As Garment Exports Rise, Job Growth Still Looks Bleak

Garment exports from Cambodia continued a steady path toward recovery in the first four months of this year, growing in value by 11.14 percent to $772 million, the Commerce Ministry said in data released yesterday.

The rise in trade built on improved export levels recorded during the first quarter of the year, when garment exports rose by 9.1 percent.

Despite the rebound in exports, analysts say job growth is bouncing back at a much slower rate as wholesale prices in the sector have fallen by about 10 percent when compared to the same period last year.

Catherine Vaillancourt-Laflamme, a training specialist for the International Labor Organization in Cambodia, said the low prices currently affecting the industry should act as an incentive for manufacturers to move up the value chain and produce more intricate garment items that sell at a higher price.

“If more garments of quality are produced then prices will go up,” she said, adding that demand for more complex garments was healthy.

According to the Commerce Ministry data, garment exports to the US increased by 10.08 percent to $503.26 million and accounted for 56.1 percent of all exports leaving Cambodia.

Garment exports to Europe increased by just 4.8 percent and made up 16.5 percent of Cambodia’s total exports.

The rise in exports has still not reached pre-crisis levels. Garment exports in the first four months of 2008 reached $879.84 million.

Experts say that Cambodia must increase its export base so it is not so heavily dependent on markets in the US and Europe, where 81.6 percent of all Cambodia’s exports were sent during the first four months of this year.

In a sign that efforts to broaden the market for Cambodian garments may be taking hold, garment exports to Japan increased by 144.2 percent to $17.67 million between January and April.

“We’ve been doing that [expanding the export market] all along. It’s just a question of whether the factors were favorable,” said Ken Loo, secretary-general of the Garment Manufacturers Association in Cambodia.

Mr Loo said that the Asean-Japan Free Trade Agreement, which took effect in Cambodia in December, had triggered the substantial growth in exports to Japan.

He added that job growth in the garment sector would “probably not” recover this year, with prices still hovering at between 10 to 15 percent lower than the same period last year.

As the economic recovery takes hold in developed countries, “consumers are demanding cheaper garments and at the same time higher quality,” Mr Loo said.

“We’ve always being saying that buyers need to pay us more so we have more to pay the workers with.”

A report released last week by the International Labor Organization showed employment growth of 0.2 percent from November 2009 to April 2010.

Still, the industry’s workforce has declined 17.7 percent from April 2008 to 297,000 employees in April 2010, according to the report.

Mean Sophea, director of the trade preference department in the Ministry of Commerce, said that while Cambodia stands to benefit from rising labor costs in the wider region, its poor level of human resources puts it at a serious disadvantage.

“We hardly compete with Vietnam,” Mr Sophea said. “We’re a very poor country…with human resources constraints. Vietnam can take the opportunity to increase its market share in the US.”

Much of the growth potential in Cambodia’s garment sector currently hinges on debate in the US on whether or not to change its so-called General System of Preferences, a large-scale trade system outlining benefits for least developed countries.

Duty-free status “will be beneficial for Cambodia because our economy is dependent on garment exports,” Mr Sophea said. “If we don’t have a sizeable market we will face a very serious problem.”



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