GSP & MFN fails to accelerate apparel sector growth

03 Sep '08
4 min read

Cambodia is one of the late entrants in the field of manufacturing and exports of apparels and clothing compared to its Asian counterparts. Despite that, the industry in Cambodia was expected to give a tough competition to its Asian counterparts like Bangladesh, Vietnam and India.

But whereas Bangladesh and Vietnam have been able to clock double digit growth rates, Cambodian shipments of apparels are barely able to scratch the 3 percent mark.

Cambodia has been granted Generalized System Preferences (GSP) as well as the Most Favoured Nation (MFN) status by US. This was a golden opportunity for the garment industry to increase its manufacturing capabilities and its exports to the biggest buyer country of apparels in the world. However it was not to be. Some where down the years, things started going wrong as the accompanying figures project.

Total garment exports from Cambodia went up marginally from US $2.62 billion in 2006 to just $2.71 billion in 2007 to post a growth of a nominal 3.23 percent. In the same comparative period shipments to its largest buyer the US, rose from $1.90 billion to $1.91 billion.

The share in total exports of apparels to US is a staggering 70.49 percent. In short the sector was totally dependent on one country for its exports.

In the first six months of 2008, total shipments of garments and textiles rose to $1.37 billion from $1.32 billion in the corresponding period of 2007 to register a gain of a very small 3.72 percent.

Shipments to the US in the same comparative period recorded near zero growth. While actual value of exports of garments rose from $967.47 to a marginal $967.78 million, however that of textiles fell from $9.10 million to $8.55 million.

The only saving grace was in its combined shipments of textiles and garments to Canada and Non-EU countries. The growth in exports to Canada was due to a surge in shipments of garments which rose by an incredible 31.07 percent which in turn helped the overall exports to grow by 36.34 percent. This growth came in no less measure to a heave from textiles as well as others goods which include accessories.

On the other hand exports to Non-EU countries also grew by a flattering 24.66 percent, once again with due help from exports of apparels which also saw an awesome growth of 24.57 percent, when compared with figures of the first half of 2008 and those of the same period in 2007.

While shipments to the European Union projected a positive growth, those to Japan depicted a negative growth in the period under review.

The Garment sector of Cambodia, which is the leading export earner and employment generator for the country and which employs around 360,000 workers, is presently collapsing under the pressure built up by falling US orders, rising fuel and raw material prices, sky-rocketing transportation costs and low productivity of workers.

Growth in exports, especially to the US, began to decline in late 2007, thanks to stiffer competition from Vietnam and Bangladesh. This year is expected to be no better or could turn out to be worse with recessionary trends visible in the markets of US and the EU.

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