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Cambodia's Garment Industry | Analysis

Info: 3744 words (15 pages) Essay
Published: 1st Dec 2017 in Economics

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  1. Introduction

The export of Cambodia is the main sector and the heart of the country economy and in order to promote economic growth, provide more jobs for people, and also provide any other benefit from year to year. The exports of the country are many products such as the cereal export; the vehicles, the rubber and many others think that we can export to other countries. But the most product of the exportation that can be run the large part of economic of Cambodia is the garment factory and there were more than 50 percent of products that Cambodia can export to foreign countries. Before the 1994 the garment factories and garment export of the country were very low but after that Cambodia had sign the agreement with U.S on labor to trade in 1999. The export of garment to the U.S and Europe were gain to more than 90 percent of the product or garment that made in Cambodia. Through an arrangement with GEBTI II joint venture Partner DAI Nathan Associates was bringing the USAID-funded Cambodian Garment Industry productivity center (GIPC) to full sustainability by 2011. After joint this center, it also can help Cambodia to rise to the challenge of global competition in part of garment industry by raising the output, making the costs become lower, about the Cambodian work force of industry skills was develop, and in order to applied to other industries, the center were establishing models of good governance in apparel manufacturing. To be clear about the exportation on garment factory in Cambodia such as the situation, the attracted of foreign investor, the benefit, and the facing problem on present and in the future, they’re also the factor that the make us know more about the export of garment in Cambodia.

  1. Situation in Cambodia

The garment industry in Cambodia mostly contributes to the national income and represents a large proportion of the whole nation’ manufactured sector more than other sector in the country which approximately 80% of the state economy. However, when Cambodia government firstly opened its own decision for foreign direct investment in 1994, the United State and European Union provided traded privileges such as Most Favored Nation (MFN) and Generalized System of Preferences (GSP). At that time, there were only 236 garment export- oriented factories, which officially registered with Garment Manufacturers Association in Cambodia (GMAC). From 1994 to early 2008, before the world economic crisis, the garment industry was reported as the main export sector for Cambodia overcomes the tourism sector and agriculture sector. In that period, the country gained a lot of profits and investments from many countries especially US and EU which highly contributed to the local and state economy and the garment industry was ranked in top of the leading sector in the country’ export.

The garment industry was hardly hit by the world economic downturn in 2008, which this main sector severely suffered and dropped in national export about 23% to the America and European Union. According to Camboguide research, it stated clearly that during the year of 2008 and 2009, the garment industry companies was forced to shut down up to 30 garment industries and due to recession the company had to lay off approximately more than 30,000 workers in the garment industry sector. We can understand from that situation that Cambodia government was encountered national job opportunity, which increased the unemployment rate resulting to a lot of demonstrations inside the country. In fact, with the global crisis, the government would not hand out the problems more easily and it faced many difficulties in providing job for both frictional unemployment and structural unemployment.

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Even though Cambodia garment industry experienced the hardship in the duration of world economic crisis, the situation seemed to be more better in the last quarter of 2009 and early 2010 which marked the beginning of improvement from the current crisis and it showed that the Cambodia economy was recovering or got out of danger a little bit. In 2010, as mentioned above there were 236 garment industries, among all Taiwan top the list with 66 factories which followed by China and Hong Kong. It was known that Taiwan garment industries employed a lot of female’s workers of 276,268 accounted to 92 % of female employment with the average wage of $80. But there were a shift to main market of Japan currently expanded after EU and US exports.

Figure 1

Source: Retrieved from Garment Manufacturers Association in Cambodia 2010

Figure 2

Source: Retrieved from Garment Manufacturers Association in Cambodia 2010


UNESCAP organization survey stated that in 2011 garment, which account for two-third of industry manufacturing and 80% of export on garment industry would benefit from expanded quotas in Europe market. Garment exports to the United States and the European Union reached $2.7 billion and $1.6 billion on target. And Cambodia export to all countries was worth $4.61 billion with 9% growth comparing to 2011, $4.24 billion.

  1. Factor that investor choose to invest in Cambodia

There are five main factors that investor making their decision to invest in Cambodia including government incentive, low cost of labor, free flow of quota, good location and government policy. Since Cambodia have been affect by the global economic crisis, so in 2008 the Prime Minister of Cambodia Hun Sen officially announce that the 1% profit fee of all garment factories is about to suspended for four years from 2008-2012. This policy mainly seen as investment incentive, which government subsidies for all investor who have face the trouble during that period could be able to generate income and use that tax profit to reinvest in the country to keep them survive and invest more. Moreover, the cost of labor is also one of the main factors for the main target of investor, since our labor force still low if we compare to other country in the region and even China which the cost of worker are gradually increase. Beside that the free access of quota to the US and EU markets as the important factor for developing countries like Cambodia to recruit more investor. Thus, Cambodia firm would find it out easier to export their product in the large market without quota. Fourth factor is that Cambodia is locate on a good geographical that is close to the foreign direct investment of garment factories source. Which FDI in the garments sector mainly comes from neighboring countries such as China, Taiwan Province of China, Republic of Korea, Hong Kong- China, Malaysia and Singapore. Thus, the investor would figure out the easy way to increase their production in close network or cross border. Last and the most important factor is the government policy in which 100 percent of foreign ownerships are allowed in Cambodia. Thus, foreign investors were encouraged to invest and they would be able to own their property and industrial themselves.

