Cambodian Factories Seek Eco-Friendly Power Alternatives

By SIMON MARKS

PHNOM PENH — Almost every day for the past 15 years Cheang Vet, a roadside mechanic near Phnom Penh’s Cambodian-Japanese Friendship Bridge, has witnessed the constant flow of traffic making its way in and out of the capital by its main northeasterly access point.

But in the last decade, as the number of people employed in Cambodia’s garment sector has increased from about 25,000 in 2000 to around 300,000 today, he has noticed a steady increase in one particular type of vehicle entering Phnom Penh: heavy-load trucks carrying huge stacks of firewood.

“There are at least 10 trucks a day carrying about two and a half tons of firewood,” Mr. Vet estimated. “They tell me they are on their way to the garment factories on the other side of the city.”

The majority of the country’s garment factories — making clothes for brand names in the U.S. and European markets — use firewood to heat old-fashioned boilers that produce hot water for dying fabrics and steam for ironing.

Some factories depend on firewood to supply all of their energy needs, according to industry experts.

Indeed, the use of firewood for energy is widely considered better for the environment than fossil fuels, as trees can be replanted to offset carbon emissions released during combustion. But replanting plans are limited here, while demand for firewood is growing.

In the 1990s, large areas of Cambodia’s rubber plantations — planted by the French in the early 20th century — had aged to the point where their yields of latex, the sap from which natural rubber is made, had dropped considerably, requiring extensive replanting.

Felling old trees made large quantities of rubber wood available to the emerging garment and brick factories in the Phnom Penh region.

But, according to a report released last year by the French environmental organization Geres, this source of timber is running out.

The Geres report found that 69 of the 310 garment factories then registered with the manufacturers’ association said they were using rubber wood to produce steam for ironing and dyeing clothes. In total, Geres estimated that garment factories burned around 65,000 cubic meters, or about 2.3 million cubic feet, of wood every month.

But a “critical period” started in 2009, the report said, “where rubber wood will not be available in sufficient quantity to supply the industrial sector its energy requirements.”

Energy experts and environmentalists say that timber is now being obtained instead from the country’s remaining natural-growth forests.

Graeme Brown, a private consultant working on natural resource management issues, said that a heightened demand for new rubber plantation acreage was leading to forest clearance, creating a “ready supply of natural forest timber.”

With the costs of wood-fired heating far lower than the cost of electricity from the national grid — power prices in Cambodia are among the highest in the region because of poor infrastructure and the use of inefficient diesel generators — there are fears that demand for firewood will continue to grow.

Still, there are signs that Cambodia’s garment factories, after a decade of efforts to improve labor standards, are now starting to concern themselves with environmental issues, too.

Albert Tan, vice president of Suntex, a Singaporean-owned garment factory in Phnom Penh, said the company had brought in a team of engineers from Malaysia to assess ways the factory could use less energy.

Mr. Tan said that wasting less energy would allow the factory to burn less wood and would also reduce dependence on diesel-powered backup generators in the event of a power cut — a frequent occurrence in Cambodia.

“There are not many results yet, but some studies are going on to see how best we can be eco-friendly and take care of the environment,” he said.

The owners of the factory, which produces about 2.5 million pieces of clothing per month for export to client brands in the United States and Europe, are also considering installing a gasification unit that would convert biomass or organic waste into cleaner-burning, more efficient synthetic gas, he added.

Rin Seyha, managing director of SME Renewable Energy, in Phnom Penh, said his company had been approached by several garment factories looking to use gasification.

But the technology available in Cambodia is still insufficient for large energy users like clothing factories, he said, and potential clients are often put off by the cost of importing larger units.

A gasification plant with a one megawatt generating capacity, imported from India, costs $300,000. Mr. Seyha’s company sold just one plant to a garment factory last year and so far in 2010 has aroused interest in three more. After 70 factories shut down during the global financial crisis, there are now about 250 factories operating in Cambodia.

Cutting down on emissions from burning wood and protecting the forests would help the industry’s image with environmentally conscious consumer abroad. But profit-focused private investors often balk at the first hurdle when it comes to introducing more environmentally friendly technology, because they consider the costs involved to be too high, said Yohanes Iwan Baskoro, country director for Geres.

