A worker at the Injae garment factory.
EVEN with news of a punishing slowdown in the garment sector, the Korean-owned Injae garment factory is buzzing with activity.
Orders from the US clothing giant JC Penney and Aeropostale are keeping the sewing lines working overtime, and manager Kang Nam-shik says he is cautiously optimistic about the coming months.
"Our orders are strong right now, but we are still waiting for a turnaround.... If things pick up, Cambodia could see more garment factories open up," said Kang, who also heads Korean Chamber of Commerce.
Injae is one of Korea's 25 factories in Cambodia and employs more than 1,000 workers.
Like other garment factories, Korean ones are reliant on the US market and have been hit hard by the slowdown.
Kang said falling foreign demand has lead 25 percent of Korean garment factories to shut their doors.
He said US demand is down 10-15 percent from last year, and that new markets can't make up for the shortfall.
"There is strong demand in other markets, but it is not enough. The average for a US order is more than 100,000 pieces per style.
For Europe, it is only about 2,000 pieces. There is a big difference between producing 1,000 and 1 million pieces," he said.
"We have been approached by a lot of interested European buyers, but we can't meet their prices," he said.
The manager says doing business in Cambodia has its good and its bad points, but that in general, the sector is well-positioned compared to its neighbours.
"Garment makers are coming to Cambodia not necessarily because it is a good business climate, but because other countries like China are not looking as good as they used to."
He said that competition from heavy industries like shipbuilding and auto manufacturing have driven up the cost of labour in China, making Laos and Cambodia good alternative production bases.
The main challenges for garment producers in Cambodia, he says, are low worker productivity, slow customs procedures, and costly energy.
"Productivity is 10-15 percent lower than Vietnam and China, but that can be improved with more training."
He said that a low-tech customs service means that export containers take longer than expected to reach suppliers.
"Containers can be held up to 2-weeks at customs, which costs us a lot."
When containers are delayed, factories have to fly the garments to suppliers, which costs more than double. He said he expects a modest recovery in 2009. "We need to see what happens over the next 5-6 months ...Things are good here, but not for all factories."