S PERFORMANCE IN TERMS OF: [-2=very negatively; -1= somewhat negatively; 0= not at all(no change); 1= somewhat positively; 2= very positively] Overall, companies expressed that all, but price/production costs would be 'somewhat positively' impacted by improved labor standards. 40% of all respondents felt that improved labor standards somewhat negatively impact price/production costs. Price / Production cost Pool of qualified job applicants Employee turnover Absenteeism Product quality Workforce productivity Number of accidents -2 -1 0 1 2 Based on weighted data % Very Somewhat No Somewhat Very Mean Weighted positively positively change negatively negatively average (+2) (+1) (0) (-1) (-2) Price / production cost 13.3 20.0 26.7 40.0 0 0.07 -0.45 Pool of qualified job 33.3 40.0 26.7 0 0 1.07 0.87 applicants Employee turnover 33.4 53.3 13.3 0 0 1.20 1.33 Absenteeism 35.7 42.9 21.4 0 0 1.14 1.35 Product quality 26.7 60.0 13.3 0 0 1.13 1.40 Workforce 13.3 80.0 6.7 0 0 1.07 1.42 productivity Number of accidents 26.7 60.0 13.3 0 0 1.13 1.48 QUESTION 6 ­ HOW IMPORTANT TO YOUR CONSUMERS IS THE OBSERVATION OF INTERNATIONAL LABOR STANDARDS (SUCH AS THE ILO STANDARDS) IN PRODUCTION ? Most, 40% of all respondents felt that ILO standards in production were only of 'moderate importance' to consumers. However, there was a discrepancy between US & European companies, where 71.47% of European companies stated that such standards were of 'major' or 'critical importance' to consumers. US had the opposite response with 85.7% stating that they were of 'minor' or 'moderate importance'. % Critical importance (5) 13.3 Minor Not Critical Major importance (4) 33.4 importancimportant importanc e 0% e Moderate importance (3) 40.0 13% 13% Minor importance (2) 13.3 Not important (1) 0 Mean 3.47 Major Weighted average 2.83 Moderate importanc importanc e e 33% 41% Based on weighted data Comments "Our customers tell us it important. There is also an elevation of the issue in the media and this has only heightened this in the last couple of years. Combined with the domestic textile industry and impulses in the domestic protection industry, workers rights have become significantly more important to the American consumer than they used to be." "The only time that the observation of international labor standards becomes important to consumers is when labor rights groups put it into the media. Its all up to the publicity." QUESTION 7 ­ TO ADDRESS LABOR PRACTICE CONCERNS, DOES YOUR COMPANY : (select all that apply) Count Have its own code of conduct 14 All of the above Participate in voluntary certification 9 scheme (WRAP, SA 8000, ...) Multistakeholder Participate in a voluntary 7 initiative multistakeholder initiative (Global Compact, ETI, ...) Code of None of the above 1 conduct 0 5 10 15 Based on weighted data Comments 6 respondents out of 15 stated participation in all categories Only one does not participate in any initiative QUESTION 8 ­ HOW WOULD YOU RATE THE EFFECTIVENESS OF THE FOLLOWING VOLUNTARY CERTIFICATION/AUDIT SCHEMES ? [1= nonexistent (no effectiveness); 2=low; 3= moderate; 4= high; 5= very high] It proved difficult for many respondents to rate the different voluntary schemes, especially if they did not use them. Due to very low awareness and understanding of the different schemes, there is a very low rate of response for this question. Data has therefore not been computed for that question. WRAP seemed to be the most well-known audit scheme. Additionally, companies seemed to hold the most confidence in their own auditing system. As 61.5% of respondents rated their own company's code highly as having a "very high" (5) level of effectiveness. Count Very high High Moderate Low Very low Don't know WRAP 2 1 3 2 2 5 FLA 1 4 2 0 0 8 SA 8000 0 3 3 1 1 7 ETI 0 0 4 0 0 11 Clean clothes 0 1 2 2 1 9 AA 1000 0 0 3 0 2 10 WRC 0 1 6 0 0 8 Company's own code of conduct and 9 5 0 0 0 1 monitoring system Comments "I think that broadly marketed compliance programs are less effective at actually changing programs than tailored programs designed to tackle a specific business problem or need. The voluntary certification audits only give a performance of a factory in a point of time. More important is the actual priority and practical decision making change that comes with more precise definitions of what compliance priorities are and more frequent interaction. Just semi-annually going to the factory is not as important or effective as being there more frequently." QUESTION 9 ­ HOW IMPORTANT WILL THIS KIND OF VOLUNTARY CERTIFICATION/AUDIT SCHEMES BE TO YOUR FIRM WHEN