The garment industry suffered a net loss of 20,000 jobs and 22 factories in 2008 as international demand for Cambodian-made garments plummeted, and the outlook for 2009 remains bleak with more expected factory closures and job losses, industry officials said Wednesday.
Kaing Monika, external affairs manager of the Garment Manufacturers Association in Cambodia, which oversees all of the country’s exporting garment factories, said 43 member factories closed in 2008 and 21 new factories opened.
As GMAC’s membership fell to 268 factories, the total number of workers in GMAC-affiliated companies also fell from 340,000 to 320,000, Kaing Monika said.
“If the crisis worsens, then GMAC workers will continue to lose their jobs,” he said by telephone Wednesday.
GMAC chairman Van Sou Ieng said the sector should brace for more losses.
“There is going to be a drop [in garment orders] this quarter,” he said by telephone.
Commerce Ministry Secretary of State Mao Thora said his ministry is measuring the impact of the global financial crisis on the garment industry and is preparing a plan to prevent further losses.
“We can’t make any plans without first understanding the problems,” he said by telephone Wednesday.
About 70 percent of all Cambodian garment exports go to the US, Kaing Monika said, and as American shoppers closed their purses and retail outlets shuttered their doors, annual garment revenues from exports to the US have declined for the first time on record.
Kaing Monika said that, according to the US Commerce Department, 2008 revenues from Cambodian garment exports to the US dropped by about 0.35 percent to $2.233 billion, down from the near 20 percent yearly increases seen in 2005, 2006 and 2007.
While export revenues dropped, the volume of garments exported to the US actually increased 3.82 percent last year, Kaing Monika said, meaning that Cambodian factories are selling their products at reduced prices.
“Cheap is the key word now,” he said.
Cheap, however, is hard to achieve in Cambodia, because of low productivity and expensive electricity and fuel, and because all raw products must be imported while most final products must be exported, Van Sou Ieng said.
For these reasons, Vietnam, which boasts cheap electricity and a domestic market for textiles, is still managing double-digit garment export growth, while Cambodia’s total garment exports grew by just 2 percent in 2008, Van Sou Ieng said.
According to data from the Commerce Ministry, in the first 11 months of 2008 total garment exports grew by 2.41 percent to $2.79 billion, with considerable growth (32.85 percent) in exports to Canada. But revenues from garment exports to the US and Japan fell 0.72 percent and 24.97 percent respectively.
Garment exports account for about 10 percent of Cambodia’s GDP, which hit $11 billion in 2008, up from $8.6 billion in 2007, said Neou Seiha, an economist at the Economic Institute of Cambodia.
“When the garment revenues are slowing, this means that the GDP is also slowing,” Neou Seiha said by telephone Wednesday. “As garment exports have decreased, so too has Cambodia’s GDP growth rate.”
Past years of strong growth in the key sectors of tourism, construction and garments have kept GDP growth high, Neou Seiha said, but with each sector feeling a slowdown the country’s economic growth rate has taken a beating.
Though the garment sector directly employs more than 320,000, Neou Seiha said those workers in turn, indirectly, sustain more than 1 million Cambodians.
“One million people are feeling the slowdown in growth in the garment sector,” he said.
Also of concern is that pressure on the garment sector to cut costs could spur factories to reduce workers’ benefits, said Ny You, communications officer of the International Labor Organization’s Better Factories Cambodia program.
“We have to make sure the working conditions in the factories are favorable and the factories are not reducing entitlement benefits. We don’t have a clear survey or research, but most of the people think that at the time of a financial crisis [the factories] will try to reduce costs,” he said Tuesday.
The Better Factories Cambodia program, which had 337 exporting and non-exporting member factories at the beginning of 2008, now registers fewer than 300 members because of steady factory closures, Ny You said by telephone.
Free Trade Union President Chea Mony said that in the first weeks of 2009 another two factories have closed and three have suspended operations.
“I would like the government to take actions to protect us,” he said Wednesday.