Last year, the EU partially withdrew Cambodia from the EBA (Everything But Arms Act), due to which Cambodia's garment and footwear industry started facing import duties in the EU. As a spiralling effect, Cambodia started diverting its garment exports to the US and other countries and imports to EU declined significantly. A report.
Cambodia's apparel exports significantly dropped by 36.56 per cent in 2020 to $112.45 million from $177.27 million in 2019 to EAEU(Eurasian Economic Union). The sudden decline happened between April 2020 to June 2020 and the exports made a recovery in July 2020.
Cambodia Apparel Export
Apparel industry is the backbone of Cambodia's export industry. Cambodia's apparel industry contributes for more than half of the total merchandise exports of the country. Also, the apparel sector is a major part of Cambodia's manufacturing output.
Most of the apparel manufacturers of Cambodia still follow the cut-make-trim technique due to underdeveloped manufacturing technologies and lower capital availability. The US and the EU are the major apparel export destinations of the country.
Cambodia approximately exports more than 3/4th of total apparel export to the EU and the US. EU's EBA act (Everything But Arms Act) provides a free access to Cambodian products in the EU region. Under this act, the EU provides a status of LDC (Least Developed Country) to Cambodia. Approximately more than 90 per cent of Cambodia's apparel exports enter duty free into the EU.
On August 12, 2020, EU's partial withdrawal of Cambodia from EBA took effect. Under this partial withdrawal, some products of Cambodian garment and footwear industry started facing import duties in the EU. Due to this partial withdrawal, the share of the garment exports of the country to the EU diverted to the US and other countries including Russia, Belarus, and Kazakhstan.
In April 2020, the country was under the major impact of the COVID-19 pandemic. Approximately, 130 apparel factories had shut down by the end of April 2020. The crisis remained till the end of June 2020. Approximately, 0.15 million garment workers lost their jobs in the country by July 2020 which was approximately 25 per cent of the total workers. And about 600 companies suspended their work.
According to ILO's (International Labour Organisation) report in 2019, approximately 80 per cent of garment workforce in Cambodia are women, and mostly under the age of 35, hence the garment industry got considerably affected. As women have additional responsibilities such as childcare, particularly with COVID-19 pandemic, the factory closures had caused economic insecurity and income stresses. Therefore, brands such as H&M, PVH, Target and M&S, had committed to maintain their existing orders.
Cambodian apparel exports grew again in June 2020 with higher exports to the US. The garments buyers in the US took up the excess capacity left after the EU customers began to cut ties with Cambodia. Asian Development Bank's country director for Cambodia said that the country would rebound to the growth of 5.90 per cent in 2021 with strong government initiatives and policies, social assistance for the poor, and monetary aid to small and medium-sized enterprises. According to the World Bank data, the US's share in Cambodia's exports was 26.80 per cent in 2019, slightly ahead of the EU's 25 per cent. This gap may extend further in 2021. Out of these exports, garments and footwear contributed the major share.
Also, the input materials for the manufacturing of garments had been impacted significantly, especially imports from China. The Cambodian fabric imports from China declined by 50.18 per cent in 2020 to $2,296.77 million from $4,610.09 million in 2019. It suddenly dropped in January 2020 and February 2020. The Cambodian yarn imports from China declined by 14.47 per cent in 2020 to $188.33 million from $220.18 million in 2019. The Cambodian fibre imports from China declined by 22.31 per cent in 2020 to $4,016.93 million from $5,170.53 million in 2019.
Cambodia Fabric Imports from China
Cambodia Yarn Imports from China
Cambodia Fibre Imports from China
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