While Cambodia faces the possibility of losing access to the EU’s preferential Everything But Arms (EBA) agreement, leading Chinese clothing manufacturer Shenzhou International Group Holdings Ltd appears unconcerned, recently investing $150 million in a new facility in Phnom Penh.
With construction breaking ground on Wednesday, such a significant project is a strong sign that large manufacturers would be able to overcome EBA withdrawal, an economist said on Thursday.
The groundbreaking ceremony at the site in the Phnom Penh Special Economic Zone was attended by Shenzhou International Group Holdings chairman Ma Jianrong, Chinese ambassador Wang Wentian, Nike Inc vice-president Mark Griffie and Hun Manet, deputy commander-in-chief of the Royal Cambodian Armed Forces and the commander of its infantry.
Sam Ma, assistant to the general manager of Shenzhou International Group Holdings, said that since it began operating in Cambodia in 2005, the company has become one of the largest textile manufacturers in the Kingdom. Last year alone, the firm exported $440 million of products and employed a total of 11,500 people.
“We decided to make full use of the factory’s experience in Cambodia and further expand the production capacity and facilities here,” Ma said.
The new factory is scheduled to be completed in March 2021 and will create a further 17,000 jobs, he added.
Shenzhou International Group Holdings is a leading exporter to China, and its customers include Nike, Adidas and Uniqlo.
Nike vice-president Griffie said Shenzhou Co Ltd’s first shipment for Nike was in 2007, and since then the firm has grown to be one of the American sporting equipment giant’s largest and most important apparel suppliers.
More than 3,000 Shenzhou (Cambodia) employees in the Kingdom make products for Nike, while the majority of its products serve the European market.
“Cambodia has been an important country for Shenzhou and for Nike,” Griffie said. “With the new factory that will be built on this site, we look forward to continued growth together in Cambodia for many years to come.”
The garment sector is the backbone of Cambodia’s export-driven economy. The majority of the Kingdom’s textile exports are shipped to the EU due to the EBA scheme, which allows Cambodian products to be imported into the 28-nation bloc duty and tax-free.
However, the EU last month announced that it had begun the 18-month process of withdrawing the Kingdom’s access to its EBA over “a deterioration of democracy and respect for human rights”.
The Garment Manufacturers Association in Cambodia later issued an announcement saying that a suspension of EBA would increase tariffs by 12 per cent in the garment sector and by eight to 17 per cent for footwear.
Chan Sophal, founder and director of the Centre for Policy Studies, told The Post on Thursday that a large manufacturer like Shenzhou International Group Holdings considers investments in the long term, and are therefore confident they can overcome the loss of EBA.
“This kind of news supports my analysis that the Cambodian economy will continue to grow with or without the EBA scheme as long as Cambodia continues to carry out reforms for competitiveness in the long term,” Sophal said.