Cambodia to Gain as Adidas Pivots From China

Adidas, one of the country’s biggest garment buyers, says it will expand production in Cambodia over the next five years as part of its pivot away from China to lower-cost producers in Southeast Asia.

During an investors workshop last week, the German sportswear giant’s head of sourcing, John McNamara, announced plans to increase orders from Burma, Cambodia, Indonesia and Vietnam over the next half-decade to escape rapidly rising labor costs in China, according to a Reuters report.

Adidas shoes are displayed at a shop in Phnom Penh on Tuesday. (Siv Channa/The Cambodia Daily)
Adidas shoes are displayed at a shop in Phnom Penh on Tuesday. (Siv Channa/The Cambodia Daily)

On Tuesday, a spokeswoman for Adidas said the brand intended to raise its global share of sourcing from Cambodia by 4 percent by the end of the decade.

“Cambodia is an important source country for us and we are committed to it. In fact, we expect sourcing volumes to further increase over the next couple of years,” Katja Schreiber said in an email.

“In 2014 we sourced 16 percent of our apparel from Cambodia and we expect this percentage to increase to 20 percent by 2020. We also source some of our footwear from Cambodia and will continue to do so.”

Ms. Schreiber said the shift to Southeast Asia was also part of the brand’s plans to diversify its suppliers. The company says it currently sources from 24 of Cambodia’s 500-odd exporting garment factories, including Grand Twins International, one of only three firms listed on the country’s fledgling stock exchange.

The planned increase comes despite rising labor costs in Cambodia itself. As of January, the minimum wage for garment workers will have jumped 40 percent, to $140 per month, in the space of just two years. Labor costs are rising in Burma and Vietnam, too, but, as in Cambodia, remain far lower than in China.

The shift also comes amid complaints from the government, factories and unions that the major brands sourcing from Cambodia are not raising the prices they pay for their orders. Factories also complain that buyers rarely make long-term commitments, making it difficult to plan ahead.

Spokesmen for the Labor Ministry and the Garment Manufacturers Association in Cambodia, which represents the country’s exporting garment factories, could not be reached for comment.

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