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Big rise in funds for travel goods manufacturing

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A leather bag for sale in a shop in the capital Phnom Penh. POST PIX

Big rise in funds for travel goods manufacturing

Cambodia has seen investment in the manufacture of travel goods soar noticeably in early this year as the Council for the Development of Cambodia (CDC) figures reveal grants for bag manufacturers accounted for nearly half of all investment projects.

Industry insiders claim the spike is due to tariff privileges Cambodian-made travelling goods receive from the US under its Generalised System of Preferences (GSP) and the increasing trend of global manufacturing firms leaving China due to rising labour costs.

CDC has granted investment approval to a total of 45 projects from January to Tuesday, according to figures on its Facebook page, of which 21, almost half, were for bag manufacturing. The accumulated investment capital for the 21 projects is about $100 million, and if all projects materialise, 31,951 jobs will be created.

CDC reviews investment applications and grants incentives to investment projects meeting the requirements as laid out in Cambodian investment law.

CDC officials could not be reached for comment on Tuesday.

Garment Manufacturers Association in Cambodia (GMAC) deputy secretary-general Kaing Monika on Tuesday said there is an increasing trend in low value-added industries leaving China due to rising costs of labour and to avoid tariffs in response to the escalating trade war between the US and China.

He added that Cambodia is becoming more attractive to those companies, thanks to duty-free access to the US market since July 2016, when 28 travel-goods production lines operating in the Kingdom became eligible for the scheme.

“The main reasons behind attracting more bag manufacturers is the GSP that the US provides to Cambodia, the trend of manufactures leaving China due to the rising costs of labour there and a shortage of labour in low value-added industries,” he said.

He added that the threat of a US-China trade war was another factor contributing to the push in China for manufacturers of low value-added products to accelerate plans to relocate factories to other countries – including Cambodia.

US President Donald Trump late last year threatened to raise levies on $200 billion worth of Chinese goods from 10 to 25 per cent. The list of affected products included handbags, travel items and other accessories. Though Trump announced a delay in the tariff increase late last month, analysts still warn that it does not mean the trade war is officially over.

Travel goods manufacturers are not obliged to register as GMAC members but are encouraged to on a voluntary basis. There are currently more than 20 members voluntarily registered as GMAC members, up from around 10 in 2017.

According to Monika, the value of Cambodian travel goods exports amounted to about $500 million last year, of which $350 million was exported to the US market.