Figure 1

Cambodia Goods Export to EU, 2012


Value (Mio Euro)

Share (%)

Textiles and Textile articles



Footwear, hats and other headgear



Transport equipment



Vegetable products



Foodstuffs, beverages, tobacco



Source: European Commission

  • Benefit of having Garment Industrials

The garment industry had played an important role in generate the rapid growth of Cambodia economic (GDP), because of three main factors including the decreasing of unemployment rate, reduction of poverty and creation indirect job. Firstly, it helps increasing the number of employment rate for more than thirty thousand new jobs annually that mostly are women who migrate from rural area. Since most people in rural area haven’t had what to do besides helping their parent, so there ability will not be generate fully in producing good and service. While garment factory have provided them varieties work, therefore it can ensure that most the people have a good job to do. Secondly, garment industrial sector help generate suitable income, which essential for the government goal in reducing poverty. Mainly, it help employed plenty of workers mostly unskilled and poorly educated, who are young women that migrate from rural area to seek for a job to survive. More than that, this sector helps people to improve their living standard through providing the suitable salary. Since most people are being employed, thus they will have more income to spend on their purpose. Especially, workers can use their money saving to support their family or to send it to their parent to support as well as to enhance their parent life in hometown. Third and the most important benefit, this sector has provided benefit for the involvement of everyone by creating many varieties of indirect jobs. Since most workers are moving from province and mostly they were not allowed to stay in industrial, so they need to find a room which close to their workplace for rent. Worker not only concern with living place, but they also concern with food supply which worker didn’t have much time to cook it themselves. Fortunately, this concern has created many indirect jobs for the surrounding people they needs transporter to pick them up to work. Thus, mostly seller and service provider could be benefit in generate income from this sector through doing transportation like taxi by picking up them both workplace and home as well as doing trade with employee by selling food.

  • Facing problem
    1. Migration from rural to city
      1. Contribute

Historical of Cambodia is specifically one of the most social struggles system, war and political play a main role in society and clearly understand as a key factor why Cambodia stand at the low position and then started to enter the global economy. Because of the migration from rural to city, in order to fulfill the stomach and can survive properly, most of worker prefer to work in garment factory than other field. It is around 85-90 percent of textile and garment workers are migrant women rather than men who totally contribute a significant proportion of their profits to their families in rural areas, who waiting these money to support for their live for a whole month, these amount covers nearly 80 percent of the country’s population (EIC 2007). According to Cambodia Institute of Development Study (CIDS) annually report that the basic costs of basic living expenses for garment women workers per month was $93 (CIDS 2009a) that was a reasonable living wage for most of the worker who are work in Cambodia. So they must earn over these amount in order to pay for dairy expense and make some saving for their family. Some worker seem really hard to contribute money to their family due to profit which they can earn are less than 93 which is the minimum wage around $72 and $75 per month (CIDS 2009b) so they can afford only for their daily live. Thus it has nothing to contribute to urban family, which is waiting for consumption. Such as one worker at least spend around 5,000 Riels per day on food and based on the salary they earn without including high nutrition and healthy food, it just a basic food to survive only. Consequence, this factor still remain the challenge for both inside and outside aspect that government and also worker-facing problem nowadays.

  1. Competitive

Primary competitive advantages for Cambodia’s garment industry are considered one of a low pay among other country in region. In 2008, the minimum wages for regular worker rose from $45 per month to $56. So with a low salary, a lot of investor comes to invest in Cambodia for million dollars to open a business on garment sector. Based on garment production alone, more than 70 percent of the country’s export revenues came from garments sector in 2008-2010, which was affected to Cambodia’s GDP at current prices by 27percent. Since the past until 2010, the garments sector exports were increased from US$2.2 billion to US$3.0 billion which is the good sign for Cambodia to focus on more on this factor and should work more interdependent with other state, Such as US, EU, China and our neighbor country too. Together in this sector, markets account for a total of 75-80 percent and have a strong competitive of the countries Garment exports to run the economic smoothly. Beside this in order to escape and low down the competitor outside country, Cambodia tried to make a good relationship with other country in the aim of export production in the market more easily in those country, so Canada, Japan and Mexico also become our export market. Even though having interdependent on economic field, but standard must be followed that can compete with other country. For example EU markets are satisfied with Cambodia-made sweater. So if we take a look more on garment sector and produce more beneficial for customer, I strongly believe that, Cambodia garment sector still can compete with outsider and produce as good as developed country or even better in the future.

