Cambodia and Thailand announced a Memorandum of Understanding (MoU) on logistics last month to establish a cooperation framework that is expected to improve the competitiveness of Southeast Asia’s apparel supply chain and broaden prospects for buyers in the region.
The University of Delaware’s associate professor of fashion and apparel studies, Dr Sheng Lu, describes Cambodia and Thailand as emerging apparel sourcing destinations for many western fashion brands and retailers.
He explains both countries are members of The Association of Southeast Asian Nations (Asean), which has established free trade agreements with several leading apparel importing countries or regions such as the EU, Japan, and the recently implemented Regional Comprehensive and Economic Partnership (RCEP).
How will Cambodia and Thailand MoU boost apparel sourcing potential?
Lu adds: “A closer partnership on logistics through the new MOU hopefully would reduce the transportation cost, improve the region’s capacity to meet trade agreements’ rules of origin requirements, and develop an ever more integrated and competitive regional apparel supply chain.”
As part of the new agreement the countries announced a transport infrastructure development policy and said logistics will be given priority for socio-economic development.
Cambodia’s secretary of state for ministry of public works and transport Koy Sodany told Thailand’s secretary general of national economic and social development council, Danucha Pichayanan, Cambodia is drafting a master plan on transport connectivity. She said it includes road, railway, expressway, waterway, maritime road, port, airport and logistics infrastructure development that would need US$50bn for a ten-year period.
Apparel industry expert and Gherzi Textil Organisation partner, Robert Antoshak, points out the countries are significant apparel manufacturing hubs in their own right and he believes the agreement will forge closer ties to attract and facilitate investment in the region, while also the enhancing logistical capabilities of both countries.
He also highlights it’s timely for Thailand and Cambodia to make this agreement given the movement of many industries away from China to countries elsewhere in Asia, adding: “This will offer greater opportunities for buyers to source form the region.”
Back in March, the Cambodian government launched a long-awaited five-year development plan to shape the future of the country’s apparel and footwear sector by boosting productivity and reducing tariffs on businesses.
The strategy aimed to address five goals: Strengthening workers’ capacities, improving career opportunities, improving working conditions, expanding local and foreign investment, especially into higher-value production, and promoting market diversification in the apparel, footwear and travel goods sector.
The country’s finance minister, Aun Pornmoniroth, explained at the time: “The strategy is a package solution to deal with challenges in the sector. It will also grab new opportunities…that contribute to economic development.”
The strength of Cambodia’s apparel sourcing potential was revealed in the May 2022 figures from the US’ Office of Textiles and Apparel (OTEXA) as Cambodia had the largest increase in shipment volumes year-on-year, beating the likes of China, Vietnam and Bangladesh.