Apparel exports to the US, Cambodia’s largest market, have been on the decline since October, according to data from the Ministry of Commerce. Officials attribute the decline to increasing competition from Vietnam, which joined the World Trade Organization in January 2007, as well as the brewing US economic slowdown. Nevertheless, exports to Canada and the European Union have grown marginally, mitigating the effects on the country’s garment industry.
In the last three months of 2007, apparel exports to the US were $352 million, 30 percent below 2006 levels, according to Ministry of Commerce data. And in the first trimester of this year, exports to the US slipped 1.44 percent—compared with the same period the year before—to $500 million, according to the data.
But overall, Cambodia’s apparel exports have increased slightly—4.78 percent in the first trimester of this year—because of rising demand in Europe and Canada, according to Ministry data.
Exports to Canada surged 42.43 percent to $50 million, and exports to the EU rose 20.46 percent to $139.7 million, in the first trimester of this year compared with the same period a year ago. However, exports to Japan slid 17.87 percent, to $8.3 million.
“With its current recession, American demand and spending on clothing is believed to drop. Lucky enough, we are surviving by a very slight increase, but the rate is far lower than the usually around 20 percent yearly increases in 2005, 2006 and 2007 respectively,” Kaing Monika, external affairs manager for the Garment Manufacturers Association of Cambodia, said in an e-mail.
He added that exports to the EU have been on the rise since 2003, a trend that has been bolstered by the falling dollar. He said that rising production costs in China have worked in Cambodia’s favor, as buyers search for alternative sources of clothing.
Labor costs remain low in Vietnam, but Vietnam has found it difficult to recruit enough garment workers as it focuses on ramping up its heavy industries, he said.
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 this year the EU is surpassing the US as his major market.
So far this year, 40 percent of exports, by quantity, have gone to the US and 50 percent to the EU; in 2006, 52 percent of exports went to the US, and just 40 percent to the EU, he said.
“The US market is not as good as before,” he said.
Increasing competition from China and Vietnam has also hurt business, he said. Two of his largest US customers shifted production to Vietnam this year, he said.
“Cambodia is a small competitor,” he added.
According to International Development Systems, a US group that tracks apparel imports, US apparel imports from Vietnam rose 40.15 percent-—the most of any major importer—for the year ending February 2008. Imports from Cambodia rose only 10.56 percent during the same period. China remains the largest US apparel supplier, accounting for nearly a third of all imports, according to IDS.
Meanwhile, garment exports from Cambodia to Europe seem to be holding firm.
Adrian Ross, general manager of New Island Clothing (Cambodia) Ltd, which makes clothes for Britain’s Marks and Spencer PLC, said he’s planning to expand.
New Island plans to build a 3,500-square-meter extension to its factory and ramp up output in the next year by 25 to 30 percent, he said.
“We have been increasing our production on a continual basis since opening the plant,” he said in an e-mail.
New Island, which doesn’t export to the US, is a subsidiary of the UK’s Quantum Clothing Group Ltd and employs 900 Cambodian workers, Ross said.