CONSIDERING SOURCING AFTER 2004 (POST QUOTAS) ? The strong majority, 78.6%, of respondents felt that voluntary certification/audit schemes would be of major or critical importance when they consider sourcing post quotas in 2005. Count % Minor Of critical importance 6 40 importan Not Of major importance 6 40 ce important Of moderate importance 1 7 7% Critical Moderate 7% Of minor importance 1 7 importan importan Not important 1 7 ce ce Total 15 100 39% 7% Average : 4.00 Weighted average : 3.55 Major importan ce 40% Based on weighted data CHALLENGES, OPTIONS AND PLANS FOR CAMBODIA POST-2004 QUESTION 10 ­ HOW FAMILIAR ARE YOU WITH THE EXISTING ILO MONITORING SCHEME IN THE APPAREL SECTOR IN CAMBODIA ? The majority of respondents are either somewhat or not familiar with the ILO monitoring scheme. count % Very familiar 4 26.7 50 Somewhat familiar 7 46.6 40 Not familiar 4 26.7 30 Total 14 100 20 10 0 Very familiar Somewhat Not familiar familiar Based on weighted data QUESTION 11 ­ HOW WOULD YOU RATE THE ABILITY OF THE ILO MONITORING SCHEME TO: [1= nonexistent (no ability); 2= low; 3= moderate; 4= high; 5= very high] Most respondents noted that they did not know enough about the ILO's program to rate their ability. Respond to consumers and NGOs expectations Provide transparency Involve stakeholders Promote compliance Improve labor standards Credible inspections 1 2 3 4 5 Based on weighted data Mean Weighted average Provide credible inspections 3.89 4.43 Improve labor standards 4.11 4.39 Promote compliance with your company's code of conduct 4.22 4.36 Involve the whole industry's stakeholders 4.00 3.91 Provide an adequate level of transparency 4.00 3.73 Respond to consumers and NGO expectations 3.67 3.55 QUESTION 12 ­ HOW WOULD YOU RATE CONFIDENCE IN EACH OF THE FOLLOWING ASSURANCES THAT LABOR STANDARDS ARE IMPROVED ? [-2= nonexistent (no confidence); -1= low; 0= moderate; 1= high; 2= very high] Overall, a report from an NGO selected by the company, a report from the ILO, and an Internal audit ranked highest as the tools that would instill high levels of confidence that labor standards are improved. Internal audit ILO monitoring report NGO selected by buyer Consulting firm selected by buyer NGO selected by supplier Certification or label National labor inspectorates External information Consulting firm selected by supplier -2 -1 0 1 2 Based on weighted data % Very high High Moderate Low Very low Mean Weighted (+2) average (+1) (0) (-1) (-2) Internal audit 23.1 46.1 15.4 15.4 0 0.77 1.39 Report from the ILO 23.1 46.1 23.1 7.7 0 0.85 1.34 monitoring program Report from an NGO 7.1 50.0 35.8 7.1 0 0.57 0.69 selected by your company Report from a consulting 14.3 14.3 64.3 7.1 0 0.36 0.24 firm selected by your company Report from an NGO 14.2 64.3 21.5 0 0 -0.07 -0.02 selected by the supplier External certification or 7.1 14.3 57.2 21.4 0 0.07 -0.21 label Report from the national 0 7.1 50.0 42.9 0 -0.36 -0.23 inspectorates External information 0 7.1 35.7 57.2 0 -0.50 -0.24 (newspapers, NGO reports, ...) Report from a consulting 7.1 21.5 28.6 35.7 7.1 -0.14 -0.60 firm selected by the supplier Comments "Have had experience with some of the external certification programs and I think they are very limited in their ability to accurately assess what is happening in factories, whereas some of the NGOs we have worked with are very skilled in dealing with labor issues in factories. When we work with these people we can genuinely improve performance. There are 2 parts....the level of accuracy by the organizations. In many cases these organizations cannot identify the problems. Then, the second piece is if you can work to make the changes." QUESTION 13A ­ PLEASE CITE THREE MAJOR CHALLENGES THAT CAMBODIAN FACTORIES ARE CURRENTLY FACING ? Phase our of quotas (2) Adversarial relationship between GMAC and NGOs, improving capacity-building approach with NGOs (2) Skill and competence on the part of management regarding effective labor relations Corruption (2) Need to reach a higher rate of productivity (2) Importing of materials and supplies / sourcing fabric in the country (5) Insufficient pool of skilled workers Logistics / poor roads and infrastructure (2) Education / awareness of workers of labor standards; improving labor standards (3) Political Instability (2) and recent political assassinations of union leaders. Competing with China in both quality and price (6) Bureaucratic red tape Delivery lead time (4) Comments "Cambodian factory owners and managers being able to effectively manage buyer expectations on delivery and other performance measures. For