Cambodia’s apparel exports to the US increased over the first half of 2008 despite an overall decline in the US’ importation of apparel, according to a report released Tuesday.
Because of low overhead costs and cheap labor, Cambodia’s gross apparel exports to the US rose 2.15 percent during the first half of this year compared with a 4 percent decline in worldwide apparel exports to the US, according to Emerging Textiles, a US publication that compiles and analyzes data on the textile industry.
The US has sharply increased Cambodian-made hosiery, cotton dresses and cotton sweaters, the study found in data supplied by the US Commerce Department.
Cambodia’s apparel exports to the US totaled $1.16 billion in the first half of the year, up from $1.13 billion in the first half of 2007, according to Emerging Textiles.
At the same time, however, Emerging Textiles said the unit value of Cambodia’s apparel exports to the US had decreased by 2 percent, meaning that Cambodia is selling more apparels but for lower prices.
By contrast, US apparel imports have declined from China by 4 percent, from the Philippines by 17.2 percent and from Thailand by 1.8 percent, according to Emerging Textiles. Vietnam, however, saw exports increase 25 percent, Bangladesh saw exports increase 6.7 percent and most Central American countries also saw exports rise.
“Cambodia got better results compared with other countries and resisted surging competition from Vietnam,” said Axel Mangenot, founder and editor of France-based Emerging Textiles, a monitor of the worldwide garment industry.
“What is actually helping Cambodia is the relatively low level in wages and the direct link between large US brands and the apparel producers in the country,” Mangenot wrote in an e-mail.
Cambodia’s increase in exports to the US bodes well considering the overall decrease in US imports of apparels, Mangenot said, which is due to the fall in US house prices and the rise in gas and food prices.
If Cambodia continues to monitor working conditions and increase reliability, Mangenot said the country can expect to see the Chinese clothing industry relocate here as well as to Vietnam in the coming years.
But at the same time, Mangenot said, Cambodia must look into creating a national textile industry to provide yarns and fabrics and also brace for more competition from China come Jan 1, 2009, when the US lifts quotas on Chinese imports.
While it’s not bad news for the local garment industry, local economists also said it’s not great news.
Neou Seiha, an economist with the Economic Institute of Cambodia, confirmed that the value of exports to the US increased 2 percent over the first half of 2008. But comparatively, the value of exports to the US had increased more than 10 percent over the same period in 2007.
Profits from apparel exports to the US have been declining since October 2007, according to Commerce Ministry data. Profits are decreasing, Neou Seiha explained, because the US is fetching lower prices for apparel exports amid an economic slowdown.
Kaing Monika, external affairs manager for the Garment Manufacturers Association of Cambodia, said GMAC’s 310 member factories have also recorded a 2 percent increase in exports to the US. But at the same time, Kaing Monika said high oil prices, skyrocketing inflation and low productivity levels are hurting overall profits in the local garment industry.
“It is good in terms of growth, but I think if you analyze it further it’s not really good. Production costs are high and profit margins are very thin,” he said Wednesday by telephone.
Miguel Lin, the general manager of QMI Industrial Co Ltd, which employs 5,100 workers and is one of Cambodia’s largest garment manufacturers, said Wednesday that QMI’s volume of exports to the US was stable over the year.
However, he confirmed that apparel exports are fetching lower prices.
While China is a threat to the garment industry, he said US importers continue to be interested in Cambodian apparel because of the country’s high labor standards, Finance Ministry Secretary General Hang Chuon Naron said.
Cambodia exported at total of $1.5 billion in garments over the first half of 2008, which put the country on track to hit $3 billion by the end of the year, although he said garment exports usually increase in the second half of the year.
Yet while this would be a 7 percent increase from 2007 to 2008, Hang Chuon Naron said it would also be less than the 10 percent increase from 2006 to 2007.
“We can’t say it’s down. We need to wait until the end of year,” he said by telephone Wednesday.
Exports to Asean nations, while a small percentage of total exports, had increased 300 percent over the first half of 2008 due in part to the weak dollar cheapening Cambodian exports, Hang Chuon Naron said, adding that this might help maintain overall high growth in the garment industry.