Cambodia was the only country in the Greater Mekong subregion to have increased its rate of exports following the 2008 global financial crisis, thanks largely to garments accounting for the majority of its manufacturing exports, a new report has found.
The Greater Mekong 5 – Cambodia, Laos, Vietnam, Myanmar and Thailand – have all increased exports over the past two decades, reaching a combined total of $383 billion. But in the five years following the financial crisis, all of the Mekong 5, other than Cambodia, have seen a deceleration in their export growth rate, according to the ANZ’s Greater Mekong Quarterly Outlook.
“The two key points from the report pertaining to Cambodia are firstly, that Cambodia is the only Mekong economy that has grown exports at a faster pace post-GFC than pre-GFC; and secondly that the composition of trade is beginning to diversify away from garment and textile,” said Grant Knuckey, CEO of ANZ Royal.
According to the report, Cambodian exports had a compounded annual growth rate of 15.5 per cent prior to 2007-2008 and rose to 16.2 per cent in the five years following the economic crisis.
Despite the slow rate of growth, exports in the region are still driven by the strength of Thailand’s shipments, followed by Vietnam. While comparative rankings remained the same, Thailand saw its share of Mekong 5 exports drop from 76 per cent in 2003 to 60 per cent in 2013. During the same period, Vietnam leapfrogged from a 19 per cent share of regional shipments to 34 per cent.
Cambodia’s heavy reliance on clothing and apparel exports helped because these are products normally purchased using disposable income and didn’t see much dip in demand from importing countries after the financial crisis and hence didn’t see as much of a collapse as electronics did.
Mey Kalyan, senior adviser to the Supreme National Economic Council, agreed with this assessment saying Cambodian exports were not “luxury” items and people overseas continued to consume these products despite the downturn.
“It is what is used. It is not in good shape but people will continue to consume these products because it is not a luxury item,” Kalyan said.
He added that value-added manufacturing in bags, leather goods and auto parts would further help Cambodia diversify from labour- and resource-heavy sectors, like garments. The government recently released the Industrial Development Policy 2015-2025, which would give a greater push to increasing variety in Cambodia’s exports, Kalyan said.
“It is like driving a car. You have to change gears from one to two to three, based on your objectives. It is time to change gears,” said Kalyan.
Cambodian clothing and textile products accounted for more than 94 per cent of exports in 2004. But in 2014, close to three quarters of Cambodia’s $7.4 billion exports was from garments and apparel, where as “other” high value-added manufacturing had risen to 19.5 per cent, from 1 per cent in 2004. The report did not detail what these other exports were, with rice, shoes, timber and fishing rounding up the Kingdom’s exports.
“This suggests that exports are slowly moving away from traditional shipments of low value-added production. If Cambodia continues to follow this path, its strong trade out performance of recent years looks set to continue,” the report reads.
Srey Chanthy, an independent economist, said that while the process of enlarging Cambodia’s export basket was slow, more needed to be done to reduce dependence on labour-intensive manufacturing.
“Not in the short term, but in the medium term that can happen,” Chanthy said.
“But the government has to put in place resources, especially human resource development and training, for the youth and young workers in the country.”