Cambodia’s garment and footwear exports will likely experience slower growth this year – although this is not expected to be indicative of an overall decline, the country’s garment association has said.
Ken Loo, secretary-general of the Garment Manufacturers Association in Cambodia (GMAC), told a recent textile summit that growth is expected at around 5% this year, compared with 7% in 2016. The slowdown, however, is a normal market occurrence due to the expansion of the industry’s production base, he told delegates.
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While export figures have not yet been published for the first nine months of this year, Loo told the conference that 25 new factories opened in Cambodia this year, while 53 had closed, the Phnom Penh Post reported.
Cambodia’s garment sector benefits from an abundance of cheap labour and preferential trade status under the EU’s Everything But Arms scheme and duty-free access to the US for travel goods. However, a minimum wage hike, set to take effect from January 2018, could affect exports, manufacturers believe.
GMAC has been calling on the government to help manufacturers offset the 11% higher minimum wage and worker-benefit package. As well as an increase from US$153 a month to $170, employers are expected to pay 100% of the workers’ healthcare costs, a cost previously split between the government and employers, and one it says many of its members will not be able to afford.
Loo says this will cause the Kingdom to gradually lose its competitive advantage as a low-cost destination, and has warned that manufacturers will need to increase productivity in order to remain competitive.
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By GlobalDataGMAC has proposed the Export Management Fee – formerly known as the Export Quota Management Fee – which was introduced during the quota period, should be revised in order to help offset the rising labour costs.
It also believes Camcontrol fees, imposed on businesses for inspection and fraud repression, should be reduced to lower the logistics costs of the sector’s imports and exports.
Cambodia manufacturers seek help to offset rising labour costs
