Cambodia: solid growth for garment industry

The International Labour Organisation (ILO) published its second issue of the Cambodia Garment and Footwear Sector Bulletin last week and found that Cambodia's garment and footwear industry, which is still the backbone of the country's economy, experienced a "solid" first half of 2015: Its export value grew by 12.7 percent to 3 billion US dollars between the first half of 2014 and the first half of 2015, employment rose by 10.2 percent and real wages increased by 19 percent in the same time period.

In only ten years, the country's share of garment and footwear exports worldwide has increased rapidly from 1.1 percent in 2005 to 1.8 per cent in 2014, making Cambodia the 8th largest garment and footwear exporter by market share after China, Vietnam, Hong Kong, Bangladesh, India, Turkey and Indonesia, respectively.

Cambodian garment exports reach 2.7 billion US dollars

"Although footwear exports have grown more rapidly than garment exports, footwear remains a relatively small proportion of the total sector. In value terms, exports of the garment and footwear sector reached 3 billion US dollars in the first half of 2015, of which footwear comprises 282 million US dollars, or 9% of the total. Garments account for the remaining 2.7 billion US dollars in exports", finds the report, citing data by the Ministry of Commerce. However, footwear exports are growing more rapidly at an average of 33 percent over the past five years (2009-2014), while garments exports showed an average annual growth of 17.8 percent in the same time period.

In view of a globally competitive garment industry, Cambodian garment producers had to face declining prices paid by buyers: Between 2001 and 2014, the price per dozen garments sold to the US market fell by 32 percent, while the average price paid by EU buyers reduced by 15 percent, the two single biggest export destinations for Cambodia.

In fact, with 42 percent of total garment and footwear exports, the EU became the most important export destination in 2014, overtaking the US at 34 percent. This trend continued in the first half of 2015, with a share of 43 percent for the EU and 30 percent for the US. The remaining 27 percent went to other countries, notably Canada and Japan.

In terms of wages, Cambodia's minimum wage has reached a level of 128 US dollars per month after it was increased from 100 US dollars per month as of January 1st, 2015 (in 2013, it was 80 US dollars a month). Effective from January 1st, 2016, the minimum wage - which only applies to the garment and footwear sector - will further increase to 140 US dollars per month. The minimum wage increase of 28 percent from 2014 to 2015 puts Cambodia ahead of other garment-producing nations like Indonesia, Pakistan, Vietnam, India and Bangladesh where the increases were 23.8 percent, 16.1 percent, 11.4 percent, 11.2 percent and 4.5 percent, respectively.

The Cambodian garment and footwear industry currently employs more than 600,000 people - of which 86 percent are women - in some 655 registered factories. Garment and footwear exports remain the backbone of economy, representing 80 percent of all merchandise exports and accounting for 10.2 percent of the gross domestic product. Thus, the garment and footwear sector is Cambodia’s largest manufacturing industry and its largest foreign exchange earner.

Looking ahead, the apparel industry banks on skill development, to ensure stability of labour supply, productivity growth and improving living standards of workers. In early September, construction on a garment training institute has started, which is expected to be completed by 2017. Cambodia is also looking to move its industrial base from relatively low-cost and labour-intensive activities to be a higher value-added industry.

Images: Cambodian women garment workers / ILO in Asia and the Pacific