Sourcing guide: Cambodia

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Sourcing guide: Cambodia

LIZ MILLER, WGSN 27.01.10

Cambodia's garment industry is closely tied to the demands of US consumers, so has faced a
difficult period with a number of factory closures. The government and trade bodies are trying
to introduce measures to diversify the industry away from dependence on one market.

QUICK COUNTRY FACTS

Official name: Cambodia
Population: 14 million
Capital city: Phnom Penh
Main languages: Khmer, French and English
Currency: Riel (KHR)
Government: Multi-party democracy under constitutional monarchy
Membership of international groups/organisations: United Nations, ASEAN, Asian Development Bank, World Trade
Organization, International Monetary Fund and World Bank
Free trade agreements: ASEAN. Countries according Most Favoured Nation or Generalised System of Preference of zero
or reduced imports from Cambodia include Australia, Canada, South Korea, Japan, Norway, New Zealand, Republic of
Korea, Russia, Sweden and the US
Main trading partners (all industries): Import partners: Singapore, Vietnam, Japan, Australia, Hong Kong, Indonesia,
Thailand. Export partners: Singapore, Japan, Thailand, Hong Kong, Indonesia, Malaysia, US
Known for: Knitted garments for women, men and children, plus sports and casualwear
Major holiday periods: Chinese New Year (January or February), Khmer New Year (April), Water Festival (November)

Cambodia

Made in Cambodia

Summary
Cambodia's garment industry is relatively young, dating from when the Kingdom of Cambodia was reestablished under the monarchy in 1993. The US and EU granted trade privileges to the country in 1996
and foreign investment in the sector from China, Hong Kong, Malaysia and Singapore enabled the
industry to grow rapidly.
Garments and textiles now dominate the country's export sector and have helped drive economic
growth, alongside construction, agriculture and tourism. Cambodia's garment industry enjoyed steady
growth from 2001 to 2007, up 16.6 per cent, but dropped by 2.2 per cent in 2008, affected by the global
recession.
Garment, textile and shoe exports from Cambodia were worth about $3 billion in 2008, with around two
thirds of all garment, textile and shoe shipments going to the US. Together the clothing industry
accounts for more than 85 per cent of Cambodia's exports. Garment exports make up around 96 per
cent of the industry, with shoes worth around 3 per cent and textiles accounting for just under 1 per
cent.

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Sourcing guide: Cambodia

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However the drop in garment exports, alongside a decline in construction and tourism means Cambodia's
GDP is forecast to slip by 1.5 per cent this year compared to 2008 according to the Asian Development
Bank. In 2010 an upturn in exports is expected and GDP is forecast to grow by 3 per cent.

State of the industry

The Cambodian garment industry has been through a very challenging period in 2008 and 2009. Reports
suggest that the industry has shrunk by around 25 per cent due to its exposure to the US market, which
has seen a drop in demand for clothing due to the recession and the knock on effect of a decline in
factory orders.
There are around 260 export-oriented textile and garment factories operating in the country and these
employ about 310,000 workers, who are mostly women according to the Garment Manufacturers
Association in Cambodia (GMAC). This year 77 garment factories shut in the first nine months, affecting
around 20,000 workers. Another 53 factories suspended operations between January and September,
but half of these have reopened according to a report from the Ministry of Labour.
Garment exports to the US have fallen 28 per cent year on year to $1.12 billion over the first nine
months of the year, according to figures from the Ministry of Commerce. The Cambodian apparel
industry appears to be losing out to neighbouring rivals, as Bangladesh, Vietnam and China all exported
more garments to the US in the first five months of the year according to the United Nations.
The majority of the industry is made up of medium sized factories according to GMAC. "Around 65 per
cent of the factories employ between 700 and 1500 workers; the largest ones employ up to 8,000
workers," says GMAC business development manager Kaing Monika. "Around 70 per cent are located
around Phnom Penh."
Cambodia specialises in knitted goods, with around 37 per cent of production for womenswear, 36 per
cent menswear, 10 per cent for children and babies, 15 per cent for sports or casualwear, and around 2
per cent for swimwear and lingerie.

Trade agreements
The US recently removed Cambodia and Laos from a blacklist that limited government support for US
companies doing business in the country. This means more American investment into the two countries,
with US companies able to apply for financing through the Export-Import Bank of the United States. This
builds on the bilateral Trade and Investment Framework signed in 2006.
In the last few years Cambodia has signed trade agreements with Vietnam, China, Uganda, Korea,
Thailand and Bangladesh.
Cambodia is currently lobbying for the EU to relax its rules of origin which affects exports to that trade
area. It also wants the US to implement a Duty Free Quota Free agreement of at least 97 per cent with a
move towards 100 per cent.
Within the ASEAN group Cambodia is currently operating with tariffs between 0 and 5 per cent and is
working towards 0 per cent by 2015.
Imported goods are subject to VAT of 10 per cent and there is a four-band system of duties with rates
ranging from 0 to 120 per cent. Equipment and machinery are 15 per cent and raw materials 7 per cent,
while finished goods are 35 per cent.

