CIAO DATE: 11/04

Cambodia Blazes A New Path To Economic Growth and Job Creation

Abstract

A unique and successful international policy experiment has been under way in Cambodia for the last six years. In the country’s export apparel factories, working conditions and labor rights are monitored by inspectors from the International Labor Organization (ILO), an international public organization. The results of the inspections are published in credible, highly transparent reports that describe in detail whether the factories are in compliance with national labor laws and internationally agreed basic labor rights. These reports are published on the Internet, and a range of Cambodian and international actors use them. The U.S. government uses the reports as a key input for decisions under an innovative scheme that allows Cambodian firms to sell more apparel in the U.S. market if they improve working conditions and respect workers’ rights. Private retail apparel firms that buy from Cambodian factories also use the reports. These buyers, conscious of their brand reputations, use the reliable information they find in the reports to steer orders toward compliant factories and away from noncompliant ones.

The Cambodian experiment combines roles for local and international actors in previously untried ways. It relies on a combination of private self–regulation with limited but essential interventions by governments and international organizations. The experiment warrants attention by policy makers elsewhere around the world for two reasons. First, it introduces new policy tools that can help to maximize societal benefits from global production systems. These novel instruments now have an established record of effectiveness that can be studied by those who wish to adopt similar approaches. Second, the project combines elements of voluntary corporate self–regulation with key public interventions. The public interventions–at both national and international levels–corrected deficiencies that typically arise in purely voluntary corporate self-regulation. The resulting system changed the incentives facing private actors, effectively aligning their interests more closely with public objectives. As policy makers search for effective ways to improve the governance of increasingly global production systems and to realize more of the potential of private self–regulatory efforts, the Cambodia experiment offers new and successful methods that can be replicated, as well as important analytical lessons.

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