The worldwide stock market slowdown in the wake of terrorist attacks in the US has rattled the nerves of economic officials here in Cambodia, especially those involved in the garment industry.
The main markets for Cambodia’s garment industry are the US and Europe. Although the full impact of the terrorist attack—which sent European and Asian markets plummeting Tuesday and Wednesday—will not be fully measured for some weeks, some factories are already reporting that their business partners abroad are asking for a postponement or cancellation of orders.
“I received some phone calls from the United States Wednesday morning, asking about postponing the contracts,” Garment Manufacturing Association of Cambodia President Van Sou Ing said.
US markets remained closed Wednesday, but some were planning to open for trading on Thursday.
Some economists were forecasting an slowdown in the world’s largest economy even before Tuesday’s terrorist attacks. The US unemployment index rose from 4.5 percent to 4.9 percent between July and August, the highest one-month unemployment increase in seven years, which prompted a further slide in the stock market.
The day after the attacks, which leveled New York City’s World Trade Center, the US dollar lost two percent of its total value against the Japanese yen. Economists say a shrinking currency tends to decrease a country’s demand for imports, since their currency buys less overseas.
Moreover, if the US economy continues its downward slide in the wake of the terrorist attacks, it could bring consumer confidence down with it.
All of this could undermine Cambodia’s garment sector. A great many Cambodian companies subcontract with US manufacturers to make such goods as T-shirts and tennis shoes for sale in the US.
The garment industry is Cambodia’s largest exporter and the country’s largest employer.
Some manufacturers say it is still too early to tell what impact the attacks will have, but acknowledged their concern.
“I haven’t received any calls to cancel or postpone contracts. I don’t think [it will happen] now, but maybe later,” Cambodian Fabrics Manufacture manager Sam Han said.
While stressing that it was still premature to predict how the terrorist attacks will ripple through the world economy and affect Cambodia, Ministry of Commerce Secretary of State Sok Siphana, who returned from a US visit just one day ahead of the attacks, said he was worried.
“How can Cambodia’s garment products sell in America in this situation?” he asked.
In this context of uncertainty, further labor violence, like that seen last week at the Ming Da shoe factory, will only make things worse, Van Sou Ing said.
“I don’t think violence, demonstrating, breaking stuff and stealing things is a good solution. It was not a good idea to do that, and won’t reach a good solution,” he said.