Kent International, a large US-based bicycle manufacturer, has reiterated its commitment to the Kingdom, saying it would continue to produce from Cambodia even if it were to lose preferential access to the US.
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Arnold Kamler, CEO of Kent International, said the company’s bikes are eligible for duty-free treatment in the US because 35 percent of components are local and because the frames are manufactured in the Kingdom.
“Even if we lose these preferences in the US, we would not move because we see costs in China skyrocketing in the next five years,” he told Khmer Times on Friday.
He said labour costs in China are increasing by 15 percent every year and this trend will continue.
“We are also impressed with the workmanship at the textile factories that we visited in Cambodia,” he added.
The company’s factory, located about 10 miles from downtown Phnom Penh, is expected to begin operations next year.
“We had hoped to begin this spring but so many obstacles have been thrown in the face of the people who are building the factory which has delayed the construction of the factory. It now looks like the first production will not begin until about 10 months from now.”
The company produces about 3 million bicycles a year. Once its factory in the Kingdom is operational, about 30 percent of Kent International’s annual production will come from Cambodia.
In January, US senators Ted Cruz and Chris Coons introduced the Cambodian Trade Act of 2019, which would require the US government to review the preferential trade treatment Cambodia receives under the Generalised System of Preferences (GSP).
Mr Kamler also commented on the Everything-but-arms (EBA) deal with the European Union.
The EBA trade scheme – which allows the Kingdom to export everything except ammunition duty-free and quota-free to the European Union – is now under review over perceived setbacks to human rights and democracy following the dissolution of the CNRP, the country’s main opposition party, in 2017.
The review is expected to conclude early next year.
Mr Kamler said his company will not be moving production outside Cambodia even if Cambodia’s trade status with the EU changes, explaining that the European market is not a priority for them.
“Europe is not a consideration for us for this move. For Cambodian production, our focus is the US market,” he said.
“We have a very large business of almost 3 million bicycles a year that we sell to the USA, Canada, Australia, and Japan. We used to have a nice business in Europe before the dumping duties from China were implemented and have not tried to reengage doing bicycle business in Europe in more than 15 years as during this period, we became so busy supplying these other markets.
Kent International’s commitment contrasts with a recent statement from the Cambodian Bicycle Coalition (CBC) announcing its intention to relocate if the EBA is revoked.
CBC, representing A&J (Cambodia) Co. Ltd., Smart Tech (Cambodia) Co. Ltd., and SpeedTech Industrial Co. Ltd, said their ability to competitively supply EU customers is dependent upon continued market access under the EBA programme, Bike Europe reported in October.
“It would be tragic for our workforce and devastating for the communities in which we operate in Cambodia if we are forced to relocate to other countries that will still have duty free access to the EU, such as Bangladesh, Myanmar, and Vietnam,” CBC Chairman Jon Edwards said.
“Without it, CBC manufacturers would face an EU tariff of 14 percent on their exports. Other regional suppliers such as Bangladesh and Myanmar would not, and a free trade agreement with Vietnam will soon give that country secure duty-free access to the EU,” CBC said.
It emphasised that any withdrawal of trade benefits will hurt the 6,000 workers in the Cambodian bike sector.
“We will continue to engage with EU decision-makers to appeal for continued EBA eligibility for our Cambodian bicycle production,” CBC said.
According to Bike Europe, 835,000 regular bikes were exported from Cambodia to the EU during the first half of this year, making the country the biggest exporter by far of such products to Europe. The runner-up is Taiwan with 546,000 bikes.
Last year, Cambodia exported 1.5 million bicycles to the EU, worth a combined $331 million, according to a World Bank report released in May. In 2017, the Kingdom became the largest bicycle supplier to the EU market, overtaking Taiwan.