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Industrial sector grows, but still reliant on garment factories

An employee works at a garment factory in Phnom Penh’s Por Sen Chey district in 2014. Vireak Mai
An employee works at a garment factory in Phnom Penh’s Por Sen Chey district in 2014. Vireak Mai

Industrial sector grows, but still reliant on garment factories

The government released a summary of the country’s industrial sector over the past five years, showing a marked increase in growth across a wide variety of indicators.

The report, released by the Ministry of Industry and Handicrafts (MIH) last week, lacks specific data but shows a generally positive trend in the number of factories in the country, the number of workers employed in the industrial sector and the variety of goods produced for both import and export.

Cambodia had a total of 1,522 registered factories in 2017, up 37 percent from five years ago when there were 1,108 factories. That growth was halted last year, as the number of factories actually decreased for the first time in five years, down slightly from the all-time high of 1,579 in 2016.

The slight drop in the total number of factories could be attributed to the government’s push to diversify from garment factories and pursue more large-scale projects, according to Hort Pheng, director of the Industry Affairs Department at MIH.

“Now we’ve almost filled demand for garment factories, of which there are already more than a thousand,” Pheng said. “Now our policy will focus on attracting investment for technical factories, as a potential industry that promotes large scale” projects and operations.

The number of garment factories grew 29 percent over five years and now stands at 1,031, about two-thirds of the total number of factories. The remaining one-third of the factories were a diverse set of manufacturing operations, including 117 food, beverage and cigarettes factories; 104 chemical rubber and plastic factories; and 44 paper processing factories.

Factories in the Kingdom generated $10.79 billion in revenue last year, up 70 percent from 2013. More than $7 billion of that total came from the export-focused garment industry, while domestic industries generated another $2.62 billion.

The steady improvement in the industrial sector reflected improvements in the government’s commerce and investment policies, but Cambodia needed to further diversify its workforce and increase the skills of its workers to stay competitive, according to Nguon Meng Tech, director of the Cambodia Chamber of Commerce.

“Even if we have a good policy from the government, the industry still needs the human resources and technicians in order to serve new investment,” Meng Tech said. “We have to encourage the emigrant workers to look at working in this country.”

Cambodia’s economy has long been reliant on the garment sector, which employed 847,419 workers last year, making up 86 percent of the 982,203 people employed in the industrial sector, according to the report.

That puts the country at risk of disruption from potential shocks in the industry or rollbacks in preferential trade agreements. The main importer of Cambodian garments is the EU, which offers Cambodia duty-free access under the Everything But Arms (EBA) agreement, on the condition that democratic and human rights standards are met.

Reuters and the Financial Times both reported last week that the EU was considering possible sanctions against the Cambodian government over a crackdown on the political opposition, including a possible rollback of the EBA agreement.

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