example, factories tend to over-commit and say they can order in X amount of time because they want to ensure they have business. Then, they have too many orders to fill . This leads to excessive overtime or subcontracting that is not authorized." "Ability to compete on price. Not a huge factor; it is one they are aware of and they need to continue to be competitive. This doesn't mean they have to be the lowest. Cost always has to be part of the equation." QUESTION 13B ­ HOW MIGHT THESE BE MOST EFFECTIVELY ADDRESSED IN CAMBODIA ? Improve infrastructure (4) More widespread and comprehensive worker education programs ; capacity-building training of supervisors and manager (4) Investment in technology to improve efficiency Vertical integration and access to supplies and fabric ­ linked to speed (8) Dialogue between producers, corporations, unions, NGOs, and government (2) Keeping GSP Be more competitive (2) Better long term planning / better coordination and communication with buyers and factories regarding business requirements Political stability Improve productivity Decrease corruption (3) WTO membership (2) Comments "More competition. Small business people have to compete or they will be out. In the short term they should be able to compete with China; in the long term, may be difficult." QUESTION 14A ­ WHAT PERCENTAGE OF THE PRODUCTS YOU SOURCE FROM CAMBODIA ARE CURRENTLY UNDER QUOTAS ? Quotas affect American companies more than European. On average, 78% American companies have products sourced from Cambodia under quotas compared to only 1% of European companies. Percentage of products sourced under quotas : EU : from 0 to 5% US : from 40 to 100% QUESTION 14B ­ WHAT ARE YOUR POST 2004 BUYING PLANS IN CAMBODIA ? Interestingly, no company, European or American, plans to decrease their buying from Cambodia post 2004. All plan on increasing or staying the same. More European companies (83%) vs. American (37.5%), plan to increase. American companies tend to want to wait and see what the results of the post quota world before making changes. count % Decrease Increase purchases 8 57.1 purchases Purchase at same level 6 42.9 0% Decrease purchases 0 0 Total 14 100.0 Purchase at same level 43% Increase purchases 57% Based on weighted data QUESTION 14C ­ WHAT ARE YOUR GENERAL REASONS ? Comments "We will not change our sourcing from Cambodia until we see the global impact of the lack of quotas." "We want to continue to keep our source based diversified and not to put all of our source base in China. We continue to also get effective pricing and delivery from our suppliers in Cambodia." "We will keep it the same right now until we see what is happening with the quotas in China. There is a safeguard provision in China. If the US allows China to be completely open, we would move a lot of what we make in Cambodia to China. Since now the US is threatening. I suspect post 2006-7 Cambodia will lose much of their business because there is no fabric. Its very stable in China and easy to make an investment. Wages are more in China but productivity is higher. Worker costs are not that high. Fabric is more determinant in costs than labor; so, its where the fabric is. The reason we did business in Cambodia is strictly the quota. I must say we have a couple of very good suppliers in Cambodia that we want to keep but they have to remain competitive against of China in terms of speed and price and quality (the only 3 things we care about). It takes 2-3 weeks to get the fabric to Cambodia. Again, we are hedging out bets in Cambodia as we think that there will still be restrictions on textiles in China till 2008." "The quality standard from Cambodia is quite good and this also makes us want to buy more." QUESTION 15 ­ FOR EACH OF THE FOLLOWING POSSIBLE GOVERNMENT INTERVENTIONS, PLEASE RATE THE INFLUENCE EACH WOULD HAVE IN YOUR DECISION TO CONTINUE TO INVEST IN OR SOURCE FROM CAMBODIA. [1= nonexistent (no influence); 2= low ; 3= moderate ; 4= high; 5= very high] Capacity-building Co-funding of ILO scheme Public recognition Strengthened enforcement Stronger legal framework 1 2 3 4 5 Based on weighted data % Very high High Moderate Low No Mean Weighted (5) influence average (4) (3) (2) (1) Better capacity-building 6.7 80.0 13.3 0 0 3.93 3.84 support to factory management and workers for improved labor standards Continued government co- 7.7 53.8 38.5 0 0 3.69 3.66 funding of the ILO scheme or some variant, when the US government funding come to an end More public recognition of 6.7 33.3 53.3 6.7 0 3.40 3.48 suppliers with high labor and environmental performance (e.g. award scheme) Strengthened enforcement 20.0 13.3 60.0 6.7 0 3.47 2.95 of existing labor and environmental laws Stronger legal framework 6.7 33.3 60.0 0 0 3.47 3.09 on labor and environmental standards QUESTION 16 ­ DO YOU AS A BUYER CONTRACTUALLY STIPULATE THE ORIGIN OF THE COTTON FABRIC THAT IS USED IN PRODUCTION IN CAMBODIA ? Over half of all respondents (57.1%) said yes they contractually stipulate the origin of cotton. count % Don't Yes 8 57.1 know No 5 35.7 7% Don't know 1 7.1 Total 14 100 No 36% Yes 57% Based on weighted data QUESTION 17 ­ IF CAMBODIA PRODUCED ITS OWN COTTON FABRIC TO AN APPROPRIATE SET OF CSR STANDARDS (LABOR + ENVIRONMENT), PRICE AND QUALITY BEING EQUAL, WOULD YOU REQUIRE YOUR SUPPLIERS TO USE IT ? A majority, 64% of all firms, said 'Yes', they would require the use of such cotton to a large or small extent; more US firms stated they would do this to a "large extent: (42.9% vs. 28.6%)of the US firms, said 'yes to a large extent'[. Europe was more uncertain, with only. Common reasons for Yes include greater speed and access to markets. count % Yes to a large extent 5 35.7 Don't know Yes to a small extent 4 28.6 25% Yes to a large extent No not at all 2 14.3 39% Don't know 3 22.4 Total 14 100 No not at all Yes to a 16% small extent 20% Based on weighted data Comments Yes : it would improve tariff-free access to market and it would lead to shorter delivery lead times. No : "We are moving away from dictating or controlling raw material usage. We are relying more on our factories to provide what is known as full package service which means that they get the order and they source all the raw materials and deliver it rather than us getting involved in purchasing raw materials for them" QUESTION 18 ­ WHILE A PRECISE CALCULATION DOES NOT EXIST, IT IS ESTIMATED THAT THE COST OF PRODUCING A SPECIFIC ITEM IN CAMBODIA IS ROUGHLY 20% HIGHER THAN THE SAME IN CHINA, WHICH COULD BE DUE IN PART TO HIGHER LABOR STANDARDS. GIVEN THAT YOU ARE CURRENTLY PAYING SOME ADDITIONAL COST TO SOURCE FROM CAMBODIA, WHAT PERCENTAGE OF A PRICE PREMIUM WOULD YOU CONTINUE TO PAY ONCE THE QUOTA REGIME IS LIFTED, IF YOU COULD BE GUARANTEED COMPLIANCE WITH LABOR STANDARDS? The nature of this question was highly contested by many of the respondents. Many felt it was angled and simply did not agree that it was more expensive to do business in Cambodia. Hence, few people answered (only 4 US respondents and 4 European companies). Many gave detailed comments even if they did not answer. Comments "The reason we are sourcing there now is that in some instances we can get better pricing than from China." "It goes to the point of why we are investing so much there today. We do see the benefits of better labor standards. But, if they do not keep things in balance and say decided to be the best labor standards in the world, and price escales to say 70% of the region, we would decrease business. The balance that Cambodia has today is a good one." "Quite frankly it's the wrong question. We won't buy it unless its in an environment where there are higher labor standards. I do not think it costs more to have the right labor." QUESTION 19 ­ WOULD YOU BE WILLING TO PARTICIPATE (OR PARTICIPATE MORE) IN COLLABORATIVE CAPACITY-BUILDING APPROACHES (WITH UNIONS, GOVERNMENT, NGOS, OTHER BUSINESSES, ...) FOR ENHANCED SOCIAL AND ENVIRONMENTAL STANDARDS, TO COMPLEMENT WHAT YOU CURRENTLY PROVIDE DOWN YOUR SUPPLY CHAIN RELATIONSHIP IN CAMBODIA ? European and US companies feel differently about participating in collaborative capacity building approaches in Cambodia. All US companies stated they would be willing to participate to a small or large extent, while the majority, 71.4% of EU companies said "no, not at all". Reasons for this lack of enthusiasm to get involved often revolved around time count % Yes to a large extent 1 7.1 Yes to a Yes to some extent 8 57.1 No not at large No not at all 5 35.8 all extent 36% 7% Total 14 100 Yes to some extent 57% Based on weighted data Comments "One of our priorities is worker education and the other priority is supplier ownership (suppliers developing management systems for compliance that will enable more sustainable compliance), We begin to move away from a policing approach with suppliers to an approach where suppliers are implementing their own compliance and we help provide the training and assistance to do that." "What you need is real support from GMAC to make these programs work." "No, because until I am 100% sure until Cambodia can compete with China on an equal foothold, I would rather not invest in the far east at all."