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Logo of Phnom Penh Post newspaper Phnom Penh Post - Wage increases threaten US garment export future

Wage increases threaten US garment export future

Trade with the US might be increasing, but the Western nation’s long-time appetite for Cambodian-made garments might be headed for a decline.

Official data from the US Department of Commerce shows that imports from Cambodia reached $2.161 billion for the January-to-September period, up marginally from $2.017 billion during the same nine months in 2013.

The US has long been the largest importer of Cambodian-made goods, with the vast majority of products coming from the garment sector.

However, Kaing Monika, deputy secretary of the General of Garment Manufacturers Association of Cambodia (GMAC) told the Post yesterday that garment exports to the US market had in fact declined by 9 per cent between January and September.

He said the incremental increases to Cambodia’s minimum wage were inflating production costs for US firms. Last week, unions and the Ministry of Labour announced that the minimum wage would increase to $128 per month from the current $100 per month.

“Now, the total value of export of garment to EU is nearly the same to US’s. In the future, the export to EU will overtake US market due to the tax exemption for our products under the Everything But Arms deal,” Monika said.

“Also, the recent hike of minimum wage is making it increasingly difficult to compete for the US market. Cambodia does not receive duty free benefits from the US and places like Vietnam, which have high productivity at low costs, make it hard to compete,” he went on to say.

Hiroshi Suzuki, CEO and chief economist of the Business Research Institute for Cambodia (BRIC), retained optimism for the two countries’ trade relationship saying the US economy’s recovery, while gradual, will fuel increases in exports of Cambodian products.

“It’s regrettable, however, to see the slow increase of exports to US. That said, the US economy is on the way to full recovery, and exports from Cambodia could be expected to increase in near future,” he said.

Suzuki urged both nations to work towards diversifying its trade away from the Kingdom’s garment industry.

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