PHNOM PENH, Aug 12 (Reuters) - Cambodia's garment factories have indicated they will reject demands for an increase in the minimum wage next year, angering unions and risking upheaval in a crucial economic sector for years dogged by unrest.
A survey distributed among members of the Garment Manufacturers Association in Cambodia (GMAC), which represents the country's more than 500 factories, showed 63 percent of members want no raise and 26 percent support only marginal increases of $1-$5.
It comes ahead of talks next month between the government, factories and unions to address demands for a sharp increase from the current monthly $128 minimum to $177 in 2016. A final decision will be made in October.
Any flare-up would be a poorly timed blow to Cambodia, for which garments and footwear orders for brands like Gap, Nike, Adidas and H&M provide crucial jobs and are a key driver of the fledgling economy.
"We asked our members how much they can afford to increase," GMAC Secretary General Ken Loo told Reuters on Wednesday. "They say they cannot afford (any increase)."
Sustaining the $5 billion sector is a tricky balancing act for Cambodia. Higher wages could placate workers but make the country uncompetitive, while protests by unions risk scaring investors away.
Cambodia's competition is increasing, with Myanmar now receiving the same European Union trade privileges as Cambodia and courting foreign investors with tax breaks and what is likely to be a cheaper workforce.
Factory output remains strong in neighbouring Vietnam, which exported $31 billion in garments and footwear last year and is negotiating a Pacific trade pact that will give it tariff-free access to Cambodia's biggest market, the United States.
Hiroshi Uematsu, head of the Phnom Penh Special Economic Zone, said the wage issue was worrying investors and any increase should be "rational and reasonable".
The growth of the garment sector is a double-edged sword for Cambodia. The industry has created 600,000 jobs that sustain rural families and has spurred years of robust growth, but strikes by increasingly assertive and politicised unions have become troublesome.
The unions were outraged on Wednesday and threatened to stop work if factories were unwilling to budge on pay.
"Past raises have been done with blood and if factories don't give more, they will have problems of having no workers," said Chea Mony, president of Free Trade Union.
Pav Sina of the Collective Union Movement of Workers, said: "There won't be any other choice - our workers won't stay quiet." (Editing by Martin Petty)