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Logo of Phnom Penh Post newspaper Phnom Penh Post - Garment exports plummet 35 percent in first quarter

Garment exports plummet 35 percent in first quarter

090519_13.jpg
090519_13.jpg

Latest official figures show month-on-month declines worsening from January to March, but garment sector sources point to signs of recovery.

Photo by:
TRACEY SHELTON

Workers make clothes last week at the Injae Garment Co Ltd factory in Phnom Penh. 

GMAC to host forum to address decline

THE garment industry is planning a joint forum with the government and leading manufacturers on May 27 at Phnom Penh's Raffles Hotel Le Royal. "Eighteen out of 274 owners and senior management from garment factories in Cambodia will attend," said Kaing Monika, external affairs manager of the Garment Manufacturers' Association of Cambodia (GMAC), the country's largest garment industry association and organiser of the forum. Kaing Monika said that Minister of Commerce Cham Prasidh would preside over the event. "It will be a platform for investors to voice their concerns and discuss the challenges they are facing as the sector faces a decline [in production orders]," he said. "It is also a chance for buyers to express their concerns and to try and strategise on ways of working with the industry."
NGUON SOVAN

FIGURES obtained Monday from the Ministry of Commerce show garment exports plummeted 35 percent in the first quarter of 2009.

Exports to the United States were worst hit, down 47 percent compared with the first quarter of 2008, while those to the European Union fell 22 percent, and to Canada 21 percent.

Cambodia exported garments worth US$279 million to the US in the first quarter, with the EU and Canada purchasing US$124 million and US$39 million respectively. Exports fell every month in the quarter compared with 2008: down 19 percent in January, 23 percent in February, and a shocking 60 percent in March, suggesting that the industry had yet to reach a turning point by the end of March.

There was some good news. Exports to Japan were up 14 percent and those to other markets - a category which includes the Middle East and Russia - increased 61 percent, a sign that the Kingdom had managed to seek out new markets in the face of plummetting world demand.

Local garment producers have been working to diversify beyond the US and European markets, but those rises have come off low volumes.

Despite the drop in exports to key markets, industry insiders say the country's garment sector may have already hit bottom although figures for April are not yet available.

Signs of life are emerging, with US retail sales (excluding automobiles) expected to show a slight increase in April. A Bloomberg survey predicts a 0.2 percent increase, following a 1 percent decrease in March.

Domestic garment-makers said that the Kingdom continues to benefit from lower costs, luring factories away from Vietnam and China.

The Garment Manufacturers Association of Cambodia (GMAC) told the Post that the number of factories registered with the industry trade body increased from 260 at the beginning of the year up to 274 currently, and said more factories could open this year.

GMAC's External Affairs Manager Kaing Monika said that some factories may have started operations before the beginning of the year.

"Three months ago the situation was very bad.... Things are a bit better right now," Kaing Monika said. "We expect to see more orders by June, but the situation is not entirely clear."

Signs of economic life

The owner of the Injae garment factory in Phnom Penh said last week that lower costs and an improving business climate were encouraging more factories to set up shop here.

"Factories are moving from China to Cambodia and Laos," said Nam-Shik Kang, Injae's managing director. "In China, the garment sector is competing for labour with industries like shipbuilding and automobiles, which is making it more expensive. In Cambodia, garments are the only industry."

Nam-Shik Kang expects an industry turnaround will materialise by September provided US demand picks up.

Vanessa Rossi, an emerging markets expert at the UK research body Chatham House, said the garment sector might see a slight recovery this year.

"Investors may start to build up their inventories in the near future, but we should be extremely careful because this is not necessarily a sign of underlying growth," she said.

Garments were expected to make up just over 70 percent of Cambodia's total export revenue for 2009, the London-based Economist Intelligence Unit said last month.

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