On February 12, the European Commission decided to partially withdraw the Everything But Arms (EBA) scheme from Cambodia, affecting about one-fifth of Cambodia’s exports, including garments, footwear and travel goods. The move is expected to cost the Kingdom about $1.1 billion in revenue.
Simultaneously, the Kingdom is facing the consequences of the new coronavirus outbreak in China, which has forced factories there to suspend operations. This has disrupted the supply of raw materials in the local garment industry.
To discuss the present and future of the sector in light of these challenges, The Post’s May Kunmakara sits down with Garment Manufacturers Association in Cambodia (GMAC)’s secretary-general Ken Loo.
What is GMAC’s opinion on the EU’s decision to partially withdraw the EBA?
Ken Loo: Regarding the EBA issue, the imposition of tariffs will affect about $1.5 billion worth of exports. However, about $400 to $500 million of that amount is actually being exported to the UK, which has said it will continue to grant Cambodia trade preferences once they finalise the process of leaving the EU. If they stay true to their word, only about $1.1 billion worth of exports would be affected by the EBA.
How this will impact the sector is hard to tell. The industry now employs 750,000 workers. Forty-six per cent of our exports are going to the EU, accounting for about 350,000 workers. About 20 per cent of our exports will be affected. Doing a straight correlation, we can conclude that about 70,000 workers might be affected.
What sectors can absorb the labour that will be affected?
Ken Loo: We don’t know for sure, but we see very strong growth in the travel goods sector. Travel goods exports have grown from $53 million in 2016 to about $1.4 billion last year. This is very strong growth. If this continues, it would not be difficult for this sector to absorb some of the impacts of the EBA.
Following the outbreak of the new coronavirus in China, the government revised the economic growth projection from 6.5 per cent to 6.1 per cent in 2020. How will Covid-19 affect your industry?
Ken Loo: So far, the impact has been minimal. The main impact is the disruption of the supply chain, with about 60 per cent of our raw materials coming from China. But, you have to remember that Cambodia is not the only country that will be affected. Other countries in the region also rely heavily on China for the supply of raw materials, so they will also suffer.
The main impact that we will see in March and April if the situation in China doesn’t improve is that factories here will run out of fabric. As a result, they will have to suspend operations temporarily.
What do you think the government will do next with regards to the EBA issue?
Ken Loo: The government has been engaging in dialogue with the EU since the European bloc launched the investigation. I am sure the government will continue this dialogue. How the EU assesses such engagement and whether it recognises the progress made by Cambodia, it’s hard to predict.
The private sector has also been very engaged in providing information to the EU. We have told them that we didn’t agree with their decision to launch the investigation.
GMAC issued a statement a few days ago in response to the EU’s decision. In the report, we reiterated that Cambodia is fully committed to upholding labour rights. We have been doing so for the last 20 years and we will continue to do so. We asked the EU to look at other countries that continue to enjoy EBA privileges. Compared to these countries, Cambodia scores high when it comes to respecting labour rights.
Once again, I would like to urge the EU to reconsider its decision. The partial withdrawal of the EBA will harm the livelihoods of many low-income individuals and will undo a lot of the progress achieved in the last two decades.