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Export slump for garments softens

Export slump for garments softens

A shopper walks past a store in the US. Industry figures say Christmas sales in the US are critical for Cambodia’s garment sector.

GARMENT exports declined at their slowest pace this year in October, falling just 6.64 percent on an annualised basis to US$199.35 million, figures released Wednesday by the Ministry of Commerce showed.

The decline is the smallest year-on-year monthly drop since last December, when exports fell 13.64 percent to $222.1 million, though industry figures said it was too soon to claim that the sector’s fortunes were changing.

Garment Manufacturers Association of Cambodia Secretary General Ken Loo said one relatively good month was not enough to predict whether the impact of the global economic recession on the sector was beginning to bottom out.

Sales figures were “nothing to scream about” at the moment, he said, adding that a good performance over two or three months would be necessary before the Champagne bottles could be brought out.

“I wouldn’t say it’s positive, you can’t tell, but 2010 will definitely be a better year than 2009,” he said.

Garment exports have now fallen 20.02 percent over the first 10 months of 2009 and are worth just under $2 billion, official figures show.

They have fallen on a year-on-year basis every month since last November, when they fell 0.89 percent to $218.3 million, dragged down by falling consumer spending in the key US market, which accounts for around 70 percent of total garment exports.

Exports also fell in July and September last year, before the shockwaves of the US financial meltdown began to be felt around the world, but gained in every other month in 2008.

October’s figures come after exports declined 15.15 percent year on year in September to $189.7 million, which at the time was the best month for the sector this year.

More worryingly, the sector has been losing market share against regional competitors in the key US market since the onset of the global financial crisis.

The World Bank said in November that Cambodia’s US market share had fallen from 3.2 percent last year to 2.8 percent in mid-2009, reflecting what it labelled a “possible structural weakness” in the country’s competitiveness.

All countries in the region had been hit hard as US demand for garments plummeted in the midst of the economic and financial crisis, but as demand began to recover, Cambodia was not sharing in the gains, the World Bank said.

The International Monetary Fund echoed the concerns in a report earlier this month, saying the country’s primary export industry was showing little sign of recovery, and that underlying structural issues – including low productivity, unreliable supply and high cost of electricity, high transport costs and protracted time to market, as well as a lack of vertical integration – had reduced Cambodia’s competitiveness in the region.

Exports to the US have fallen 25.82 percent across the first 10 months of the year to $1.27 million, ministry figures show, but they fell in October just 4.5 percent from a year earlier to $126.6 million.

Ok Boung, a secretary of state at the Ministry of Commerce in charge of garment exports, called on the US government to pass a bill currently before it that would extend duty-free access to Cambodia garment exports. Other least- developed countries enjoy preferential access to the market, but Cambodia pays some of the highest export duties in the world, he said.

“If the US gives us [duty-free access] we believe that the economic crisis in Cambodia will be saved,” Ok Boung said.

Export figures for November are not yet available as there is a lag of up to two months before exporters register details with the Ministry of Commerce.

Customs refuses to release its up-to-date data publicly.


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