Concern In Cambodia As Garment Orders Wind Down

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Concern In Cambodia As Garment Orders Wind Down

Cambodia’s commerce ministry and apex garment makers’ body have expressed concern over a decline in purchase orders from Western nations, Cambodia’s main garment export market, after members of the association reported reductions and revisions in contracts. Ken Loo, Secretary General, Garment Manufacturers’ Association in Cambodia (GMAC) said that the unstable global environment and increasing likelihood of an economic downturn in Western countries, which constitute some of the biggest buyers of Cambodian garments, have sparked “serious concern over the export situation for the second half”. He said that some of the “many” GMAC members that reported reductions and revisions in orders have gone so far as to seek advice from the association’s legal team on the procedures for partial suspension of production. Loo affirmed that GMAC is conducting an “extensive survey among all members” to more accurately gauge the situation surrounding the purchase orders. He pointed out that employers are now “going through a huge jump in labour-related costs”, with contributions to a new pension scheme for private sector workers set to be carried out from Oct 1 and the to-be-determined sectoral minimum wage to take effect on Jan 1. “This double cost increase is serious enough to be worried about, not to mention other issues like higher logistics cost and higher cost of compliance which is increasing yearly, buoyed by buyer demand,” he said. He argued that while export growth is typically regarded as positive, figures can be misleading and don’t account for the net incomes of the businesses involved, after all costs are deducted. For example, only 39% of companies in Cambodia made a profit last year, 43% lost money, while 18% merely broke even, he said, citing a study by the Japan External Trade Organisation (JETRO). Going forward, Cambodia must take a proactive and cautious approach to issues that could put more cost pressure on companies, he suggested, adding that the Cambodia Garment, Footwear and Travel Goods Sector Development Strategy 2022-2027 launched in March has to be “followed through in speedy and forceful manner to help cushion the coming downturn, which is very real”. Cambodia’s commerce ministry has advised exporters to look to destinations closer to home, and with partners through free trade agreements (FTA). According to the General Department of Customs and Excise, Cambodia exported US$ 6.6 billion worth of garments, footwear and travel goods in the first half (H1) of this year, up by 40% from the US$ 4.72 billion logged in the same period last year.