Following a year of turbulence, political and labor unrest will continue to drag on the economy in 2014, the Asian Development Bank said in a recent report.
But for manufacturers planning to create crucial value-added jobs, Cambodia’s biggest obstacle to growth is a lack of skilled workers.
Factory owners in Phnom Penh’s Special Economic Zone (SEZ) say political instability in the wake of July’s national election and nationwide strikes in the garment sector have not significantly affected business.
But as Cambodia’s industrial sector tries to diversify beyond garment factories, a widespread lack of capable workers presents a big hurdle.
Yasuyuki Inoue, vice president of Minebea (Cambodia) Co. Ltd. said companies are flocking to Cambodia because of low labor costs, but they struggle to find able workers. His company employs 4,000 workers to make machinery components and electronics devices.
“Costs in Thailand are too high, so we can’t expand there anymore and China’s are also high,” Mr. Inoue said. “There are no other countries where it is financially viable for expansion so we came here.”
“The work we do here is tech intensive and recruiting workers is a big challenge,” he said.
Saran Sopha, a customer service manager at the SEZ, said labor unrest has had little impact on higher-value factories outside the garment sector. There, unions have yet to gain a foothold.
“The problems in the garment industry are caused by the unions in the factories,” she said. “Political and labor unrest have not really impacted the size of investment and applications in the SEZ.”
Hiroshi Suzuki, chief economist at the Business Research Institute of Cambodia, said: “The political situation had some effect on the economy. However, I am of the opinion that the level of the effect is limited.”
Japanese manufacturers, which make up almost 50 percent of those listed in Phnom Penh’s SEZ, have not been deterred by the political climate in Cambodia, Mr. Suzuki added.
“I could not find any evidence that Japanese investment has been directly affected by the political situation,” Mr. Suzuki said.
The government has stressed a need for Cambodia to diversify its exports from low-skilled and low-paying industries, such as garments, by placing a priority on vocational training and job training programs. Garments currently account for 80 percent of Cambodia’s exports.
Ourng Borinn, head of human resources at A Plus Consulting, said although the number of university graduates in the country is expanding rapidly, there remains a severe skills mismatch.
“[Graduates] can’t meet the expectation of the employer,” Mr. Borinn said.
“Demonstrations in the garment sector are not deterring investment in other sectors,” he said. “But my concern is a mismatch of skills that exist when new companies enter the country.”