Cambodia’s Textile Exports Growth Faces Threat From Domestic Political Turmoil

Economy

Cambodia’s Textile Exports Growth Faces Threat From Domestic Political Turmoil

Just as the going started to get good for Cambodia with an upward swing in the manufacturing chain, the country is facing a worsening political climate that threatens to nullify the gains made by its garment industry.

The current Prime Minister of Cambodia Hun Sen has been dubbed an autocratic ruler who has clamped down on civil rights and has jailed opposition leaders. Of late Cambodia’s ties with the US have been deteriorating with the US imposing visa sanctions on the country for refusal to take back deported individuals. .

The West by and large expressed grave concern over the strained political relations as it might lead to loss of trade relations and benefits Cambodia is currently enjoying. The observers opined that the current authoritarian regime needlessly damages Cambodia’s relationship with the international community including the United States and other countries. “This will seriously hinder Cambodia’s economic growth and prosperity and tends to push the country to a state of economic isolation,” the observer concluded.

The current crisis situation follows a not so distant discussion held in the month of August between US and Cambodia to enhance their partnership under the Trade and Investment Framework Agreement (TIFA). The agreement between the two countries was aimed at enhancing the trade sector.

Even more is at stake. The European Union (EU) currently permits Cambodia’s garments and other exports to enter their markets without any duty. Right now the EU is seriously rethinking on the trade status enjoyed by Cambodia under the Everything But Arms (EBA) program.

Recently, the Garment Manufacturers’ Association of Cambodia (GMAC) had corresponded with the United Nations, asking for sustained support for the garment sector. The garment sector happens to be the country’s largest export industry. The manufacturers expressed concern that overseas buyers will reduce their quantum of sourcing from Cambodia in wake of the prolonged political crisis.

The GMAC spokesman expressed the view that the current government’s behavior might be misconstrued by either the US or the EU. “We just want to set aside the fears of our clients in the West,” he pointed out.

The correspondence to the UN expressed the sentiment that the Cambodian garment workers were happy after receiving a 11 percent wage hike and there was no question of labour unrest in the country.

In the current year, till October, the US alone had imported USD 2.18 billion worth of textiles and apparels from Cambodia. This however, was a 2.42% decline as compared to the previous year, spanning the same period.

A World Bank (WB) report pointed out that Cambodia’s total volume of exports in garments and apparels sector touched the USD 3.3 billion mark during the first half of the year. However, fears are that the expansion that took place in the first half might not continue for rest of the year.

The World Bank report further said, exports grew but at a slower pace than in the previous year. The growth figures for 2017 stood at 5.4 percent as compared to a robust 8.4 percent in the year 2016. The WB expects growth to touch the 6.8 percent mark by the end of this year.

At present, political turmoil apart, Cambodia’s growth in the garment sector is also being constrained by hike in workers’ wages and high logistics costs. The World Bank in its report concluded that export diversification and robust inflows of FDI will continue to fuel growth in Cambodia’s garment sector.