Table 1: Three tiers of US textile and apparel suppliers, 2008 ($ per square meter equivalent, sme)

High price (over $4 per sme)

Italy ($7.96 per sme)

Medium price ($2.50-$4.00 per sme)

Vietnam ($2.99 per sme) Indonesia ($2.63 per sme)

Cambodia ($2.62 per sme)

Low price (under $2.50 per sme)

Pakistan ($1.05 per sme) China ($1.59 per sme) Honduras ($1.93 per sme) Bangladesh ($2.13 per sme)

Source: Textile Outlook International (2009).

  1. Employment

Employment in Cambodia is the main factor, which is concerned by government. In 2008, there are 350.000 workers who employed directly in garment industry. This amount can consider as a part of helping government to reduce unemployment rate with in the country. Additionally garment factory help to provide many jobs to workers and plays as the crucial factor. From time to time, capital in-flow to country in the huge amount that can cut down the expense of the government and afford to the poor people as well. Unluckily, in 2009 during the economic crisis, there were 296,800 workers who dropped the work which have a negative impact on factor in Cambodia. Then. In the first quarter of 2012 there were 356,609 workers in 320 registered textiles and garment factories (BFC 2012) The Economic Institute of Cambodia (EIC 2007) estimates that direct production-related employment accounts for only 53 percent of Employment generated, meaning total employment related to this sector may exceed 600,000, significant for a country of some 14 million people.

  1. Rural Poverty Reduction

Poverty inside country has reached proportion. There are 3,900,000 hectares of arable land in Cambodia. This can do nothing. According to research shows that the government of Cambodia has try hard to attract the investor by providing 2,033,664 to private companies under its land concession schemes. They can use technology to change the disable land to the useful land in order to build factory for running the business. Working with this company, rural poverty started to decrease gradually and people can get more work through that activity. Later on in 2011approximately 800,000 hectares were used again and then it can create more opportunity to the people who live around that area. After having work to do, people can earn money, which can use all of this money for expense, saving, sending to family as well. This garment factor really important for developing country even though it face many problems since the early time that is the demonstration, but later on situation started to get better and better by government tried to increase the salaries to afford the living-standard of the workers more better. And it clearly shows that poverty in Cambodia annually more forward to become higher and higher like Asian Country too.

  • Conclusion

To sum up, the garment factory industry is the most importance of Cambodia exportation. The garment was the main factor that can make the part of economic of Cambodia growth among others export. The situation of garment export in 2008- 2012 were increase from year to year, that can show us clearly about the economic of the country of growing from time to time, also can gain more jobs for people, make good relation among trade country, moreover, can get more attract of investor, and other benefit for Cambodian. This factor can make the export of Cambodia increase by more than 50 percent of country exportation. Beside all of the benefit of the garment factor that the country has, there are also have the problem that this factor have face such as the standard of clothes and other problem that the country might face in the future. In Cambodia the exportation of garment factory is the main part of export in 2008-2012. We are agree that the garment factory are still be the main export of Cambodia, that can make this country gain a lot of benefit, while there are facing some problem. In order to keep the among of the garment exportation gain more benefit for the country, so we should provide our products to get through the standard of the countries that import the products from us, those standard such as the price of the good, the quantity especially, the quality of the product.

  • Appendix

Source: http://www.gmac-cambodia.org/imp-exp/garment.php



  • Reference

Camboguide. Economy of Cambodia. Retrieved from http://www.camboguide.com/cambodia-profile/info/economy-of-cambodia

Garment Manufacturers Association in Cambodia. (2010). GMAC. Phonm Penh, Cambodia: Author

Economic Commission. European Union, Trade in Goods with Cambodai. Retrived from http://trade.ec.europa.eu/doclib/docs/2006/september/tradoc_113362.pdf

Kun Makara. (2010). Garment industry remains wary despite export growth. The Phnom Penh Post. Retrieved May 10, 2010 from http://www.phnompenhpost.com/business/garment-industry-remains-wary-despite-export-growth

Makara, K. (2010, 08 19). Keeping the garment sector healthy. The Phnom Penh Post. Retrived from http://www.phnompenhpost.com/business/keeping-garment-sector-healthy

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Narong, H. C. & Lee, D. J. (2012). Cambodia. UNESCAP. Retrieved from http://www.unescap.org/pdd/publications/survey2012/notes/cambodia.asp

Nathan Associates Inc. Cambodia, Micro Small and Medium Enterprise 2/Business Enabling Environment (2008-2012). Retrieved from http://www.nathaninc.com/projects-and-cases/cambodia-micro-small-and-medium-enterprise-business-enabling-environment

NATSUDA, K., GOTO, K. & THOBURN, J. Challenges to the Cambodian Garment Industry in the Global Garment Value Chain. Ritsumeikan Center for Asia Pacific Studies (RCAPS), 2009.

UNCTAD. Cambodia Sector-Specific Investment Strategy and Action Plan. Inter-Agency Working Group, February 2013.



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