Efficiency Key To Garment Profits, ILO Says

Garment factories in Cambodia must improve their energy efficiency and introduce new measures to avoid waste if they are to increase their profitability and protect themselves from the effects of the global financial crisis, according to a report by the International Labor Organization and International Finance Corporation.

The report, ?Energy Performance in the Cambodian Garment Sector,? which was received yesterday, comes as the UN announced that orders for garments made in Cambodia are down by almost 40 percent for the year, with the sector losing market share to neighboring countries like Bangladesh and Vietnam.

According to the report, which is based on interviews with 31 factories, or 12 percent of all exporting garment makers in Cambodia between July and August this year, the key areas for garment factory owners to look at when saving energy are lighting systems, sewing machines, air ventilation and boilers for ironing and dying clothes.

The report does not, however, discuss alternatives in detail, nor does it distinguish how much factory owners can save by implementing more energy efficient technologies.

The average energy cost to produce a ton of garments in Cambodia is $560, the report concludes, though in the highest case scenarios factories were seen to spend more than $1,700 to produce that amount.

Overall energy accounts for 16.7 percent of total production costs, but 31 percent of responding factories had a percentage energy cost higher than the average.

Electricity is used by all factories but accounts for only 24.5 percent of total energy usage.

Wood fuel, used to create steam for ironing and hot water for dying, was found to account for 43.3 percent of total energy usage in the fectories and is used by 71 percent of all factories, mainly due to its low costs.

The report also found sewing machinery to account for 38.9 percent of electricity consumption followed by lighting at 23.9 percent and air conditioning at 232 percent.

Experts say that lighting costs can be greatly reduced by investing in energy-saving light bulbs, as can costs on air conditioning through using units more sparingly.

?There are a number of steps that garment factories can take in order to operate in away that uses energy more efficiently, thereby reducing a substantial cost component of operations in a highly competitive market environment? the report states.

?Not all measures to save energy need high capital requirements. In feet, many of the suggestions are at no cost?
Julia Brickell, resident representative for the IFC, said there is a strong correlation between energy efficiency and the cost of producing garments.

?In Cambodia, where cost of energy is high, it has an impact on the industry?s competitiveness and reducing this cost can help the industry position itself better compared to other countries where power is cheaper.?

?So while, we agree that some of the longer-term options may require financial outlay, there is already great initial potential for cost reduction through good housekeeping and better energy management practices, which do not require capital,? she added.
But Ken Loo, secretary-general of the Garment Manufacturers Association of Cambodia, said that garment factory owners would struggle to implement energy saving methods during the current economic downturn.

?I think that most of the factory owners know where they can improve in cutting costs,? he said. ?If they could I am sure they would be inclined to pump more money into making their operation more efficient?

The report does recommend, however, that factory owners conduct energy audits.

?Energy audits have generally not been performed in most of the garment factories surveyed Where they have been performed, there has been little follow-up and recommendations have not been implemented,? the report states.

?The logical next steps for factories that find themselves lagging compared to their peers would be to commission a detailed energy audit of their plant," Ms Brickell said.

?Such audits provide not only recommendations but also expected financial investments and payback periods,? she explained.

Experts say that improving energy efficiency in garment factories would also refine their image visa-avis the environment.

?As international buyers increasingly develop and implement their own environmental codes of conduct and climate change policies, it will become increasingly important for Cambodian garment factories to be able to meet buyers demand,? said Ms Brickell.

?Cambodia is already leading the way in labor standard compliance. Energy efficiency could be another area where the sector could play a leading role globally.?

Catherine Vaillancourt Laflamme, training specialist for ILO, said the philosophy behind the energy study was to highlight to garment factory owners where they can make cost cutting measures to their enterprise without jeopardizing their quality and production levels.

?Given the high cost of electricity in Cambodia and given also the feet that Cambodia has been hit by the financial crisis, factories are struggling right now,? she said. ?The train of thought with this report is to help factories to make some savings.?

Sourced = The Cambodia Daily