Investors need to be educated to understand that improved technology can achieve a profitable return for companies in the long run, he said, adding that as well as fiscal incentives from the government, the banking sector also needs more encouragement to provide loans for environmental improvement.

“If we can’t show that there is profits in it for them I don’t think they will participate,” Mr. Baskoro said.

Julia Brickell, resident representative in Phnom Penh for the World Bank’s private-sector lender, the International Finance Corp., also said lenders needed to be persuaded.

“Financial institutions may focus too much on the short-term costs of investing in energy-efficiency improvements and not immediately see the longer-term benefits for their potential clients in terms of cost savings,” Ms. Brickell said. “This may impact their willingness to provide financing for technological upgrades.”

Garment workshops often operate from leased premises and lack fixed assets to provide collateral for loans, she added. “This may also result in reluctance on the part of the financial institutions to extend financing for energy efficiency improvements.”

Still, some progress is being made. A factory in Kandal Province, near Phnom Penh, which supplies garments to Hennes & Mauritz of Sweden and Marks & Spencer of Britain, is a case in point.

Wood is still being used to heat the factory’s boilers, but the company is using its staff house to test energy saving technologies on a small scale.

“Every factory wants to save costs, and our biggest cost is electricity,” said a manager at the factory, who spoke on condition of anonymity because, she said, bosses in Hong Kong had asked her to keep a low profile.

The company, one of Cambodia’s largest with nearly 3,000 workers, has installed solar panels on the roof of its staff house, where 50 air-conditioned rooms accommodate the management. To discourage energy waste, anyone using more than 200 kilowatt-hours of electricity per month is charged 50 cents per extra kilowatt-hour used.

Marks & Spencer is advising the factory through its so-called Plan A corporate strategy, to focus on improving environmental standards. More efficient lighting, better insulation and improved temperature control are three measures that have been identified.

At another factory, in Phnom Penh, where roughly 1,000 workers make luxury menswear for export, a program to fit energy-saving light bulbs is under way. With 3,500 neon lights in operation throughout the day, a sizable reduction in electricity consumption is expected, the factory’s general manager said, also speaking on condition of anonymity.

But balancing the need for increased productivity — Cambodia’s work force is among the least productive in the region, reflecting poor training levels — against the investments needed for better environmental standards is an almost impossible challenge, this manager said.

“The bottom line is this industry — in particular the garment sector — is the toughest sector in terms of competition,” he said. “Some people just can’t afford to make some of the changes that are being recommended.”

And according to several economic analysts and consultants here, who declined to be named because of the delicacy of the issue, it is not in the interests of manufacturers to show they can afford to install environmentally friendly technologies, because their brand-name clients may respond by putting pressure on them to lower their costs.

Still, Kanwarpreet Singh, chief representative for the H&M clothing brand in Cambodia, said that the industry as a whole was looking into newer and cleaner technologies to improve its image.

“If you use a lot of firewood, then it is not good for the environment,” he said. “As a company we try to encourage other sources of energy.”

Although Hennes & Mauritz factories use firewood as an energy source, Mr. Singh said, the company was evaluating alternatives.

For now, though, those are still unclear, and as Cambodia struggles to recover from a slump last year in exports to key U.S. and European markets, improving energy standards in factories is not a priority, he said.

Garment exports, accounting for 90 percent of Cambodia’s total exports, dropped almost 20 percent by value in 2009, to $2.38 billion.

“Nowadays one has to compete globally,” said Permod Kumar Gupta, chief technical adviser for the United Nations Industrial Development Organization in Cambodia. “We have to think, in the coming years, if we are not able to compete economically, environmentally and socially then difficulties will remain in how to compete with countries like China.”

Regardless of environmental concerns, Cambodia’s garment sector desperately needs to improve energy efficiency, with some factories spending up to $1,700 to produce a ton of clothing — more than three times the amount in neighboring Vietnam.

“In terms of energy efficiency, the sectors that are using biomass are particularly wasteful,” said Mr. Gupta.