On Cambodia & Textiles

After 30 years of civil war, occupation and turmoil Cambodia has finally found back the track to stability. The new King Sihamoni enjoys growing popularity and support of the people after he followed retired King Sihanouk on the throne in 2005. Prime Minister Hun Sen is in the meanwhile the longest reigning Premier amongst his colleagues in the Asean countries.

The sectors that the government especially wants to develop in the coming years are the Agro-culture Industry, the field of Tourism and the Textile-sector. The textile sector in Cambodia has in fact a long history prior to the modern day production facilities that cater the demand for exports at present day times.

Weaving of silk and cotton and the manufacturing of clothes can be traced back to the early days of the Khmer empire. During the French colonial period Cambodia was a provider of raw materials as well as a buyer of finished products. After Independence from France in 1954 the industrialization process began. In the late 50’s and the 60’s textile and garment factories were built in several Provinces.
Unfortunately these facilities were badly damaged or even destroyed during the fights that followed in the 70’s & 80’s.

In the mid-90’s a new export garment industry started to develop and gained great momentum in the coming years. The Exports from the Cambodian Garment industry grew from US$ 4 million in 1994 to 2,115 million in 2005.

After the end of the Multi Fibre Agreement on Textiles beginning of 2005 Cambodia was able to increase its exports despite the increased competition from countries like China & India. In fact the drop of quotas has led to a consolidation in the industry, smaller manufacturers closed down, while bigger facilities increased their production and new players came to Cambodia for the first time.

Some 70% of exports now go to the US and around 25% to the EU – which grants Cambodia MFN (Most Favoured Nation) status and therefore duty free imports for certain garments under the GSP agreement.

Currently there are some 300 garment factories – with more than 90% in the vincinity of the capital Phnom Penh - employing roughly 300.000 workers. Most investment in the factories is from Mainland China, Hong Kong as well as Taiwan, and to a lesser extent from countries such as Singapore, Korea and Malaysia.

In the previous years the GMAC (Garment Manufacturing Association of Cambodia) has made significant efforts to establish Cambodia as a “clean place” of production where international labor standards are met.

It profited here from the cooperation with the ILO (International Labor Organization) which initiated and runs a number of projects aiming at raising labor standards as well as productivity in the factories.
The prospects for the future are still positive as the Cambodian government tries to further attract investors with generous tax breaks as well as with a pool of low cost labor.

International customers have also recognized the relatively good labor standards provided in Cambodia and continue to add this market into their sourcing portfolio.

It is desirable that the positive development in the garments sector continues as it is not only a revenue source for the Cambodian government, but equally important it provides a steady income for the 300.000 mainly female workers. Some 90% of these mostly low-skilled workers come from rural areas in the provinces and are now often even in the position to support their families despite the relatively low income. Moreover about twice the number of jobs is dependent directly from the Cambodian Garment sector, such as in the sectors of transportation, food catering etc..

The above figures may not be striking on the international level – however they are significant for a country that recovers from 30 years of turmoil, is still listed as LDC (Least Developed Countries) and remains one of the poorest in Asia.