Export/import summary
Apparel exports dropped dramatically at the beginning of 2009 by 36 per cent in the first quarter
compared to 2008, according to figures from the Council for the Development of Cambodia.
The US makes up the biggest garment export market for Cambodia (around 67 per cent), followed by
the EU (just under 22 per cent), Canada (around 6 per cent), Japan (roughly 0.5 per cent) and the rest
of the world (approximately 4.5 per cent) according to figures from the Cambodian Ministry of
Commerce.
Garment exports to the US were down by 1.68 per cent from 2007 to 2008, standing at $1.945bn, while
textiles exports dropped by 10 per cent to $18.7m. In the EU, exports were up very slightly from 2007 to
2008, by 0.25 per cent to $613m, but textiles exports collapsed by nearly 59 per cent to $592,603. More
positively, shoe exports to the US jumped by 658 per cent to be worth $1.8m in 2008.

Strengths and weaknesses

Strengths
Low wages
Industry bodies, such as the GMAC, are trying to provide more training to middle management
Weaknesses

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What was a strength in the past, the large amount of business done with the US market, is now a
weakness
Lack of education and productive skills of many of the population, particularly in the poor areas of
countryside, which lack basic infrastructure
More than 50 per cent of the population is under 21
Worker unrest is a problem in factories, as many different unions are in operation and energy prices
are high

Labour
Wages were raised last year to an average of $67 to $79 per month depending on bonuses and
overtime, which puts Cambodia at the lower end of the spectrum compared to its Asian neighbours.
Unions are lobbying for a living wage of a minimum of $93 per month according to the Ethical
Corporation.
The Global Apparel Manufacturing Labour Cost Update 2008, by US-based consulting house JassinO'Rourke Group, found that Cambodian workers were second only to Bangladesh in terms of the lowest
wages, earning an average of $0.33 per hour. Bangladeshi workers earn just $0.22, in Pakistan the
wages are $0.37, in Vietnam $0.38, in Sri Lanka $0.43, Indonesia $0.44, India $0.51 and China $0.86.

Industry/government initiatives
In response to the global slowdown the Cambodian government suspended the 1 per cent tax on
garment factory expenditure, which includes raw material imports and employee salaries, in January.
The move will remain in place until 2011.
The government has also proposed a special fund for training programmes and promotion of supporting
industries. It is also pursuing improvement in labour standards with collaboration from trade unions and
diversification of the market for garments.
The GMAC is trying to make its factories more competitive by reducing bureaucracy and cutting the
number of illegal strikes and export costs.
Foreign Direct Investment approvals in 2008 for the garment industry numbered 149, down 12.9 per
cent on the previous year. There are 38 projects receiving investment, down from 39 last year according
to the Council for the Development of Cambodia.
Cambodia is trying to increase its silk production with the aid of the UN, which will improve the technical
capacity to product silk, nurture disease free silk eggs, organise training courses and help silk farmers.
The country uses 400 tonnes of silk per year, but only produces 50 tonnes.

Trade show participation

Shanghai International Clothing & Textile Expo, China, March 2010
www.fashionshanghai.com
GFT, BITEC, Bangkok, Thailand, July 2010
www.garmenttextile.com
HKTDC Hong Kong Fashion Week for Fall/Winter, Hong Kong, January 2010
www.hktdc.com
Dhaka International Yarn & Fabric Show, Bangladesh, July 2010
www.difsonline.org

FURTHER RESOURCES
LOCAL INDUSTRY ORGANISATIONS
The Garment Manufacturers Association in Cambodia.
175 Jawaharial Nehru Boulevard (Street 215),
SK Phsar Dem Kor,
KH Tuol Kork 12159
Phnom Penh, Cambodia
Tel: +855 23 301180
Fax: +855 23 882860
Email: info@gmac-cambodia.org
Website: www.gmac-cambodia.org
Cambodian Garment Training Center
74, Street 67, Group 53,

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Sourcing guide: Cambodia

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12209 Phnom Penh, Cambodia

Tel: + 855 23 216391
Fax: + 855 23 216392
Email: cgtc@gmac-cambodia.org
Garment Industry Productivity Center
3, Street 62 (continuation of Street 516),
Sangkat Tuol Sangke,
Khan Russey Keo,
Phnom Penh, Cambodia
Tel: +855 23 864227-9
Email: info@gipc.org.kh
Website: www.gipc.org.kh
Council for the Development of Cambodia
Government Palace, Sisowath Quay,
Wat Phnom,
Phnom Penh, Cambodia
Tel: +855 23 981154
Fax: +855 23 428426
Email: CDC.CIB@online.com.kh
Website: www.cdc-crdb.gov.kh
GLOBAL RESOURCES
Global Sources
Sourcing website, focus on accessories, bags, trimmings, fabrics.
www.globalsources.com
MFG.com
Global online marketplace connecting buyers and suppliers of manufactured products from around the
world in a collaborative, real-time manufacturing marketplace. MFG.com is dedicated to buyers and
purchasing professionals of apparel, home and commercial textiles.
www.MFG.com Textiles
Useful links
Click here for links to websites offering information on tariffs and quotas, sustainability and organic,
industry publications and conferences, as well as tools for translation services and currency conversion.
RELATED REPORTS
Global sourcing: World Retail Congress 09 insights
Sustainable manufacturing: a scenario analysis
LATEST NEWS
For the latest news on the Cambodian textile and apparel industry, visit WGSN's Textiles and Production
news services.

WGSN 2010

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