Export growth in the garment sector, Cambodia’s flagship industry, approached a standstill in 2007 as global market forces converged to cool demand for Cambodian-made garments, industry officials said Wednesday.
The total value of all garment exports last year rose to $2.93 billion, a meager increase over the $2.88 billion recorded in 2006, said Ken Loo, secretary-general of the Garment Manufacturer’s Association of Cambodia.
“We’re up 2 percent [in 2007], which is nothing,” he said Wednesday, adding that growth in 2006 was up 18 percent compared to 2005.
GMAC announced Tuesday that fourth-quarter exports of garments from Cambodia in 2007 had nose-dived by 46 percent when compared with the same period in 2006.
An official at the Ministry of Commerce said Tuesday that the government had yet to tally official 2007 garment industry export data.
Though it is too early to predict if the downward trend will continue, industry experts reiterated Wednesday that the nation’s largest employer and largest source of income will have to reform in several ways if it is to remain afloat in the global marketplace.
“It is hard to say. I think the trend will continue into 2008 unless we do something dramatic,” Loo said.
The government should help stabilize labor relations, as uncertainty due to strikes is dissuading investors and compounding worries about regional competition, he said.
Sok Hach, director of the Economic Institute of Cambodia, said Wednesday that the recent drop off in garment exports was likely due both to the European Union’s recent lifting of import quotas on Chinese garments and to the slowing US economy.
Cambodia remains competitive in terms of minimum wage and as an ethical sourcing destination, but poor infrastructure and low productivity makes Cambodia less attractive for investors.
“A prediction is very hard to see,” Sok Hach said.
“I think the Cambodian garment industry will survive because the economic slow down in the US will reverse in six to 12 months,” he added.
CPP lawmaker Cheam Yeap, chairman of the National Assembly’s finance commission, said that while regional competition in the garment industry is a concern the Cambodian economy is robust and diversifying.
“We’ve never seen the number of investors decrease. The number of investors and foreign direct investment keeps increasing,” he said, adding that the economy rested on other pillars, including tourism, agriculture and construction.
“I think there is no clear sign of an impact on the garment industry in Cambodia yet,” he added.
Free Trade Union President Chea Mony said Wednesday that he doubted labor action was the cause of declining garment orders. The FTU has led only three strikes so far this year, he said.
Garment workers are demanding an increase in the minimum wage as it has not kept pace with the cost of living, he added.
Men Nimmith, executive director of the Arbitration Council Foundation, which supports the Arbitration Council, said the council had resolved 148 labor disputes in 2007, 80 percent of which it settled by making a judgment.
Strikes alone are not the main source of the garment industry’s woes, Men Nimmith said, adding that he doubted the industry is in grave danger.
“In my point of view, the garment industry will not die soon because some buyers purchase our product because it is linked to international labor standards,” he said.
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