Dec 13, 2017
Cambodia's garment export growth expected to slow next year
Dec 13, 2017
Concerns about the impact of next year’s election and competition from lower-cost or more efficient Asian rivals will slow the growth of Cambodia’s garment industry next year, the main manufacturers’ group said.
The Garment Manufacturers Association in Cambodia, representing 600 factories that employ around 700,000 people, said it expected export growth of 3 to 4 percent next year from a rate of 8 percent in the first nine months of 2017.
It did not see any major risk that the European Union would cut trade preferences, a threat raised by the bloc after the main opposition party was dissolved last month at the request of Prime Minister Hun Sen’s government.
“Any concern is legitimate but we feel that any economic sanctions won’t happen,” Kaing Monika, deputy secretary of GMAC, told Reuters in an interview. He said he saw industry growth slowing “because of election concerns from buyers.”
Cambodia is due to hold elections in July next year and Hun Sen looks set for an easy win after the dissolution of the opposition Cambodia National Rescue Party (CNRP) and arrest of its leader, Kem Sokha.
In 2016, Cambodia’s garment exports were worth $6.3 billion and they reached $4.9 billion in the first seven months of 2017.
If there was the loss of EU duty free access under the Everything But Arms scheme for poor countries it would deal a huge blow to Cambodia, which is among the world’s top garment-making hubs and sends about 30 percent of its exports to the European Union.
The European Chamber of Commerce in Cambodia said it opposed any cut to trade preferences.
“Trade sanctions will not help in any way and they will put into jeopardy all the achievements that Cambodia has made over the past 20 years,” said Blaise Kilian, the chamber’s advocacy manager.
Labour rights campaigners shared that view.
“We think it’s important for the brands to stay engaged in Cambodia,” said Elena Arengo from the International Labor Rights Forum, a workers’ rights group. “Pulling out would mean workers getting hurt.”
Cambodia’s factories supply global brands including Gap Inc , Sweden-based H & M Hennes & Mauritz AB, and sportswear brands Nike, Puma and Adidas , among others.
Over the past two decades, Cambodia has been the sixth fastest expanding economy in the world, with an average GDP growth rate of 7.6 percent, according to the World Bank, driven largely by garment exports.
Cambodia has been getting increasingly close to China politically and economically in recent years, and that relationship will only tighten in the face of Western condemnation of Hun Sen’s crackdown on the opposition.
But China also has a big stake in the success of the garment industry. Around 65 percent of Cambodia’s garment factories are owned by companies from Greater China.
In terms of labor costs, wages in Cambodia are higher than in Bangladesh, another garment-making hub, where the minimum monthly wage for garment workers is 5,300 taka ($65) compared to the current, $153 minimum wage in Cambodia.
Vietnam’s costs may be higher - the government’s minimum wage range is $113.61 to $165.13 - but Cambodia sits below Vietnam when it comes to productivity, said Kaing Monika.
“They have cheaper production costs, they have their own textile mills, they have cheaper electricity and more efficient infrastructure,” said Kaing Monika.
“They have direct shipments from Ho Chi Minh to Los Angeles while we do not have that. We have to go to Hong Kong or Malaysia,” he said.
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