News of the Cambodian garment sector’s slowdown in 2014 has sparked varied outlooks for the industry, which has long led the Kingdom’s exports and been the country’s engine for growth.
Ministry of Commerce data, released earlier this week, show exports for the sector slowed to a mere 4 per cent increase last year. A total of $5.7 billion of Cambodian-made garments were exported in 2014, up from $5.5 billion in 2013.
The figure marks a significant drop in year-on-year growth rates. Between 2009 and 2011, garment exports rose by 25 and 35 per cent respectively. Between 2011 and 2013, the industry grew at about 10 per cent.
“This four-to-six-year period can be considered a transition for the industry,” Srey Chanthy, independent economic analyst said.
Chanthy said while the 2014 result is underwhelming, new investment in the garment industry is expected to continue over the next six years. But new businesses will look to improve the industry’s efficiencies.
“After that period you will see the stabilisation of or decline in investments in the sector. Of course, Cambodia cannot continue to rely on the sector to expand its economy in a sustainable manner unless the sector can innovate.”
Chanty said that Cambodia’s garment industry lacks “long-term vision” and that inevitably the declining garment sector, which relies on cheap labour, will be replaced by higher-skilled manufacturing industries.
Alongside Myanmar and Bangladesh, Cambodia’s cheap labour force was listed as one of the most competitive out of 172 countries in UK-based analytics firm Maplecroft’s 2015 Labour Cost Index, published last week.
The index, however, came with a raft of warnings to firms considering entering Cambodia’s low-cost labour market.
Businesses should be wary of strikes, disruptions and poor worker health, and indirect costs to business such as brand damage, investor alienation, and potential lawsuits, the analytics company’s statement said.
Cambodia’s minimum wage has increased twice following the nationwide strikes of garment workers in January 2014, which resulted in five people being killed after security forces opened fire on protesters with live rounds. In February 2014, the minimum wage rose from $80 per month to $100, and on January 1, 2015, wages again rose to $128 per month.
Kaing Monika, deputy secretary of the General of Garment Manufacturers Association of Cambodia (GMAC), said with minimum wage negotiations again slated for July, the future growth and stability of the sector was unknown.
“First, it totally depends on the buyers’ current and future confidence – their sense of certainty in delivery of goods by factories here. The less confidence, the less orders,” he told the Post yesterday.