Garment Sector Sheds 51,000 Jobs in 6 Months

More than 51,000 garment workers have lost their jobs since September, an approximate 15 percent drop in the number of people employed by the clothing manufacturing industry, which now employs around 300,000 people, Commerce Minister Cham Prasidh told an economic forum Thursday.

The job losses in the garment industry come as garment export figures for February plummeted approximately 56 percent compared to February 2008, according to Cham Prasidh’s presentation at the “2009 Cambodia Outlook Conference” in Phnom Penh.

“This is a challenge for the Royal Government of Cambo­dia…. [The economy is] not immune to the external shocks,” said Cham Prasidh, whose presentation focused on the ways in which Cambodia’s narrowly based economy has been struck by falling global demand.

Cham Prasidh, along with many other participants, said that reforms must be deepened, manufacturing diversified beyond garments, and more infrastructure built, particularly for agriculture which could cushion Cambodia from the unfolding economic crisis.

“We have to move to new markets. We have to move to new markets in the region,” he said.

He also advocated for a more step-by-step approach to improving the economy rather than a single stimulus package.

Prime Minister Hun Sen told the forum that the country needs to strengthen the economy so that its previous growth is not lost by the time the global economy picks back up. The global crisis will have “serious impacts on us all,” he said.

“This crisis will impact some key economic sectors and bring down the growth of major sectors such as garments, tourism and construction by about 15 to 20 percent which will have negative impacts on our economy and people,” Hun Sen said, striking a very different tone than on Monday when he said that pessimistic predictions about the economy were unimportant.

Hun Sen comments on Monday were made in reaction to the International Monetary Fund’s recent warning that Cambodia is heading toward recession, and that GDP would contract by 0.5 percent this year after a decade frequently characterized by double-digit growth.

IMF Resident Representative John Nelmes reiterated on Thursday that Cambodia’s economy was in negative territory, and that volatility still remains in the “grim” global economic climate.

“We’re talking about a period of major contraction in economic activity,” Nelmes said.

“What we have seen so far is that the depth of the recession is much worse than anticipated,” he said.

“The prospects for growth next year for Cambodia have large degrees of uncertainty around any numbers we put out there. We have for Cambodia 3 percent growth projected for 2010,” he said, adding that predictions can change.

Data on exports from some countries are “frightening,” and US retailers have projected negative growth this year, Nelmes said. “This does not bode well for garment exports,” he added.

High inflation in 2008 and the rising value of the dollar have also made Cambodia a more expensive destination for tourists, Nelmes continued.

He predicted that tourism, which had seen nearly 20 percent growth annually for several years – but dropped to about 5 percent growth in 2008 – could also experience negative growth in 2009. And retail sales of cars and motorcycles declined 50 and 20 percent at the end of 2008 compared to 12 months earlier, he added.

Stephen Higgins, CEO of ANZ Royal Bank, said that Cambodia needs cheaper electricity and more roads to make it more competitive.

While the cost of one kilowatt-hour of electricity in Vietnam is about $0.05, it often costs more than $0.18 in Cambodia, Higgins said. And the cost of transporting agricultural goods in Cambodia is four times higher than the cost of transporting goods in Thailand, he said.

“These are major constraints,” Higgins said.

“If the government is going to spend money they should be spending it on things that will increase the productive capacity of the country,” he said, adding that although agriculture infrastructure can improve, it will likely create more income but fewer jobs.

More manufacturing in areas other than garments will be needed to absorb the country’s growing workforce, he said, noting that garments make up more than half of the country’s industrial output, while food manufacturing makes up less than 10 percent.

Higgins also advocated for the long-promised commercial court to deal with business disputes as a key to encouraging investors.

Corruption remains a concern for investors, and a law or other anti-corruption measures could help the situation, he said.             “Showing that something is being done about [corruption] certainly would go a long way.”

 

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