Cambodia’s garment exports to
its second largest market, the U.S., are up and growing, but so are trade
tensions, which could nip some of that growth in the bud.Exports of apparel and
footwear products from Cambodia are expected to grow 5 percent this year, and
the Garment Manufacturers Association in Cambodia (GMAC) says that growth
should sustain in the coming years too, according to the Khmer Times.
That is, provided that trade relations remain as is and ideally, amiable.In
recent months, the U.S. imposed visa sanctions on Cambodia for refusing to take
people back who the U.S. is trying to deport. In recent weeks, Cambodian Prime
Minister Hun Sen has accused the U.S. of trying to topple its government.Cambodia’s overall export figures show its total exports to the U.S. up 5.6% to
$2.28 billion, so if there’s to be any fallout in export numbers over politics
and relations, it hasn’t happened yet.And though it’s too soon for much of these tensions to have
impacted the apparel and textiles sector, for the year to September the U.S.
took in $2.18 billion worth of textiles and apparel from Cambodia, a 3.2% dip
from the same period last year.
That indicates that the bulk of the growth expected for Cambodia’s garment
exports this year will likely come from what’s going to the European Union.
However, the country is facing issues there too.A delegation from the European
Parliament warned last week that Cambodia could face action that would shift
the country’s aid and trade preferences over its human rights situation, which
has improved far less than Western leaders and companies doing business there
want.
These tensions all come as the cost of sourcing in Cambodia is set to increase,
too.The country recently approved an 11 percent wage hike that will bring
garment workers’ average wages to $170 a month starting in January. The hike,
which was part of a bigger benefits package, has garment manufacturers worried
that it will serve as a hit to Cambodia’s competitiveness when stacked against
other low-cost sourcing countries like Vietnam and, in particular, Myanmar,
where wages are a considerably lower $67 a month. Even if Myanmar approves a 55
percent wage hike that’s presently being mulled in the country, that would
bring wages to $99—still a much more cost-competitive option than Cambodia.
According to the Khmer Times, 25 new garment factories have started operations
in Cambodia this year, but as many as 53 have closed citing costs that were too
high to continue.“When the minimum wage is raised to $170 in January, more
factories will encounter difficulties if things don’t change,” Ken Loo, GMAC
general secretary, told the Khmer Times. “We hope there is a change in
productivity, a reduction in the cost of doing business and new governmental
policies to help investors.”
Source: Khmer Times, Cambodia Tuesday, 07 November 2017