As Garment Industry Rebounds, Disadvantages Remain

As Cambodia’s garment industry continues to rebound in the wake of the global financial crisis, lingering problems persist that put Cambodia at a competitive disadvantage, participants in a workshop on the industry said yesterday.

Neou Seiha, a senior researcher for the Economic Institute of Cambodia, said Cambodian garment exports had increased 12 percent in the first six months of the year compared to the same period last year even as the industry faced disadvantages with production costs. According a copy of his presentation, total exports reached $1.2 billion in the first six months of the year.

“If we can keep this growth in the next six months of this year, our garment industry will have the same level of growth as in early 2008,” he said after his presentation. The EIC co-hosted the one-day event which questioned the competitiveness of Cambodia’s garment industry.

But he said Cambodia’s lack of textile mills and its labor conflicts put it at a disadvantage and increased production costs.

“We don’t have factories to produce cloth like China and Vietnam,” he said. “We just stand by producing clothing.”

If Cambodia is able to launch a robust textile industry, it will become more independent of market fluctuations and become more attractive for buyers, he said.

Tatsufumi Yamagata, director of the Japan-based Institute of Developing Economies which also hosted the event, said that Cambodian labor costs, as of a 2008 study, were twice as high as that of Bangladesh

“Bangladesh was less affected by the crisis,” he said on the sidelines of the conference. “Cambodia might have a hard time competing with Bangladesh.”

Still, he said, though Vietnam and China had some advantages in terms of technology and human resources, they often have higher wages.

Ken Loo, secretary-general of the Garment Manufacturers Association in Cambodia, said that even with the approved wage increase to $61 scheduled to begin in October, Cambodia could become more competitive in comparison to other countries like Bangladesh, China and Vietnam which are also dealing with unions clamoring for wage hikes.

“We won’t know the final impact, because I think the dust is still settling,” he said. “It will of course affect our competitive position.”

(Additional reporting by Tim Sturrock)

 

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