Cambodia’s garment industry—one of the main engines of the economy—is still growing but that growth appears to be slowing, according to data from the Ministry of Commerce obtained Wednesday.
According to the ministry, total exports of garments and textiles in the first five months of this year amounted to nearly $985 million, an increase of 11.2 percent compared to the same period in 2006.
But the growth is significantly lower than the leap in exports during the same period in 2006.
From January to May 2006, garment industry exports amounted to around $885 million—a 30 percent jump from $680 million exported in the first five months of 2005. From January to May 2005 garment exports grew 9.4 percent compared to the same period in 2004.
Last year garment exports accounted for nearly 19 percent of the country’s total GDP and, according to the International Labor Organization, the industry as of April employed more than 337,000 workers.
Ken Loo, secretary-general of the Garment Manufacturers’ Association of Cambodia, said the industry was concerned about the apparent slowing in growth but said there was little that could be done about it for now.
“It is a combination of external factors that are beyond our control,” he said.
The main reason is likely the recent ascension of Vietnam to the World Trade Organization, Ken Loo said.
Vietnam’s entry to the WTO in January has eliminated many of the restrictions that kept Vietnamese goods out of international markets that Cambodia exports to.
Ken Loo added that another potential factor is the price fetched by garments on the international market, which he said has continued to drop.
Thon Virak, deputy director of the Commerce Ministry’s foreign trade department, said Cambodia’s exports have still shown strong growth in the US and European Union markets, but there has been a decline in exports to non-EU countries.
The ministry’s figures, however, show that though there was significant growth in exports to the US from January to February compared to the same period last year, there has actually been a significant decline in exports for April and May compared to the same time last year.
However, according to the data, garment exports tend to rise in the latter half of the year.
A World Bank economist said Thursday that Vietnam’s WTO membership has definitely had an effect on Cambodia’s garment industry.
“Cambodian and Vietnam are equal competitors,” the economist said, on condition of anonymity, adding that Vietnam no longer needs to pay prohibitive taxes on their exports that could previously reach as high as 32 percent.
The Cambodian garment industry also faces a far bigger challenge come the beginning of next year when the US and EU eliminate safeguards on Chinese exports, the economist said.
“It will be seriously competitive among garment exporters in 2008 if the US and EU lift those safeguards,” he added.
(Additional reporting by John Maloy)