Major challenges of Cambodia’s garment sector

Desk Report       
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Cambodia’s garment exports grew at a slower speed in the first half of the year. The industry experts of the country opined that Cambodia is facing huge competition from several countries, which is the reason of this low growth. The central bank of the country said, possibly due to stronger competition from Vietnam and Myanmar for U.S. sales, garment exports grew just 4 percent in the first six months of the year, less than half of the 9 percent pace seen in the same period in 2016.

National Bank of Cambodia (NBC) revealed its semiannual report, where the growth is mentioned. “The garment sector, which is the strongest force in expanding the economy, maintains fair growth even though it is at a little slow pace if compared with the same period last year,” National Bank of Cambodia (NBC) said in its semiannual report.

Figure 1: Showing the recent challenges faced by Cambodia’s garment industry.
Figure 1: Showing the recent challenges faced by Cambodia’s garment industry.

Cambodia’s garment exports observed a 2.3 percent drop in exports to the United States amid stronger competition from Vietnam and Myanmar, according to the report. On the other hand, Cambodia’s minimum wage is increased, which is also a factor, leading to higher production costs, the report said.

Cambodia’s new minimum wage is $153 for garment workers, more than double from many competitive countries like India, Bangladesh, Ethiopia etc.

The country’s exporters may face more challenges ahead as the World Bank’s upgrade of the economy last year to lower-middle income country status. Cambodia will no longer receive preferential trade access in the European Union (EU) over the next three years, the report noted.

Foreign direct investment in the garment sector also declined. It is dropped by about 30 percent in the first quarter of 2017, compared to a 5 percent drop in the same period last year, according to the report.

Cambodia’s textile and footwear industry generates $6 billion annually for the economy. The industry is very important for the economy of Cambodia that has created 600,000 jobs, sustaining many rural families.

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