With a new wage hike looming in the horizon, the Cambodian garment and footwear industries need to boost productivity and cut down costs if they are to remain competitive in international markets, a Singaporean research firm said.
According to a report from ASEAN+3 Macroeconomic Research Office (AMRO) released on Monday, Cambodian factory owners should now endeavour to ramp up efficiency at their facilities, with the public sector doing its part in improving logistics infrastructure and reducing the cost of electricity, before the latest wage increase comes into effect.
“Cambodia’s wage increases should be in line with underlying productivity growth. Cambodia should continue to improve its competitiveness across other dimensions including trade facilitation, logistics improvement and reducing electricity cost,” the report says.
A new minimum wage for the garment sector will kick in January next year, increasing the minimum salary for workers in the industry from $153 to $170. The new directive makes the minimum wage in the kingdom higher than those of other countries with large garment industries, such as Bangladesh and Myanmar.
Kaing Monika, the deputy secretary-general of the Garment Manufacturers Association in Cambodia (GMAC), applauded the report for its accuracy and said they’ve been working for a long time to bolster productivity in the sector.
“I think the report is accurate and reflects the reality on the ground. The risk of rising wages for the garment and shoes industries is obvious if not properly managed and dealt with,” he said.
“Productivity improvement and production efficiency is a must to help the industries stay afloat.”
He added there is also a need to diversify activities in the industry to increase the country’s role in regional value chains. He urged local entrepreneurs to explore possibilities in the supply of raw materials and in designing clothing articles.
Presently, Cambodia has 520 garment factories and 52 footwear factories which are members of GMAC.
According to official data from the General Department of Customs and Excise (GDCE), garment and footwear exports – which account for 78 percent of total exports – rose by 7.2 percent last year, reaching $7.3 billion.
AMRO forecasts economic growth will remain robust throughout 2017 and 2018, with inflation reaching 3.3 percent in 2017, up from 3 percent in 2016, driven by the surging price of crude oil.