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Footwear Kicks In as Factory Exports Surge 17 Percent

Sok Chan / Khmer Times Share:
Workers on a sewing line stitch jackets and coats at one of the hundreds of garment factories that circle Phnom Penh. Supplied.

The total value of exports from the garment, footwear and other factories rose 17 percent year on year to $7.1 billion last year, according to a report from Ministry of Industry and Handicraft released yesterday.
Kaing Monika, external affairs manager at the Garment Manufacturers Association in Cambodia, told Khmer Times that garment exports rose about 14 percent last year, from $5.3 billion in 2014. Exports of footwear surged more than 20 percent last year from 2014’s $441 million, Mr. Monika said. He attributed the surge in exports to new factories opening in the Kingdom.
“This is a good number,” Mr. Monika noted, adding that most of the new factories were Chinese owned. Industry analysts have said that Chinese manufacturers – particularly those in labor-intensive industries – have been shifting production to Southeast Asia to tap its large, young and inexpensive workforce. 
Mr. Monika said garment and footwear factories still faced challenges finding skilled workers but added that if there was “no chaos” in the sector it “would build the trust of buyers.” He was referring to the frequent strikes and protests by workers demanding higher wages, improved working conditions, meals, and bonuses, among other issues. 
Vietnam’s membership in the Trans-Pacific Partnership (TPP), which has been described as the world’s largest free-trade zone, had yet to have an impact on Cambodia’s garment industry, Mr. Monika said. The trade deal will allow exports garments and footwear from Vietnam duty- and quota-free access to the US market, but it needs to be ratified by the 12 governments that have signed on to it first, including the US Congress – where there has been some opposition to it in its current form. 
Mr. Monika forecast that the TPP would impact Cambodia’s footwear and garment exports in three years. However, officials in Cambodia have told Khmer Times that the treaty is likely to change after the next US election and that Cambodia was last year invited to join the TPP. Officials at the US embassy here have denied that a formal invitation has been made. 
Yesterday’s report from the Industry Ministry put the total number of industrial and handicraft factories at 1,450 last year, with garment, footwear and bag factories accounting for the lion’s share – 1,007. The report put the number of food, beverage and cigarette factories at 120, paper and paper-production factories at 38, and chemical, rubber and plastic factories at 101. 
The report said handicraft, garment, shoe and bag factors generated about 754,000 jobs, while total employment at industrial and handicraft factories rose to almost 860,000 jobs. 
Industry Minister Cham Prasidh said officials at his ministry were speeding up the registration process for factories in order to boost living standards, and were offering consultation services to small and medium-sized enterprises (SMEs) and other businesses to upgrade their facilities. 
“To develop the industry and handicraft sector requires  participation from all relevant stakeholders, including national and international institutions as well as the private sector,” Mr. Prasidh said. “The Ministry of Industry continues to boost efficiency, and is pushing SMEs to comply with its strategy development plan,” he added.  
Mey Kalyan, senior adviser to the Supreme National Economic Council, told Khmer Times that he welcomed the move, saying Cambodia was diversifying its economy. Mr. Kalyan, however, stressed that the garment and footwear industry is facing rising competition from trade treaties signed by other exporting countries and Myanmar’s emergence as a production base for the sector. 
He was referring, in part, to a free trade deal being negotiated between Vietnam and the European Union which will allow garment and footwear exports from that country to enjoy the same duty- and quota-free access that those from Cambodia now enjoy. 
Mr. Kalyan said rising minimum wages in Cambodia and the appreciation of the US dollar were also risks to garment and footwear exporters in Cambodia. Cambodia’s dollarized economy does not allow it to depreciate its currency to offset rising wages, as other exporting countries can do.
“The Cambodian government, investors and workers have to solve these problems together as we are in the same boat,” Mr. Kalyan said. Strikes and demonstrations are not the solution, he said, adding that workers and factory owners must reach a shared understanding in order to ensure the viability of the sector. Workers have to upgrade their skills and increase their productivity to compete with other countries in the region and around the globe, he added.  
According to a report from National Bank of Cambodia, garment exports (which about for about 70 percent of total exports) rose 12 percent year on year last year compared to 9 percent in 2014. 
The European Union is now the largest market for garment exports, followed by US. Between 2010 and 2014 the US fell from 60 to 35 percent in terms of the total proportion of garment and exports, while the proportion to the EU rose from 23 percent to 42 percent. 
This occurred after Cambodia received duty- and quota-free access under the EU’s “Everything but Arms” trade program for developing nations. Exports to other developed markets, including Canada and Japan, also rose.

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