Garment and footwear makers, together with the government, are to press the United States to give Cambodia preferential trade terms for footwear exports.
For in depth analysis of Cambodian Business, visit Capital Cambodia
Kaing Monika, deputy secretary-general of the Garment Manufacturers Association in Cambodia, said the US was going to review its Generalised System of Preferences (GSP).
Preference systems let developing countries export certain goods to donor countries at reduced tariff levels.
At present, Cambodian footwear, textiles and garments are excluded from the US GSP.
Mr Monika said Cambodia’s footwear and garment industry had been exporting under the US most-favoured nation (MFN) programme which requires paying import tax of below 35 per cent as the US government charges high tax rates to protect local industries.
Many types of footwear were import sensitive but today most of them are made entirely overseas, he said.
“I think it is an appropriate time for the United States government to review the GSP program for poor countries like us,” he added.
“The US GSP has been offered to poor countries since 1974 but garment and footwear products have never been included.
“Recently, as far as I know, the US government is going to consider granting GSP on footwear that’s why we have to try our best to file our petition to Washington to consider offering it to us too.”
He said the association has been in discussion with all footwear factory owners over the issue and was seeking help from a law firm in the US over processing documentation for the petition.
However, there are prerequisites needed before the petition is filed.
Cambodia has to show improved working conditions with high levels of labour and social compliance. These and the recent rise of the minimum wage are the main aspects to prove to the US the development of the industry.
“If we can get it, it would be very important for Cambodia’s economic development as there would be more investments resulting in the creation of jobs,” he said.
Pen Sovicheat, director-general of the domestic trade department at the Ministry of Commerce, said it would be good news for Cambodia if the US government granted GSP to the footwear industry which currently exports a lot to the EU and the US under the MFN scheme.
“We do support GMAC joining hands with us and seeking help to get the GSP because it would benefit our economy,” he said.
“Although the GSP doesn’t reduce the tax to zero, we still want to get it.”
In July last year, the US government granted duty-free benefits for Cambodia for the export of travel goods such as luggage, backpacks, handbags and wallets under the GSP.
Presently, GMAC has some 59 footwear manufacturing factories and exported $700 million worth of goods last year.
Mr Monika said the continuing rise in the minimum wage in the industry would have a big impact on Cambodian competitiveness and constrain growth of the industry.
“But if we can get GSP on footwear, it would be a big help with our competitiveness,” he said.
He said Cambodia still has time to lodge the application and hoped the US would finish its review by the end of the year.