Pressure Rising on Cambodia’s Duty Free EU Export

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TAIPEI (TAIWAN): March 12, 2014 (Bike Europe) – The rapidly expanding bike exports from Cambodia to the European Union by 55% in the first ten months of 2013 did not pass unnoticed.
 
At last week’s Taipei Cycle Show industry insiders pointed at indications for fraud while changes in the local content regulations, required for obtaining the GSP Plus status, could also hamper Cambodia’s bike exports to the EU.
At this year’s Taipei Cycle Show, which took place last week from March 5- 8, the increase of Cambodia’s export to Europe to 1.2 million bicycles was a much discussed issue.
 
Re-packaging
It is said that of Cambodia’s six factories only three are really painting and assembling bicycles. These three are, Asama, Strongman and A&J.
 
The other three are, according to various sources, no more than empty halls where re-packaging is taking place. Also one of the three is said to have left Cambodia recently and moved to Pakistan as this country also has GSP Plus duty free status for Europe.
 
Changes in local content regulations
Along with the said signs of fraud, changes in the local content regulations that came into force at the start of this year, required for obtaining EU’s GSP Plus status, might also hamper Cambodia’s bike exports to the EU.
 
That is caused by the fact that components used in the Cambodian export bikes which are sourced from Singapore and Malaysia are no longer considered to be local content since January 1, 2014.
 
Shimano Singapore and Malaysia
The Cambodian bike makers source components from Shimano Singapore and Malaysia, which contributes significantly to the 30% local content.
 
As Shimano is now out of the local content, Cambodian bike makers are looking for others to fill the gap. They turned to (probably among others) SRAM. In his A-Team presentation President Stan Day said this, “SRAM will not set up production in Cambodia. We are and will stay committed to Taiwan.”
Supply to ZEG
 
All this could affect the supply of bicycles to its buyers in the EU. The most prominent among them is the German-based organization ZEG.
This dealer cooperative with 1,000 plus affiliated dealer/members sources several hundred thousand bikes from Strongman in Cambodia.
 
Cambodia’s Export to EU Skyrockets
Despite the depressed market conditions throughout Europe in 2013 Cambodia’s export to the EU skyrocketed. The country is well under way to take over Taiwan’s leading position in bike export to Europe.
 
Taiwan’s export in units declined by 19.9% and in value by 23.2%. Currently there are six bike-making facilities in Cambodia of which five are of Taiwanese origin.
 
Between January and October 2013 Cambodia’s bike export showed a huge increase of no less than 55% to 1,211,654 exported units. Cambodia is now the second biggest bicycle exporter to Europe after Taiwan. Europe’s latest import statistics also show that the number one bike supplier for Europe, Taiwan is quickly losing ground.
 
Taiwan: twofold decline
Taiwan’s export declined by 19.9% from 2,028,290 to 1,625,415 units compared to 2012. In the same period the average value of these exported bikes dropped as well, from € 272.34 to € 260.85.
 
This twofold decline resulted in a worsening of the Taiwan’s bicycle export value of 23.2% from € 552 million to € 423 million.
 
GSP+ duty free export status
 
Cambodia benefits from the its EU General System of Preferences (GSP+) duty free export status to Europe in combination with low labor costs. The spurs a continued growth of the number of bike manufacturers in this country.
 
Currently there are six bike-making facilities of which five are of Taiwanese origin. Even premium brands like Specialized are now having their bikes being assembled in Cambodia, were the average value per to the EU exported unit has reached € 175. Only Taiwan also manages to export such high priced bikes.
 
Other rising stars
 
Cambodia is not the only rising star on the horizon. Other countries that show a double digit increase in their export volume to Europe are the Philippines (+ 13.2%), China (+ 38.9%) and Bangladesh (+ 7.4%).

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