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Swifter footwear sales help push garment growth

A truck leaves a footwear factory in Kampong Cham province in 2014.
A truck leaves a footwear factory in Kampong Cham province in 2014. Vireak Mai

Swifter footwear sales help push garment growth

Cambodia's garment sector – a key driver of the economy – exhibited modest growth last year, with total exports topping $6.3 billion in 2015, up from $5.8 billion one year earlier, according to an industry report released yesterday.

In its third bulletin on the Kingdom’s garment sector, the International Labour Organisation (ILO) said the footwear segment far outpaced the sector’s modest 6.5 per cent export growth last year, with footwear exports increasing by 21.8 per cent to $538 million in 2015.

The report also showed a slowdown in new factory openings, with just 75 new garment factories opening in 2015, and two closing shop, compared to a net 98 new factories in 2014.

Matthew Cowgill, chief technical adviser for the ILO’s regional office for Asia and the Pacific, said the drop in new factory openings could be attributed to the government’s push to diversify investment flows to other sectors of the economy.

“There are signs that this investment is increasingly diversified, with investment flowing to sectors beyond the garment and footwear sector,” he said. “I would note that the net increase of 73 garment and footwear factories over the year remains quite strong.”

The report cites figures from the Cambodian Investment Board, which reported that of the 124 new approved investments, 72 were in the garment and footwear sector, reflecting a 17 per cent drop in terms of value.

Despite an increase in exports, Cambodian garment exporters saw a continuing decline in the prices paid by buyers, especially in the US and Japanese markets, the report said.

Cowgill added that the ILO had not studied the causes for these drops in price to “conclusively state the reasons for price trends in various markets”.

“Many factors on both the demand and supply side of the garment and footwear market can affect prices,” he explained.

Ken Loo, spokesman for industry body Garment Manufacturers Association in Cambodia (GMAC), said that a decline in prices paid by buyers has been going on for 30 years and was not a new trend.

“The main reason for the loss is the increase in labour costs with little or no increase in productivity,” he said.

On the issue of new garment factory openings, Loo said he was unsure of the ILO’s source, but that GMAC had seen an equal number of closures and new factories last year – 85 members in total – but that was including both the garment and footwear sectors, as well as their subcontractors.

This quarter’s report also contained a review on the tripartite minimum wage determination process used in the Kingdom, which Cowgill said was more an “explanation of the process, rather than a judgment about whether the minimum wage is set at the ideal level”.

“The ILO does not take a view about the appropriateness of the level of the minimum wage,” he added.

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