Flagging garment industry faces threat from larger competitors, but could shift to European Union markets as US economic downturn hits sales
Garment workers eat their lunch outside of a factory in Phnom Penh.
CAMBODIA is pushing the United States to import more of the Kingdom's textiles amid fears for the garment sector, a key economic driver that has been rapidly slowing since 2007 and is likely to face its most serious hit yet as the worsening financial crisis in America further dampens trade.
Prime Minister Hun Sen, in a meeting Monday with US Deputy Secretary of State John Negroponte, urged the US - the largest buyer of Cambodian garments - to increase imports to more than US$2 billion.
"This is an opportunity for the Cambodian people to have more jobs," Hun Sen told reporters after the meeting.
Cambodia's garment sector has traded on its reputation as a labour-friendly industry, allowing the International Labour Organisation to monitor workplace conditions and carving out a niche market that allowed it to compete with larger producers. But buyers appear increasingly likely to turn towards cheaper manufacturers in countries like China and Vietnam, Cambodia's most serious competitors, and the effects are beginning to show.
Cambodia exported $967.9 million worth of garments to the US in the first five months of 2008, while Vietnam tallied up $1.9 billion and China $12 billion, according to US Commerce Department figures.
The Asian Development Bank, in a revision of its 2008 development outlook, said Cambodia's garment sector had an "uncertain future".
"The scheduled removal at end-2008 of the US safeguards [on Chinese textiles], coupled with Vietnam's accession to WTO, will expose it to much stiffer competition," the ADB said.
Even more alarming is data from the Cambodia Development Research Institute (CDRI), which says that the volume of textile and clothing exports to the US dropped by more than 15 percent in 2007.
THIS IS AN
OPPORTUNITY FOR THE CAMBODIAN PEOPLE TO HAVE MORE JOBS.
"With the US economic slowdown, purchasing power is much lower," said independent economist Sok Sina.
Industry officials say the result has been the closure of 25 factories so far this year. While new factories continue to open, there has been a net loss of 2,000 jobs.
"The sector is likely heading for a nosedive," said Cheath Khemara, a senior labour officer with the Garment Manufacturers Association of Cambodia (GMAC), adding that industry players, from factory owners to union leaders, lacked a comprehensive strategy to deal with the downturn.
Sok Sina said, however, that with the US market shrinking, Cambodia could look more towards the European Union to bolster its flagging textile sector. The EU currently takes only 24 percent of Cambodia's garments, but exports values rose $47 million in the first five months of the year to $222 million, according to the CDRI.
"Cambodia's exports to the EU are strong," Sok Sina said.
Government officials have also downplayed the ADB's gloomy outlook, saying overall exports remain strong. "Of course factories close ... but the sector keeps growing," said Thon Virak, deputy director general for the Foreign Trade Department at the Commerce Ministry.